TIDMUOG
RNS Number : 7043A
United Oil & Gas PLC
27 September 2022
United Oil & Gas PLC / Index: AIM / Epic: UOG / Sector: Oil
& Gas
27 September 2022
United Oil & Gas Plc
("United" "the Group" or the "Company")
Half-year 2022 results
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 June 2022. A
shareholder call will take place this morning, details are
below.
Brian Larkin, CEO commented:
"The Company's balance sheet is the strongest it has ever been
and in the first half of the year we have continued an active work
programme across our portfolio of assets.
"We look forward to drilling both the ASH-4 development well and
ASF-1X exploration well on the Abu Sennan licence by the end of the
year. Successful outcomes on these wells have the potential to
significantly increase production levels, add reserves, and boost
the longer-term value of the Abu Sennan licence.
"United's portfolio consists of complementary assets that have
the potential to provide short, medium and long term upside to all
our stakeholders and provides a platform for growth. Abu Sennan in
Egypt continues to deliver production and strong cashflows, Maria
in the UK contains a discovery with a potential development
adjacent to some of the largest oil fields in the Central North
Sea, and Jamaica, where the Walton Morant licence offers access to
high impact exploration potential with a quality drill-ready
prospect."
1H 2022 Operational summary
-- 1H 2022 Group working interest production averaged 1,552 boepd
-- In Egypt
- Active drilling programme continues with three out of five
wells in the 2022 programme now drilled
- Successful ASD-2 development well brought onstream in March,
just six days after well completion.
- ASV-1X exploration well did not yield commercial volumes, but
encountered evidence for the migration of hydrocarbons de-risking
this element of the petroleum system in this area of the
licence
- AJ-14 development well encountered seven metres of net pay.
The operations programme continues with well stimulation expected
to deliver production rates in line with pre-drill estimates of c.
300 bopd gross (post period)
- The ASH-4 development well has commenced drilling, targeting
over 2 mmbbls gross in the prolific Alam El Bueib reservoir (post
period)
- Significant increase in the interpreted in-place volumes on
the ASH field following improvement to the subsurface imaging from
seismic reprocessing
- Zero - Lost Time Incident Frequency rate and Fatal Accident
Frequency rate. No environmental spills, Restricted Work Incidents
or Medical Treatment Incidents
-- In Jamaica, a two-year licence extension was granted and the
Initial Exploration Period will now run to 31 January 2024
-- In the UK, low cost technical studies have been completed
ahead of commissioning of an independent contingent resources
report on the Maria discovery
1H 2022 Financial summary
-- Group revenue for the first half of 2022 was $9.8m(1) (1H 2021:$10.2m)
-- Realised oil price of $105.5/bbl (1H 2021:$63.1/bbl)
-- Gross Profit (excluding Egypt tax gross up) $5.6m (1H 2021: $5.7m)
-- Cash Operating Expenses of $8.40/boe (1H 2021: $4.61/boe)
-- Profit After Tax of $2.4m (1H 2021: $2.0m)
-- Cash collections in the six-month period of $8.7m (1H 2021: $8.2m)
-- Repayments on BP Pre-payment facility of $1.6m (H1 2021: $2.4m)
-- Group cash balances at period end were $3.8m (1H 2021: $2.0m)
-- Group Cash balance as at 23/9/2022 of $4.7m
(1) 22% working interest net of Government Take
1H 2022 Corporate summary
-- Appointment of Peter Dunne as Chief Financial Officer, with effect from 5 May 2022
-- United terminated the sale and purchase agreement with
Quattro Energy Limited to sell its UK Central North Sea Licences;
P2480 (Zeta) and P2519 (Maria)
-- Agreement signed with Anasuria Hibiscus UK Ltd for $2.5m in
relation to the Crown milestone payment, with $1.5m received in 1H
2022 and the remainder due prior to year-end
-- Completion and receipt of proceeds in relation to the sale of
UOG Italia Srl to Prospex Energy for EUR2.2m plus EUR0.1m working
capital adjustment
-- Tom Hickey, non-executive director stepped down from the Board on 23 September 2022
Outlook
-- The full year 2022 average group working interest production
guidance range has narrowed to 1,450 - 1,500 boepd (vs 1,500-1,650
boepd previously guided). This is primarily due to rescheduling of
the 2022 drilling programme in order to incorporate the results of
seismic reprocessing prior to drilling the high impact ASH-4
development well which has now commenced drilling
-- In Egypt, drilling results from ASD-2 and the seismic
reprocessing over the ASH field are expected to have a positive
impact on year-end reserves
-- The drilling programme in Abu Sennan is continuing, and we
look forward to completing the ASH-4 development well, targeting
2.2 mmbbls gross recoverable resources from the prolific AEB
reservoir and the ASF-1X exploration well with a pre-drill target
of c. 8 mmbbls gross recoverable resources
-- In the UK, we are expecting to complete an independent
contingent resources report during Q4 2022 on the Maria discovery
ahead of assessing commercialisation options
-- In Jamaica, a number of companies are currently conducting detailed technical evaluations
-- United continues to evaluate M&A opportunities with a
strengthened balance sheet to support the growth strategy
CEO Statement
United's current portfolio now consists of three complementary
assets that have the potential to provide short, medium and long
term upside to our stakeholders and a solid platform for continued
growth. Abu Sennan in Egypt continues to deliver strong cashflows
and is central to our ability to fund activity across our other
assets. Maria in the UK contains a discovery with a potential
development that neighbours some of the largest oil fields in the
Central North Sea, and on our Jamaica licence, we have identified a
drill target which offers high impact exploration potential. The
business is well placed to benefit from rising commodity prices and
to play a responsible part towards energy security during the
global energy transition.
The Company's balance sheet is the strongest it has ever been,
with period end cash balances of $3.8m. We have good cashflows from
the Egypt production which is leveraged to the current high
commodity prices. We remain disciplined in our approach to capital
allocation to where it delivers the best returns to our
stakeholders and we continue to focus on G&A and operating
costs. In order to deliver longer term value from our Egyptian
portfolio we continue to invest free cash flow through
participation in the drilling programme. The work programme has
delivered good operational results which we believe will optimise
the continuing returns from the field for all stakeholders.
Safety will always be of the highest priority within the
business and we are pleased to report that during the period the
operator has achieved an excellent record of safety in Egypt and
has reported zero Lost Time Incidents, Medical Treatment Injury,
Restricted Work Injury, spills, fires or environmental
incidents.
We are pleased with the progress of the 2022 five-well Egyptian
drilling programme with drilling at the ASH-4 development well
currently underway. This well is targeting 2.2 mmbbls gross
recoverable resources from the prolific AEB reservoir which has
produced over 4 mmbbls to date on Abu Sennan. The final well in the
programme is the exploration well ASF-1X, which has a pre-drill
target of c. 8 mmbbls gross recoverable resources. Successful
outcomes on these wells have the potential to significantly
increase production levels, add reserves, and materially enhance
the longer-term value from the Abu Sennan licence.
The Maria licence in the UK contains a discovered resource near
existing producing fields and infrastructure, which in a success
case has the potential to be brought into production through a
low-cost development utilising existing infrastructure. We have
completed the low-cost work programme and will be initiating an
independent contingent resources report during Q4 2022 ahead of
assessing commercialisation options .
In Jamaica, we have completed a number of work programme items
that have further enhanced our understanding of the acreage and we
are encouraged by the number and quality of companies that are
currently conducting detailed technical evaluations of the
opportunity.
During the period we were delighted to welcome Peter Dunne to
the team as CFO bringing over 20 years' experience of working in
senior finance leadership roles including over 14 years in the
upstream oil and gas sector. Peter's strategic, financial, capital
markets and treasury expertise will be invaluable to the Company,
adding to its strength and depth as we continue to grow the
business. Peter took over from David Quirke, who stepped down from
his role as Executive Director and Chief Financial Officer in May
2022. David was instrumental in our asset acquisitions, divestments
and capital markets transactions and I thank him for his insight,
guidance and commitment and wish him the very best. Tom Hickey,
independent non-executive director stepped down from the Board on
23 September 2022 ahead of taking up an executive position at
Kenmare Resources. Tom's commitment and wealth of experience has
been invaluable during United's transition into a producing
company.
Finally, we remain focused on our strategy: to create value by
actively managing our existing assets whilst growing our business
through additional high-margin opportunities. Our growth strategy
is supported by four pillars;
- the strength of our assets;
- commitment to managing a responsible business;
- financial and risk management; and
- an experienced team
Brian Larkin, Chief Executive Officer, 26 September 2022
Operations Update
Egypt, Abu Sennan licence (22% working interest)
First half (1H) 2022 Group working interest production averaged
1,552 boepd net (1,290 bopd oil and 262 boepd gas). Group working
interest production to 31 August averaged 1,478 boepd net.
The full year 2022 average group working interest production
guidance range has narrowed to 1,450 - 1,500 boepd (vs 1,500-1,650
boepd previously guided).
This updated guidance is the result of changes to the 2022
drilling schedule, primarily the moving of the high-impact ASH-4
development well, from Q2 to Q3, to incorporate the results of
seismic reprocessing and ensure an optimised well location.
The first well in the 2022 Egyptian drilling campaign, the ASD-2
development well, continues to deliver strong production
performance. As a result, the proportion of high value oil
production from Abu Sennan is now expected to comprise 86% of the
full-year production mix, compared to 82% forecast at the start of
the year.
The results from both the drilling at ASD-2 and the seismic
reprocessing at the ASH field, are expected to have a positive
impact on Abu Sennan reserves when these are updated at the end of
2022.
2022 Egypt work programme
The 2022 approved work programme consists of five firm wells
(three development and two exploration wells) and eight
workovers.
The drilling programme commenced in late January 2022 with the
ASD-2 development well. The well encountered over 25.5 metres of
net pay and was brought onstream less than six days after
completion and has continued to produce at levels above initial
expectations.
The second well, the ASV-1X exploration well, spud on the 14
April. The well was put on test, and although no hydrocarbons
flowed, evidence for the migration of hydrocarbons observed in the
ASV-1X structure has helped de-risk this element of the petroleum
system in this area of the licence and will assist in optimising
future well targets.
The third well, the AJ-14 development well, spud on 21 June and
safely reached Total Depth in early August, ahead of schedule and
under budget. The AJ-14 well successfully encountered seven metres
of net pay in the primary Abu Roash-C ("ARC") target in line with
the higher end of the pre-drill estimates.
Following the installation of a down-hole pump, oil has been
recovered to the surface from the well, however consistent flow
rates have yet to be established, due to near-borehole formation
damage. Well stimulation has previously delivered successful
results on a number of Abu Sennan wells with a stimulation
programme expected to commence on AJ-14 shortly, subject to final
partner approval. As the AJ-14 well encountered good quality
reservoir facies in the ARC in the heart of the Al Jahraa field,
once the borehole issues have been addressed, commercial flow-rates
in line with the pre-drill expectations of c. 300bopd are expected
to be established.
The ASH-4 development well, the penultimate well in the 2022
drilling programme, has commenced drilling.
The completion of seismic reprocessing earlier in the year has
significantly improved the quality of the subsurface imaging over
the ASH field resulting in an optimised location for ASH-4, as well
as increasing in-place volumes by almost 30% on the ASH field (from
17 to 22 mmboe gross according to operator estimates). In addition,
it has helped identify a further six additional potential
development well locations, which will be considered for future
drilling programmes.
The ASF-1X exploration well is planned to be the fifth and final
well in the 2022 drilling campaign. This well will target un-risked
mean recoverable resources estimated by United at approx. 8 mmbbls
gross in multiple reservoirs to the south-west of the ASH field.
This is a key well, not just for the significant volumes that it is
targeting directly, but also for the potential to de-risk a number
of other similar structures in this portion of the licence.
We look forward to continuing the active Abu Sennan drilling
programme into 2023. With the exploration area of the licence
expiring in September 2023, we expect a balance of exploration
drilling, aiming to grow reserves and ensure all the prospective
areas of the licence are captured, and development drilling, aiming
to maintain and boost production. We anticipate finalising the 2023
drilling programme with the Abu Sennan JV partners in the coming
months.
Jamaica, Walton Morant licence (100% working interest)
The farm-out campaign continues to progress with a number of
parties currently conducting detailed technical evaluations. The
campaign has been supported by the two-year extension to the
Initial Exploration Period which was granted in January 2022, the
continuing technical work programme, and by the higher oil price
environment and improved industry sentiment that has been observed
since the start of 2022.
UK Central North Sea, P2519 (Maria) licence (100% working
interests)
Licence P2519 includes Blocks 15/18e and 15/19c and covers an
area of circa 225 km(2) . The licence contains the existing
Forties-aged Maria discovery, as well as additional Forties and
deeper prospectivity. United estimated as part of its licence
application that Maria holds circa 6 mmboe mid-case recoverable
resources. The low-cost technical studies commitments have been
completed, and an independent contingent resources report is
scheduled for completion in Q4 2022 before commercialisation
options are assessed.
Licence P2480, containing the Zeta prospect, was relinquished in
July. As an exploration target, Zeta did not offer the same
near-term potential as the Maria discovery and the decision was
taken not to progress into the next phase of the licence.
Financial Update
Highlights
1H 2022 1H 2021
Net average production 1,552 boepd 2,730 boepd
volumes (boepd)
------------ ------------
Oil price realised
($/bbl) $105.5 $63.10
------------ ------------
Revenue(1) $9.8m $10.2m
------------ ------------
Gross profit (2) $5.6m $5.7m
------------ ------------
Profit after tax $2.4m $2.0m
------------ ------------
Cash from operating
activities $4.8m $6.3m
------------ ------------
Capital expenditure $3.4m $4.3m
------------ ------------
Debt repayments $1.6m $2.4m
------------ ------------
Cash operating
cost per boe $8.40 $4.61
------------ ------------
(1) 22% working interest stated net of government take
(2) Gross profits excluding Egypt tax gross up
The Company continues to maintain a detailed and consistent
approach to capital discipline, with our financial and business
strategy based upon investment and safeguarding of capital to
optimally manager our assets and enhance shareholder value. In H1
2022, with the Company benefiting from the high commodity price
environment and have delivered a Gross profit of $5.6m, excluding
other income relating to tax entitlement volumes.
Group Production and Commodity Prices
Total group working interest production for H1 2022 was 1,552
boepd. The average realised oil price was $105.50/bbl and the
average realised gas price was $2.61/mmbtu.
Revenues
Group Revenues for the six month period ending 30 June 2022 was
$9.8m (1H 2021 $10.2m), with increased commodity prices offsetting
reduced average production. The entire revenue for the Group is
generated from our 22% interest in the Abu Sennan concession in
Egypt and is stated after accounting for government entitlements
under each of the production sharing contracts. The 1H 2022 average
realised oil price per barrel achieved was $105.5/bbl (representing
a discount to Brent of circa $2.37/bbl).
Group Operating costs, Depreciation, Depletion &
Amortisation ("DD&A"), and expenses
Cash Operating costs amounted to $8.40/boe (H1 2021: $4.61/boe).
Whilst the current higher commodity price environment has had a
subsequent inflationary impact on operating costs, the increase in
the per barrel cost is being primarily driven by the predominantly
fixed nature of the cost base, and the reduction in average daily
production in the period. DD&A charges on production and
development assets amounted to $1.8m for the six months to 30 June
2022.
Derivative Financial Instrument
In January 2022 the Group extended the final maturity date on
the BP facility from 30 September 2022 to 31 December 2023. This
amendment to the final maturity of the facility requires the Group
to recognise a fair value loss on the derivative of $1.5m in the
period, rather than recognising the charge over the remaining
maturity of the facility. No additional charge to the income
statement in relation to the fair value of the derivative will
arise over the remaining period of the facility if the prevailing
oil price remains above $70 per barrel. In the event oil drops
below $70 per barrel, a derivative gain will be recognised in the
income statement.
Exploration Costs
There were no exploration costs written off in the period.
Impairment
There were no impairment triggers in the period.
Taxation and other income
In Egypt under the terms of the Production Sharing Agreement all
corporate taxes are paid by EGPC who receive production
entitlements from the licence. The Egypt concession is subject to
corporate income tax at the standard rate of 40.55%. However,
responsibility for payment of corporate income taxes falls upon
EGPC on behalf of UOG Egypt Pty Ltd. The Group records a tax charge
with a corresponding increase in other income for the tax paid by
EGPC on its behalf. Due to accumulated tax- deductible balances
there was no tax due in the prior period.
Cash
US$'000
Opening Cash at 1 January
2022 397
Net cash inflow from operations 6,411
Movements in working capital (1,484)
Proceeds from Divestments 3,887
Exploration Expenditure (1,318)
Development Expenditure (2,138)
Repayment of Debt facility (1,633)
Exchange movements
and other (316)
Closing Cash at 30 June 2022 $3,806
The impact of recent global macroeconomic volatility has
resulted in both a devaluation of the Egyptian Pound and
restrictions on outgoing US Dollar transfers by the Central Bank of
Egypt, which have made it challenging to consistently schedule the
repatriation of cash from Egyptian operations.
We have continued to receive remittances from EGPC throughout
the period in both Egyptian pounds and USD, the former of which is
primarily used to fund our active drilling and operations programme
in country. The Group continues to actively manage its cash and
working capital position to support our business operations.
Capital Expenditure
The Group engages in an active work programme across our
portfolio of assets with forecast cash capital expenditure for the
full year 2022 of $7.7m of which $3.4m was incurred in 1H 2022,
including $2.9m on the drilling programme in Egypt and workover
activity in addition to $0.5m on Jamaica and UK assets.
Events today
Management is hosting a shareholder call at 1100 BST today.
Investors that wish to participate in the event, please click on
this link to register https://bit.ly/3Sg95Di
Confirmation email with the details of the dialling in process
will be sent to your email address.
A presentation will be available today on www.uogplc.com.
S
This announcement contains inside information for the purposes
of Article 7 of Regulation 2014/596/EU which is part of domestic UK
law pursuant to the Market Abuse (Amendment) (EU Exit) regulations
(SI 2019/310).
Glossary:
bopd - barrels of oil per day | boepd - barrels of oil
equivalent per day
mmbbls - million barrels of oil | m- million
Enquiries
United Oil & Gas Plc (Company)
Brian Larkin, CEO brian.larkin@uogplc.com
Sharan Dhami, Head of IR sharan.dhami@uogplc.com
& ESG
Beaumont Cornish Limited
(Nominated Adviser)
Roland Cornish | Felicity
Geidt +44 (0) 20 7628 3396
Tennyson Securities (Joint
Broker)
Peter Krens +44 (0) 020 7186 9030
Optiva Securities Limited
(Joint Broker)
Christian Dennis +44 (0) 20 3137 1902
Camarco (Financial PR)
Georgia Edmonds | Emily +44 (0) 20 3757 4983 uog@camarco.co.uk
Hall | Sam Morris
Notes to Editors
United Oil & Gas is a high growth oil and gas company with a
portfolio of low-risk, cash generative production, development,
appraisal and exploration assets across Egypt, UK and a high impact
exploration licence in Jamaica.
The business is led by an experienced management team with a
strong track record of growing full cycle businesses, partnered
with established industry players and is well positioned to deliver
future growth through portfolio optimisation and targeted
acquisitions.
United Oil & Gas is listed on the AIM market of the London
Stock Exchange. For further information on United Oil and Gas
please visit www.uogplc.com
CONSOLIDATED INCOME STATEMENT
Period ended 30 June 2022
Note Period Period Year ended
ended ended 31 December
30 June 30 June 2021
2022 2021
Unaudited Unaudited Audited
$ $ $
Revenue 9,782,239 10,213,771 19,228,698
Other income 3,360,093 1,940,574
Cost of sales 4 (4,172,012) (4,538,696) (8,911,815)
Gross profit 8,970,320 5,675,075 12,257,457
Administrative expenses:
------------------------------------ ----- ------------ ------------ --------------
Other administrative expenses (1,188,964) (960,888) (1,763,362)
Impairment of intangible
assets (290,609) - (624,546)
Impairment of divestment
receivable - - (394,686)
Exploration and New Venture
write offs (122,793) (236,832) (377,934)
Foreign exchange (losses)
/ gains (158,346) (127,135) (356,850)
Gain on disposal of non-current
assets held for sale - - 118,651
------------------------------------- ----- ------------ ------------ --------------
Operating profit 7,209,578 4,350,220 8,858,730
Fair value loss on derivative
financial instruments (1,457,545) (1,540,451) (1,527,250)
Interest expense (10,435) (787,987) (1,395,504)
------------ ------------ --------------
Profit before taxation 5,741,598 2,021,782 5,935,976
Taxation (3,360,093) - (1,861,882)
------------ ------------ --------------
Profit for the financial
period attributable to the
Company's equity shareholders 2,381,505 2,021,782 4,074,094
Earnings per share from continuing
operations expressed in cents
per share:
Basic 3 0.37 0.32 0.64
Diluted 3 0.35 0.30 0.62
------------ ------------ --------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Period Period Year ended
ended ended 31 December
30 June 30 June 2021
2022 2021
Unaudited Unaudited Audited
$ $ $
Profit for the financial
period 2,381,505 2,021,782 4,074,094
Foreign exchange difference (241,389) 32,513 (209,164)
---------- ---------- --------------
Profit for the financial
period attributable to
the Company's equity shareholders 2,140,116 2,054,295 3,864,930
CONSOLIDATED BALANCE SHEET
At 30 JUNE 2022
Note 30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
$ $ $
NON-CURRENT ASSETS
Intangible assets 5 6,104,920 7,424,024 4,970,091
Property, plant and equipment 6 18,261,905 16,065,215 17,990,809
24,366,825 23,489,239 22,960,900
Non-current assets / assets
in disposal groups held for
sale - - 2,561,250
24,366,825 23,489,239 25,522,150
CURRENT ASSETS
Inventory 272,341 111,093 145,570
Trade and other receivables 7 6,334,151 7,484,842 7,702,022
Cash and cash equivalents 3,806,121 2,036,635 397,308
----------- ----------- -----------
10,712,613 9,632,570 8,244,900
TOTAL ASSETS 34,779,438 33,121,809 33,767,050
=========== =========== ===========
CAPITAL AND RESERVES ATTRIBUTABLE
TO EQUITY HOLDERS OF THE
COMPANY
Share capital 8 8,416,182 8,416,182 8,416,182
Share premium 8 16,215,361 16,215,361 16,215,361
Share-based payment reserve 2,376,659 2,101,982 2,247,465
Merger reserve (2,697,357) (2,697,357) (2,697,357)
Translation reserve (799,493) (316,427) (558,104)
Retained earnings 3,052,862 (1,380,955) 671,357
----------- ----------- -----------
TOTAL EQUITY 26,564,214 22,338,786 24,294,904
CURRENT LIABILITIES
Trade and other payables 3,923,213 4,512,347 5,422,734
Derivative financial instruments 1,229,802 1,942,972 1,346,044
Borrowings 9 1,413,983 3,075,515 2,422,212
Current tax payable - 138,084 57,246
Lease liabilities 28,517 21,358 83,368
----------- ----------- -----------
6,595,515 9,690,276 9,331,604
NON-CURRENT LIABILITIES
Borrowings 9 709,753 661,741 -
Decommissioning Provisions 274,262 - -
Derivative financial instruments 611,199 336,605 -
Lease liabilities 24,495 94,401 24,494
----------- ----------- -----------
1,619,709 1,092,747 24,494
Liabilities associated with
assets in disposal groups
held for sale - - 116,048
TOTAL LIABILITIES 8,215,224 10,783,023 9,472,146
TOTAL EQUITY AND LIABILITIES 34,779,438 33,121,809 33,767,050
----------- ----------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Period ended 30 June 2022
Share-
based
Share Share payment Retained Translation Merger Total
capital premium reserve earnings reserve reserve equity
$ $ $ $ $ $ $
For the period ended
30 June 2022
Balance at 1 January
2022 8,416,182 16,215,361 2,247,465 671,357 (558,104) (2,697,357) 24,294,904
Profit for the period - - - 2,381,505 - - 2,381,505
Foreign exchange
difference - - - - (241,389) - (241,389)
---------- ----------- ---------- ------------ ------------ ------------ -----------
Total comprehensive
income for the period - - - 2,381,505 (241,389) - 2,140,116
Contributions by
and distributions
to owners:
Share based payments - - 129,194 - - - 129,194
Total contributions
by and distributions
to owners - - 129,194 - - - 129,194
---------- -----------
Balance at 30 June
2022 (Unaudited) 8,416,182 16,215,361 2,376,659 3,052,862 (799,493) (2,697,357) 26,564,214
---------- ----------- ---------- ------------ ------------ ------------ -----------
For the period ended
30 June 2021
Balance at 1 January
2021 8,138,619 16,047,975 1,922,090 (3,402,737) (348,940) (2,697,357) 19,659,650
Profit for the period - - - 2,021,782 - - 2,021,782
Foreign exchange
difference - - - - 32,513 - 32,513
---------- ----------- ---------- ------------ ------------ ------------ -----------
Total comprehensive
income for the period - - - 2,021,782 32,513 - 2,054,295
Contributions by
and distributions
to owners:
Share based payments - - 179,892 - - - 179,893
Shares issued 277,563 167,385 - - - - 444,949
Total contributions
by and distributions
to owners 277,563 167,385 179,892 - - - 624,841
---------- -----------
Balance at 30 June
2021 (Unaudited) 8,416,182 16,215,361 2,101,982 (1,380,955) (316,427) (2,697,357) 22,338,786
---------- ----------- ---------- ------------ ------------ ------------ -----------
For the period ended
31 December 2021
Balance at 1 January
2021 8,138,619 16,047,975 1,922,090 (3,402,737) (348,940) (2,697,357) 19,659,650
Profit for the period - - - 4,074,094 - - 4,074,094
Foreign exchange
difference - - - - (209,164) - (209,164)
Total comprehensive
income for the year
Contributions by
and distributions
to owners:
Shares issued 277,563 167,386 - - - - 444,949
Share-based payments - - 325,375 - - - 325,375
Balance at 31 December
2021 (Audited) 8,416,182 16,215,361 2,247,465 671,357 (558,104) (2,697,357) 24,294,904
CONSOLIDATED STATEMENT OF CASHFLOWS
Period ended 30 June 2022
Period ended 30 June 2021 Period ended 30 June 2021 Year ended 31 December
2021
Unaudited Unaudited Audited
$ $ $
Cash flows from operating
activities
Profit before taxation 5,741,598 2,021,782 5,935,976
Adjustments for:
Share-based payments 129,194 179,893 325,375
Amortisation 1,858,201 2,308,395 4,107,685
Depreciation 1,839 2,029 3,985
Fair value loss on
derivatives 1,457,545 1,540,451 1,527,250
Impairment, decommissioning
and NV costs 413,403 - 624,546
Gain on non-current assets /
disposal groups held for
sale 57,926 - (118,651)
Gain on disposal of
property, plant and
equipment - (25,683) (25,683)
Interest expense 10,435 787,987 1,395,504
Foreign exchange movements 158,344 127,135 356,850
Tax paid (3,417,339) - (1,940,574)
-------------------------- -------------------------- --------------------------
6,411,146 6,941,989 12,192,263
(Increase) / decrease in
inventories (126,771) (75,364) (109,841)
Decrease / (increase) in
trade and other receivables (132,129) (2,030,535) (2,276,303)
(Decrease) / increase in
trade and other payables (1,224,657) 1,516,232 (697,544)
-------------------------- -------------------------- --------------------------
Net cash from operating
activities 4,927,589 6,352,322 9,108,575
Cash flows from investing
activities
Cash from disposal of
business 3,887,275 - 160,404
Purchase of property, plant
& equipment (2,138,247) (3,093,236) (3,607,826)
Payments for intangible
exploration assets (1,318,314) (1,257,093) (2,121,050)
Net cash used in investing
activities 430,714 (4,350,329) (5,568,472)
Cash flows from financing
activities
Issue of ordinary shares
(net of expenses) - 444,949 444,949
Repayments on swap financing
arrangement (710,824) (2,292,540) (3,518,359)
Payments on oil price
derivatives (922,286) (132,632) (1,805,086)
Capital payments on lease (46,195) (22,159) (68,914)
Interest paid on lease (3,888) (7,984) (14,421)
-------------------------- -------------------------- --------------------------
Net cash used in financing
activities (1,683,193) (2,010,366) (4,961,831)
Increase / (decrease) in
cash and cash equivalents 3,675,110 (8,373) (1,421,728)
Cash and cash equivalents at
beginning of period / year 397,308 2,188,902 2,188,902
Effects of exchange rate
changes (266,297) (143,894) (369,866)
-------------------------- -------------------------- --------------------------
Cash and cash equivalents at
end of period / year 3,806,121 2,036,635 397,308
========================== ========================== ==========================
Notes to the financial information
Period ended 30 June 2022
1. GENERAL
The interim financial information for the period to 30 June 2022
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 2021,
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
2022.
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 2021 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 2021,
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
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.
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. Careful portfolio management and divestment of
non-core assets in Italy and the UK Central North Sea been
monetised in the first half of 2022 and aligned with positive cash
receipts from EGPC significantly strengthen the cash position at
mid-year and cashflow projections remain strong for the second half
of 2022.
The directors remain confident 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 26
September 2022 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 from hydrocarbon sales represents the Group's share of
sales from its producing interest in Egypt, at the point in time
when ownership of the oil has passed to the buyer. This includes
adjustments to invoiced quantities for entitlement share
adjustments calculated on a licence by licence basis that arise in
the period The Group does not have performance obligations
subsequent to delivery.
Other Income - Tax Entitlement Volumes
Under the concession agreements in Egypt, income tax due on
taxable profit is paid on the Group's behalf by EGPC. To achieve
this through the agreements, the Group notionally receive a greater
share of hydrocarbon production in excess of the Group's
entitlement interest share of production equal to the amount
required to cover the tax payable. The oil is produced and sold on
the Group's behalf and proceeds remitted to the tax authorities.
This income does not fall within the definition of revenue and is
therefore shown as other income with an equal and opposite tax
charge recorded through current taxation.
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 amortised
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 on a prospective
basis 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.
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 financial instruments.
Embedded derivative financial 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.
3. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Basic and diluted loss per share
Period ended Period ended Year ended
30 June 2022 30 June 31 December 2021
2021
Profit for the period ($) 2,381,505 2,021,782 4,074,094
Weighted average number of ordinary shares for the purposes of
basic earnings per share(number) 644,803,969 630,039,328 637,482,325
Dilutive shares 37,200,000 38,575,000 24,871,644
Weighted average number of ordinary shares for the purposes of
diluted earnings per share(number) 682,003,969 668,814,328 662,353,969
Basic earnings per share from continuing operations (cents per
share) 0.37 0.32 0.64
Diluted earnings per share from continuing operations (cents
per share) 0.35 0.30 0.62
============== ============= ==================
4. COST OF SALES
30-Jun-22 30-Jun-21 31-Dec-21
$ $ $
Production Operating costs 2,360,166 2,280,289 4,906,713
Depreciation, depletion and
amortisation 1,811,846 2,258,407 4,005,102
4,172,012 4,538,696 8,911,815
========== ========== ==========
5. INTANGIBLE ASSETS
Intangible assets comprise the Group's exploration and
evaluation projects which are pending determination.
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.
6. PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment assets primarily consist of the
group's producing assets in the Abu Sennan concession in Egypt,
plus some office assets and right of use leased office space.
Management reviews the property, plant and equipment for
indications of impairment at each balance sheet date in accordance
with IAS 36. No indications of impairment have been identified at
either 30 June 2022 or 31 December 2021.
7. TRADE AND OTHER RECEIVABLES
30 June 2022 30 June 2021 31 December 2021
$ $ $
Trade receivables 1,545,991 234,629 2,257,609
Prepayments and deposit 6,739 7,735 7,361
Accrued income 3,732,373 4,257,664 2,865,287
Other tax receivables 49,048 134,814 71,765
Crown disposal proceeds due 1,000,000 2,850,000 2,500,000
------------- ------------- -----------------
6,334,151 7,484,842 7,702,022
============= ============= =================
8. SHARE CAPITAL & SHARE PREMIUM
Allotted, issued, and fully paid:
30 June 2022
Share capital Share premium
No $ $
Ordinary shares of GBP0.01 each
Opening balance 644,803,969 8,416,182 16,215,361
At 30 June 644,803,969 8,416,182 16,215,361
30 June 2021
Share capital Share premium
No $ $
Ordinary shares of GBP0.01 each
Opening balance 625,153,969 8,138,619 16,047,975
Allotments:
Share issued for cash (exercise of warrants) 19,650,000 277,563 167,385
At 30 June 644,803,969 8,416,182 16,215,361
31 December 2021
Share capital Share premium
No $ $
Ordinary shares of GBP0.01 each
Opening balance 625,153,969 8,138,619 16,047,975
Allotments:
Share issued for cash (exercise of warrants) 19,650,000 277,563 167,385
At 31 December 644,803,969 8,416,182 16,215,361
9. BORROWINGS AND DERIVATIVES
Summary of borrowing arrangements:
In February 2020, the Group entered into a prepaid commodity
swap arrangement for $8 m to part-finance the acquisition of
Rockhopper Egypt Pty Ltd. The funds were to 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.
In January 2022, the Group refinanced the swap arrangement, with
the remaining balance to be repaid through a further 24 monthly
repayments which are structured as a fixed notional amount with
variations based on movements in oil prices. The refinanced swap
arrangement is a substantial modification and has therefore been
accounted for as a termination of the old debt and commencement of
a new arrangement. This has again been accounted for as a loan at
amortised cost with an embedded derivative which is separately
accounted for at fair value.
As at 30 June 2022, a fair value loss on derivative financial
instruments has been recognised as a result of the refinancing
arrangement.
10. EVENTS AFTER THE BALANCE SHEET DATE
There have been no events since the Balance Sheet date that have
any material impact on the half year results announced.
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 30 31 December
June 2022 June 2021 2021
Unaudited Unaudited Audited
$ $ $
Cost of Sales 4,172,012 4,538,696 8,911,815
Less:
Depreciation, depletion and amortisation (1,811,846) (2,258,407) (4,005,102)
Inventories - - 109,841
------------ ------------------- --------------
Cash Operating costs
* 2,360,166 2,280,289 5,016,554
------------ ------------------- --------------
Production (BOEPD)
* 1,552 2,730 2,327
------------ ------------------- --------------
Cash Operating cost per BOE ($) 8.40 4.61 5.90
------------ ------------------- --------------
EBITDAX
EBITDAX is a non-IFRS measure that represents earnings
(exclusive of Egypt income relating to tax entitlement volumes)
before Interest, tax, depreciation, amortisation, exploration
expense and impairment.
Exploration expense excluded as write off is one-off in nature
and not normal annual activity.
Presented to help users understand the cash profitability of the
Group.
Period Period Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
Unaudited Unaudited Audited
$ $ $
Operating Income 3,849,486 4,350,221 6,918,155
Depreciation, Depletion & Amortisation 1,858,201 2,308,395 4,107,685
Exploration/NV, Impairment & Decommissioning
Expense 413,403 236,832 1,002,480
-------------- ------------------- --------------
EBITDAX 6,121,090 6,895,448 12,028,320
-------------- ------------------- --------------
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