TIDMUOG
RNS Number : 3664A
United Oil & Gas PLC
29 September 2020
29 September 2020
United Oil and Gas Plc
("UOG", "United" or the "Company")
Interim Results for the Half Year to 30(th) June 2020
United Oil & Gas PLC (AIM: "UOG"), the growing oil and gas
company with a portfolio of production, development, exploration
and appraisal assets is pleased to announce its unaudited financial
and operating results for the half year ended 30(th) June 2020. A
shareholder call will take place at 12.00 GMT today.
Brian Larkin, Chief Executive Officer commented:
"2020 has been successful for United, with integration of the
Egypt assets which are delivering low cost, sustained production,
material reserves growth and positive operating cash flow. Post
period end we were also awarded operatorship and 100% ownership of
the high impact Walton Morant exploration licence in Jamaica, we
have strengthened the Board and we recently welcomed new
institutional shareholders onto our register, all of which marks
our arrival as a full cycle oil and gas company.
"Looking ahead our focus remains on managing United in a
responsible way as we allocate capital prudently and efficiently to
grow the business. We are well placed to manage the challenges the
industry is experiencing and to take advantage of an improvement in
market conditions."
Year to date highlights
Strategic - strengthening of the Board and shareholder base
-- Rockhopper Egypt acquisition completed following Egyptian
Government Approval including successful equity placing and
re-admission of the enlarged Group to AIM
-- Significant strengthening of the Board with the appointment
of Ms Iman Hill as non-executive director post period end
-- Establishment of Environmental, Social and Governance (ESG)
Board Committee in September 2020 to drive forward our commitment
to operating sustainably
-- Successful placing of Rockhopper Exploration plc's 18.3%
shareholding in United with new institutional investors post period
end
Operational*- sustained, low cost production performance and
reserves growth
-- Group working interest 1H-2020 production averaged 1,975 boepd net*
-- Success at the ASH-2 and ES-5 Wells in Egypt increased
working interest production from 1,709 boepd on 1(st) March 2020 to
2,716 boepd on 30(th) June 2020
-- Independent reserves report by Gaffney Cline & Associates
from the end of 2019 indicates a 12.5% increase in Abu Sennan Gross
2P Reserves to 13.5 MMboe representing a 190% reserves replacement
ratio
-- 100% equity stake and operatorship of the Walton Morant
licence in Jamaica along with 18-month extension secured
-- Provisional award of Blocks 15/18e and 15/19c, containing the
Maria and 15/18a-6 Discoveries, in the UK's 32(nd) offshore
licensing round
*From the completion of Rockhopper Egypt acquisition to period
end, 28(th) February 2020 to 30(th) June 2020.
Financial* - revenue growth delivering positive operating
cashflow
-- Group Revenue of $2.4m
-- Gross Profit of $0.3m
-- Fair Value Gain on Derivative Instrument $2.8 m
-- Profit after Tax $1.8m
-- Realised oil price of $28.26/bbl
-- Cash collections in the four-month period of $3.6m
-- Cash operating costs of $4.36/boe
-- Repayments on BP Pre-payment facility $0.7m lower than projected due to hedge impact
-- Group Cash balance of $1.2m
*From the completion of Rockhopper Egypt acquisition to period
end, 28(th) February 2020 to 30(th) June 2020.
Outlook - continued focus on capital discipline while
progressing high quality asset base
-- Re-engagement of drilling operations in Egypt, with the ASH-3
development well expected to spud in late 2020/early 2021
-- Installation of a gas pipeline at the ASH field, Egypt, will
commence shortly: this will reduce flaring, and on targeted
completion in late 2020, will deliver up to 7 mmscf/d (1.5 mmscf/d
net) of gas
-- Discussions with the Abu Sennan Joint Venture Partners on
further development drilling at the ASH field and the location for
the 2021 exploration commitment well are ongoing.
-- H2-2020 production guidance forecast by Operator of 2,300 boepd net to United
-- Pricing discount improvements and reductions agreed with EGPC
has potential to deliver between $600,000 to $800,000 uplift in
revenues at current production levels on an annualised basis
-- Work programme underway at the Walton Morant licence, Jamaica
to further derisk the acreage, including the Colibri prospect,
estimated to contain gross unrisked mean prospective resources of
229 MMstb
-- CPR to be commissioned over at least 10 further targets in
the Walton Morant Basin ahead of a farm-out process and drill
decision in 2021.
-- United, as a full cycle E&P company, is well positioned
and continues to evaluate new venture opportunities emerging across
the industry
Chief Executive's Report
The first half of 2020 has marked United's arrival as a full
cycle oil and gas company. In a relatively short space of time, we
have developed a balanced portfolio of assets which delivers
production, near-term development potential and the opportunity for
significant growth through exploration.
Operations in 2020 have taken place against the background of
sustained low oil prices, driven in large part by the global
pandemic. The strength of our business lies in our experienced
team, business relationships, industry leading low operating cost
base and operational flexibility. Accordingly, management moved
decisively in early 2020 to implement a strategy aimed at
protecting the value of our assets and our balance sheet.
Our 2020 interim results show our first production revenue,
based on four months of production at a low point in the oil price
cycle. Brent crude prices hit a low of $9/bbl in April 2020 and
averaged $30/bbl during the four months of operating results.
However, with production rising and some positive signs in relation
to oil price and the benefits of our hedged volumes of oil and
fixed price gas contracts, this is an excellent base from which to
build. Our low cost, low oil-price breakeven in Egypt is delivering
positive operational cashflow even at the low oil prices seen
earlier this year.
United will continue to evaluate new venture opportunities
emerging with the aim of putting the Company in a position to move
quickly should a value opportunity present itself. Our objective is
to ensure that we emerge from the current challenging environment
having used it as an opportunity and platform to grow.
At a corporate level we were delighted to appoint Ms. Iman Hill
as a Non-Executive Director of the Company on 7(th) September 2020.
Iman is an experienced oil industry leader with over 30 years'
experience in delivering successful exploration and production
projects at global companies such as Shell, BP, BG Group, Dana Gas,
Sasol and Energean. She has extensive experience in Egypt, the
Mediterranean, the North Sea and South America, working in both
onshore and offshore projects. Iman most recently served as Chief
Operating Officer with Energean. We have also taken an important
step forward with the formation of a Board ESG Committee to drive
forward our commitment to operating sustainably.
Post period end, the United share register saw significant
diversification with the sale by Rockhopper Energy plc of their
complete 18.3% shareholding in a managed transaction which saw a
series of new institutions invest in the Company. While the wider
market for junior oil and gas companies remains challenging, this
is an important vote of confidence in United's strategy, portfolio
and team.
Against the backdrop of the Covid-19 pandemic and oil price
environment, management's focus will continue to be on capital
discipline, cost control and advancing our core assets in a
sustainable manner, We will continue to manage capital carefully to
ensure that we maintain a strong balance sheet.
We are working on all our licences to ensure that they are
progressing and that further development and exploration drilling
activity in Egypt can resume in late 2020/early 2021. In Italy, we
will continue to progress the necessary permitting to allow
production to commence in 2021. In Jamaica work is underway to
further de-risk the Colibri prospect and a CPR is to be
commissioned covering at least 10 further targets in the Walton
Morant Basin ahead of a farm-out process and drill decision in
2021. In the UK, our geotechnical team will advance our Central
North Sea licence, identifying the best means to release the value
in the exciting Zeta prospect and recent licences awarded in the
32(nd) Round.
I would like to thank all shareholders for their support and
feedback. I would also like to thank all our staff for their
continued hard work.
Operational Review
While the decision was taken early in 2020 to defer all
non-essential capital expenditure, United has still been active
across all licence areas in 2020.
Following the completion of the acquisition of the Rockhopper
Egypt we have undertaken a review of our portfolio to ensure that
we are maximising our focus on the licences which we believe can
deliver the best value for shareholders.
Egypt
The performance of Abu Sennan has been exceptional since the
beginning of 2020, clearly demonstrating the significant upside
potential identified by our team's technical assessment. On the
1(st) March, after completion of the deal, gross production levels
were at 7,770 boepd (1,709 boepd net). These increased to 12,347
boepd (2,716 boepd net) at the end of June, having reached a high
of 14,282 boepd (3,142 boepd net) in early June during the testing
of the ES-5 Well. Gas is sold under a fixed price contract and
comprises c. 25% of the production totals.
The El Salmiyah-5 Well was spudded on 3(rd) February 2020, and
reached total depth of 4,400m MD (3,911m TVDSS). The Well was
targeting previously undrained reservoirs of the El Salmiyah Field.
The outcome significantly exceeded pre - drill expectations with
net pay encountered in all of the targeted intervals, totalling in
excess of 120m for the Well and a well-test achieving flow rates of
4,100 bopd, with a further 18 mmscf/d gas. At the end of June,
after completion of the testing programme, the ES-5 well was
producing at 2,900 bopd and 9mmscf/d on a controlled rate.
The ASH 2 Well, which was drilled in late 2019, came on stream
on 2(nd) January 2020 and has consistently produced oil at over
3,000 bopd (660 bopd net).
In addition to successful drilling, production was increased
through the development of infrastructure. Completion of the low
capital expenditure gas pipeline project at Al Jahraa led to the
production of additional gas and the elimination of flaring from
that field.
The Independent reserves report by Gaffney Cline &
Associates from the end of 2019 identified a significant
improvement of reserves at the Abu Sennan concession
-- 12.5% increase in Abu Sennan Gross 2P Reserves to 13.5 MMboe
(15% gas) compared to 12 MMboe at the beginning of 2019,
representing a 190% reserves replacement ratio
-- Gross 1P reserves up by 76% to 4.2 MMboe and gross 3P
reserves up by 46% to 28.6 MMboe (from 2.4 MMboe and 19.6 MMboe
respectively at the beginning of 2019)
-- Gross 2C contingent resource addition of 0.73 MMboe
These increased reserves do not take into account the successful
El Salmiyah-5 well. We expect the additional reserves from this
well to be captured in the 2020 year-end reserves report.
Re-engagement of drilling operations is scheduled to commence at
the ASH field in late 2020/2021 with the ASH-3 Well. Given the
performance of the ASH-2 well to date, and the clear potential in
the structure, this is being prioritised ahead of the remaining
three wells of the deferred 2020 development campaign which are
ready to be advanced once market conditions allow. Installation of
a gas pipeline at the ASH field is also expected to commence
shortly. This will reduce flaring, and on completion in early 2021,
will bring up to 7 mmscf/d (1.5 mmscf/d net) of gas on stream.
Potential locations for the 2021 exploration commitment well are
also being discussed with the Joint Venture Partners, and we expect
the prioritised target to be finalised before the end of the
year.
Italy
Our licences in Italy are located in the North of the country,
close to the epicentre of the outbreak of Covid-19. This has had an
understandable impact on the level of activity which has been
possible in Italy and the speed at which decisions can be taken by
governmental agencies.
In January 2020, the operator Po Valley Energy confirmed that
they had received formal technical environmental approval from the
Italian Environmental Ministry for the development of the Selva Gas
field.
This approval from the technical committee at the Ministry is an
important milestone in the environmental approval (EIA) process
whereby the project development plan is reviewed in great detail.
As a final step, the Environmental Minister must sign off on the
technical committee's review report. The Italian Government has
been focussed on Covid-19 legislation and European funding stimulus
packages which has delayed domestic approvals; however, the
operator has now indicated that they anticipate final approval to
be granted in October 2020.
We now estimate that production will come on stream in 2021. The
planned facilities will have the capacity to deal with c. 2Bcf per
annum. (c. 875 boepd).
UK
United has already demonstrated through the Crown divestment the
value that active portfolio management can deliver, particularly
when combined with strong technical capability.
In January, the Company purchased a high-quality 3D seismic
dataset covering Licence P2480 in the Central North Sea, acquired
in the 31(st) Round. This data is being worked up in advance of a
likely independent appraisal of the prospects later in the year.
The licence includes multiple plays and low risk prospects, the
Zeta prospect being the most promising of these.
On 3(rd) September 2020, United was provisionally awarded two
Blocks in the UK's 32(nd) offshore licensing round. These are in
close proximity to Licence P2480 and contain the Maria and 15/18a-6
discoveries. This cluster of highly attractive licences will
increase our options in this region.
Following completion of the Egyptian acquisition, the Company
undertook a review of the asset base. This review reflects the
quality of opportunity presented by the now core licences. As a
result, United's Wessex Basin portfolio was deemed non-core and
United is reviewing alternatives for this portfolio.
Jamaica
The Walton Morant Licence in Jamaica is an asset which has the
potential to open a new hydrocarbon frontier. The United leadership
team have extensive knowledge of this asset, having worked on it
over a number of years, prior to the formation of the Company.
The previous operator, Tullow Oil, decided to relinquish their
80% interest in this licence when it came up for review at the end
of July 2020. United worked with the Jamaican Government to map out
a plan for the further development of the licence based on the
extensive information that has been gathered on the licence and
feedback from a farm-down process run jointly by Tullow and
United.
Confirmation that United would assume full operatorship of the
licence for a nominal fee was issued after the half year on August
3(rd) and the Production Sharing Agreement has been amended to
extend the Initial Exploration Period for 18 months. In addition,
United has acquired the results of approximately $30m of investment
by the previous operator in the licence.
The amended Walton Morant Licence covers an area of 22,400km (2)
, and has numerous plays and prospects already identified across
three separate basins. Eleven wells have been drilled to date (nine
onshore, two offshore), and all bar one contained hydrocarbon
shows.
United plans to complete a low-cost work programme to further
de-risk the high-graded Colibri prospect and perform detailed
interpretation of the numerous follow-ons. The Colibri prospect
alone has been independently estimated to contain gross unrisked
mean prospective resources of 229 MMstb, and up to 513 MMstb in a
high-case scenario. A new CPR report over at least 10 further
targets will be commissioned in the second half of 2020.
This cost-effective activity will be informed by the feedback
from companies who have engaged positively with United, and the
previous licence operator in the farm out process, to date. It is
believed this work will have a significant impact on the continuing
farm-down process.
Financial Review
Strategy
Our financial strategy underpins the business strategy of the
Company and is based upon the investment and safeguarding of
capital to enhance shareholder value. The core areas of the
financial strategy are maintaining a balanced capital structure,
disciplined capital allocation, portfolio management delivery and
managing commodity price risk all leading in turn to delivering
free cashflow.
In this period of historic low oil prices, we have acted early
and decisively to ensure that we protect our balance sheet,
maximise cashflow, defer capital expenditure and reduce
discretionary expenditure. We have deferred development capital
expenditure in both Egypt and Italy, revised our G&A budget
significantly and benefitted greatly from both our oil hedging
programme and fixed price gas contracts.
United's results for this half year are the first to include our
interest in the Abu Sennan concession in Egypt, acquired on 28(th)
February 2020 through the Rockhopper Egypt transaction. Operations
are accounted for in the Income Statement from the date of control
i.e. 28(th) February 2020 as per the requirements of IFRS 10. All
assets and liabilities and movements from the effective date of the
transaction i.e. 1(st) January 2019 have been brought onto the
balance sheet at fair value.
Highlights *
1H 2020
Net average Production volumes 1,975 boepd
(boepd)
------------
Oil Price Realised ($/bbl) $28.26
------------
Oil and Gas Price Realised ($/boe) $25.94
------------
Revenue (1) $2.4m
------------
Gross Profit $0.3m
------------
Profit after Tax $1.8m
------------
Cash Operating Cost per boe $4.36/boe
(2)
------------
*From the completion of Rockhopper Egypt acquisition to period
end, 28(th) February 2020 to 30(th) June 2020.
(1) 22% working interest stated net of government take
(2) See non-IFRS Measure at page 26
Rockhopper Egypt Acquisition and inclusion in this Half Year
Report
The acquisition of Rockhopper Egypt was completed in February
2020, following Egyptian Government approval for the transaction.
The acquisition was transformational for the Company delivering a
solid production base and transitioning the Company to a full cycle
E&P Company.
The consideration for the Rockhopper Acquisition was US$16
million which was funded by:
-- the issue of 114,503,817 Consideration Shares at 3 pence to Rockhopper PLC
-- a pre-payment financing structure of US$8 million provided by BP
-- the Placing of 150,616,669 Placing Shares at 3 pence per share
In tandem with the announcement of the Rockhopper acquisition,
United also announced the divestment of the Crown Discovery to
Hibiscus Petroleum for consideration of up to $5m. The Company is
anticipating receipt of a further payment of $2.85m from Hibiscus
in December of this year.
Group Production and Commodity Prices
Total group working interest production for the four months was
1,975 boepd. The average realised oil price was $28.26/bbl and the
average realised gas price was $2.61/mmbtu. Following negotiations
between the Operator and EGPC post period end there has been a
significant reduction in the Western desert discount to Brent from
$2.90/bbl in early 2020 to $0.60/bbl. This has the potential to
generate between $600,000 to $800,000 uplift in revenues at current
production levels on an annualised basis .
Group Operating costs, DD&A, and expenses
Cash Operating costs amounted to $4.36/boe
DD&A charges on production and development assets amounted
to $1.1m
Derivative Financial Instrument
The Company's pre-payment facility with BP provides downside
price protection by effectively hedging 6,609 bbls of oil at
$60/bbl per month from March 2020 through to September 2022. As at
30 June 2020, a fair value gain of $2.8m has been recognised as a
result of oil price movements in the period.
Exploration Costs written off
There were no exploration costs written off in the period
Impairment
There were no impairment triggers in the period
Taxation
In Egypt under the terms of the Production Sharing Agreement all
corporate taxes are paid by EGPC.
Capital Expenditure
Cash capital expenditure for the period amounted to $1.6m with
$1.1m spent on the successful ES-5 Well and $0.3m incurred on
maintenance capital expenditure also in Egypt. The remaining $0.2m
was split across our other assets.
CONSOLIDATED INCOME STATEMENT
Period ended 30 June 2020
Note Period Period Year ended
ended ended 31 December
30 June 30 June 2019
2020 2019
Unaudited Unaudited Audited
$ $ $
Revenue 2,435,922 - -
Cost of sales 5 (2,170,599) - -
------------ ---------- --------------
Gross profit 265,323 - -
Administrative
expenses (605,088) (756,408) (1,947,964)
------------ ---------- --------------
Operating loss (339,765) (756,408) (1,947,964)
Fair value gain
on derivative financial
instruments 2,821,715 - -
Interest expense 11 (709,976) - (4,841)
------------ ---------- --------------
Profit/ (loss)
before taxation 1,771,974 (756,408) (1,952,805)
Taxation - - (186,270)
------------ ---------- --------------
Profit/ (loss)
for the financial
period attributable
to the Company's
equity shareholders 1,771,974 (756,408) (2,139,075)
Earnings / (loss)
per share from
continuing operations
expressed in cents
per share:
Basic and diluted 4 0.33 (0.22) (0.62)
------------ ---------- --------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Period Period Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
Unaudited Unaudited Audited
$ $ $
Profit/(loss) for the financial
period 1,771,974 (756,408) (2,139,075)
Foreign exchange difference (279,997) 24,987 405,954
------------ ------------ --------------
Profit/(loss) for the financial
period attributable to the
Company's equity shareholders 1,491,977 (731,421) (1,733,121)
CONSOLIDATED BALANCE SHEET
At 30 JUNE 2020
Note 30 June 30 June 31 December
2020 2019 2019
Unaudited Unaudited Audited
$ $ $
NON-CURRENT ASSETS
Intangible Assets 6 7,437,988 7,986,167 5,580,864
Property, Plant and Equipment 7 12,939,128 3,525 26,722
20,377,116 7,989,692 5,607,586
CURRENT ASSETS
Inventory 50,879 - -
Trade and other receivables 9 5,253,482 579,548 3,524,655
Cash and cash equivalents 1,193,576 1,787,178 1,275,537
----------- ----------- -----------
6,497,397 2,366,726 4,800,192
TOTAL ASSETS 26,875,053 10,356,418 10,407,778
CAPITAL AND RESERVES ATTRIBUTABLE
TO EQUITY HOLDERS OF THE
COMPANY
Share capital 10 8,059,774 4,564,787 4,564,787
Share premium 10 15,989,999 9,912,988 9,912,988
Share-based payment reserve 1,771,218 1,465,036 1,591,808
Merger reserve (2,697,357) (2,697,357) (2,697,357)
Translation reserve (291,224) (392,194) (11,227)
Retained earnings (2,483,424) (2,872,731) (4,255,398)
----------- ----------- -----------
TOTAL EQUITY 20,348,986 9,980,529 9,105,601
CURRENT LIABILITIES
Trade and other payables 1,391,548 375,890 1,085,701
Derivative financial instruments 84,504 - -
Borrowings 11 1,580,138 - -
Current tax payable 176,903 - 190,446
Lease liabilities 47,541 - 26,030
----------- ----------- -----------
3,280,633 375,890 1,302,177
NON-CURRENT LIABILITIES
Borrowings 11 2,904,699 - -
Derivative financial instruments 340,736 - -
----------- ----------- -----------
3,245,435 - -
TOTAL LIABILITIES 6,526,068 375,890 1,302,177
TOTAL EQUITY AND LIABILITIES 26,875,053 10,356,418 10,407,778
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Period ended 30 June 2020
Share-
based
Share Share payment Retained Translation Merger Total
capital premium reserve earnings reserve reserve equity
$ $ $ $ $ $ $
For the period ended
30 June 2020
Balance at 1 January
2020 4,564,787 9,912,988 1,591,808 (4,255,398) (11,227) (2,697,357) 9,105,601
Profit for the period - - - 1,771,974 - - 1,771,974
Foreign exchange
difference - - - - (279,997) - (279,997)
------------------------ ---------- ----------- ---------- ------------ ------------ ------------ ------------
Total comprehensive
income for the period - - - 1,771,974 (279,997) - 1,491,977
Contributions by
and distributions
to owners:
Share based payments - - 118,249 - - - 118,249
Shares issued 3,494,987 6,521,815 - - - - 10,016,802
Share issue expense - (444,804) 61,161 - - - (383,643)
Total contributions
by and distributions
to owners 3,494,987 6,077,011 179,410 - - - 9,751,408
---------- -----------
Balance at 30 June
2020 (Unaudited) 8,059,774 15,989,999 1,771,218 (2,483,424) (291,224) (2,697,357) 20,348,986
------------------------ ---------- ------------ ------------ ------------ ------------
For the period ended
30 June 2019
Balance at 1 January
2019 4,564,787 9,912,988 1,465,036 (2,116,323) (417,181) (2,697,357) 10,711,950
Loss for the period - - - (756,408) - - (756,408)
Foreign exchange
difference - - - - 24,987 - 24,987
------------------------ ---------- ----------- ---------- ------------ ------------ ------------ ------------
Total comprehensive
loss for the period - - - (756,408) 24,987 - (731,421)
Total contributions - - - - - - -
by and distributions
to owners
---------- -----------
Balance at 30 June
2019 (Unaudited) 4,564,787 9,912,988 1,465,036 (2,872,731) (392,194) (2,697,357) 9,980,529
------------------------ ---------- ------------ ------------ ------------ ------------
For the period ended
31 December 2019
Balance at 1 January
2019 4,564,787 9,912,988 1,465,036 (2,116,323) (417,181) (2,697,357) 10,711,950
Loss for the period - - - (2,139,075) - - (2,139,075)
Foreign exchange
difference - - - - 405,954 - 405,954
Total comprehensive
loss for the year - - - (2,139,075) 405,954 - (1,733,121)
Contributions by
and distributions
to owners:
Share-based payments - 126,772 - - - 126,772
Balance at 31 December
2019 (Audited) 4,564,787 9,912,988 1,591,808 (4,255,398) (11,227) (2,697,357) 9,105,601
CONSOLIDATED STATEMENT OF CASHFLOWS
Period ended 30 June 2020
Period ended 30 June 2020 Period ended 30 June 2019 Year ended 31 December
2019
Unaudited Unaudited Audited
$ $ $
Cash flows from operating
activities
Profit/(loss) before
taxation 1,771,974 (756,408) (1,952,805)
Adjustments for:
Share-based payments 118,249 - 126,772
Depreciation 1,113,723 1,149 94,026
Fair value gain on
derivatives (2,821,715) - -
Impairment of intangible
assets - - 2,111,319
Gain on disposal of
intangible assets 44,241 - (2,881,976)
Interest expense 709,976 - 4,841
Foreign exchange movements (105,156) (21,718) 268,159
-------------------------- -------------------------- --------------------------
831,292 (776,977) (2,229,664)
Increase in inventories 49,283 - -
Decrease / (increase) in
trade and other receivables 2,730,890 159,572 (61,527)
(Decrease) / increase in
trade and other payables (2,978,581) (32,122) 677,689
-------------------------- -------------------------- --------------------------
Net cash from operating
activities 632,884 (649,527) (1,613,502)
Cash flows from investing
activities
Cash outflows on business
combination (11,200,000) - -
Cash acquired in business
combination 46,543 - -
Disposal of intangible
assets - - 950,000
Purchase of property, plant
& equipment (1,392,505) - (1,637)
Payments for intangible
exploration assets (654,941) (2,830,448) (3,097,401)
Net cash used in investing
activities (13,200,903) (2,830,448) (2,149,038)
Cash flows from financing
activities
Issue of ordinary shares
(net of expenses) 5,712,315 - -
Proceeds on issue of swap
financing arrangement 7,760,288
Repayments on swap financing
arrangement (789,233)
Capital payments on lease (34,881) - (88,387)
Interest paid on lease (2,845) - (4,841)
-------------------------- -------------------------- --------------------------
Net cash from financing
activities 12,645,644 - (93,228)
Increase / (decrease) in
cash and cash equivalents 77,625 (3,479,975) (3,855,768)
Cash and cash equivalents at
beginning of period / year 1,275,537 5,149,906 5,149,906
Effects of exchange rate
changes (159,586) 117,247 (18,602)
-------------------------- -------------------------- --------------------------
Cash and cash equivalents at
end of period / year 1,193,576 1,787,178 1,275,537
Notes to the financial information
Period ended 30 June 2020
1. GENERAL
The interim financial information for the period to 30 June 2020
is unaudited.
2. ACCOUNTING POLICIES
The interim financial information in this report has been
prepared on the basis of the accounting policies set out in the
audited financial statements for the period ended 31 December 2019,
which complied with International Financial Reporting Standards as
adopted for use in the European Union ("IFRS").
IFRS is subject to amendment and interpretation by the
International Accounting Standards Board ("IASB") and the IFRS
Interpretations Committee and there is an on-going process of
review and endorsement by the European Commission.
The financial information has been prepared on the basis of IFRS
that the Directors expect to be applicable as at 31 December
2020.
The Directors have adopted the going concern basis in preparing
the financial information. In assessing whether the going concern
assumption is appropriate, the Directors have taken into account
all relevant available information about the foreseeable
future.
The condensed financial information for the year ended 31
December 2019 set out in this interim report does not comprise the
Group's statutory accounts as defined in section 434 of the
Companies Act 2006.
The statutory accounts for the year ended 31 December 2019,
which were prepared under IFRS, have been delivered to the
Registrar of Companies. The auditors reported on these accounts;
their report was unqualified and did not contain a statement under
section 498(2) or 498(3) of the Companies Act 2006. The report did
however include reference to matters which the auditors drew
attention by way of emphasis regarding going concern, namely the
Valuation of the Walton Morant licence in Jamaica and the
consideration relating to the Crown disposal.
Foreign currency
The Group's presentation currency is USD.
Going Concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the CEO's Statement and Directors' Report.
The Group closely monitors and carefully manages its liquidity
risk. Cash flow forecasts are regularly updated, and sensitivities
run for different scenarios, including, but not limited to, changes
in commodity price and different forecasts for the Group's
producing assets. The Group's Base Case forecast sufficient
financial headroom for the 12 months from approval of its 2020
Interim Financial Statements on 29th September 2020.
The directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the 12
months from the date of approval of its Interim Financial
Statements on 29(th) September 2020 therefore the directors
continue to adopt the going concern basis of accounting in
preparing the financial statements.
Revenue
Revenue comprises invoiced sales of hydrocarbons to customers,
excluding value added and similar taxes. Also disclosed within
revenue is tariff income recognised, excluding value added and
similar taxes, for gas transportation facilities provided to third
parties.
Revenue is recognised at a point in time as control passes to
the customer, which is typically the point of delivery of
hydrocarbons. The Group does not have performance obligations
subsequent to delivery.
Classification and measurement of financial liabilities
The Group's financial liabilities include borrowings, trade and
other payables and embedded derivative financial instruments.
Financial liabilities are initially measured at fair value, and,
where applicable, adjusted for transaction costs unless the Group
designated a financial liability at fair value through profit or
loss.
Subsequently, financial liabilities are measured at amortised
cost using the effective interest method except for derivatives and
financial liabilities designated at FVTPL, which are carried
subsequently at fair value with gains or losses recognised in
profit or loss.
All interest-related charges and, if applicable, changes in an
instrument's fair value that are reported in profit or loss are
included within finance costs or fair value gains/(losses) on
derivative instruments.
Embedded derivative nancial instruments
A borrowing arrangement structured as a prepaid commodity swap
with monthly repayments over 30 months has embedded in it a
derivative that is indexed to the price of the commodity. This is
considered to be a separable embedded derivative of a loan
instrument.
At the date of issue, the fair value of the embedded derivative
is estimated by considering the derivative as a series of forward
contracts with modelling of the fixed and floating legs to
determine a repayment schedule and derive a net present value for
the forward contract embedded derivative.
This amount is recognised separately as a financial liability or
financial asset and measured at fair value through the income
statement. The residual amount of the loan is then recorded as a
liability on an amortised cost basis using the effective interest
method until extinguished upon conversion or at the instrument's
maturity date.
Exploration and evaluation assets
The group accounts for oil and gas expenditure under the full
cost method of accounting.
Costs (other than payments to acquire the legal right to
explore) incurred prior to acquiring the rights to explore are
charged directly to the profit and loss account. All costs incurred
after the rights to explore an area have been obtained, such as
geological, geophysical, data costs and other direct costs of
exploration and appraisal are accumulated and capitalised as
intangible exploration and evaluation ("E&E") assets.
E&E costs are not amortised prior to the conclusion of
appraisal activities. At the completion of appraisal activities if
technical feasibility is demonstrated and commercial reserves are
discovered, then following development sanction, the carrying value
of the relevant E&E asset will be reclassified as a development
and production asset within tangible fixed assets.
If after completion of appraisal activities in an area, it is
not possible to determine technical feasibility or commercial
viability, then the costs of such unsuccessful exploration and
evaluation are impaired to the Income Statement. The costs
associated with any wells which are abandoned are fully impaired
when the abandonment decision is taken.
Development and production assets, are accumulated generally on
a field by-field basis and represent the costs of developing the
commercial reserves discovered and bringing them into production,
together with the E&E expenditures incurred in finding
commercial reserves which have been transferred from intangible
E&E assets.
The net book values of development and production assets are
depreciated generally on a field-by field basis using the unit of
production method based on the commercial proven and probable
reserves. Assets are not depreciated until production
commences.
Depreciation of production assets
Production assets are accumulated into cash generating units
(CGUs) and the net book values are depreciated using the
unit-of-production method by reference to the ratio of production
in the year and the related economic commercial reserves, taking
into account future development expenditures necessary to bring
those reserves into production.
The gain or loss arising on disposal or scrapping of an asset is
determined as the difference between the sales proceeds, net of
selling costs, and the carrying amount of the asset and is
recognised in the income statement.
Each asset's estimated useful life has been assessed with regard
to both its own physical life limitations and the present
assessment of economically recoverable reserves of the oil and gas
asset at which the item is located, and to possible future
variations in those assessments. Estimates of remaining useful
lives are made on a regular basis for all oil and gas assets,
machinery and equipment, with annual reassessments for major items.
Changes in estimates which affect unit production calculations are
accounted for prospectively.
3. RELATED PARTY TRANSACTIONS
The directors are considered to be the key management personnel
of the company. During the interim period, the company paid fees to
executive and non-executive directors amounting to $273,920 (Period
ended 30 June 2019 - $188,500).
Graham Martin and David Quirke, both directors of the company,
have each subscribed for 2,000,000 Subscription Shares and 833,333
Subscription Shares respectively at the subscription price of 3p
being the same price as the other Subscribers as part of the
Subscription in the deal to acquire the Egyptian assets from
Rockhopper, effective 28(th) February 2020.
4. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Given the Group's reported loss for previous periods, share
options and warrants are not taken into account when determining
the weighted average number of ordinary shares in issue during the
year as they would be anti-dilutive, and therefore the basic and
diluted loss per share are the same.
Basic and diluted loss per share
Period ended Period ended Year ended
30 June 2020 30 June 2019 31 December 2019
Profit/(loss) for the period ($) 1,771,974 (756,408) (2,139,075)
Weighted average number of ordinary shares (number) 531,981,886 345,613,985 345,613,985
Earnings / (loss) per share from continuing operations (cents
per share) 0.33 (0.22) (0.62)
============== ============== ==================
5. COST OF SALES
30-Jun-20 30-Jun-19 31-Dec-19
$ $ $
Production Operating costs 1,049,911 - -
Depreciation, depletion 1,071,405 - -
and amortisation
Inventories 49,283 - -
2,170,599 0 0
============================ ========== ==========
6. INTANGIBLE ASSETS
Exploration Computer Total
and Evaluation software
assets
$ $ $
Cost
At 31 December 2018 5,226,219 - 5,226,219
Additions 3,086,027 11,374 3,097,401
Disposals (792,033) - (792,033)
Exchange differences 207,925 - 207,925
At 31 December 2019 7,728,138 11,374 7,739,512
Acquired in business combinations 2,951,159 - 2,951,159
Additions 654,941 - 654,941
Transfer to production assets (1,711,784) - (1,711,784)
Disposals (44,241) - (44,241)
Exchange differences 7,041 9 7,050
At 30 June 2020 9,585,254 11,383 9,596,637
Depreciation
At 31 December 2018 - - -
Impairment 2,111,319 - 2,111,319
Exchange differences 47,329 - 47,329
---------------- ---------- ------------
At 31 December 2019 2,158,649 - 2,158,649
Exchange differences - - -
---------------- ---------- ------------
At 30 June 2020 2,158,649 - 2,158,649
Net book value
At 31 December 2019 5,569,490 11,374 5,580,864
================ ========== ============
At 30 June 2020 7,426,605 11,383 7,437,988
================ ========== ============
In August 2020 United Oil & Gas Plc announced that it had
received approval from the Jamaican Government to take forward the
Walton Morant Licence, Jamaica, on a 100% operated basis having
been assigned Tullow Jamaica's 80% equity in the licence for a
nominal fee. United now plan continue with a low-cost work
programme to further de-risk the Colibri prospect and perform
detailed interpretation of the numerous follow up targets
identified. The Company also plan to continue the farm-down process
to bring in new partners ahead of a newly agreed drill or drop
decision at the end of January 2022. To date United have incurred
$2,893,643 exploration costs in Jamaica.
In Italy, the impact of COVID-19 has curtailed the timing of
first gas, which we now estimate will come on stream in 1H 2021.
The operator, Po Valley Operations PTY Limited have progressed some
of the consents required so far in 2020 to commence production,
including formal technical environmental approvals from the Italian
Environmental Ministry for the development of the Selva Gas Field.
The planned facilities will have the capacity to deal with c. 2Bcf
per annum. (c.920 boepd). Some minor infrastructural works have
also been ongoing and to Balance Sheet date United have incurred
$2,392,616 on our Italian operations.
In the UK work continues on our PL090 licence with some
independent reservoir modelling, whilst some high-quality 3D
seismic dataset covering the P2480 licence in the Central North Sea
has been purchased. The company was also awarded some new licences
on a 100% basis in the 32(nd) Licencing Round, announced subsequent
to the reporting date in September 2020, with some initial 3D
Seismic purchased and detailed geological and geophysical analysis
work planned. Some desk top work has also been performed on our
PEDL licences in the Wessex basin. At the Balance Sheet date
$669,284 has been capitalised on our UK exploration assets. United
continues to work on divestment of the Wessex basin portfolio.
In February 2020 United completed the acquisition of Rockhopper
Egypt Pty Limited and as a result acquired $2,951,159 in
exploration assets. Of this, $1,711,784 was allocated to the
successful ASH-2 well and was transferred to Oil & Gas
production assets in Q1 2020. At the Balance Sheet date, $1,471,062
was capitalised as Intangible assets in Egypt.
Management review the intangible exploration assets for
indications of impairment at each balance sheet date based on IFRS
6 criteria. Commercial reserves have not yet been established and
the evaluation and exploration work is ongoing. The Directors do
not consider that any indications of impairment have arisen and
accordingly the assets continue to be carried at cost.
7. PROPERTY, PLANT AND EQUIPMENT
Production Computer Office Total
assets equipment lease asset
$ $ $ $
Cost
At 31 December 2018 - 6,952 - 6,952
Transition to IFRS 16 - - 72,453 72,453
Additions - 1,638 41,860 43,498
Exchange differences - - 462 462
At 31 December 2019 - 8,589 114,775 123,364
Acquired in business combinations 10,861,147 - 61,126 10,922,273
Transfers 1,711,784 - - 1,711,784
Additions 1,392,505 - - 1,392,505
Exchange differences - - (433) (433)
At 30 June 2020 13,965,436 8,589 175,468 14,149,493
Depreciation
At 31 December 2018 - 2,236 - 2,236
Charge for the year - 3,562 90,464 94,026
Exchange differences - 15 366 381
----------- ----------- ------------- -----------
At 31 December 2019 - 5,812 90,830 96,642
Charge for the year 1,071,405 - 42,317 1,113,723
Exchange differences - - - -
----------- ----------- ------------- -----------
At 30 June 2020 1,071,405 5,812 133,147 1,210,365
Net book value
At 31 December 2019 - 2,777 23,945 26,722
=========== =========== ============= ===========
At 30 June 2020 12,894,030 2,777 42,321 12,939,128
=========== =========== ============= ===========
All producing assets of $12,894,030 at the Balance Sheet date
relate to operations in the Abu Sennan concession in the Western
Desert of Egypt, having completed the acquisition of Rockhopper
Egypt Pty Limited in February 2020 and immediately recognising a
value of $10,861,147 in producing assets.
The costs of the ASH-2 well of $1,711,784, having been completed
in late 2019 and coming on stream in January 2020 producing at over
3,000 bopd gross (660 net to UOG 22% share) were transferred to
producing assets at the end of Q1 2020.
The El Salmiyah-5 development well was drilled in Q1 2020 and
the outcome was more successful than originally anticipated, with a
net pay of 120m for the Well and flow rates exceeding 4,000 bopd.
The cost to United of the development well was $1,392,505 and is
included in producing assets at the balance sheet date.
Management review the Tangible assets for indications of
impairment at each balance sheet date based on IFRS 6 criteria.
With the successful drilling results achieved in both the ASH-2 and
El Salmiyah-5 wells, and gross 2P Reserves increasing to 13.5MMboe
before the addition of El-Salmiyah from the results of a recently
performed Independent CPR finding, combined with the steady
increase in commodity prices since the start of the COVID-19
pandemic, the company believe no impairment indicators are present
that would reduce the carrying value of $12.9m of PP&E at the
balance sheet date.
8. BUSINESS COMBINATIONS
The Company completed the acquisition of Rockhopper Egypt Pty
Limited from Rockhopper Exploration plc ("Rockhopper") on 28(th)
February 2020. The Acquisition, which had an effective date of 1st
January 2019, included a 22% non-operating interest in the
producing Abu Sennan concession, onshore Egypt. The consideration
paid to Rockhopper for the Acquisition was funded by:
-- the issue to Rockhopper of 114,503,817 Consideration Shares
at 3 pence per Ordinary Share representing 18.5% of the Company's
Enlarged Ordinary Share Capital,
-- a pre-payment financing structure of US$8 million provided by BP ('the BP Facility') and
-- the issue of 150,616,669 Placing Shares at 3 pence per share
with certain existing and new investors and 8,419,498 Subscription
Shares also at 3 pence per share.
The consideration paid was lower than the carrying value of
assets acquired by $460,405 and management concluded this small
difference in fair value of assets and liabilities acquired be
allocated against the intangible assets. No goodwill has been
recognised on the acquisition.
$
Fair value of consideration transferred
Cash 11,500,000
Liabilities 3,259,090
Shares issued 3,933,276
18,692,366
Recognised amounts of identifiable
net assets
Intangible assets 2,951,159
Property, plant and equipment 10,922,273
------------
Total non-current assets 13,873,431
Inventory 100,162
Trade and other receivables 4,759,717
Cash at bank and in hand 46,543
Total current assets 4,906,422
Trade and other payables (25,336)
Lease liabilities (62,152)
------------
Total current liabilities (87,488)
Fair value of net assets acquired 18,692,366
9. TRADE AND OTHER RECEIVABLES
30 June 2020 30 June 2019 31 December 2019
$ $ $
Trade debtors 2,077,940 - -
Prepayments and deposit - 29,675 340,019
Other tax receivables 325,542 549,873 334,636
Crown disposal proceeds due 2,850,000 - 2,850,000
------------- ------------- -----------------
5,253,482 579,548 3,524,655
============= ============= =================
10. SHARE CAPITAL & SHARE PREMIUM
Allotted, issued, and fully paid:
30 June 2020
Share capital Share premium
No $ $
Ordinary shares of GBP0.01 each
Opening balance 345,613,985 4,564,787 9,912,988
Allotments:
28 Feb issue for business combination 114,503,817 1,463,002 2,457,843
28 Feb issue for cash 159,036,167 2,031,985 4,063,972
Share issue costs - - (444,804)
At 30 June 619,153,969 8,059,774 15,989,998
30 June 2019
Share capital Share premium
No $ $
Ordinary shares of GBP0.01 each
Opening balance 345,613,985 4,564,787 9,912,988
At 30 June 345,613,985 4,564,787 9,912,988
31 December 2019
Share capital Share premium
No $ $
Ordinary shares of GBP0.01 each
Opening balance 345,613,985 4,564,787 9,912,988
At 31 December 345,613,985 4,564,787 9,912,988
11. BORROWINGS AND DERIVATIVES
Summary of borrowing arrangements:
In February 2020, the Group entered into a prepaid commodity
swap arrangement for $8 million to part-finance the acquisition of
Rockhopper Egypt Pty Ltd. The funds will be repaid through 30
monthly repayments which are structured as a fixed notional amount
with variations based on movements in oil prices. Due to the price
structure, the arrangement includes an embedded derivative (a
forward contract). For financial reporting purposes, this must be
separately accounted for at fair value at each balance sheet date.
The balance of proceeds that did not relate to the derivative were
treated as the opening carrying amount of the loan which will then
be measured at amortised cost over its life, with finance charges
recognised to give an even return over the loan life and repayments
of capital allocated appropriately.
As at 30 June 2020, a fair value gain on derivative financial
instruments has been recognised as a result of oil price movements
in the period.
12. EVENTS AFTER THE BALANCE SHEET DATE
There have been no events since the Interim 30 June Balance
Sheet date that have had a material impact on the results
announced.
13. COPIES OF INTERIM REPORT
Copies of the interim report are available to the public free of
charge from the Company at United Oil & Gas Plc, 200 Strand,
London, WC2R 1DJ during normal office hours, Saturdays and Sundays
excepted, for 14 days from today and are available on the Company's
website at www.uogplc.com.
Glossary
Non-IFRS measures
The Group uses certain measures of performance that are not
specifically defined under IFRS or other generally accepted
accounting principles.
Cash-operating costs per barrel
Cash operating costs are defined as cost of sales less
depreciation, depletion and amortisation, and movements in
inventories. The cash operating costs are then divided by barrels
of oil equivalent produced to demonstrate the cash cost of
producing oil and gas from the Group's producing assets.
Period Period Year ended
ended 30 ended 31 December
June 2020 30 June 2019
2019
Unaudited Unaudited Audited
$ $ $
Cost of Sales 2,170,599 - -
Less:
( 1,071,405
Depreciation, depletion and amortisation ) - -
( 49,283
Inventories ) - -
----------------------- ---------------- ----------------
Cash Operating costs
* 1,049,911 - -
----------------------- ---------------- ----------------
Production (BOEPD)
* 1975 - -
----------------------- ---------------- ----------------
Cash Operating cost per BOE ($) 4.36 - -
----------------------- ---------------- ----------------
* From the completion of Rockhopper
Egypt acquisition to period end,
28(th) February 2020 to 30(th)
June 2020.
Management are hosting a call today at 09.30am for analysts. For
dial in details please contact Emily Hall at Camarco 020 3757 4996
or Emily.hall@camarco.co.uk
A shareholder call will take place at 12.00pm GMT today. Should
investors wish to participate in the event, please click on this
link to register https://bit.ly/2S9mfow
Confirmation email with the details of the dialling in process
will be sent to your email address.
A presentation will be made available today on
www.uogplc.com.
For further information please visit the Company's website at
www.uogplc.com or contact:
United Oil & Gas Plc (Company)
Brian Larkin, CEO brian.larkin@uogplc.com
Beaumont Cornish Limited (Nominated
Adviser)
Roland Cornish and Felicity Geidt +44 (0) 20 7628 3396
Optiva Securities Limited (Joint
Broker)
Christian Dennis +44 (0) 20 3137 1902
Cenkos Securities Plc (Joint Broker)
Joe Nally (Corporate Broking) +44 (0) 20 7397 8900
Derrick Lee and Pete Lynch +44 (0) 131 220 6939
Murray (PR Advisor) +353 (0) 87 6909735
Joe Heron jheron@murrayconsultants.ie
Camarco (Financial PR/IR)
Billy Clegg
Georgia Edmonds
James Crothers +44 (0) 203 757 4983
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