TIDMUOG
RNS Number : 6156X
United Oil & Gas PLC
27 April 2023
United Oil & Gas PLC / Index: AIM / Epic: UOG / Sector: Oil
& Gas
27 April 2023
United Oil & Gas plc
("United" or "the Company")
Final audited results for the year ended 31 December 2022
United Oil & Gas PLC (AIM: "UOG"), the full-cycle oil and
gas company with a portfolio of production, development,
exploration and appraisal assets is pleased to announce its audited
results for the year ended 31 December 2022. A shareholder and an
analyst call will take place this morning, details are below.
Brian Larkin, CEO, commented:
" 2022 was filled with extensive corporate and operational
activity across our portfolio, all completed with zero LTI's,
TRIR's and environmental incidents. In Egypt it was a challenging
year for United, with five wells drilled and completed in addition
to a number of workovers, delivering mixed results following an
exceptional 100% drilling success rate during 2020 and 2021. Abu
Sennan remains integral to our portfolio and going forward activity
on the licence will focus on maintaining and extending long-term
production rates to generate operational cashflows for many years
to come. In Jamaica, the farm-out efforts of this high impact
exploration licence continued with the addition of a new advisor to
support the process. In the UK post year-end, an agreement was
signed for the conditional sale of the Maria discovery, which is in
line with our strategy to actively manage our portfolio.
"Our work programme in Egypt in the first half has started
strongly, with a focus on development drilling and workovers. We
were delighted with the result of the ASH-8 well which is producing
at stable rates and look forward to the results of the ASD-3 well
which spud in March. For the remainder of the year, newsflow will
centre around the results from our ongoing Egyptian drilling
programme, the expected completion of the sale of Maria and further
progress on the Jamaica farm-out.
"We remain committed to our growth ambitions with a focus for
new ventures in the Greater Mediterranean and North and West
African regions, where the Board and management's experience and
relationships can be leveraged. As such, United is well placed to
execute our growth strategy, with a continued focus on disciplined
capital allocation to generate the best returns for shareholders.
"
Operational summary
-- Group full-year 2022 production averaged 1,312 boepd net
(1,137 bopd oil and 175 boepd gas) in line with revised 2022
guidance of 1,300-1,325 boepd
-- 2022 Egypt work programme completed, consisting of three
development wells, two exploration wells, and eight workovers
-- Safety and the environment: Zero lost time incident frequency
rate. No environmental spills, restricted work incidents or medical
treatment incidents
-- In Jamaica, the completion of additional technical studies
that were agreed as part of the licence extension have provided
additional positive support to the farm-out process
-- 2023 Egypt work programme has commenced positively, with the
ASH-8 development coming onstream in March ahead of schedule and
above expectations (post period)
-- The second well in the 2023 drilling campaign, the ASD-3
development well, spud at the beginning of April 2023 (post
period)
Financial summary
-- Group revenue for full year 2022 was $15.8m (1) (2021 : $19.2m)
-- The average realised oil price per barrel from Egypt achieved
was $96.1/bbl ( 2021 : $68.9/bbl)
-- Gross Profit of $12.9m (2021 : $12.3m)
-- Profit After Tax $2.3m (2021 : $3.6m)
-- Cash Collections of $16.9m (2021: $17.3m)
-- Group Cash balances as at 31 December 2022 were $1.4m with
Net Debt of $1.5m (FY 2021: Cash balances $0.4m, Net Debt
$3.9m)
-- BP Acquisition facility to be fully repaid in 2023
-- Capital expenditure for the year was $8.6m (FY 2021 : $6.9m)
-- Egyptian receivables of $4.4m (FY 2021 : $5.1m)
(1) 22% working interest net of Government Take
Corporate summary
-- Appointment of Peter Dunne, as Chief Financial Officer, effective from 5 May 2022
-- Amounts due from Anasuria Hibiscus UK Ltd for Crown disposal
fully satisfied in the year ($2.5m)
-- 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
-- Directors' purchases increase total directors' shareholding
to 5.64% of issued share capital as at year-end
-- Tom Hickey, non-executive director stepped down from the Board on 23 September 2022
-- A binding Asset Purchase Agreement signed for the conditional
sale of UK Central North Sea Licence P2519 containing the Maria
discovery for a total consideration of up to GBP5.7 million (post
period)
-- United intends to seek the requisite shareholder approvals at
this year's Annual General Meeting to approve a limited share
buyback programme, which will be subject to completion of the Maria
sale and market conditions (post period)
-- The Company initiated a full review of its G&A
expenditure in Q4 2022 and has commenced a programme to reduce
these costs by up to 15% in 2023 compared to 2022 (post period)
Outlook
-- Q1 2023 oil production averaged 841 bopd net, with an exit
rate for the quarter of 1,275 bopd net
-- The first well in the 2023 campaign, the ASH-8 development
well, came onstream in March at rates above expectations and six
weeks ahead of the anticipated start-up
-- The ASH-8 result, coupled with the continuing development
drilling in the first half of the year has the potential to have a
positive impact on production levels for 2023, and actual quarterly
production information will be provided in H2
-- 2023 Egypt work programme consists of two firm wells, and at
least eight workovers, with the potential to add additional wells
and workover activity to the programme later in the year:
- ASH-8 Development well: Onstream in March 2023
- ASD-3 Development well: Commenced drilling on 1 April
- AJ14 workover: well drilled in 2022 is now onstream
- The potential for additional drilling in 2023 will be
finalised with JV partners once the results of the ASD-3 well are
available
-- Farm-out campaign for the Walton Morant licence, Jamaica,
continues to be a focus with the appointment of Energy Advisors
Group ("EAG"), a Houston-based M&A advisory group, targeting US
companies and investment funds. Process is ongoing with indicative
offers due Q2 2023
-- Group cash capital expenditure for the full year is
forecasted to be approx. $5m, funded from existing operations, with
circa $4.5m to be invested in Egypt and up to $0.5m across the
other assets in the portfolio
-- ESG focus on evaluating emissions baseline in Egypt with
operator and contributions to social investment programmes
-- Continued evaluation of new opportunities in the Greater
Mediterranean area and North and West Africa regions to grow the
business in line with the strategy
Events today
Management is hosting a call today at 0930 BST for analysts. For
dial in details please contact uog@camarco.co.uk
A shareholder call will take place at 1130 BST today. Investors
that wish to participate in the event, please click on this link to
register https://bit.ly/3oyhzMH
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).
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
| Asia Szusciak +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 Hall +44 (0) 20 3757 4983 |
|Sam Morris uog@camarco.co.uk
Notes to Editors
United Oil & Gas is a full-cycle 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
CHAIR'S STATEMENT
FOR THE YEARED 31 DECEMBER 2022
Dear Shareholders,
Introduction
2022 has been another active year for the Company between our
operations in Egypt, the progression of our farm-out campaign for
the high-impact Walton Morant licence in Jamaica, and post year end
the announcement of the conditional sale of our Maria licence.
Although average production on our non-operating position in Egypt
is down in 2022 compared to 2021, it continues to generate positive
cashflows, and we see good potential from the existing fields to
maintain and potentially increase production for many years to
come. I feel we remain well placed to capitalise on new
opportunities which we continue to explore in the Greater
Mediterranean and North and West African regions and that we have a
strong management and technical team with the capability to realise
our growth strategy.
In Jamaica we completed various technical studies which lent
support to the farm-out process which continued throughout 2022. We
have seen growing momentum in the level of interest from parties
that possess both the technical and financial capacity to add value
to the project and discussions are ongoing with a number of
potential partners. Business development opportunities across the
full cycle continued to be offered to and assessed by the team in
the course of 2022, and while a number of such opportunities are
still under consideration only the most attractive ones consistent
with our strategy and investment criteria will be taken forward.
The war in Ukraine caused uncertainty in oil and gas markets with
prospective sellers and buyers of assets having difficulty in
forecasting prices with enough certainty to complete transactions.
There are positive signs now that commodity markets are settling
down which should lead to more opportunities being concluded.
Strategy
We are a full-cycle oil and gas company with the operational
cashflow to support our existing business. We aim to create value
by actively managing our existing assets whilst growing our
business through additional high-margin opportunities in the
Greater Mediterranean and North and West African area.
Post year end
The key event since the year end has been the signing of an
agreement for the sale of the licence containing the Maria
discovery for a consideration of up to circa $7m (GBP5.7m), which
is expected to complete in May this year. This sale was at a
materially higher maximum consideration than we had agreed in 2021,
reflecting the increased value of the asset following work by our
technical team.
The proceeds from this sale will be used to further our new
venture activities and if market conditions are right to fund a
limited share buyback programme for which we intend to seek
shareholder approval at our forthcoming AGM.
The company remains focussed on reducing costs and allocating
capital where it delivers the best returns. In anticipation of the
Maria sale and the reduction of our operational footprint in 2023
we carried out a full review of our G&A expenditure in late
2022, as a result of which we announced in our Trading and
Operations update, on 26 January 2023, a programme to reduce our
G&A by 15% across all categories of expenditure. This programme
is now well underway.
Board and governance
David Quirke stepped down as CFO in June 2022 to pursue
interests outside of the industry. We are very grateful to David
for the commitment and professionalism he brought to the role and
wish him every success in his future endeavours. David was replaced
as CFO by Peter Dunne who comes with a wealth of professional and
industry experience and has very quickly taken to the role with
energy and enthusiasm. In September 2022, Tom Hickey stepped down
as an independent non-executive Director to take up an executive
role outside the oil and gas industry.
An internal Board and Committee evaluation was carried out
post-year end, the findings, and conclusions from which will be
reported in the Annual Report. Despite only having two
non-executives at the moment, I believe that we continue to have a
good balance of technical, financial, commercial and ESG experience
on the Board, that all Committees continue to function effectively
and that the non-executive directors give appropriate support and
challenge to the executives both at and outside of Board and
Committee meetings.
Dialogue with shareholders
Shareholders' views on the company, its strategy, remuneration
policy and indeed all aspects of our business and operations are
very important to the Board and we welcome every opportunity to
engage. I can be reached via the Company Secretary at
info@uogplc.com.
Conclusion and outlook for 2023
2022 was another very active but challenging year for the
Company in the development and pursuit of our strategy and I would
like to record my thanks once again to our executives and all our
staff for their continued commitment and energy throughout the
year.
We have a full-cycle portfolio, the cash flow to support our
operations, a farm-out process in Jamaica is continuing and a
variety of new venture opportunities under consideration. We look
forward positively to the year ahead.
Graham Martin
Chair
CEO'S STATEMENT
FOR THE YEARED 31 DECEMBER 2022
2022 was filled with operational activity across our portfolio,
all completed with zero LTI's, TRIR's and environmental incidents.
In Egypt, five wells were drilled and completed in addition to a
number of workovers. In Jamaica, the farm-out efforts have
continued to be a focus with the addition of a new advisor, and in
the UK post year end an agreement was put in place for the
conditional sale of the Maria discovery.
Operationally, it was a challenging year for United, delivering
mixed results from our Egyptian drilling campaign, following an
exceptional 100% drilling success during 2020 and 2021. The JV has
executed a number of targeted drilling campaigns since 2020 and
having assessed the production and exploration results from these,
our expectation is that operational activity at Abu Sennan will now
focus more on maintaining and extending long term production rates
to generate operational cashflows throughout the period of the
licence. We continue to strive to execute our strategy to grow our
business and to drive business performance against a global
backdrop that highlighted the importance of energy security both at
home and across the locations in which we operate.
Our place in the global energy transition
Reliable access to clean, affordable energy supplies is required
as a fundamental building block to the delivery of sustainable
development of economies and society as we transition to a less
carbon intensive energy mix. What is required is responsible,
transparent, and safe investment in traditional sources of energy
given the absolute need for clean, safe, reliable and affordable
energy supply to communities around the world. We see a place for
United to responsibly and safely develop oil and gas resources to
aid global economic development, contribute to energy security and
the energy transition whilst delivering value for all our
stakeholders.
In 2022 we have also seen increased volatility in global
commodity prices with oil prices increasing following the invasion
of Ukraine. This, combined with other macro supply risks, resulted
in the Brent benchmark price reaching a peak of nearly $125 a
barrel in March, with the Group realising on average of 96/bbl for
our production in the period.
The fundamentals of the business and our business model remain
resilient against this backdrop of oil price volatility,
geopolitical shocks and the macroeconomic challenges that have
impacted Egypt. Our portfolio of assets across the energy life
cycle mitigates risks; in Egypt our producing asset provides
important cashflows; in Jamaica the exploration opportunity has the
potential to be transformative for both United and the region; and
in the UK our track record of adding value to and realising value
from assets means we can look to invest further to grow the
business.
Financial resilience
Revenue for the Company was approx. $16m (2021: $19m) generated
from Abu Sennan, which benefited from the continued high oil price
partially offsetting the impact of lower production in the second
half of 2022. In the year we also continued to pay down the BP
facility which will be fully repaid during 2023. There is potential
in 2023 to consider refinancing the asset given the long term
cashflow forecast to be generated from Abu Sennan. The Egyptian
pound devalued by circa 60% against the USD in 2022 but since the
beginning of 2023 following the announced agreement with the IMF,
we have seen improved USD liquidity and a recommencement of regular
payments from EGPC. The Group remains focussed on the optimisation
of the cost base and as announced earlier in the year, we are
undertaking a Company wide review of G&A targeting a reduction
of 15% from 2022.
Abu Sennan - maintaining and extending long term production
Abu Sennan remains integral to our portfolio, offering a
low-cost onshore operating environment, production and cashflows
for the business which has shown to be resilient even in a period
of prolonged oil price volatility. In addition, the flexibility of
the work programme means that we can tailor our capital allocation
as needed.
Production in 2022 averaged 1,312 boepd net compared to 2,327
boepd in 2021. This decrease reflects the substantial decline in
production that occurred during H2 2021 as water broke through at
the ASH Field, as well as expected decline from the existing
well-stock during 2022, partially offset by additional production
from drilling activity and workovers. In 2022 United and its Joint
Venture ("JV") partners executed another active work programme of
five wells and a number of workovers. Although the two exploration
wells have not delivered on their pre-drill potential, two of the
three development wells came on production in 2022 with the third
one commencing production following remedial works carried out in
2023. Abu Sennan has been producing since 2012 and has generated
material cashflows to United since we acquired it in 2019. As the
fields mature, the operational activities will focus more on
maintaining and extending long term production rates to generate
operational cashflows for many years to come.
Jamaica - focus on accelerating the farm-out process
In the latter part of 2022 United engaged with Energy Advisors
Group ("EAG"), a Houston based advisory company to work alongside
Envoi. EAG has the potential to open up new pools of interest in
North America, and the United team met with a number of potential
parties in Houston at the beginning of 2023, to market the Jamaican
opportunity. The farm-out of our high impact exploration licence
with 2.4 billion barrels of un-risked mean prospective oil resource
remains a key focus with a timetable for receipt of indicative
offers due in Q2 2023.
Portfolio Management - acquire and create value
Acquiring assets, adding value and monetising them in excess of
our investment has always been part of United's DNA. Licence P2519,
containing the Maria Discovery was awarded to United by the OGA in
December 2020. Following a low-cost work programme conducted by the
Company's technical team, adding immense value, United has agreed
to a conditional sale of 100% of our interest in this licence for a
total consideration of up to $7m (GBP5.7m).
Environmental and Social
Energy security, transition and climate change have again been a
focus this year, especially in Egypt during COP27 which was held in
Sharm El Sheikh. United and JV partners continue to work with EGPC
to identify and measure emissions, and initiatives to reduce them.
We are pleased to report that the JV has had another year of zero
LTI's and environmental incidents and the community investment
programmes have focused on youth education, mentoring and
empowerment.
Looking ahead - in good shape to execute our strategy
There are a number of catalysts in 2023 that have the potential
to provide a material increase in the Group's value. During the
first half of 2023, we look forward to closing the conditional sale
of the Maria licence and to updating the market on progress on the
Jamaica farm-out. The work programme in Egypt commenced in January.
ASH-8, the first well in the 2023 drilling campaign encountered 22
meters of net pay and was brought on stream at nearly 3,000 bopd
gross six weeks earlier than anticipated. The ASD-3 development
well commenced drilling at the beginning of April, and we look
forward to providing updates on this well in due course.
We remain committed to our growth ambitions with a focus of new
ventures in the Greater Mediterranean and North and West African
regions, where the Board's experience and relationships can be
leveraged. We enter 2023 in a good place to execute our strategy,
and a business focussed on disciplined capital allocation to
generate the best returns. I would like to take this opportunity to
thank all our stakeholders for their support and our employees for
their hard work, commitment and tenacity.
Brian Larkin
Chief Executive Officer
REVIEW OF OPERATIONS
T here was a significant amount of operational activity for
United in 2022, and it was very pleasing to once again be able to
report zero LTI's, TRIR's and environmental incidents. In Egypt,
five wells were drilled and completed in addition to a number of
workovers. In Jamaica, the farm-out efforts continued, with the
addition of a new advisor, and in the UK an agreement is in place
for the conditional sale of the Maria discovery.
Egypt (22% non-operated working interest, operated by Kuwait
Energy Egypt)
The Abu Sennan licence is located in the prolific Abu Gharadig
Basin in the Western Desert, onshore Egypt, circa 200km west of
Cairo. United acquired its 22% working interest in the licence in
April 2020. Since that time, we have seen production and reserves
growth, and although we are now entering a more mature phase of the
licence life cycle, the assets continue to offer low-risk
development and exploration opportunities. There are eight
producing fields within the licence, the largest of which are the
Al Jahraa, ASD, and ASH fields.
Production
Group full-year 2022 production averaged 1,312 boepd net (1,137
bopd oil and 175 boepd gas) (2021: 2,327 boepd). The 2021 figures
are somewhat skewed by the high production that was achieved in H1
before the impact of water breakthrough at the ASH wells that
occurred in Q3 2021. Higher value oil production from the asset in
H2 2021 averaged 1,514 bopd net, compared to 1,137 bopd achieved in
2022, reflecting decline from the existing well-stock partially
offset by additional production from drilling activity - the main
contributor being the ASD-2 well which came onstream in March 2022.
The 2022 average production achieved is in line with the revised
guidance that was issued in November of last year.
2022 Abu Sennan work programme
The 2022 work programme consisted of three development wells,
two exploration wells and eight workovers. The drilling programme
achieved mixed results, with production added from ASD-2 and ASH-4,
but with disappointing results from the two exploration wells. A
number of workovers which were planned for late 2022 were delayed
due to operational issues and are now expected to be completed in
H1 2023.
Development drilling
The drilling programme commenced with the ASD-2 development
well. The well encountered over 25.5 metres of net pay and was
brought onstream in March 2022 at rates above expectations and has
continued to outperform projections throughout the year, with over
400,000 barrels now produced from the well. The AJ-14 development
well found 7 metres of good quality net pay in the Abu Roash-C
("ARC") target, in line with the higher end of the pre-drill
estimates . However, due to near-borehole formation damage,
consistent flow was not established. Workover activity required to
bring this well onstream was completed in April 2023, with
production commencing in late April. The ASH-4 development well
encountered 20 metres of net pay in the Alam El Bueib reservoir in
an area that appears to be at least partially separated from the
previously producing wells. The well was brought onstream in
November 2022, and despite a steep initial decline, production from
the well had stabilised by early 2023.
Exploration drilling
Two of the larger, but higher risk, prospects in the Abu Sennan
exploration portfolio were drilled in 2022. The ASV-1X well spud in
April, and although there were some encouraging signs indicating
the presence of hydrocarbons, the well did not flow on test. The
ASW-1X well did not encounter hydrocarbons in any of the multiple
pre-drill targets and was plugged and abandoned at the beginning of
2023.
2023 work programme
The proposed 2023 Egypt work programme consists of two firm
wells and at least eight workovers. In 1H 2023 the focus will be on
development drilling and in optimising production from existing
wells through low-cost interventions. The first development well,
ASH-8, commenced drilling at the beginning of the year and
encountered 22 meters of net pay. This well was brought onstream in
March, with an initial stabilised rate of circa 2,980 bopd and 2.64
mmscf/d gross (circa 656 bopd and 0.58 mmscf/d net) achieved on a
32/64" choke. The second development well, ASD-3, spud at the
beginning of April and is aiming to build on the success achieved
with ASD-2 in 2022. In parallel to the development drilling,
workovers in Q1 2023 have targeted enhanced production from
multiple reservoirs across a number of wells. Although we have seen
some delays to the uplift in production expected from these
workovers due to a combination of permitting and mechanical issues,
the activity performed on both AS-5 and AJ-14 is now contributing
positively to production from the asset. Additional potential
clearly remains in the targeted reservoirs, and work is continuing
to ensure that we maximise the production potential from all of the
existing wells.
In line with previous years, where there has been flexibility in
the drilling programmes, we expect any additional drilling in 2023
to be finalised with partners once we have seen the results of both
of the development wells. There remains a portfolio of additional
prospects within the Abu Sennan licence that continues to benefit
from the ongoing seismic reprocessing efforts. The potential value
that could be added by future exploration drilling continues to be
considered carefully by the JV partners.
1H 2023 production guidance of 700-900 bopd net was provided in
January 2023. Unlike previous years, where production has comprised
circa 15% gas, the guided range is based on 100% oil production, as
with the installation of pumps at the ASH Field and expected
recompletions, the lower-value gas production in 1H 2023 was
expected to be negligible.
Oil production in Q1 averaged 841 bopd net. With the ASH-8 well
coming onstream in March at rates above expectations and six weeks
ahead of the anticipated start-up, the exit rate from the quarter
was 1,275 bopd net, with an additional 170 boepd of gas.
The continuing development drilling in the first half of the
year has the potential to have a positive impact on production
levels in H2, and actual quarterly production information will be
provided in H2.
Jamaica, Walton Morant licence (100% working interest)
The Walton Morant licence is a 22,400km(2) offshore exploration
block situated to the south of the island of Jamaica. The licence
benefits from excellent data coverage, including 2,250km(2) of 3D
data, and this has helped define multiple plays, and material
prospects within the acreage. Over 2.4 billion barrels of
recoverable unrisked potential has been identified on the licence,
including the 400mmbbl drill-ready Colibri prospect. United is
currently running a farm-out campaign to attract a partner to
accompany us in drilling Colibri - and potentially unlock the huge
value that lies in this under-explored area.
The farm-out campaign remains a key focus as we seek to move
this potentially transformational project forward within the
current phase of our licence term, which expires at the end of
January 2024. Energy Advisors Group ("EAG") have been engaged
alongside our existing advisors, Envoi Ltd, with the aim of
accessing capital from US companies and investment funds. There are
a number of companies currently evaluating the opportunity and a
deadline for indicative offers has been set for Q2 2023.
UK Central North Sea
Maria Discovery, Licence P2519 (100% working interest)
Licence P2519 containing the Maria discovery covers an area of
circa 225 km(2) in the Outer Moray Firth Basin of the UK Central
North Sea (CNS).
In January 2023, the Company announced that it had entered into
an Asset Purchase Agreement ("APA") with Quattro Energy Limited
("Quattro") to sell Licence P2519 for a maximum consideration
including contingent bonus payments of up to GBP5.7 million (circa
US$7.0 million).
The divestment of the Licence reflects United's strategy to
focus its new ventures programme on opportunities in the Greater
Mediterranean and North and West African regions whilst remaining
opportunistic for value accretive transactions outside of these
core areas.
UK Onshore
Waddock Cross, Licence PL090 (26.25% working interest,
non-operator )
Licence PL090 containing the shut-in Waddock Cross Field is
situated circa 11km to the east of Dorchester, in the onshore
Wessex Basin, UK.
Recent work that has been completed by the operator, Egdon
Resources U.K. Limited, has clearly shown the commercial viability
of a phased development of Waddock Cross. Work continues on
securing planning and permitting consents, finalising the site
facilities and well designs, ahead of a potential 2024 drilling
campaign. Although Waddock Cross remains non-core to United, there
is clearly value within this asset, and United will continue to
evaluate all the alternatives for realising this potential.
Health, Safety and Environment
While United had no field activity in 2022 in which we were the
operator, we continued to work with our Joint Venture partners and
as part of the Joint Operating Company (JOC) in Egypt. It is very
pleasing to be able to report that our operator in Egypt maintained
another year of zero Fatalities, Medical Treatment Cases,
Restricted Work Injuries and a zero rate for Lost Time Injury
frequency and Total recordable incidents frequency or environmental
spills. There were two minor incidents reported from Abu Sennan -
one involving property damage, and the other a small fire that was
extinguished by the emergency team. Both of these were fully
investigated to provide lessons learnt and to allow mitigation
measures to be put in place.
Group reserves and resources
Country Egypt Jamaica UK Total
Asset Abu Walton Morant Maria Waddock Cross
Sennan
Working Interest 22% 100% 100% 26.25%
Net 2P Reserves
(mmboe) 2.3(1) 2.3
Net 2C Resources
(mmboe) 10.2(5) 0.4(4) 10.6
Net Prospective
Resources (mmboe) 8.4(3) 2,421(2) 2.3(3) 2,431.7
==================== ======== ============== ======== ============== ========
(1) ERCE reserves report, April 2023. Reserves of 2.3 MMboe are
Net Working Interest and do not represent the Net Entitlement share
of future production legally accruing under the terms of the
development and production contract
(2) GaffneyCline & Associates report, December 2020;
Summation of Walton Morant Prospective Resources completed by
United
(3) Figures based on United interpretation and calculations
(4) ERCE Competent Persons Report, December 2019
(5) GaffneyCline & Associates report, January 2023;
Converted to mmboe by United
FINANCIAL REVIEW
This Financial Review provides an overview of the Group's
Financial Performance for the year end 31 December 2022 and of
United's financial position as at that date.
The Groups operations have continued to be both highly cash
generative and profitable in the year, with Operating Cashflow of
$8.7m (2021: $9.1m) and EBITDAX of $13.2m (2021: $13.6m) being
generated. This strong cashflow and profitability has enabled the
Group to fund an extensive $7.0m Capital Programme in the year to
maximise the long-term value of the Group's assets whilst at the
same time continuing to pay down the Group's debt, with the current
BP facility to be fully repaid in 2023. The Group's financial
performance in the year has been impacted by the reduction in Net
Average production compared to the prior year which has resulted in
a 18% reduction in revenue.
Financial results summary 2022 2021
Net Average Production volumes (boepd) 1,312 2,327
Oil Price Realised ($/bbl) 96.10 68.90
Gas Price Realised ($/mmbtu) 2.63 2.63
Revenue (1) $15.8m $19.2m
Gross Profit $12.9m $12.3m
Cash operating cost per boe (2) $10.3 $5.9
Exploration costs written off $0.7m $0.4m
Profit after Tax $2.3m $3.6m
Basic profit per share (cents) 0.36 0.64
Capex $8.6m $6.9m
EBITDAX (2) $13.3m $13.6m
Cashflow from Operating Activities $8.7m $9.1m
======================================== ======== =======
(1) 22% interest net of government take
(2) See Non-IFRS measure
Group Production and Commodity Prices
Total group working interest production for 2022 was 1,312
boepd, a decrease of 44% for the year (2021: 2,327 boepd) This
decrease reflects the substantial decline in production that
occurred during H2 2021 as water broke through at the ASH Field, as
well as expected decline from the existing well-stock during 2022,
partially offset by additional production from drilling activity
and workovers. The Group's average realised oil price was $96/bbl
representing an increase of 39% on the prior year, and the fixed
gas price was $2.63/mmbtu. Group revenue for the year totalled
$15.8m representing a reduction of 18% on the prior year with the
increase in commodity prices being offset by the impact of
declining production in the year. Revenues from the Abu Sennan
concession are stated after accounting for government entitlements
under the production sharing contract. Crude oil from Abu Sennan is
sold as Western Desert Blend and the average discount to Brent was
$4/bbl.
Group Operating Costs
Total Group cash operating costs were $4.9m (2021: $4.9m). The
cash operating cost per barrel has increased to $10.3/boe in 2022
(2021: $5.9/boe) with this increase primarily relating to the
increase in variable costs due to higher fuel costs coupled to a
reduction in production compared to the prior year.
Group Depreciation, Depletion and Amortisation (DD&A)
Group DD&A associated with producing and development assets
amounted to $3.3m (2021: $4m). DD&A per boe is currently
$6.72/boe.
Administrative Expenses
Administrative Expenses for the year totalled $3.6m (2021: $3.8m
restated) Adjusting for the non-cash items under IFRS 2 Share Based
Payment and IFRS 16 Leases, the administrative expense is $3.2m
(2021:$3m). Included in Administrative expenses are foreign
exchange losses of $1.1m (2021: $0.4m) with the increase being due
primarily to realised losses on the devaluation of the Egyptian
pound versus the USD during the year.
As previously announced in January 2023, the Group is currently
implementing a number of initiatives to further reduce General and
Administration costs whilst ensuring continuity of operational
capability. Following a detailed review the Group's cost base a
programme is now in place for 2023 that is targeting a 15%
reduction compared to 2022.
Divestments
During 2022 the Group completed the sale of UOG Italia Srl to
Prospex Energy for a total of $2.5m. In addition the Group entered
into a settlement agreement with Anasuria Hibiscus UK relating to
the Crown milestone payments for a total of $2.5m, with all
payments being settled in the period.
Post year end, in January 2023, the Company signed an agreement
with Quattro Energy for the conditional sale of UK Central North
Sea (UK CNS) Licence; P2519 for a consideration of up to GBP5.7m
(c. $7m). This maximum consideration consists of a c$3m payment on
completion with an additional c$1.1m due on approval of the Field
Development plan expected in late 2023. Additional contingent
payments are due upon reaching gross production thresholds from the
field. The exploration asset value of P2519 remains capitalised as
Intangible, as no agreement was in place prior to year end, and
therefore no disposal costs or profits on disposal have been
recognised in 2023. The carrying value of the Maria licence in the
Balance Sheet as at 31 December 2022 is $1.2m.
Derivative financial instrument
On January 31 2022 the Company and BP extended the maturity of
its pre-payment facility that was put in place to support the
acquisition of Rockhopper Egypt in 2020, to 31 December 2023 to
create further financial flexibility for the Company. The new terms
provide downside protection by effectively hedging a volume of
barrels at $70/bbl per month through to December 2023. As at 31
December 2022, an unrealised loss of $1.5m has been recognised as a
result of oil price movements in the period.
Taxation and Other Income
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.
Profit/loss post tax
The profit for the year from continuing operations was $2.3m
(2021: restated: $3.6m).
Cash flow
Net cashflow from continuing operations amounted to $8.7m (2021:
$9.1m), a small decrease of 3% compared to 2021. Cost control and
liquidity management both served to protect the cashflows.
Capital investment
Total capital expenditure on continuing operations for the year
amounted to $8.6m (2021: $6.9m), with $2.4m incurred on the three
successful development wells, $1.4m on two exploration wells, and
$3.2m on other development and infrastructure projects in Abu
Sennan. The remaining $1.4m was invested in other assets across the
remainder of the portfolio.
The Group will continue to focus on capital discipline with 2023
capital investment largely directed at maximising value from the
Group's producing assets. The Group's cash capital expenditure for
the full year is forecasted to be approx.$5m, fully funded from
existing operations, with circa $4.4m to be invested in Egypt and
up to $0.6m across the other assets in the portfolio.
Balance Sheet
Intangibles Assets increased during the year to $7.4m (2021:
$5m). Additions for the year amounted to $2.6m in Egypt, $0.8m
Jamaica and $0.4m on UK assets. The Group has written off $0.5m on
unsuccessful exploration drilling costs in Egypt.
The movement in Property, Plant and Equipment was $2.5m which
represents cost in relation to three development wells, additional
facilities and workovers on the Abu Sennan producing assets in
Egypt. Additions were $5.7m in total, with a DD&A charge of
$3.3m on a unit of production basis.
Trade and other receivables amounted to $4.4m and included $0.9m
of accrued income on oil and gas sales. Borrowings at year end were
$2.8m.
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 Chair's statement.
United regularly monitors its business activities, financial
position, cash flows and liquidity through the preparation and
review of detailed forecasts. Scenarios and sensitivities are also
regularly presented to the Board, including changes in commodity
prices and in production levels from the existing assets, plus
other factors which could affect the Group's future performance and
position. A base case forecast has been considered which uses
budgeted commitments and prevailing forward curve assumptions for
oil prices. The key assumptions and related sensitivities include a
"Reasonable Worst Case" ("RWC") sensitivity where the Board has
considered a scenario with significant aggregated downside,
including a delay in the payment of receivables in Egypt, a
reduction in forecasted revenue of 12% and an increase in forecast
capital expenditure in Egypt by 15%. The RWC incorporates a
scenario whereby the sale of Maria P2519 l to Quattro does not
complete in the period. Under the combined RWC, the Group forecasts
there will be sufficient resources to continue in operational
existence for the foreseeable future.
The likelihood of all these downside sensitivities taking place
simultaneously and lasting for the entire forecast period is
considered to be remote. Under such a RWC scenario, we have
identified appropriate mitigating actions, including the deferral
of additional uncommitted capital expenditure, seeking a
restructuring of debt arrangements and adjustment of the Group cost
base, which would be available to us and have been demonstrated as
effective strategies in previous periods of low oil prices. Our
business in Egypt remains robust given cash operating costs of less
than $11/boe, flexible drilling contracts and downside price
protection on our hedged volumes and gas contracts that are fixed
price in nature. There are limited capital commitments in the other
assets in our portfolio. The forecasts outlined above show that the
Group will have sufficient financial headroom for the 12 months
from the date of approval of the 2022 Accounts. Based on this
analysis, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. Therefore, they continue to use the
going concern basis of accounting in preparing the annual Financial
Statements.
Financial Outlook
United's financial strength is founded on our long-term approach
to prudently managing capital to generate value. United has a
streamlined portfolio of assets which are funded from operating
cashflow. We have taken significant steps to strengthening our
balance sheet and generate investment flexibility, via the
completion of two of our asset divestments, extending the maturity
on our pre-paid swap facility with the ongoing support of our debt
provider BP and the conditional sale of the Maria P2519 licence to
Quattro which is due to be completed in May. The measures that we
have taken and the value of our stable low-cost production
benefitting from the prevailing stronger commodity price
environment ensures that our balance sheet provides a stable
platform for growth from both organic and inorganic
opportunities.
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2022
Restated (note 3)
Notes 2022 2021
$ $
Revenue 4 15,831,237 19,228,698
Other revenue 4 5,181,458 1,940,574
Cost of sales 5 (8,143,910) (8,911,815)
Gross profit 12,868,785 12,257,457
Administrative expenses:
---------------------------------------------------------------------------- ------ ------------ ------------------
Other administrative expenses (1,773,154) (1,763,363)
Impairment of intangible assets (483,611) (624,546)
Impairment of receivable - (394,686)
New Venture write offs (282,275) (377,934)
Foreign exchange (losses) / gains (1,106,614) (356,850)
Loss on non-current assets held for sale - (351,162)
Operating profit 6 9,221,131 8,388,916
Finance expense 7 (1,690,896) (2,922,754)
Profit before taxation 7,530,235 5,466,162
Taxation 8 (5,181,458) (1,861,882)
Profit for the financial year attributable to the Company's equity
shareholders 2,348,777 3,604,280
Earnings per share from continuing operations
expressed in pence per share: 9
Basic 0.36 0.57
============ ==================
Diluted 0.36 0.54
============ ==================
Consolidated Statement of Comprehensive Income
Restated
(note
3)
2022 2021
$ $
Profit for the financial year 2,348,777 3,604,280
Foreign exchange gains / (losses) 337,866 (209,164)
Total comprehensive income for the financial
year attributable to the Company's equity
shareholders 2,686,643 3,395,116
Consolidated Balance Sheet as at 31 December 2022
Restated
(note
3)
Notes 2022 2021
Assets $ $
Non-current assets
Intangible assets 10 7,385,326 4,970,091
Property, plant and equipment 11 20,368,299 17,990,809
27,753,625 22,960,900
Current assets
Inventory 13 268,859 145,570
Trade and other receivables 14 4,469,493 7,702,021
Derivative financial instruments 120,168 -
Cash and cash equivalents 15 1,345,463 397,308
6,203,983 8,244,899
Assets in disposal groups held for sale 12 - 2,091,437
------------ ------------
6,203,983 10,336,336
Current liabilities:
Trade and other payables 17 (3,709,667) (5,422,734)
Derivative financial instruments - (1,346,044)
Borrowings (2,964,225) (2,422,212)
Lease liabilities (83,985) (83,368)
Current tax payable - (57,246)
------------ ------------
(6,757,877) (9,331,604)
Liabilities associated with assets in
disposal groups held for sale - (116,048)
Non-current liabilities:
Provisions (233,630) -
Lease liabilities (7,356) (24,494)
------------ ------------
(240,986) (24,494)
Net assets 26,958,745 23,825,090
============ ============
Equity and liabilities
Capital and reserves
Share capital 16 8,839,679 8,416,182
Share premium 16 16,798,823 16,215,361
Share-based payment reserve 2,547,688 2,247,465
Merger reserve (2,697,357) (2,697,357)
Translation reserve (1,008,137) (558,104)
Retained earnings 2,478,049 201,543
Shareholders' funds 26,958,745 23,825,090
============ ============
Consolidated Statement of Changes in Equity
Share-based
Share payments Retained Translation Merger
capital Share premium reserve earnings reserve reserve Total
$ $ $ $ $ $ $
For the year
ended 31
December 2022
Balance at 1
January 2022 8,416,182 16,215,361 2,247,465 201,543 (558,104) (2,697,357) 23,825,090
Profit for the
year - - - 2,348,777 - - 2,348,777
Foreign
exchange
difference - - - - 337,866 - 337,866
Total
comprehensive
income - - - 2,348,777 337,866 - 2,686,643
Foreign
exchange
adjustment
arising on
change of
parent
company
functional
currency to
USD 283,278 523,376 53,517 (72,272) (787,899) - -
Shares issued 140,219 60,086 - - - - 200,305
Share-based
payments
(Note 17) - - 246,707 - - - 246,707
Balance at 31
December 2022 8,839,679 16,798,823 2,547,688 2,478,049 (1,008,137) (2,697,357) 26,958,745
---------- -------------- -------------- ------------ -------------- -------------- -----------
For the year
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
year
(restated,
note 1) - - - 3,604,280 - - 3,604,280
Foreign
exchange
difference - - - - (209,164) - (209,164)
Total
comprehensive
income - - - 3,604,280 (209,164) - 3,395,116
Shares issued 277,563 167,386 - - - - 444,949
Share-based
payments - - 325,375 - - - 325,375
Balance at 31
December 2021 8,416,182 16,215,361 2,247,465 201,543 (558,104) (2,697,357) 23,825,090
---------- -------------- -------------- ------------ -------------- -------------- -----------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER
Restated (note 3)
2022 2021
$ $
Cash flow from operating activities
Profit for the financial year before tax 7,530,235 5,466,162
Share-based payments 246,707 325,375
Depreciation & Amortisation 3,309,940 4,111,670
Fair value loss on derivatives 1,562,467 1,527,250
Impairment of intangible assets 483,611 624,546
Loss on non-current assets / disposal groups held for sale - 325,479
Interest expense 128,429 1,395,504
Foreign exchange movements 1,106,614 356,850
Tax paid (5,238,704) (1,940,574)
9,129,299 12,192,262
Changes in working capital
Increase in inventory (123,289) (109,841)
Decrease / (increase) in trade and other receivables 732,529 (2,276,303)
Decrease in trade and other payables (1,032,853) (697,544)
------------ ------------------
Cash inflow from operating activities 8,705,686 9,108,574
Cash outflow from investing activities
Proceeds received on disposal of non-current assets 4,887,275 160,404
Purchase of property, plant & equipment (5,610,924) (3,607,826)
Spend on exploration activities (2,972,201) (2,121,050)
Net cash used in investing activities (3,695,850) (5,568,472)
Cash flow from financing activities
Issue of ordinary shares net of expenses 200,305 444,949
Repayments on oil swap financing arrangement (1,452,118) (3,518,359)
Payments on oil price derivatives (1,522,892) (1,805,086)
Capital payments on lease (90,096) (68,914)
Interest paid on lease (86,669) (14,421)
Net cash used in financing activities (2,951,470) (4,961,831)
Net increase / (decrease) in cash and cash equivalents 2,058,366 (1,421,729)
Cash and cash equivalents at beginning of financial year 397,308 2,188,903
Effects of exchange rate changes (1,110,211) (369,866)
Cash and cash equivalents at end of financial year 1,345,463 397,308
1. Statutory Accounts
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 December 2022 or
2021, but is derived from those accounts. The Auditor has reported
on those accounts, and its reports were unqualified and did not
contain statements under sections 498(2) or (3) of the Companies
Act 2006.
The statutory accounts for 2022 will be delivered to the
Registrar of Companies following publication.
While the financial information included in this preliminary
announcement has been prepared in accordance with UK-adopted
International Accounting Standards ("framework"), this announcement
does not itself contain sufficient information to comply with the
framework. The Company expects to distribute the full financial
statements that comply with UK-adopted International Accounting
Standards by 30 June 2022.
2. Principal Accounting Policies
Basis of consolidation
The financial statements for the year ended 31 December 2022
incorporate the results of United Oil & Gas plc ("the Company")
and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
All intra-Group transactions, balances, income and expenses are
eliminated in full on consolidation. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
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 Director's Report.
United regularly monitors its business activities, financial
position, cash flows and liquidity through the preparation and
review of detailed forecasts. Scenarios and sensitivities are also
regularly presented to the Board, including changes in commodity
prices and in production levels from the existing assets, plus
other factors which could affect the Group's future performance and
position. A base case forecast has been considered which uses
budgeted commitments and prevailing forward curve assumptions for
oil prices. The key assumptions and related sensitivities include a
"Reasonable Worst Case" ("RWC") sensitivity where the Board has
considered a scenario with significant aggregated downside,
including a delay in the payment of receivables in Egypt, a
reduction in forecasted revenue of 12% and an increase in forecast
capital expenditure in Egypt by 15%. The RWC incorporates a
scenario whereby the sale of Maria P2519 to Quattro does not
complete in the period. Under the combined RWC, the Group forecasts
there will be sufficient resources to continue in operational
existence for the foreseeable future.
The likelihood of all these downside sensitivities taking place
simultaneously and lasting for the entire forecast period is
considered to be remote. Under such a RWC scenario, we have
identified appropriate mitigating actions, including the deferral
of additional uncommitted capital expenditure, seeking a
restructuring of debt arrangements and adjustment of the Group cost
base, which would be available to us and have been demonstrated as
effective strategies in previous periods of low oil prices. Our
business in Egypt remains robust given cash operating costs of less
than $11/boe, flexible drilling contracts and downside price
protection on our hedged volumes and gas contracts that are fixed
price in nature. There are limited capital commitments in the other
assets in our portfolio. The forecasts outlined above show that the
Group will have sufficient financial headroom for the 12 months
from the date of approval of the 2022 Accounts. Based on this
analysis, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. Therefore, they continue to use the
going concern basis of accounting in preparing the annual Financial
Statements.
New and amended International Financial Reporting Standards
adopted by the Group
The Group has adopted the following standards, amendments to
standards and interpretations which are effective for the first
time this year. The impact is shown below:
New/Revised International Financial Reporting Effective Date: Annual periods UKEB Impact on
Standards beginning on or after: adopted the Group
Various Amendments to -- IFRS 3 Business 1 January 2022 Yes No material impact
Combinations; -- IAS 16 Property,
Plant and Equipment; --
IAS 37 Provisions, Contingent
Liabilities and Contingent Assets --
Annual Improvements 2018-2020
------------------------------------- -------------------------------------- -------- -------------------
International Financial Reporting Standards in issue but not yet
effective
At the date of authorisation of the consolidated financial
statements, the IASB and IFRS Interpretations Committee have issued
standards, interpretations and amendments which are applicable to
the Group. For the next reporting period, applicable International
Financial Reporting Standards will be those endorsed by the UK
Endorsement Board (UKEB).
Whilst these standards and interpretations are not effective
for, and have not been applied in the preparation of, these
consolidated financial statements, the following could potentially
have a material impact on the Group's financial statements going
forward:
New/Revised International Financial Reporting Standards Effective Date: Annual periods beginning on or UKEB
after: adopted
IAS 12 Amendments to IAS 12: Deferred Tax relating to 1 January 2023 No
Assets and Liabilities arising from a Single
Transaction
------------------------------------------------ ------------------------------------------------ ---------
IAS 1 Amendments to IAS 1: Classification of 1 January 2023 No
Liabilities as Current or Non-current and
Classification
of Liabilities as Current or Non-current
------------------------------------------------ ------------------------------------------------ ---------
New / revised International Financial Reporting Standards which
are not considered to potentially have a material impact on the
Group's financial statements going forwards have been excluded from
the above.
New/Revised International Financial Reporting Standards Effective Date: Annual periods beginning UKEB
on or after: adopted
IFRS 17 Insurance contracts (and subsequent 1 January 2023 Yes
amendments to IFRS 17)
----------------------------------------- ------------------------------------------ ----------
IAS 8 Definition of accounting estimate 1 January 2023 Yes
(amendment to IAS 8))
----------------------------------------- ------------------------------------------ ----------
IFRS 16 Lease liability in a sale and leaseback 1 January 2024 No
(amendment to IFRS 16)
----------------------------------------- ------------------------------------------ ----------
IAS 1 Disclosure of accounting policies 1 January 2023 Yes
(amendments to IAS 1 and IFRS Practice
Statement 2)
----------------------------------------- ------------------------------------------ ----------
IFRS 10 and IAS 28 Sale or contribution of assets between No confirmed date no
an investor and its associate or joint
venture
----------------------------------------- ------------------------------------------ ----------
Management anticipates that all relevant pronouncements will be
adopted in the Group's accounting policies for the first period
beginning after the effective date of the pronouncement. New
standards, interpretations and amendments not listed above are not
expected to have a material impact on the Group's financial
statements.
3. Restatements
3(a) Restatement of prior year financial statements: correction
of error in accounting for the disposal of UOG Italia
The results for the year to 31 December 2021 have been restated
to reflect final costs associated with the Italian disposal within
the group in the calculation of the loss in disposal of UOG Italia
in 2021, and a corresponding error in the amounts reported as
non-current assets held for sale at 31 December 2021. In the
Balance Sheet the adjustment has been restated and reclassified
from non- current to current assets.
The error has been corrected by restating each of the affected
line items for the previous period as follows:
2021 Decrease 2021
Restated
$ $ $
Balance sheet (extract)
Assets held for sale 2,561,250 (469,813) 2,091,437
Net assets 24,294,903 (469,813) 23,825,090
Retained earnings 671,356 (469,813) 201,543
Total equity 24,294,903 (469,813) 23,825,090
Income statement (extract)
Profit/(loss) on non-current assets
held for sale 118,651 (469,813) (351,162)
Operating profit 8,858,729 (469,813) 8,388,916
Profit before taxation 5,935,975 (469,813) 5,466,162
Profit for the financial year 4,074,093 (469,813) 3,604,280
========== ========= ==========
The restatement affecting profit also affects the statement of
changes in equity. Basic and diluted earnings per share, and the
note reconciling the tax charge, have also been restated.
3(b) Effect of the change in functional currency of the Company
on the Group's financial statements
On 1 January 2022, the Company's functional currency changed
from GBP to USD reflecting the fact that USD mainly influences both
sales prices and costs. This has resulted in a restatement of
equity items in the consolidated balance sheet at the date of the
functional currency change.
The quantitative effect on the components of equity in the
consolidated financial statements is as follows:
2022
$
Increase / (decrease)
Share capital 283,278
Share premium 523,376
Share-based payment reserve 53,517
Retained earnings (72,272)
Translation reserve (787,899)
----------------------
-
----------------------
4. Segmental reporting
Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for
allocating resources, assessing the performance of the operating
segment and making strategic decision, has been identified as the
Board of Directors.
The Group operates in four geographic areas - the UK, Europe and
greater Mediterranean, Latin America and Egypt. The Group's revenue
from external customers and information about its non-current
assets (other than financial instruments, deferred tax assets and
post-employment benefit assets) by geographical location are
detailed below.
2022
Latin
$ UK & EU America Egypt Total
Revenue - - 15,831,237 15,831,237
Other revenue - - 5,181,458 5,181,458
Non-current assets 1,340,605 5,228,625 21,184,395 27,753,625
---------- ---------- ----------- -----------
2021
UK & Latin
$ EU America Egypt Total
Revenue - - 19,228,698 19,228,698
Other revenue - - 1,940,574 1,940,574
Non-current assets 579,403 4,460,303 17,921,194 22,960,900
-------- ---------- ----------- -----------
Other Revenue
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 receives a
greater share of hydrocarbon production in excess or Group's
entitlement share of the production equal to the amount required to
cover the tax payable. The oil is produced and sold on the Group's
behalf by EGPC, who discharge the Group's tax liability. This
income is shown as other revenue and an equal and opposite tax
charge recorded through the current taxation.
5. Cost of sales
2022 2021
$ $
Production costs 4,930,038 4,906,713
Depreciation, depletion & amortisation 3,213,872 4,005,102
========== ==========
8,143,910 8,911,815
========== ==========
6. Operating Profit
2022 2021
$ $
Operating profit is stated after charging:
Depreciation:
* Owned assets 3,219,080 4,009,427
* Right of use leased assets 88,382 98,258
Amortisation 2,478 3,985
Share based payments 246,707 325,375
Foreign exchange losses 1,106,614 356,850
Fees payable to the Company's auditors for the audit of the annual financial
statements 90,000 70,000
7. Finance expense
2022 2021
$ $
Fair value loss on loan & derivatives 1,562,467 1,527,250
Effective interest on borrowings 41,760 1,381,083
Interest expense on lease liabilities 86,669 14,421
---------
1,690,896 2,922,754
========= =========
8. Taxation
2022 2021
$ $
Profit/(Loss) before tax 7,530,235 5,466,162
----------- -----------
Loss on ordinary activities multiplied by standard
rate of corporation tax in the UK of 19% (2021:
19%) 1,430,744 1,038,571
Tax effects of:
Foreign tax 5,181,458 1,940,574
Utilisation of tax losses - (1,038,571)
Adjustments in respect of prior periods - (78,692)
Double tax relief (1,430,744) -
-----------
Corporation tax charge 5,181,458 1,861,882
=========== ===========
The Group has accumulated tax losses of approximately $6.8m
(2021: $5.5m). No deferred tax asset was recognised in respect of
these accumulated tax losses as there is insufficient evidence that
the amount will be recovered in future years.
9. Earnings per share
The Group has issued share warrants and options over Ordinary
shares which could potentially dilute basic earnings per share in
the future.
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 year.
There were 69,179,818 (2021: 113,697,454) share warrants and
options outstanding at the end of the year that could potentially
dilute basic earnings per share in the future.
Basic and diluted earnings per share
2022 2021
Cents Cents
Restated
Basic earnings per share from continuing operations 0.36 0.57
----- ---------
Diluted earnings per share from continuing operations 0.36 0.54
----- ---------
The profit and weighted average number of ordinary shares used
in the calculation of basic earnings per share are as follows:
2022 2021
$ $
Profit used in the calculation of total basic and
diluted earnings per share 2,348,777 3,604,280
--------- ---------
Number of shares 2022 2021
Number Number
Weighted average number of ordinary shares for the
purposes of basic earnings per share 649,550,544 637,482,325
Dilutive shares 6,803,425 24,871,644
----------- -----------
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 656,353,969 662,353,969
----------- -----------
10. Intangible assets
Exploration and Evaluation assets Computer software
$ $ Total
$
Cost
At 1 January 2021 10,131,978 12,444 10,144,422
Additions 3,013,536 - 3,013,536
Disposals (2,576,724) - (2,576,724)
Transferred to non-current assets held
for sale (2,519,240) - (2,519,240)
Foreign exchange differences (236,009) (970) (236,979)
------------------ ------------
At 31 December 2021 7,813,541 11,474 7,825,015
Additions 2,972,201 - 2,972,201
Foreign exchange differences (44,093) (657) (44,750)
------------------ ------------
At 31 December 2022 10,741,649 10,817 10,752,466
Amortisation and impairment
At 1 January 2021 2,248,531 4,148 2,252,679
Charge for the year - 3,985 3,985
Impairment 624,546 - 624,546
Foreign exchange differences (25,803) (483) (26,286)
------------------ ------------
At 31 December 2021 2,847,274 7,650 2,854,924
Charge for the year - 2,478 2,478
Impairment 483,611 - 483,611
Foreign exchange differences 26,531 (403) 26,128
---------------------------------- ------------------ ------------
At 31 December 2022 3,357,416 9,725 3,367,141
Net book value
At 31 December 2022 7,384,234 1,092 7,385,326
================================== ================== ============
At 31 December 2021 4,966,267 3,824 4,970,091
================================== ================== ============
At 31 December 2022 the group's E&E carrying values of $7.4m
related to our high impact exploration activity in Jamaica,
exploration drilling in the Abu Sennan concession in Egypt, and the
UK North Sea and Waddock Cross development and exploration
campaigns, respectively.
In Egypt United and its partners drilled two of its larger, but
higher risk exploration prospects in 2022. ASV-1X was drilled in
Q2, and although it did not flow on test there were encouraging
signs indicating the presence of hydrocarbons, and the well has a
workover planned and approved in the 2023 work programme. As a
result, $0.9m spent net to United remains as an Intangible asset at
BS date. The second exploration well, ASW-1X well did not encounter
hydrocarbons in any of the multiple pre-drill targets and was
plugged and abandoned at the beginning of 2023. This resulted in a
write off of all costs incurred of $0.5m. On 31 December 2022 the
balance of Egypt Intangible assets was $0.9m
In Jamaica United continues with a farm-out campaign with the
intention of attracting partners to the licence ahead of drilling
the Colibri prospect. This farm out campaign has recently seen us
add Energy Advisors Group ("EAG") to our existing advisors, Envoi
Ltd, with the aim of accessing capital from the US companies and
investment funds. At present there are a number of companies
evaluating the opportunity with the intention of seeing final
offers by the end of 1H 2023. The current licence phase expires at
end of January 2024 and we have until then to make a well drilling
commitment. As such all costs incurred to date remain capitalised
as Intangibles, and at year end the carrying value of our
exploration activity in Jamaica amounted to $5.2m.
In the UK North Sea, the Company carries an Intangibles balance
of $1.0m at year end, representing amount capitalised to date on
the Maria discovery. In January 2023 United announced an asset
purchase agreement ("APA") with Quattro Energy Limited ("Quattro")
to sell the Maria licence, P2519 for a maximum consideration of up
to $7m. The APA was signed post year end and as a result we do not
account for these assets as held for sale at the BS date. As a
result, management believe no impairment indicators exist and we
continue to carry the Maria licence at cost of $1.0m at 31 December
2022.
In the UK Waddock Cross licence, following a review of the
updated operator development plan and in light of the increased
importance of energy security in the UK coupled with the sustained
high commodity prices, the directors are of the view that all costs
incurred on the licence in 2022 are fully recoverable given the
commercial viability of the development demonstrated by the
operator, Egdon Resources Ltd. As a result, United continue to
carry capitalised costs of $0.3m at the 31 December 2022 Balance
sheet date, which includes a decommissioning asset recognised of
$0.2m.
Management reviews the intangible exploration assets for
indications of impairment at each balance sheet date based on IFRS
6 criteria such as where commercial reserves have not yet been
established and the evaluation, exploration work is ongoing and a
development plan has not been approved. As a result of these
reviews the Directors believe no impairment indicators exist on the
company's exploration portfolio, and as a result carry intangibles
at cost value of $7.4m at 31 December 2022.
11. Property, plant and equipment
Production assets Computer equipment Fixtures and Right of use asset
$ $ fittings $ Total
$ $
Cost
At 1 January
2021 15,976,659 13,706 2,971 204,764 16,198,100
Transfer from
production
assets 2,576,724 - - - 2,576,724
Additions 5,900,375 - - 42,951 5,943,326
Disposals - - - (43,862) (43,862)
Foreign
exchange
differences - (1,068) (231) (13,820) (15,119)
At 31 December
2021 24,453,758 12,638 2,740 190,033 24,659,169
Additions 5,600,238 10,686 - 87,012 5,697,936
Foreign
exchange
differences - (724) (157) (3,508) (4,389)
At 31 December
2022 30,053,996 22,600 2,583 273,538 30,352,717
Depreciation
At 1 January
2021 2,563,268 7,316 248 20,101 2,590,933
Charge for the
year 4,005,103 3,373 951 98,258 4,107,685
Disposals - - - (16,625) (16,625)
Foreign
exchange
differences - (706) (57) (12,870) (13,633)
At 31 December
2021 6,568,371 9,983 1,142 88,864 6,668,360
Charge for the
year 3,213,872 4,359 849 88,382 3,307,462
Foreign
exchange
differences - (509) (54) 9,158 8,595
------------------ ------------------- ------------------ ------------------- -----------
At 31 December
2022 9,782,242 13,834 1,937 186,404 9,984,417
Net book
value
At 31 December
2022 20,271,754 8,766 646 87,133 20,368,300
================== =================== ================== =================== ===========
At 31 December
2021 17,885,387 2,655 1,598 101,169 17,990,809
================== =================== ================== =================== ===========
Depreciation is recognised within cost of sales for Egypt
operations, and administrative expenses for office assets. Included
in PP&E additions are internal costs of $0.6m incurred by the
Group allocated to Egyptian producing assets.
At 31 December 2022 an impairment indicator of IAS 36 was
triggered following the material reduction in average production in
2022 compared to the prior year resulting in management testing the
Egyptian Production and Development assets for impairment. The
recoverable amount has been determined using a discounted cashflow
model to estimate the value in use. Calculating the net present
value of the cashflows involves key assumptions which include the
commodity prices, 2P reserves estimates and discount rates. Other
assumptions include production profiles, future operating and
capital expenditure and the relevant fiscal terms.
As at 31 December 2022, the fair value of the assets are
estimated based on a post-tax nominal discount rate of 12%
(2021:10%) and a flat Oil price of $80/bbl (2021:$75/bbl) for the
period.
The Egyptian oil and gas asset has a carrying value of $20.4
million at 31 December 2022. Testing of sensitivity cases indicated
that a $10/bbl reduction in the long term oil price used would not
result in an impairment. We have also run a sensitivity using a 15%
discount rate which would also not result in an impairment.
12. Non-current assets and disposal groups held for sale
(restated)
During the year, on 11 April 2022, United announced the
completion of the sale of 100% of the share capital of UOG Italia
Srl to PXOG Marshall Limited, a subsidiary of Prospex Energy PLC
(Prospex), for a consideration of EUR2,164,701 (c. $2.54m).
Assets and liabilities held for sale
The following major classes of assets and liabilities relating
to these operations have been classified as held for sale in the
comparative consolidated balance sheet at 31 December 2021:
Total
held for
sale
$
Intangible assets 2,062,341
Trade and other receivables 28,588
Cash at bank and in hand 508
----------
Assets held for sale 2,091,437
Trade and other payables (116,048)
Liabilities held for sale (116,048)
Fair value measurement
The fair value of the net assets of $1,975,389 are categorised
as level 3 non-recurring fair value measurements.
The fair valuations have been determined by reference to signed
disposal agreements, in relation to which non-refundable deposits
have been received.
Loss on disposal
The net loss on disposal recognised in the income statement is
comprised of:
2022 2021
$ $
Loss on disposal of UOG Italia net of disposal expenses incurred - (236,456)
Costs incurred on disposal of UK assets - (114,706)
- (351,162)
===== ==========
13. Inventory
2022 2021
$ $
Oil in tanks 268,859 145,570
268,859 145,570
======== ========
In the year ended 31 December 2022, the movement in Oil
Inventory of $123,289 was recognised in the Income Statement.
14. Trade and other receivables
2022 2021
$ $
Trade receivables 3,549,051 2,257,609
Prepayments 6,940 7,361
Contract assets 873,206 2,865,287
Other tax receivables 40,295 71,764
Crown disposal proceeds due - 2,500,000
4,469,492 7,702,021
========== ==========
The Directors consider that the carrying values of trade and
other receivables are approximate to their fair values.
No expected credit losses exist in relation to the Group's
receivables as at 31 December 2022 (2021: $nil).
Trade receivables represent amounts invoiced for oil and gas
sold in the year, not yet received from EGPC. Contract assets
relate to one month Oil & Gas invoices not received at year-end
for the Abu Sennan producing assets in Egypt under the receivable
terms of the agreement with EGPC.
15. Cash and cash equivalents
2022 2021
$ $
Cash at bank (GBP) 52,251 50,831
Cash at bank (EUR) 23,620 16,286
Cash at bank (USD) 799,390 3,226
Cash at bank (EGY) 470,202 326,965
1,345,463 397,308
========== ========
At 31 December 2022 and 2021 all significant cash and cash
equivalents were deposited in creditworthy financial institutions
in UK, Ireland and Egypt.
16. Share capital, share premium and merger reserve
Allotted, issued, and fully paid:
2022
Share capital Share premium
No. $ $
Ordinary shares of $0.01 each
At 1 January 2022 644,803,969 8,416,182 16,215,361
Effect of Parent company functional currency change 283,278 523,376
Allotments:
Shares issued for cash (exercise of warrants & options) 11,550,000 140,219 60,086
At 31 December 2022 656,353,969 8,839,679 16,798,823
2021
Share capital Share premium
No $ $
Ordinary shares of $0.01 each
At 1 January 2021 625,153,969 8,138,619 16,047,975
Allotments:
Shares issued for cash (exercise of warrants) 19,650,000 277,563 167,386
At 31 December 2021 644,803,969 8,416,182 16,215,361
As regards income and capital distributions, all categories of
shares rank pari passu as if the same constituted one class of
share.
17. Trade and other payables
2022 2021
$ $
Trade payables 499,217 1,180,088
Other payables 1,295,681 1,599,414
Deferred shares 40,475 40,476
Accruals 1,874,294 2,602,756
3,709,667 5,422,734
========== ==========
18. Events after the balance sheet date
On the 17th of January 2023 United announced the signing of a
binding Asset Purchase Agreement ("APA") with Quattro Energy
Limited ("Quattro") to sell the Maria licence, P2519 for a maximum
consideration of up to $6.95m (GBP5.7m) inclusive of contingent
bonus payments.
Consideration comprises:
- Initial cash payment of GBP2.45 million to United (c.US$3 million) at completion.
- An additional GBP1.0 million to be paid to United upon
approval of an FDP (expected late 2023) for Block 15/18e.
- Contingent bonus payments of up to GBP2.25 million upon
reaching gross production thresholds from the field of three, four
and five million barrels.
The completion of the APA is subject to a number of
pre-conditions including the North Sea Transition Authority
("NSTA") approval to the Licence acquisition and Quattro having
available an amount equal to the completion payment of GBP2.45
million in cash. It is anticipated that completion of the APA will
be in May 2023.
Glossary
Bbl Barrels
/Bbl Per barrel
Bn Billion
bopd Barrels of oil per day
Boepd Barrels of oil equivalent per day
Capex Capital Expenditure
EGPC Egyptian General Petroleum Corporation
ESG Environment, Social, Governance
ESP Electrical Submersible Pumps
HCIIP Hydrocarbon initially in place
HSE Health, safety and environment
JOC Joint Operating Company
JV Joint Venture
km Kilometres
km(2) Square kilometres
KPI(s) Key performance indicator(s)
m Metres
M Thousand
MBbl Thousand barrels
Mbopd Thousands of barrels of oil per day
MM Million
MMBbl Million barrels
MMboe Million barrels of oil equivalent
MSET Ministry for Science, Energy and Technology
NPV Net present value
OGA Oil and Gas Authority
OPEX Operating expenditure
Q1 First Quarter
Q2 Second Quarter
Q3 Third Quarter
Q4 Fourth Quarter
scf Standard cubic feet
SPA Sales and Purchase Agreement
TD Total Depth
UK CNS UK Central North Sea
WI Working interest
% Percentage
2C Best estimate of contingent resources
2D Two-dimensional
3D Three-dimensional
2P Proved plus probable reserves
======= ============================================
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END
FR EAELKALADEAA
(END) Dow Jones Newswires
April 27, 2023 02:00 ET (06:00 GMT)
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