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REG - Argos Resources Ltd - 2021 Interim Financial Results




 



RNS Number : 8336M
Argos Resources Ltd
24 September 2021
 

 

24 September 2021

 

ARGOS RESOURCES LIMITED

("Argos" or "the Company")

 

2021 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 2021.

 

Highlights

·    $200 thousand loss for the period (H1 2020: loss of $192 thousand);

·    $550 thousand successful fund raise in May 2021;

·    $641 thousand cash reserves at 30 June 2021 (YE 2020: $438 thousand);

·    The current Second Phase of the Licence was extended until May 2022;

·    The Company continues to work on de-risking the North Falklands basin for drilling and seek partners to participate in drilling on its Licence.

 

 

For further information:

 

Argos Resources Limited (+500 22685)                           Cenkos Securities plc (Nomad & Broker)

www.argosresources.com                                                   Derrick Lee (+44 131 220 9100)

Ian Thomson, Chairman                                                        Neil McDonald (+44 131 220 6939)

John Hogan, Managing Director

 

Chairman's Statement

 

During the reporting period of the first half of the year there has been a significant stabilisation of the oil markets following a turbulent year in 2020. Brent crude oil prices have traded in the range of US$43 per barrel at the beginning of the year, increasing to over US$75 per barrel by the end of June 2021. This fairly steady rise in prices has been driven by increasing demand, although still below pre-Covid 19 pandemic levels, and reduced production by OPEC+.

 

The industry was hit hard by the unexpected sharp drop in demand and commodity prices in 2020 and responded by reducing costs, cutting capital expenditure and delaying projects. The industry is cautiously increasing activity in response to the recovery in oil prices in the first half of 2021, albeit still being hampered by operational and logistical difficulties caused by the continuing Covid-19 restrictions. Acknowledging this slowdown in activity, the Company requested an extension to the term of Licence PL001, a production licence covering an area of approximately 1,126 square kilometres in the North Falkland Basin (the "Licence"), as more time will be required to recover from this downturn. In April 2021 the Falkland Islands government agreed to a twelve-month extension to the Second Phase of the Licence to 1st May 2022.

 

In April 2021 the Company also announced that, subject to shareholder approval, it had raised $550,000 through a subscription for new shares by certain new shareholders and Ian Thomson, Executive Chairman of the Company. Shareholder approval for this fundraise was obtained at a General Meeting on 30th April. The net proceeds of the fundraise, when added to existing cash reserves, is sufficient to fund the Company's working capital requirements through the term of the Licence extension as well as costs expected to be incurred in technical work in furthering the Company's farmout efforts. A pilot study has been commissioned to reprocess some of the 3D seismic data which, if successful, would help to further de-risk the prospects mapped within the Company's Licence area and enhance its farmout potential.

 

The Company notes the decision announced on 23rd September by Harbour Energy plc, the current 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. Any impact this decision may have on the Company's activities is being assessed.

 

The Company continues to seek partners to participate in drilling on its Licence and is currently engaged with a number of counterparties who have expressed interest. Given the current challenging environment the Company believes it may be some time before any expressions of interest are translated into commitments.

 

Financial overview

The Group loss for the six months to 30 June 2021 was $200 thousand (2020: loss of $192 thousand) giving an undiluted loss per share of 0.09 cents (2020: 0.09 cents loss per share).

 

Administrative expenses were $205 thousand compared to $148 thousand for the same period in 2020.

 

Net assets of $29.6 million is an increase of $350 thousand since December 2020 as a net result of the loss for the period and a fund raise of $550 thousand.

 

Financial outlook

The Group has sufficient cash resources to continue for the period of the current licence term, which expires on 1 May 2022.  In order to continue as a going concern beyond that point the Company will need to raise further finance, either through a farmout partner or by raising funds in an equity issue.

 

The going concern comments in Note 1 contain further information.

 

 

 Ian Thomson OBE

 Chairman
 

Consolidated statement of comprehensive income

Period ended 30 June 2021

 





Note

 


6 months
ended
30 June
2021
unaudited
$'000


6 months
ended
30 June
2020
unaudited
$'000

Year
ended
31 December
2020
audited
$'000

 

 

 

 

 

Administrative expenses

 

(205)

(148)

(303)

Finance income

 

-

1

1

Foreign exchange gains/(losses)

 

5

(45)

3

 

 

 

 

 

(Loss) from operations attributable to owners of the parent

 

(200)

(192)

(299)

 

 

 

 

 

Total comprehensive income for the period

 

 

 

 

attributable to owners of the parent

 

(200)

(192)

(299)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) per share (cents):

 

 

 

 

Basic and diluted

2

(0.09)

(0.09)

(0.14)

 

 

Consolidated statement of financial position

 



Note

 

As at

30 June
2021
unaudited
$'000

As at
30 June
2020
unaudited
$'000

As at
31 December
2020
audited
$'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Capitalised exploration expenditure

 

28,903

28,776

28,815

Current assets

 

 

 

 

Other receivables

 

83

48

40

Cash and cash equivalents

 

641

560

438

 

 

 

 

 

Total current assets

 

724

608

478

 

 

 

 

 

Total assets

 

29,627

29,384

29,293

 

 

 

 

 

Liabilities

 

 

 

 

Total and current liabilities

 

 

 

 

Other payables

 

(43)

(43)

(59)

 

 

 

 

 

Total net assets

 

29,584

29,341

29,234

 

 

 

 

 

 

 

 

 

 

Capital and reserves attributable to

 

 

 

 

equity holders of the company

 

 

 

 

 

 

 

 

 

Share capital

3

7,096

6,696

6,696

Share premium

 

30,221

30,071

30,071

Retained losses

 

(7,733)

(7,426)

(7,533)

 

 

 

 

 

Total shareholders' equity

 

29,584

29,341

29,234

 

 

 

Consolidated statement of cash flows

Period ended 30 June 2021

 

6 months
ended
30 June
2021
unaudited

$'000

6 months
ended
30 June
2020
unaudited
$'000

Year
ended
31 December
2020
audited
$'000

Cash flows from operating activities

 

 

 

(Loss) for period

(200)

(192)

(299)

Adjustments for:

 

 

 

Finance income

-

(1)

(1)

Foreign exchange gains/(losses)

(5)

47

(3)

 

 

 

 

Net cash (outflow) from operating activities

 

 

 

before changes in working capital

(205)

(146)

(303)

 

 

 

 

(Increase)/decrease in other receivables

(4)

(1)

1

(Decrease) in other payables

(16)

(15)

1

 

 

 

 

Net cash (outflow)/inflow

from operating activities

(225)

(162)

(301)

 

 

 

 

Investing activities

 

 

 

Interest received

-

1

1

Proceeds from share issue

550

-

-

Exploration and development expenditure

(127)

-

(33)

 

 

 

 

Net cash inflow/(outflow)

from investment activities

423

1

(32)

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

198

(161)

(333)

Cash and cash equivalents at beginning of period

438

768

768

Exchange gains/(losses) on cash and cash equivalents

5

(47)

3

 

 

 

 

Cash and cash equivalents at end of period

641

560

438

 

 

Consolidated statement of changes in equity - unaudited

Period ended 30 June 2021

 

 

 


Share
capital
$'000


Share premium
$'000

Retained
earnings/
(deficit)
$'000


Total
equity
$'000

 

At 1 January 2020

 

6,696

30,071

(7,234)

29,533

Total comprehensive income for period to 30 June 2020

 

-

 

-

(192)

(192)

 

 

 

 

 

 

At 30 June 2020

 

6,696

30,071

(7,426)

29,341

 

 

 

 

 

 

Total comprehensive income for period to 31 December 2020

 

-

 

-

(107)

(107)

 

 

 

 

 

 

At 31 December 2020

 

6,696

30,071

(7,533)

29,234

 

 

 

 

 

 

Total comprehensive income for period to 30 June 2021

 

-

 

-

(200)

(200)

Shares issued during
period to 30 June 2021

 

400

 

150

-

550

 

 

 

 

 

 

At 30 June 2021

 

7,096

30,221

(7,733)

29,584

                 
 

 

Notes to the interim report - unaudited

Period ended 30 June 2021

 

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 23 September 2021.

 

Basis of preparation

The financial information included within this interim report has not been reviewed nor audited 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 2020 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 2021.

 

The comparative financial information for the year ended 31 December 2020 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 2020 was unqualified but did draw attention to note 1 of these financial statements which explains that the Group and Parent Company's ability to continue as a going concern is dependent on the finding of an exploration partner and obtaining further funding.  As stated in note 1, these conditions indicate the existence of a material uncertainty which may cast significant doubt over the Group's and Parent Company's ability to continue as a going concern. The audit opinion was not however modified in respect of this matter.

 

The IASB has issued some new and revised standards, amendments and interpretations to existing standards, which are effective for the financial year ending 31 December 2021.  The directors have made an assessment of the impact of these standards and they are not expected to have a material impact on the financial statements.

 

Going concern

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

 

The Company's ability to achieve its long term strategy of developing its exploration projects is dependent on finding an exploration partner.  The advent of Covid-19 caused an unexpected sharp drop in energy demand, suppressing commodity prices, and the industry responded by reducing costs, cutting capital expenditure and delaying projects.
 

Notes to the interim report - unaudited

Period ended 30 June 2021

 

1      Accounting policies (continued)

 

Acknowledging this slowdown in activity, the Company requested an extension to the Licence term as more time will be required to recover from this downturn. In April 2021 the Falkland Islands government agreed to a twelve month extension to the Second Phase of the Licence to 1st May 2022.

 

In April 2021 the holding company, Argos Resources Limited, raised $550,000 through the placing of new shares.  The fund raise, when added to existing cash reserves, is sufficient to fund the Group's working capital requirements through the term of the Licence extension as well as costs expected to be incurred in technical work in furthering the farmout efforts.

 

In order to continue as a going concern beyond the current Licence term, which expires on 1 May 2022, the Company will need to raise further finance, either through a farmout partner or by raising funds in an equity issue.

 

Should the Directors be unable to raise sufficient funds, find an exploration partner, or negotiate further Licence extensions the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

 

These factors indicate the existence of a material uncertainty which may cast significant doubt over the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.

 

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 period are discussed as follows:

 

Intangible assets - capitalised exploration expenditure, impairment and royalty interests

Evaluation and exploration (E&E) expenditure

The Group believes that the most appropriate method of accounting for E&E expenditure is to capitalise any costs incurred, including appropriate technical and administrative expenses but not general overheads, as intangible assets pending determination of feasibility of the project, as permitted under IFRS 6.

 

 

Notes to the interim report - unaudited

Period ended 30 June 2021

 

1.     Accounting policies (continued)

 

If an exploration project is successful, the related expenditures are transferred to tangible assets and amortised over the estimated life of the commercial reserves.  Where a licence is relinquished, a project is abandoned, or is considered to be of no further value to the Group, the related costs are written off.

 

Impairment

E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed the recoverable amount.

 

In accordance with IFRS 6 the Group firstly considers the following facts and circumstances in their assessment of whether the Group's exploration and evaluation assets may be impaired:

 

·    whether the period for which the Group has the right to explore in a specific area has expired during the period or will expire in the near future, and is not expected to be renewed;

·    whether substantive expenditure on further exploration for and evaluation of mineral resources in a specific area is neither budgeted nor planned;

·    whether exploration for and evaluation of hydrocarbons in a specific area have not led to the discovery of commercially viable quantities of hydrocarbons and the Group has decided to discontinue such activities in the specific area; and,

·    whether sufficient data exists to indicate that although a development in a specific area is likely to proceed, the carrying amount of the exploration and evaluation assets is unlikely to be recovered in full from successful development or by sale

 

If any such facts or circumstances are noted the Group must perform an impairment test in accordance with the provisions of IAS 36, assessing the recoverable amount of the E&E assets together with all development and production assets, as a single cash generating unit (CGU).  The aggregate carrying value is compared against the expected recoverable amount of the CGU.  The recoverable amount is the higher of value in use and the fair value less costs to sell.

 

Any E&E impairment loss would be recognised in the income statement and separately disclosed.
 

Notes to the interim report - unaudited

Period ended 30 June 2021

 

2.     (Loss) per share

 

6 months
ended
30 June
2021
unaudited
Number

6 months
ended
30 June
2020
unaudited
Number

Year
ended
31 December
2020
audited
Number

 

Shares in issue brought forward

(2 pence shares)

 

220,713,205

 

220,713,205

 

220,713,205

 

 

 

 

Shares issued in period

14,428,001

-

-

 

 

 

 

 

 

 

 

Shares in issue carried forward

(2 pence shares)

 

235,141,206

 

220,713,205

 

220,713,205

 

 

 

 

 

 

 

 

Options not exercised brought forward

6,705,818

6,705,818

6,705,818

 

 

 

 

Options not exercised carried forward

6,705,818

6,705,818

6,705,818

 

 

 

 

 

 

 

 

 

6 months
ended
30 June
2021
unaudited

6 months
ended
30 June
2020
unaudited

Year
ended
31 December
2020
audited

 

 

 

 

(Loss) for the period ($'000)

(200)

(192)

(299)

 

 

 

 

Weighted average number of ordinary

 

 

 

shares in issue during the period

225,177,116

220,713,205

220,713,205

 

 

 

 

(Loss) per ordinary share (cents)

 

 

 

Basic and diluted

(0.09)

(0.09)

(0.14)

 

Basic loss per share has been computed by dividing the loss by the weighted average number of shares in issue during the period.

 

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 2020 the share options are not considered dilutive because the exercise of share options would have the effect of reducing the loss per share.

 

 

Notes to the interim report - unaudited

Period ended 30 June 2021

 

3.      Share Capital

 

Authorised:

 

 

$'000

500,000,000 ordinary shares of 2 pence each

 

 

 

At 1 January 2020, 31 December 2020 and

30 June 2021

 

 

 

14,960

 

 

 

 

 

 

Allotted, issued and fully paid:

 

 

Number

Ordinary shares of 2 pence each

 

 

 

At 1 January 2020 and 31 December 2020

 

 

220,713,205

Issued during the six months ended 30 June 2021

 

 

14,428,001

 

 

 

 

At 30 June 2021

 

 

235,141,206

 

 

 

 

 

 

               

 

 

Allotted, issued and fully paid:

 

 

$'000

Ordinary shares of 2 pence each

 

 

 

At 1 January 2020 and 31 December 2020

 

 

6,696

Issued during the six months ended 30 June 2021

 

 

400

 

 

 

 

At 30 June 2021

 

 

7,096

 

 

 

 

             

 

 

4       Events after the reporting date

 

There were no reportable events occurring after the balance sheet date.

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