REG - Caspian Sunrise plc - Interim results for six months ended 30 June 2023
25/09/2023 07:00
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RNS Number : 4429N Caspian Sunrise plc 25 September 2023
Caspian Sunrise PLC ("Caspian Sunrise," " the Group" or the "Company")
Interim results for the six months ended 30 June 2023
Highlights
Operational
· Aggregate production in the period 351,620 bbls (2022: 414,048 bbls)
· Post period end production 1,953 bopd (2022: 2,264 bopd)**
· First commercial drilling contract for the Caspian Explorer signed
Financial
· Total revenue $17.3 million (2022: $25.6 million)
· Revenue from oil production $12.5 million (2022: $24.4 million)
· Revenue from sales trading $3.8 million (2022: $ nil)
· Revenue from drilling activities $1.0 million (2022: $1.2 million)
· Gross Profit $12.4 million (2022: $18.9 million)
· Operating profit $8.1 million (2022: $10.3 million)
· Profit before tax $7.9 million (2022: $10.0 million)
· Profit after tax $7.5 million (2022: $7.3 million)
· Net current liabilities $24.6 million (2022: $13.1 million)
· Cash $0.5 million (2022: $5.0 million)
· Total assets $130.7 million (2022: $112.5 million)
· Dividends paid in the period $3.0 million (2022: nil)
** based on production at end August 2023 & and end August
2022
Introduction
I am pleased to present the unaudited interim results for the six months ended
30 June 2023.
Overview
The Group's principal activities are the exploration, production and sale of
oil from oilfields in the Mangistau Oblast in Kazakhstan, which borders the
north-east shore of the Caspian Sea. Additionally, the Group provides onshore
and offshore drilling services to third parties.
The board believes the geological conditions present at Kashagan and Tengiz
oil fields, which are both world class discoveries and valued in the billions
of dollars, may extend to the Group's flagship BNG contract area and further
to the Block 8 contract area, which the Group is in the process of acquiring.
If so, and in particular if the Group can achieve commercial flow rates from
the deep structures at these contract areas, there should be very significant
value in the Company's shares.
Operating in Kazakhstan
The sanctions imposed on Russia in March 2022, following its invasion of
Ukraine in February 2022, have had a material adverse impact on the Group,
even though the EU and UK sanctions specifically exclude oil produced in
Kazakhstan and shipped via the Russian pipeline network.
As previously announced the ongoing large discount for oil emerging from the
Russian pipeline network and termed "Urals Oil" taken together with Kazakh
taxes on international sales still being based on the full international price
rather than the actual price achieved means that for the period covered by
this interim statement it was uneconomic to sell on the international market.
Accordingly, all the oil produced in the period under review was sold on
either the domestic market or to local mini refineries at prices currently
approximately $50-$60 per barrel lower than headline world prices.
Results
The impact of sanctions made operating conditions in the period under review
significantly tougher than in the corresponding period. Inevitably therefore
our financial performance, which is set out in more detail in the financial
review later in this interim statement, shows a worse position than 12 months
ago at most measures of performance.
Nevertheless, with contributions from our new sales trading operations and
from our drilling services activities, despite a 32% fall in headline revenues
we are able to report a marginal increase in profit after tax.
BNG Operational update
The BNG contract area is located approximately 40 km from Tengiz and extends
over 1,561 km2. The contract area has four identified structures, two of which
are shallow (MJF & South Yelemes) and two of which are deep (Airshagyl and
Yelemes Deep).
MJF structure
The vast majority of oil produced in recent years has been from the MJF
structure, which has a full production licence extending to 2043. In the
period under review 303,322 barrels of the total 351,620 barrels produced,
representing approximately 86% of the total, came from the MJF structure.
This was a fall of approximately 25% from the corresponding period as for
large parts of the period under review previously successful wells 141, 142
and 145 were not in production as the result of increasing levels of water in
these wells.
MJF workovers:
· Following remedial work at Well 142 production levels briefly returned
to previous levels before the water in the well forced another closure. We
then started drilling a new 2,450 meter side-track, which at the date of this
report has reached 2,090 meters.
· Once work at Well 142 is completed the intention is to undertake a
similar workover / side-track at Well 141.
· The workover at Well 145 did not result in the improved performance
expected. If we cannot adequately control the increasing water level there we
plan to drill a new side-track to restore the well to production.
New wells
· Well 155, a new shallow well, is planned to spud in Q4 2023.
Production from the MJF structure is currently at the rate of 1,685 bopd.
South Yelemes
South Yelemes, which is the second shallow structure at the BNG contract area,
has a full production licence extending to 2046.
Oil has been produced from this structure since Soviet times and in the period
under review 48,671 bbls were produced, representing approximately 14% of the
total. This compares to only 3% for the full year ended 31 December 2022 as
for much of that year the South Yelemes wells were shut in awaiting approval
for the requested licence upgrade.
Production from the South Yelemes structure is currently 268 bopd.
Rig mobilization for the planned horizontal well targeting possible oil in the
dolomites is scheduled for H2 2024.
Airshagyl
The Airshagyl structure extends over 58 km2. To date four wells have been
drilled to depths between 4,400 meters and 5,300 meters. Deep Well A8 has been
abandoned but we continue to work on Deep Wells A5, A6 & A7.
Deep Well plans:
· At Deep Well A5 we intend in Q4 2023 to drill a new side track
· At Deep Well A6 our intention, also starting in Q4 2023, is to repair
the well's cementing before reperforating the well.
· At Deep Well A7 our intention in Q1 2024 is to resume drilling from
the current depth of approximately 2,000 meters to the original planned depth
of 5,300 meters.
Yelemes Deep
The Yelemes Deep structure extends over 36 km2. To date two deep wells, 801
and 802 have been drilled to depths between 4,000 and 4,868 meters with a
third deep well planned to spud before the year end.
Deep Well update
· At Deep Well 801 we are working with external geologists to determine
the next course of action.
· Deep Well 802 has a revised planned total depth of 4,200 meters. A
coil tubing exercise was successfully completed, however we have been
struggling with a stuck pipe. Approximately 500 meters of the stuck pipe has
now been successfully removed from the well leaving a further 3,400 meters
still to be removed.
· In Q4 2023 we intend to spud Deep Well 803, which is a requirement
under the current BNG work programme obligations and which has a planned total
depth of 4,350 meters.
3A Best
During the period under review there has been no material progress at 3A Best.
Block 8
In September 2022 the Company acquired an option to buy the Block 8 contract
area for a maximum consideration of $60 million, payable in cash from future
production at Block 8 at the rate of $5 per barrel.
As the Block 8 contract area is owned by a member of the Oraziman family,
which holds 48.4% of the shares in Caspian Sunrise, it constitutes a related
party transaction.
Following an extended due diligence process the Independent Directors, having
consulted with WH Ireland, the Company's nominated adviser, exercised the
option to acquire 100% of the shares of Procyon Investments Limited, the UAE
registered holding company of EPC Munai LLP, which is the Kazakh registered
holder of the licence for the Block 8 contract area.
Completion of the acquisition is now dependent inter alia on the consents of
the regulatory authorities in Kazakhstan and the UAE. The Independent
Directors being Clive Carver and Seokwoo Shin, having consulted with the
Company's nominated adviser, WH Ireland, consider the terms of the transaction
to be fair and reasonable insofar as the Company's shareholders are concerned.
The Block 8 contract area extends over 2,823 km2 with three identified
structures and production from two existing wells. It was previously owned
by LG International the Korean conglomerate, which in 2006 began the
acquisition of 3D seismic data over approximately 456 km2. In recent years two
deep wells have been drilled to depths of 4,203 meters and 3,449 meters
respectively, from which oil has flowed at rates of up to 800 bopd.
Current production from Block 8 is approximately 110 bopd, with oil
transported to the same treatment and pumping station used by BNG.
Drilling at Deep Well AKD-4 has reached its planned total depth of 3,922
meters and preparations are underway to test the well.
Drilling at Deep Well T-2D, which has a planned total depth of 3,500 meters,
has reached 3,408 meters. After the remaining 92 meters are completed the well
will be prepared for testing.
The acquisition of Block 8 will bring a second flagship asset into the Group.
Either BNG or Block 8 will then have the ability to transform the value of the
Group in the event of successful deep drilling.
Caspian Explorer
In March 2023 we announced the first commercial drilling charter for the
Caspian Explorer to drill a well to a planned depth of 2,500 meters in the
summer of 2024. The well is to be drilled for the Isatay Operating Company
LLP, in which Italy's ENI is a leading participant.
Based on the terms agreed we expect an operating profit on the contract of
approximately $15 million, although the final amount will depend principally
on the time taken to drill the well.
In June 2023 we announced the conditional sale of 50% of Prosperity Petroleum
FZE, the UAE registered holding company for the Caspian Explorer, for $22.5
million in cash. However, in July 2023 we updated the market that the agreed
purchase consideration had not been received and that the board was
considering alternative options.
Discussions continue regarding both additional commercial charters and / or
sale.
Financial review
Overview
For the first three months of the corresponding period, before the impact of
sanctions, we were able to sell the majority of oil produced on the
international market. In contrast, during the period under review, all oil
sales were to either the domestic market or to domestic mini refineries.
As the price for oil sold on these domestic markets was less than half the
current international price the impact on these results is clear to see.
However, the impact of sanctions and lower production volumes was mitigated
by increased revenues from our new sales trading activities, from revenues
from our drilling services division and by the significantly reduced tax and
other deductions attributable for oil sold on the domestic markets. The net
result being a small increase in profit after tax.
Revenue from oil sales
Revenue for the period under review for the sale of oil produced at
approximately $12.5 million was approximately 49% lower than in the
corresponding period (2022: $24.4 million). This is the result of an
approximate 14% fall in the volume of oil produced and an approximate 43% fall
in the average price excluding VAT at which that oil was sold.
Production volumes
In the period under review 351,620 barrels of oil were produced (2022:
414,048) at an average of 1,926 bopd (2022: 2,288 bopd).
Production from the MJF structure at 303,332 barrels was approximately 25%
lower than in 2022, principally because wells 141, 142 and 145 were awaiting
remedial action and were either totally or mostly out of production.
Production from South Yelemes at 48,671 bbls was many times greater than in
2022, principally because for much of the corresponding period production from
South Yelemes wells was not permitted while the South Yelemes licence upgrade
application was under consideration.
No oil was produced in either the period under review or the corresponding
period from either the Airshagyl or Yelemes Deep structures.
Achieved prices
No oil was sold on the international market where prices were typically $70
per barrel or better throughout the period under review.
Approximately 48% of oil produced was sold on the domestic market where prices
averaged approximately $33 per barrel excluding VAT. Approximately 52% of
oil produced was sold to local mini refineries at various prices resulting in
the average price achieved for all production in the period under review being
approximately $35 per barrel excluding VAT.
This compares to an average achieved price of approximately $61 per barrel
excluding VAT in the corresponding period.
Sales trading
On 1 January 2023, following changes in the Kazakh regulations regarding oil
trading, it became possible for the first time for the Group to trade our own
oil. We estimate that our to date limited entry into the local oil trading
market added $3.8 million to total revenue in the period under review.
Revenue from drilling services
During the period under review CTS the Group's wholly owned drilling company
undertook drilling work at the Block 8 contract area, which as noted above the
Group is in the process of acquiring. As Block 8 is not yet owned by the
Group the charges for the drilling work at Block 8 are accounted for as
revenue. In the corresponding period CTS's work for third parties was
approximately $1.2 million.
There was no revenue from the Caspian Explorer in either the period under
review or the corresponding period.
Cost of sales and gross profit
In the period under review cost of sales fell by approximately 27% to
approximately $4.9 million (2022: $6.7 million) with gross profit for the
period being $12.4 million (2022: $18.9 million) as broken down by activity in
the table below.
$'000 6 months ended 30 June 2023 6 months ended 30 June 2022
note Revenue Cost of Gross Revenue Cost of Gross
sales profit sales profit
Oil production 12,464 2,666 9,798 24,385 3,962 20,423
Oil trading 2 3,798 671 3,127 nil nil nil
Drilling Services 1 1,024 1,566 (542) 1,206 2,743 (1,537)
Total 17,286 4,903 12,383 25,591 6,705 18,886
Notes
1. Drilling services, including CTS and Caspian Explorer
2. Sales trading commenced 1 January 2023
Selling expenses
In the period under review, selling expenses fell by approximately 59% from
$6.9 million to approximately $2.8 million largely as the result of the
reduction in export duty charges.
Other administrative expenses
These are mostly general and administrative expenses, which fell by
approximately 13% to approximately £1.4 million (2022: $1.7 million).
Operating income
The result of the above is that operating income fell by approximately 21% to
approximately $8.1 million from $10.3 million.
Finance costs
Net finance costs were approximately $0.16 million (2022: approximately $0.32
million).
Profit before tax
Profit before tax was approximately $7.9 million (2022: approximately $10.0
million).
Tax charge
Tax in the period under review has been estimated at approximately $0.4
million compared to $2.7 million in the corresponding period, with the
difference being principally the impact of lower international sales and lower
overall profitability.
Profit after taxation
Profit after taxation was approximately $7.5 million (2022: $7.3 million).
Non-current assets
Non-current assets at approximately $121.1 million were approximately $13.3
million greater than at the 2022 year end. This was largely the result of an
approximate $7.1 million increase in proven oil and gas assets, approximately
$2.4 million increase in unproven oil and gas assets and an increase of
approximately $3.8 million in long term recoverable VAT.
Net current liabilities
Net current liabilities at approximately $24.6 million were approximately $8.6
million greater than at the 2022 year end ($13.1 million). The increase being
principally additional trade and other payables and additional short term
borrowing.
Cash
Cash at the end of the period under review was approximately $0.5 million
compared to approximately $3.7 million at the 2022 year end. In September
2023, after the period end, the Group signed a $5.0 million loan with a Kazakh
bank, of which at the date of this report approximately $3.4 million has been
drawn.
Cashflows
Of the approximately $13.8 million received from customers approximately $4.8
million was paid to suppliers and staff; approximately $2.4 million was spent
on additions to unproven oil and gas assets; approximately $5.5 million was
spent on proven oil & gas assets; approximately $1.5 million was drawn on
the Block 8 loan and approximately $3.0 million was paid in dividends.
The Group also received additional loans from the Oraziman family of
approximately $0.3 million under the existing framework facility agreement.
The above resulted in an approximately $3.4 million decrease in cash from $3.7
million at the 2022 year end to approximately $0.5 million at 30 June 2023.
Going concern
The financial statements for the year ended 31 December 2022, which was
published on 6 July 2023, set out why the Directors continue to adopt the
going concern approach to the preparation of those financial statements. The
Directors believe the same considerations and conclusions apply to these
interim financial statements.
Board
Following the Annual General Meeting on 6 July 2023 Edmund Limerick stepped
down from the board after 13 years' service. The board recognises the need to
appoint additional non-executive directors to comply with best corporate
governance practice.
Dividends
There has been no change in the Company's position on dividend payments, which
are suspended until at least the end of the year at which point the board
will review the position based on the then production and revenue levels.
Outlook
While the international oil price is strong and looks set to remain so for the
foreseeable future, we continue for Russian sanctions related reasons to sell
at domestic / local mini refinery prices, which have changed little since the
end of the period under review.
We have not yet found a solution to close the huge price differential between
what we should receive and what we would actually receive for international
sales. We are however learning to live with the sanctions related operational
issues .
Short term
Our immediate focus is on increasing production, principally from the MJF
structure. We are also preparing for the Caspian Explorer's first drilling
charter commencing in Q3 2024 and working to complete the acquisition of Block
8.
Longer term
We do not wish the current largely sanctions related distractions to divert us
from our principal purpose of seeking to create long term shareholder value.
We recognise the Group's longer term value will depend for the most part on
the reserves attributable to the Group's assets, most notably from the deeper
structures. We therefore have and will continue to work to maximise our
reserves by seeking to bring those deep wells drilled into production and by
drilling additional deep wells at both BNG and Block 8.
Events which are likely to have a significant positive impact include:
· The end of sanctions or a new international delivery route avoiding
the price discount
· Commercial production from one of the BNG deep wells
· Commercial production from one of the Block 8 deep wells once acquired
· A further commercial charter or outright sale for the Caspian Explorer
We look forward to updating shareholders with news of our progress in the
coming months.
Clive Carver
Non-executive chairman
25 September 2023
Comment
Clive Carver, Chairman said
"The impact of the ongoing Russian sanctions on the Group's performance is
clearly reflected in these results.
Nevertheless, with contributions from our new oil trading operations and from
our drilling services operations and despite a 32% fall in headline revenue,
we are reporting a marginal increase in profit after taxation."
Contacts:
Caspian Sunrise PLC
Clive Carver, Chairman
+7 727 375 0202
WH Ireland, Nominated Adviser & Broker
James Joyce
+44 (0) 207 220 1666
James Bavister
Andrew de Andrade
Qualified person
Mr. Assylbek Umbetov, a member Association of Petroleum Engineers, has
reviewed and approved the technical disclosures in this announcement.
This announcement has been posted to:
www.caspiansunrise.com/investors (http://www.caspiansunrise.com/investors)
The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information
is disclosed in accordance with the Company's obligations under Article 17 of
the UK MAR. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
Six months Six months
ended ended 30 June 2022 Unaudited
30 June 2023
Unaudited
US$000s US$000s
Revenue 17,286 25,591
Cost of sales (4,903) (6,705)
Gross Profit 12,383 18,886
Selling expense (2,826) (6,906)
Other administrative expenses (1,449) (1,662)
Operating Income 8,108 10,318
Finance cost (245) (330)
Finance income 81 10
Income before taxation 7,944 9,998
Taxation (436) (2,690)
Income after taxation 7,508 7,308
Income attributable to owners of the parent 7,447 7,218
Income (Loss) attributable to non-controlling interest 61 90
Income for the year 7,508 7,308
Earnings per share
Basic income per ordinary share (US cents) 0.36 0.33
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months
ended ended 30 June 2022 Unaudited
30 June 2023
Unaudited
US$000s US$000s
Income (Loss) after taxation 7,447 7,218
Other comprehensive loss:
Items to be reclassified to profit or loss in subsequent periods
Exchange differences on translating
foreign operations 968 (9,264)
Total comprehensive income / (loss) for the period 8,415 (1,956)
Total comprehensive loss attributable to: Owners of the parent
8,354 (2,046)
Non-controlling interest 61 90
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
Unaudited Share capital Cumulative translation reserve Capital contribution reserve Merger Retained deficit Total Non-controlling interests Total equity
Reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January 2023 33,060 (66,521) (2,362) 11,511 84,872 60,560 (5,667) 54,893
Income after taxation - - - - 7,447 7,447 61 7,508
Exchange differences on translating foreign operations - 968 - - - 968 - 968
Total comprehensive
income for the period - 968 - - 7,447 8,415 61 8,476
(2,442) (2,442) - (2,442)
Dividends declared
At 30 June 2023 33,060 (65,553) (2,362) 11,511 89,877 66,533 (5,606) 60,927
For the six months ended 30 June 2022
Unaudited Share capital Share premium Deferred shares Cumulative translation reserve Capital contribution reserve Merger Retained deficit Total Non-controlling interests Total equity
Reserve
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January 2022 31,118 164,817 64,702 (62,103) (2,362) 11,511 (156,239) 51,444 (5,801) 45,643
Income after taxation - - - - - - 7,218 7,218 90 7,308
Exchange differences on translating foreign operations - - - (9,264) - - - (9,264) - (9,264)
Total comprehensive -
income for the period - - (9,264) - - 7,218 (2,046) 90 (1,956)
Shares issue (debt to equity)* 1,942 4,273 - - - 6,215 6,215
- - -
Share premium and Deferred Shares reserves cancellation** (169,090) (64,702) 233,792 - - -
At 30 June 2022 33,060 - - (71,367) (2,362) 11,511 84,771 55,613 (5,711) 49,902
Reserve Description and purpose
Share capital The nominal value of shares issued
Share premium Amount subscribed for share capital in excess of nominal value
Deferred shares The nominal value of deferred shares issued
Cumulative translation reserve Losses arising on retranslating the net assets of overseas operations into US
Dollars
Merger reserves Gains accrued as the result of acquisitions made in previous periods
Capital contribution Reserve Capital contribution arising when a shareholder has made an irrevocable gift
to the Company
Retained deficit Cumulative losses recognised in the profit or loss
Non-controlling interest The interest of non-controlling parties in the net assets of the subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30 June 31 December 30 June
2023 2022 2022
Note US$000s US$000s US$000s
Assets Unaudited Audited Unaudited
Non-current assets
Unproven oil and gas assets 5 46,243 43,813 29,090
Property, plant and equipment 6 67,815 60,746 65,471
Other receivables 7 6,359 2,533 5,813
Restricted use cash 707 694 607
Total non-current assets 121,124 107,786 100,981
Current assets
Inventories 2,457 492 677
Other receivables 6,668 5,191 5,832
Cash and cash equivalents 475 3,682 5,044
Total current assets 9,600 9,365 11,553
Total assets 130,724 117,151 112,534
Equity and liabilities 33,060
Equity
Share capital 8 33,060 33,060
Other reserves (2,362) (2,362) (2,362)
Merger reserve 11,511 11,511 11,511
Retained earnings 89,877 84,872 84,771
Cumulative translation reserve (65,553) (66,521) (71,367)
Shareholders' equity 66,533 60,560 55,613
Non-controlling interests (5,606) (5,667) (5,711)
Total equity 60,927 54,893 49,902
Current liabilities 15,871
Trade and other payables 22,498 15,206
Short-term borrowings 9 2,456 352 988
Provision for BNG license payment 3,178 3,178 3,178
Other current provisions 6,089 5,977 5,261
Total current liabilities 34,221 25,378 24,633
Non-current liabilities
Deferred tax liabilities 6,219 6,335 6,629
Provision for BNG license payment 14,875 16,297 17,923
Other non-current provisions 477 469 452
Other payables 14,005 13,779 12,995
Total non-current liabilities 35,576 36,880 37,999
Total liabilities 69,797 62,258 62,632
Total equity and liabilities 130,724 117,151 112,534
This financial information was approved and authorised for issue by the Board
of Directors on 22 September 2023 and was signed on its behalf by:
Clive Carver
Chairman
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Six months ended
30 June 2023 30 June 2022
Unaudited Unaudited
US$000s US$000s
Cash flow provided by operating activities
Cash received from customers
13,764 24,328
Payments made to suppliers
and employees (4,751) (14,222)
Net cash used by
operating activities 9,013 10,106
Cash flow used in investing activities
Additions to unproven oil and gas assets
(2,430) (5,362)
Purchase of PP&E (5,536) (129)
Cash flow used in investing
activities (7,966) (5,491)
Cash flow used by financing activities
Loans provided (1,545) -
Loans received 316 -
Dividends paid (3,025)
Net cash used by financing
activities (4,254) -
Net increase /decrease in cash and
cash equivalents (3,207) 4,615
Cash and cash equivalents at
the start of the period 3,682 429
Cash and cash equivalents
at the end of the period 475 5,044
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
INFORMATION
1. STATUTORY ACCOUNTS
The interim financial results for the period ended 30 June 2023 are
unaudited. The financial information contained within this report does not
constitute statutory accounts as defined by Section 434(3) of the Companies
Act 2006.
2. BASIS OF PREPARATION
Caspian Sunrise plc is registered and domiciled in England and Wales.
This interim financial information of the Company and its subsidiaries ("the
Group") for the six months ended 30 June 2023 has been prepared on a basis
consistent with the accounting policies set out in the Group's consolidated
annual financial statements for the year ended 31 December 2022. It has not
been audited or reviewed, does not include all of the information required for
full annual financial statements, and should be read in conjunction with the
Group's consolidated annual financial statements for the year ended 31
December 2022. The 2022 annual report and accounts, which received a
qualified opinion from the auditors, included a material uncertainty in
respect of going concern but did not contain a statement under section 498 (2)
or 498 (3) of the Companies Act 2006, have been filed with the Registrar of
Companies. As permitted, the Group has chosen not to adopt IAS 34 'Interim
Financial Reporting'.
The financial information is presented in US Dollars and has been prepared
under the historical cost convention.
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31
December 2022 except for the effect of new standards effective from 1
January 2023 as explained below. These are expected to be consistent with the
financial statements of the Group as at 31 December 2022 that are/will be
prepared in accordance with IFRS and their interpretations issued by the
International Accounting Standards Board ("IASB") as adopted by the European
Union ("EU").
Several other amendments and interpretations apply for the first time in
2023, but do not have an impact on the interim consolidated financial
statements of the Group.
Going Concern
The Group's Financial Statements for the year ended 31 December 2022, which
were published on 4 July 2023, contained reference to the existence of a
material financial uncertainty, which only approximately 10 weeks on continues
to exist. This may cast significant doubt about the Group's ability to
continue as a going concern and therefore it may be unable to realise its
assets and discharge its liabilities in the normal course of business.
The financial information in these interim results has been prepared on a
going concern basis using current income levels but a reduced work programme.
On this basis the Directors believe that the Group will have sufficient
resources for its operational needs over the relevant period, being until
September 2024. Accordingly, the Directors continue to adopt the going concern
basis.
However, the Group's liquidity is dependent on a number of key factors:
· The Group continues to forward sell it domestic production
and receive advances from oil traders with $US5.9 million advanced at 30 June
2023, and the continued availability of such arrangements is important to
working capital. Whilst the Board anticipates such facilities remaining
available given its trader relationships, should they be withdrawn or reduced
more quickly than expected then additional funding would be required. In
January 2023 the group started selling the oil products processed from the
crude oil extracted which increased the margins achieved on local oil sales.
· Similarly, the Group sells to local mini refineries. Should
these arrangements be terminated or reduced then additional funding would be
required.
· For the time being the Group is not selling to the
international markets as a consequence of the impact of sanctions on Russia,
including access to pipelines and the price at which oil emerging from Russian
pipelines is sold. These forecasts remain sensitive to oil prices, which have
shown significant volatility in recent times. In the event of a significant
decline in world and domestic oil prices additional funding would be required.
3. INCOME PER SHARE
Basic loss per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year including shares to be issued.
There is no difference between the basic and diluted loss per share as the
Group made a loss for the current and prior year. Dilutive potential ordinary
shares include share options granted to employees and directors where the
exercise price (adjusted according to IAS33) is less than the average market
price of the Company's ordinary shares during the period.
The calculation of loss per share is based on:
Six months Six months
ended 30 June 2022 Unaudited ended 30 June 2022 Unaudited
The basic weighted average number of ordinary
shares in issue during the period 2,250,501,559 2,157,729,446
The income (loss) for the year attributable to owners of the parent (US$'000)
7,447 7,284
4. FINANCIAL EXPENSE
The Group incurred financial expenses of approximately $245,000 during the 6 months to 30 June 2023 (2022: US$330,000).
5. UNPROVEN OIL AND GAS ASSETS
During the six months period ended June 30 2023 the Company's oil and gas
assets increased on US$ 2 million (2022: decrease on US$ 17 million, due
mainly to the transfer of the shallow South Yelemes structure to proven oil
and gas assets on the award of its production licence (note 6) and the
depreciation expense).
6. PROPERTY, PLANT & EQUIPMENT
Group Proved oil Motor Vehicles Other Total
and gas assets
US$'000 US$'000 US$'000 US$'000
Cost at 1 January 2022 44,929 2,126 15,946 63,001
Additions 323 176 3 501
Disposals (110) - (7,054) (7,164)
Additions 14,025 - - 14,025
Foreign exchange difference (425) (111) (424) (960)
Cost at 31 December 2022 58,742 2,191 8,470 69,403
Additions 225 12 8,602 8,839
Disposals (245) - - (245)
Foreign exchange difference (618) 125 315 (178)
Cost at 30 June 2023 58,104 2,328 17,387 77,819
Depreciation at 1 January 2022 2,771 569 2,526 5,866
Charge for the year 2,079 61 358 2,498
Disposals (19) - - (19)
Foreign exchange difference 189 11 112 312
Depreciation at 31 December 2022 5,020 641 2,996 8,657
Charge for the year 672 55 229 956
Disposals (9) - - (9)
Foreign exchange difference 234 25 141 400
Depreciation at 30 June 2023 5,917 721 3,366 10,004
Net book value at:
01 January 2022 42,158 1,557 13,419 57,135
31 December 2022 53,722 1,550 5,474 60,746
30 June 2023 52,187 1,607 14,021 67,815
7. OTHER NON-CURRENT RECEIVABLES
During the six months ended June 30 2023 the Company provided advances related
to its drilling operations in the amount of US$0.12 million (2022: US$1.52
million). VAT recoverable at the Group level as at 30. June 2023: was
approximately US$4.6 million (2022: approximately US$4,3 million).
8. CALLED UP SHARE CAPITAL
Number of ordinary shares $'000
Balance at 31 December 2022
2,250,501,560 33,060
Balance at 30 June 2023
2,250,501,560 33,060
In June 2022 the Company received approval from the UK High Court for the
cancellation of its Deferred shares and Share premium accounts
9. BORROWINGS
Six months ended Year ended 31
December 2022
30 June 2023 US$'000
US$'000
Unaudited Audited
Amounts payable within one year
Akku Investments 1,982 99
Aibek Oraziman 316 355
Other borrowings 158 534
2,456 988
At 30 June 2023 and 31 December 2022 all the loans at the group were payable
to the individuals and entities related to Oraziman family.
10. SUBSEQUENT EVENTS
In August 2023 BNG Ltd. LLP took out a $5 million loan for up to 3 years at an
interest rate of 7%. At the date of this report approximately $3.4 million
of the loan has been drawn with the funds used to purchase casing for deep
wells and the drilling rig.
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