REG - Argos Resources Ltd - 2021 Financial Results

Argos ResourcesAnnouncement

25/07/2022 07:00

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RNS Number : 5232T  Argos Resources Ltd  25 July 2022

25 July 2022

ARGOS RESOURCES LIMITED

("Argos" or "the Company")

 

2021 Financial Results

 

Highlights

 

Argos Resources Ltd (AIM: ARG.L), the Falkland Islands based exploration
company focused on the North Falkland Basin, is pleased to announce its
financial results for the year ended 31 December 2021.

 ·     US$356,000 loss (2020 loss of US$299,000).
 ·     US$304,000 cash reserves at 31 December 2021 (31 December 2020:
 US$438,000).
 ·     In April 2022 the Falkland Islands Government agreed to extend the
 licence from 1 May 2022 until 31 December 2022, with no additional work
 commitments.

 ·    A loan provided by the Chairman in June 2022 provides additional
 working capital and the Company plans to raise additional capital to support a
 further extension of the Licence beyond its current expiry date of 31 December
 2022
 ·     Ownership changes in the adjacent Sea Lion oilfield and surging oil
 prices enhance outlook for the Company.

The full Annual Report and Consolidated Financial Statements are available for
download from the Company's website:
http://www.argosresources.com/news.php?page=regulatory-news
(http://www.argosresources.com/news.php?page=regulatory-news)

 

The full Annual Report will also be sent to those shareholders who have
indicated that they wish to receive it by post on 29 July 2022.  Postal and
electronic notification of availability will also be sent to shareholders the
same day.

 

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)

Chairman's statement and Managing Director's review

 

The Company noted in its 2021 Interim Report the decision announced on 23rd
September by Harbour Energy plc, the then 60% owner and operator of the Sea
Lion oilfield, to explore the options to exit the project and its other
license interests in the Falkland Islands. Since then, Navitas Petroleum LP
has committed to acquire Harbour's interest and the operatorship of the field
and has already commenced work focussed on streamlining the development and
reducing front-end capital costs. This is a positive development for Argos
Resources as a commitment by Navitas to develop Sea Lion will attract industry
attention to the North Falkland Basin and significantly increase the
likelihood of the Company securing a farm-in partner. This positive
development, coupled with the surge in oil prices in 2022 and the recognition
that energy security has been an overlooked critical issue enhance the future
prospects for the Company.

 

The Company also announced last year that a pilot study had been commissioned
to reprocess some of the 3D seismic data on Licence PL001. The results of this
work have been positive and sufficiently encouraging that the Company intends
to extend that work across the main prospects identified in Licence PL001. The
Company believes this additional work should further de-risk those prospects
and enhance its farmout potential. The results of the pilot study have been
shared with the Falkland Island Government and its technical advisers and the
Company has informed them of its intention to seek a further two year licence
extension to 31st December 2024 to allow sufficient time for this work to be
undertaken and presented to the industry. Additional capital will need to be
raised to meet the costs of this technical work and to fund the Company's
working capital requirements should a licence extension be offered.

 

Results and dividend

The results for the year to 31 December 2021 and the Group's financial
position as at the year-end are shown in the attached financial statements.
The directors have not recommended a dividend for the year (2020: $nil).

 

Business review

The Group has returned a loss for the year ended 31 December 2021 of
US$356,000 (2020: loss of US$299,000) which equates to a loss per share of
0.15cents (2020: loss per share of 0.14 cents).

 

Administration expenses were US$355,000 in 2021 compared to US$303,000 in
2020.

 

Shareholders' equity increased from US$29.2 million to US$29.4 million in the
year since 31 December 2020, reflecting the fund raise less administration
costs and investment in the licence area.  Cash in the year decreased from
US$438,000 to US$304,000.

 

Outlook for the next financial year

The Group carried out a successful fund raise in April 2021 which funded the
Company until mid-2022.   In June 2022 the Chairman agreed a drawdown
facility of £110,000 to enable the Group to continue beyond that point.  The
Group intends to seek a licence extension of a further two years to take the
licence to December 2024 and funding in support of a work programme which will
be required under any licence extension.

Going concern

The financial statements have been prepared on the going concern basis as, in
the opinion of the directors, there is a reasonable expectation that the Group
and Company will continue in operational existence for the foreseeable future.

 

The Group and Parent Company's ability to continue in operational existence
is, however, subject to a number of uncertainties as follows:

 

The Company's PL001 Licence currently expires on 31 December 2022. The Company
has already advised the Falkland Islands Government of its wish to extend the
Licence by a further 2 years beyond this date to undertake new technical work
and to market the results of that work to potential industry partners.  A
formal application for this Licence extension cannot be submitted before the
Falkland Islands Government completes a review of its relationship with the
oil and gas sector which is currently underway and expected to be completed in
Q3 2022.  Assuming a favourable outcome to that review, the Company intends
at that time to submit a formal application for the extension to the Licence.

 

Any offer of such an extension is likely to be conditional on the Company
demonstrating that it has sufficient funding to carry out a work programme and
cover administration costs during the Licence term.  Grant of an extension is
therefore likely to be dependent on the Company raising significant further
funds in Q3/Q4 2022.

 

Failure to secure an offer of a licence extension or to raise sufficient funds
to meet the conditions of such an offer will result in the Company being
unable to continue as a going concern in the near term.

 

If a licence extension and funding are forthcoming then the Group's ability to
achieve its long term strategy of developing its exploration projects remains
dependent on finding an exploration partner and the Group continues to seek
partners to participate in drilling on its Licence.  As at the date of sign
off on these financial statements the oil and gas markets continue to be in a
state of considerable turmoil with very high prevailing prices.  The company
does not anticipate making progress on finding a partner until the markets
show signs of greater stability but is hopeful that the drivers behind the
current situation will improve the chances of success.

 

If the Group is unable to find an exploration partner, raise funds or obtain
further licence extensions then it may be unable to realise its assets and
discharge its liabilities in the normal course of business.

 

All the above factors indicate the existence of material uncertainties which
cast significant doubt over the Group and Parent Company's ability to continue
as a going concern, some of which may crystalise before the end of 2022.  The
financial statements do not include the adjustments that would result if the
Group was unable to continue as a going concern.

 

Consolidated statement of comprehensive income

Year ended 31 December 2021

 

                                                                 Year          Year

ended
ended

31 December
31 December

2021
2020

$'000
$'000
 Administrative expenses                                         (355)         (303)

 Finance income                                                  -             1
 Foreign exchange (losses)/gains                                 (1)           3

 Loss for the year attributable to owners of the parent          (356)         (299)

 Total comprehensive loss for the
 period attributable to owners of the parent                     (356)         (299)

 Basic and diluted loss per share (cents)                        (0.15)        (0.14)

 

 

 

Consolidated statement of financial position

As at 31 December 2021

 

                                               2021     2020
                                               $'000    $'000
 Assets
 Non-current assets
 Exploration intangible assets                 29,135   28,815
                                               29,135   28,815
 Current assets
 Other receivables                             43       40
 Cash and cash equivalents                     304      438

 Total current assets                          347      478

 Total assets                                  29,482   29,293

 Liabilities
 Current liabilities
 Trade and other payables                      54       59

 Total liabilities                             54       59

 Total net assets                              29,428   29,234

 Capital and reserves attributable to
 equity holders of the Company
 Share capital                                 7,095    6,696
 Share premium                                 30,222   30,071
 Retained losses                               (7,889)  (7,533)

 Total shareholders' equity                    29,428   29,234

 

 

Consolidated statement of cash flows

Year ended 31 December 2021

 

                                                            Year          Year

ended
ended

31 December
31 December

2021
2020

$'000
$'000

 Cash flows from operating activities
 Loss for period before taxation                            (356)         (299)

 Adjustments for:
 Finance income                                             -             (1)
 Foreign exchange losses/(gains)                            1             (3)

 Net cash outflow from operating activities
 before changes in working capital                          (355)         (303)

 (Increase)/decrease in other receivables                   (3)           1
 (Decrease)/increase in other payables                      (5)           1

 Net cash outflow from operating activities                 (363)         (301)

 Investing activities
 Interest received                                          -             1
 Exploration and development expenditure                    (320)         (33)

 Net cash used in investment activities                     (320)         (32)

 Financing activities
 Issue of ordinary shares                                   550           -

 Net cash from financing activities                         550           -

 Net decrease in cash and cash equivalents                  (133)         (333)
 Cash and cash equivalents at beginning of period           438           768
 Exchange (losses)/gains on cash and cash equivalents       (1)           3

 Cash and cash equivalents at end of the year               304           438

 

 

Consolidated statement of changes in equity

Year ended 31 December 2021

 

                                            Share     Share premium  Retained  Total

capital
$'000
losses
equity

$'000
$'000
$'000
 At 1 January 2020                          6,696     30,071         (7,234)   29,533
 Total comprehensive loss for the year      -                        (299)     (299)

                                                      -

 At 31 December 2020                        6,696                    (7,533)   29,234

 and 1 January 2021                                   30,071

 Total comprehensive loss for the year      -                        (356)     (356)

                                                      -
 Shares issued during year                  399       151            -         550

 At 31 December 2021                        7,095     30,222         (7,889)   29,428

 

 

Notes

 

1.    Basis of preparation

In preparing the financial information in this statement the Group, which
consists of the Company Argos Resources Ltd, and its wholly owned subsidiary
Argos Exploration Ltd, has applied policies in accordance with International
Financial Reporting Standards as adopted by the European Union ("IFRS").  The
financial information has been prepared under the historical cost convention.

 

The financial information set out does not constitute the company's statutory
accounts for 2020 or 2021. Statutory accounts for 2020 and 2021 have been
reported on by the Independent Auditors. The Independent Auditors' Reports on
the Annual Report and Financial Statements for 2020 and 2021 were unqualified
with an emphasis of matter paragraph included highlighting the material
uncertainty relating to going concern.

 

2.    Events after the reporting date

The Licence

Argos announced on 11 April 2022 that the Falkland Islands Government ("FIG")
had extended the second term of the Company's PL001 Licence from 1 May 2022 to
31 December 2022, with no additional work commitments.

 

The Company is currently in discussions with FIG regarding the terms on which
a further extension of the PL001 Licence may be granted, to enable Argos to
undertake the necessary technical work to progress the project. The Board
expects that any extension beyond 31 December 2022 would be subject to certain
technical commitments from the Company, which would require Argos to raise
additional capital.

 

Loan Facility

Mr Ian Thomson, OBE, Chairman of Argos, has agreed to provide a loan facility
of up to £110,000 to the Company (the "Loan Facility"). Drawdown from the
Loan Facility can be made at the Company's request. The Loan Facility is
available until 31 January 2023 with no interest accruing on borrowed amounts.
If the Company carries out a share issue by way of fund-raising, the lender
shall be entitled to convert the loan then outstanding into new shares issued
on the same terms as those available to other participants in the issue.

 

The Loan Facility, along with the Company's existing resources of
approximately £100,000 as of 24 June 2022, will provide the Company with
sufficient working capital until July 2023.

 

The provision of the Loan Facility is deemed to be a related party transaction
for the purposes of the AIM Rules for Companies. The Independent Directors
consider, having consulted with the Company's nominated adviser, Cenkos
Securities plc, that the terms of the Loan Facility are fair and reasonable
insofar as the Shareholders are concerned.

 

Publication of Results

As a result of the Company's extended discussions regarding its funding
position, and the associated impact on the timing for the FY21 Accounts, the
Company was not in a position to publish its 2021 Financial Statements by the
deadline of 30 June 2022. Consequently, the Company's shares were temporarily
suspended from trading on AIM as of 7.30 a.m. on 1 July 2022, pending
publication of the FY21 Accounts.

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