REG - Argos Resources Ltd - 2015 Interim Financial Results <Origin Href="QuoteRef">ARGR.L</Origin>

Argos ResourcesAnnouncement

22/09/2015 07:01

RNS Number : 7346Z
Argos Resources Ltd
22 September 2015
22 September 2015
ARGOS RESOURCES LIMITED
("Argos" or "the Company")
2015 Interim Financial Results
Argos Resources Limited (AIM: ARG.L), the Falkland Islands based company focused on the North Falkland Basin,is pleased to announce its interim financial results for the six months ended 30 June 2015.
Highlights
$0.8 million loss from expensed overhead (H1 2014: $0.7 million);
$0.8 million cash reserves at 30 June 2015 (YE 2014: $1.4 million)
The farmout of Licence PL001 (the "Licence") to Noble and Edison, in which the Rhea Stack will be drilled in 2015 at no cost to the Company, completed on 15 September 2015 ;
Noble has assumed operatorship of the Licence and Noble and Edison have been assigned a 75 percent and 25 percent working interest in the Licence respectively;
Argos retains an overriding royalty interest of 5 percent of gross production from all hydrocarbon discoveries developed within the Licence (the "ORRI");
Argos has no requirement to contribute to any future capital or operating expenditures incurred over the life of the Licence;
Argos received US$2.75 million in cash upon completion and will receive US$800,000 per annum from 1 January 2016 through to receipt of the first royalties pursuant to the ORRI;
The initial exploration well will fulfil the remaining work obligation on the Second Exploration Term of the Licence.
Mr. Ian Thomson, Chairman of Argos, said:
"The Company is pleased to have completed a deal with such highly-regarded and financially robust partners as Noble and Edison and, as a consequence, to be participating in the 2015 drilling campaign in the North Falkland Basin. The Board believes that success at Rhea will de-risk other prospects in the Licence."
For further information:
Argos Resources Limited (+500 22685)
www.argosresources.com
Ian Thomson, Chairman
John Hogan, Managing Director
Cenkos Securities plc (Nomad & Broker)
Derrick Lee (+44 131 220 9100)
Neil McDonald (+44 131 220 6939)
Citigate Dewe Rogerson (Communications Adviser) (+44 20 7638 9571)
Martin Jackson
Shabnam Bashir


Chairman's Statement
On 13 April the Company announced that its wholly-owned subsidiary, Argos Exploration Limited, had entered into a Farmout Agreement with Noble Energy Falklands Limited and Edison International S.p.A (together, the "Farmees") in respect of the Company's principal asset, a 100 percent interest in production licence PL001 covering an area of approximately 1,126 square kilometres in the North Falkland Basin. I am pleased to report that completion of the transaction occurred on 15 September 2015 following the receipt of necessary government and regulatory approvals.
The Farmees have committed to drill an exploration well in 2015 and will test the Rhea prospect at no cost to Argos. The Company believes that success at Rhea will de-risk other prospects in the Licence.
Under the terms of the farmout, the Company has transferred its entire 100 percent working interest to the Farmees and Noble has become the operator of the Licence. The Company has retained a 5 percent overriding royalty interest (ORRI) throughout the life of the Licence which entitles the Company to 5 percent of gross production from all hydrocarbon discoveries developed within the Licence. The Company has no requirement to contribute to any future capital or operating expenditures incurred over the life of the Licence.
Other terms of the farmout are that the Company received US$2.75 million in cash upon completion and will receive a further US$800,000 in cash per annum from 1 January 2016 through to receipt of the first royalties pursuant to the ORRI. The proceeds are expected to be sufficient to meet all anticipated transaction costs and running costs through to receipt of the first such royalties.
Should Noble and Edison elect to surrender the Licence following the drilling of the initial exploration well, the Company has retained the right to have 100 percent of the working interest reassigned to it, subject to appropriate Falkland Islands Government approvals.
By way of background, a 3D seismic survey was acquired by the Company in early 2011 covering the entire Licence Area. The quality of the seismic data acquired is excellent and has led to the identification of 52 prospects and 40 leads within the Licence. The Company's Competent Person's Report ("CPR") issued in July 2013 describes 52 prospects with a total unrisked potential of 3.1 billion barrels of prospective recoverable resource in the most likely case, and up to 10.4 billion barrels in the upside case.
From the large inventory of prospects described in the Company's CPR, the Rhea prospect (and Rhea Stack) is amongst the Company's top ranked prospects. The CPR describes the Rhea Stack as containing a best estimate unrisked resource potential of 443 million barrels of recoverable oil, increasing to 1,467 million barrels in the upside case.
In addition to the targeted Rhea prospect, the ORRI provides the Company with continued material exposure at no cost to further drilling and success across the Licence Area, which contains significant additional potential as described above.
A drilling campaign began in February 2015 with the Eirik Raude rig currently operating offshore the Falkland Islands. The Company expects the Rhea prospect to be drilled as part of this campaign in the fourth quarter of 2015.
Drilling the Rhea well will satisfy an outstanding commitment to drill an exploration well on the Licence no later than 25 November 2016, which is the date of the end of the Second of Three Exploration Terms of the Licence. Completing this commitment will allow the Farmees to apply for a Third Exploration Term on the Licence of a further 10 years, which will require a further work programme to be agreed between the Farmees and the Falkland Islands government.
The value of the farmout relative to the Company's market capitalisation meant that completion was deemed to be a disposal resulting in a fundamental change of business of the Company under Rule 15 of the AIM Rules. Accordingly, the approval of Shareholders for the farmout was sought and received unanimous approval at a General Meeting on 4 May 2015.
The Company is pleased to have completed a deal with such highly-regarded and financially robust partners as Noble and Edison and, as a consequence, to be participating in the 2015 drilling campaign in the North Falkland Basin. Noble Energy, an S&P 500 company (NYSE: NBL), is a world-class operator with an outstanding track record and reserves of 1.4 billion barrels of oil equivalent. Edison is a leading European energy company and a part of the EDF (Electricit de France) group.
The innovative nature of the farmout terms means that there is no material Shareholder dilution or further material Shareholder funding required by the Company for any future investments in the Licence. In addition, the Company's ongoing working capital requirements are expected to be covered by the cash proceeds from the farmout and, with the prospect of a further 10 year Third Exploration Term ahead, the Directors believe that the financial position and outlook for the Company is robust.
Financial overview
Losses for the Group for the six months to 30 June 2015 were $0.8 million (2014: $0.7 million) giving a loss per share of 0.35 cents (2014: 0.30 cents).
Administrative expenses were $0.7 million compared to $0.7 million for the same period in 2014.
Net assets have decreased from $30.5 million to $29.7 million since December 2014 as a result of the losses incurred.
Financial outlook
The cash proceeds to be received under the farmout agreement are expected to fully fund the Group until first oil production, once additional cost saving measures are implemented from 2016.
 Ian Thomson OBE
 Chairman

Consolidated statement of comprehensive income
Period ended 30 June 2015
 





Note



6 months
ended
30 June
2015
unaudited
$'000

6 months
ended
30 June
2014
unaudited
$'000
Year
ended
31 December
2014
audited
$'000




Administrative expenses 

(750)
(722)
(1,218)
Finance income

1
4
6
Foreign exchange (losses)/gains

(6)
65
(85)



Loss before tax

(755)
(653)
(1,297)

Loss from operations attributable to owners of the parent

(755)
(653)
(1,297)



Total comprehensive income for the period


attributable to owners of the parent 

(755)
(653)
(1,297)
Basic and diluted loss per share (cents)
2
(0.35)
(0.30)
(0.60)


Consolidated statement of financial position 
As at 30 June 2015
 



Note


As at
30 June
2015
unaudited
$'000
As at
30 June
2014
unaudited
$'000
As at
31 December
2014
audited
$'000
Assets



Non-current assets



Capitalised exploration expenditure
29,100
29,010
29,044
Plant and equipment
6
26
16
29,106
29,036
29,060
Current assets


Other receivables

90
93
130
Cash and cash equivalents

789
2,102
1,363


Total current assets

879
2,195
1,493



Total assets

29,985
31,231
30,553



Liabilities


Total and current liabilities


Other payables

(279)
(174)
(92)



Total net assets

29,706
31,057
30,461






Capital and reserves attributable to 


equity holders of the company





Share capital

6,643
6,595
6,643
Share premium

30,071
30,071
30,071
Retained losses

(7,008)
(5,609)
(6,253)



Total shareholders' equity

29,706
31,057
30,461


Consolidated statement of cash flows 
Period ended 30 June 2015
 

6 months
ended
30 June
2015
unaudited
$'000
6 months
ended
30 June
2014
unaudited
$'000
Year
ended
31 December
2014
audited
$'000
Cash flows from operating activities

Loss for period 
(755)
(653)
(1,297)
Adjustments for:

Finance income
(1)
(4)
(6)
Depreciation
9
10
20


Net cash outflow from operating activities

before changes in working capital
(747)
(647)
(1,283)


Decrease in other receivables
6
13
10
Increase/(decrease) in other payables
192
(198)
(127)


Net cash (outflow) from operating activities
(549)
(832)
(1,400)


Investing activities

Interest received
1
4
6
Exploration and development expenditure
(22)
(28)
(96)


Net cash used in investment activities
(21)
(24)
(90)


Financing activities


Issue of ordinary shares (share options exercised)
-
-
48



Net cash from financing activities
-
-
48



Net (decrease) in cash and cash equivalents
(570)
(856)
(1,442)
Cash and cash equivalents at beginning of period
1,363
2,892
2,892
Exchange (losses)/gains on cash and cash equivalents
(4)
66
(87)


Cash and cash equivalents at end of period
789
2,102
1,363


Consolidated statement of changes in equity - unaudited
Period ended 30 June 2015



Share
capital
$'000

Share premium
$'000
Retained
earnings/
(deficit)
$'000

Total
equity
$'000
At 1 January 2014

6,595

30,071
(4,956)
31,710
Total comprehensive income for period to 30 June 2014

-
-
(653)
(653)






At 30 June 2014

6,595

30,071
(5,609)
31,057






Total comprehensive income for period to 31 December 2014

-
-
(644)
(644)
Shares issued (share options exercised)

48
-
-
48






At 31 December 2014

6,643

30,071
(6,253)
30,461






Total comprehensive income for period to 30 June 2015

-
-
(755)
(755)


At 30 June 2015

6,643
30,071
(7,008)
29,706


Notes to the interim report - unaudited
Period ended 30 June 2015
1 Accounting policies
General information
Argos Resources Limited is a limited liability company incorporated and domiciled in the Falkland Islands under registration number 10605. The address of its registered office is Argos House, H Jones Road, Stanley, Falkland Islands.
This consolidated interim report was approved for issue by the directors on 21 September 2015.
Basis of preparation
The financial information included within this interim report is reviewed but unaudited and is based on the consolidated financial statements of Argos Resources Limited and its subsidiary Argos Exploration Limited ("the Group"). The consolidated financial statements are prepared in compliance with the recognition and measurement requirements of International Financial Reporting Standards as adopted by the European Union (IFRSs) and interpretations of those standards as issued by the International Accounting Standards Board (IASB). They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2014 annual report. These accounts have been prepared in accordance with the accounting policies that are expected to be applied in the report and accounts of Argos Resources Limited for the year ending 31 December 2015.
The comparative financial information for the year ended 31 December 2014 has been derived from the full statutory financial statements for that period which were prepared in compliance with IFRSs. The Independent Auditors' Report on the annual report and financial statements for 2014 was unqualified and did not draw attention to any matters by way of emphasis.
The IASB has issued various new and revised standards, amendments and interpretations to existing standards that are not effective for the financial year ending 31 December 2015 and have not been adopted early. The directors do not expect these standards and interpretations to have material impact on the financial statements.
Significant accounting judgements, estimates and assumptions
The Group makes certain estimates and assumptions regarding the future in relation to intangible assets and impairment of these assets. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed as follows:
Exploration and evaluation expenditure
As permitted under IFRS 6 the Group has accounted for evaluation and exploration expenditure using the "full cost" method. All expenses associated with oil exploration are capitalised as intangible assets, pending determination of feasibility of the project. As there were some regulatory approvals outstanding the farmout didn't complete in the period and therefore hasn't been accounted for at 30 June 2015.

Notes to the interim report - unaudited
Period ended 30 June 2015
1 Accounting policies (continued)
Impairment of intangible assets
If there are circumstances which suggest that the carrying value of intangible assets may be impaired, the Group is required to test whether the intangible assets have suffered any impairment. The valuation of intangible assets requires judgements to be made in respect of discount rates, growth rates and future cash flows and the cost of capital. Actual outcomes may vary.
2 Loss per share
6 months
ended
30 June
2015
unaudited
Number
6 months
ended
30 June
2014
unaudited
Number
Year
ended
31 December
2014
audited
Number
Shares in issue brought forward (2 pence shares)
218,863,205
217,363,205
217,363,205

Options exercised
-
-
1,500,000

Shares in issue carried forward (2 pence shares)
218,863,205
217,363,205
218,863,205


6 months
ended
30 June
2015
unaudited
6 months
ended
30 June
2014
unaudited
Year
ended
31 December
2014
audited

Loss for the period ($'000)
(755)
(653)
(1,297)
Weighted average number of ordinary
shares in issue during the period
218,863,205
217,363,205
217,835,808

Basic and diluted loss per ordinary share (cents)
(0.35)
(0.30)
(0.60)
In accordance with IAS 33 as the Group is reporting a loss for this period, the preceding interim period and the year to 31 December 2014 the share options are not considered dilutive because the exercise of share options would have the effect of reducing the loss per share.
3 Events after the reporting date
The Company announced the farmout on 13 April 2015, noting that completion was subject to shareholder, government, regulatory and partner approvals. All required approvals have since been received allowing the transaction to complete on 15 September 2015. 

Independent review report to Argos Resources Limited
Introduction
We have been engaged by the Company to review the set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 which comprises of the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity and notes to the interim report.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the set of financial statements.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.
Our responsibility
Our responsibility is to express to the Company a conclusion on the set of financial statements in the half-yearly financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.


Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.
BDO LLP 
Chartered Accountants
London
United Kingdom
Date 21 September 2015
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).


Investor Information and advisors
Registered office
Argos House
H Jones Road
Stanley
Falkland Islands
Registrars
Computershare Investor Services (Jersey) Ltd
Queensway House
Hilgrove Street
St Helier
Jersey, JE1 1ES
Business address
Argos House
H Jones Road
Stanley
Falkland Islands
Bankers
Lloyds Bank PLC
3-5 Bridge Street
Newbury, RG14 5HB
Company Secretary
Kevin Kilmartin
Argos House
H Jones Road
Stanley
Falkland Islands
Bankers
Lloyds Bank International Ltd
Corporate Banking
9 Broad Street
St Helier
Jersey, JE4 8RS
Nominated advisor and broker
Cenkos Securities PLC
6.7.8 Tokenhouse Yard
London, EC2R 7AS
Bankers
Standard Chartered Bank
Ross Road
Stanley
Falkland Islands
Solicitors (Falkland Islands law)
Kevin Kilmartin
Argos House
H Jones Road
Stanley
Falkland Islands
Bankers
HSBC Bank Bermuda Ltd
Harbourview Centre
87 Front Street
Hamilton, HM 11
Bermuda
Solicitors (English law)
Peachey & Co LLP
95 Aldwych
London, WC2B 4JF
Public relations
Citigate Dewe Rogerson
3 London Wall Buildings
London, EC2M 5SY
Auditors
BDO LLP
55 Baker Street
London, W1U 7EU
Website
www.argosresources.com

This information is provided by RNS
The company news service from the London Stock Exchange
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