REG - Caspian Sunrise plc - Interim Results
Caspian Sunrise Plc
Interim results for the six months ended 30 June 2021
Financial highlights
During the period
Six months ended 30 June
2021
2020
$'m
$'m
Revenue
10.1
5.0
Gross Profit
7.7
2.4
Operating profit / (loss)
3.9
(0.9)
Profit / (loss) before tax
3.4
(1.4)
Total assets
124.9
121.9
Cash & cash equivalents
0.3
0.2
Inventories & other current assets
5.6
4.7
Current liabilities
28.4
28.4
· International oil price recovers from approximately $16 per barrel to approximately $75 per barrel
· Revenue doubles
· Gross profit triples
· Mix of export / domestic sales for the period 66% : 34% (2020; 58% : 42%%)
· Cash at the period end $0.3 million
Subsequently
· International oil prices remain strong
· Domestic oil price recovers from approximately $6 per barrel to approximately $20 per barrel
· Proposed $6.2 million debt conversion @ 3.2p per share, subject to regulatory and independent shareholder approval.
· Commitment to clear the path to pay first dividends
Operational highlights
During the period
Six months ended 30 June
Units
2021
2020
Total production
bbls
228,387
272,707
Production for export sales
bbls
150,735
115,233
Production for domestic sales
bbls
77,652
157,474
Average daily production in the period
bopd
1,262
1,494
Daily production at the period end
bopd
1,124
1,268
Current daily production
bopd
1,689
N/A
· 16 % decrease in production
· First horizontal well drilled
· Conditional 3A Best farm out completed
· First charter completed for the Caspian Explorer
· Reserves at 30 June 2021, P1 15.4 mbbls, P 26.6 mbbls
· Appointment of Seekwoo Shin as Chief Operating Officer
Subsequently
· First horizontal well flowed with initial production of 629 bopd reaching a maximum rate of 730 bopd before dropping to current rate of 600 bopd
· Current production 1,689 bopd
· Negotiations for a second charter for the Caspian Explorer at an advanced stage
Contacts:
Caspian Sunrise PLC
Clive Carver
Chairman +7 727 375 0202
WH Ireland, Nominated Adviser & Broker
James Joyce / Andrew de Andrade
Qualified person
Mr. Assylbek Umbetov, an employee in the Company's technical department, has reviewed and approved the technical disclosures in this announcement.
This announcement has been posted to:
www.caspiansunrise.com/investors
The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.
Caspian Sunrise Plc
Interim results for the six months ended 30 June 2021
Chairman's Statement
Introduction
I am pleased to set out in these interim results a much stronger position than at the same time last year.
Overview
Oil prices
The principal catalyst for the recovery in the Group's fortunes has been the dramatic improvement in both the world oil price and the price at which domestic production has to be sold in Kazakhstan.
International prices have recovered from a low in Q2 2020, of approximately $16 per barrel to the current approximately $75 per barrel and for the majority of the period under review were in excess of $50 per barrel. The domestic price also recovered from a low of approximately $6 per barrel to the current approximately $20 per barrel, although this increase came too late to have much impact on the period under review.
The outlook for world prices remains positive and we have no reason to expect anything other than further upwards movement in the domestic price.
The sharp improvement in oil prices together with increased production and the first contributions from the Caspian Explorer and the conditional 3A Best farm-out have resulted in a much improved financial position. This in turn has allowed a more expansive approach to the development of BNG, which is has already led to increased production.
Impact of Covid
The lengthy drill site shut-downs experienced in the corresponding period in 2020 did not occur in the period under review. However, the impact of the drilling slow-down in 2020 became apparent with no new wells coming on stream in the period under review, resulting in a fall in the volume of oil produced with the expected declines at older wells.
Additionally, we had several periods when the Almaty office was closed following staff testing positive for Covid-19. Nevertheless, while there remains a Covid impact on general efficiency and in sourcing supplies the impact is far less pronounced than in 2020.
Progress at BNG
Details of progress at our flagship asset BNG are set out below in the operational review.
Assessed historic costs
The big disappointment in the period under review was the much delayed court ruling denying our appeal against the charges assessed and levied by the Kazakh authorities to cover past state contributions to developing assets. This charge typically arises when a Contract Area, or in our case a structure on a Contract Area, moves from an appraisal licence to an export licence.
At dispute was the State's assertion that 100% of the assessed amounts from the whole BNG Contract Area - which currently covers an area of approximately 1,000 sq km - should fall entirely on the MJF structure which at approximately 13 sq km represents just 1.3% of the total BNG Contract Area.
Our appeal was the final appeal permitted and following the court's ruling we shall have to continue to pay approximately $800,000 each quarter for the next 8 years, funds which could have been spent on further development.
On a positive note, any other structures on the BNG Contract Area which move to export licence such as South Yelemes or either of the two existing deep structures, Airshagyl or Yelemes Deep, would be free from further assessed historic cost recoveries.
3A Best
At 3A Best the responsibility to fund the next stage of development will rest with our new partners once the updated licence is issued.
Caspian Explorer
The initial charter for the Caspian Explorer since its acquisition in October 2020, was completed in August 2021.
The income from the first charter more than covers the operating costs since acquisition.
We are in advanced discussions with a leading international oil company regarding the Caspian Explorer being chartered to drill a new offshore well in 2022.
Dividends
It has been a long-held objective that the Group be a regular payer of dividends. Accordingly, at a General Meeting to be convened for the purpose later this year, shareholders will be asked to approve the capital reduction required to allow the future payment of dividends. This would also require the approval of the UK Court.
OPERATIONAL REVIEW
Production in the six-month period was 228,387 bbls at a rate of 1,262 bopd. (2020: 272,707 bbls at 1,494 bopd).
Throughout the period under review and subsequently there was no contribution from the South Yelemes structure, which before being shut in during the licence upgrade application was producing at the rate of approximately 300 bopd.
There were three principal factors contributing to the decline in production volumes:
· 3% of production decline was due to there being no production from South Yelemes in 2021
· 5% of production decline was due to the loss of production from well 144 due to high water cut
· 7% of production decline was due to lower production rates from well 141
BNG
To date there are four identified structures on the BNG Contract Area. The two shallow structures are the MJF structure and South Yelemes. The two deep structures are Airshagyl and Yelemes Deep.
MJF structure
In the period under review 100% of oil produced came from the MJF structure, which we discovered in 2013 and extends to approximately 13 sq km2.
At 30 June 2021, there were 9 wells drilled on the structure of which 6 were producing. The key development during the period was at Well 154, which was spudded on 26th April 2021, and completed in July 2021 with a Total Depth of 2,548 meters. This was the first of our wells to utilise horizontal drilling techniques, with the final 200 meters of the well drilled horizontally within the reservoir unit.
This allowed the well to be perforated over a 175 meter section of the reservoir, rather than the typical 4-6 meter interval with vertical wells through the same reservoir unit
The initial 5 day average daily production rate was 629 bopd. Subsequently, production reached a maximum rate of 730 bopd before dropping to current rate of 600 bopd.
We are using the same horizontal drilling technique at Well 153 and at the date of this report have re-drilled approximately 2,200 meters of the total planned of 2,400. The final 200 meters will be drilled horizontally into the reservoir unit.
South Yelemes structure
The South Yelemes structure extends to approximately 4.5 sq km and was discovered in the Soviet era.
As noted above during the entire period under review and subsequently we have not been allowed to produce from the existing wells on the South Yelemes structure while the Kazakh authorities assess our application to move the structure from an appraisal to an export licence.
We continue to expect the structure to resume production under a new export licence before the end of the year.
Airshagyl structure
The Airshagyl structure was discovered in the Soviet era and extends up to 58 km2 with three deep wells on the structure being Deep Well A5, Deep Well A6 & Deep Well A8.
In summary, during the period under review none of our attempts to get the three deep wells to flow was successful.
· At Deep Well A5 work to clear the well paused on several occasions to allow drill pipes and crews to be used elsewhere.
· At Deep Well A6 we tested a chemical formulation that had worked elsewhere to promote oil flow. However, the extreme temperature and pressure negated the impact of the more powerful chemicals used.
· At Deep Well A8 the original planned Total Depth was 5,300 meters. In the period under review, we continued work to clear the well of debris to allow production from an intermediate depth of 4,500 meters. Since the period end we have resumed drilling towards the original Devonian target at 5,300 meters and have encountered three potential additional intervals within the Early Carboniferous (C1) with oil shows. At the date of this report drilling at Deep Well A8 has reached 4,840 meters.
Yelemes Deep structure
The Yelemes Deep structure was discovered in the Soviet Era and extends over 15 km2 with the one deep well on the structure being Deep Well 801.
During the period under review and subsequently the only operational activity was our unsuccessful attempt at getting the well to flow using the same techniques as at deep Well A6 on the Airshagyl structure.
Operational plans for the remainder of the year
Note: operational plans are liable to change at short notice. The plans set out below are liable to be superseded for a variety of operational and / or financial reasons.
MJF structure
We plan to complete the workover at Well 153 and then workover wells 146 & 141 using the same horizontal drilling techniques, rig and crew as on Well 154.
South Yelemes
When we receive the export licence we shall resume production at the existing wells and look to re-drill some using horizontal drilling techniques.
Airshagyl
At Deep Well A5 we plan to drill a new side-track at this well from a depth of 3,850 meters to 4,500 meters commencing in October 2021, provided we have access to new drill pipes.
The side-track will be drilled using our G40 rig and once started is expected to take three months to complete.
At Deep Well A6 we are working with a Dutch based specialist laboratory on a chemical treatment that can cope with the temperatures and structures we face. As noted above the chemicals used earlier in the year at Deep Wells A6 and Deep Well 801 did not produce the results we hoped for. It will only be when we have confidence in the results of this investigative work that we will look to re-frack both Deep Wells A6 and 801. It is unlikely we will conduct a new chemical treatment this year.
At Deep Well A8 we will continue drilling towards the original planned Total Depth of 5,300 meters. Once completed we will return to examine the new potential intervals identified between 4,500 and 4,840 meters.
At Yelemes Deep
The comments above relating to Deep Well A6 on the Airshagyl structure also apply to Deep Well 801.
Before the end of the year we plan to spud a new deep well, Deep Well 802, targeting structures in the Devonian. This will be the fifth deep well at BNG and the second on the Yelemes structure
The well has a planned Total Depth of 5,300 meters and will be drilled using our RT50 rig. As we have already acquired the casing for the well and will be using or own rig the additional costs are expected to be limited to $5 million.
Drilling is expected to take six months to complete.
Board changes
In March 2021, we were pleased to confirm the appointment of Seekwoo Shin as Chief Operating Officer. Mr Shin has been with the Group since 2019 and was previously head of the Korean National Oil Corporation's operations in Kazakhstan.
FINANCIAL REVIEW
Revenue & costs of sales
Revenue in the period doubled to $10.1 million (2020: $5.0 million)
Oil prices
International oil prices rose dramatically in the period. In the second half of 2020 the international oil price was below $50 per barrel while in the period under review the relevant international price was $50 or more.
The sharp increase in domestic prices occurred later than the recovery in international prices and had little impact on revenues in the period under review.
Production volumes
Production volumes fell by approximately 16%, largely as the result of no production from South Yelemes and operational issues with wells 141 and 144 on the MJF structure. Additionally, the limited new drilling in 2020 resulted in no new wells being brought into production during the period under review.
International vs Domestic sales
The average mix for the period under review was 66:34 international: domestic (2020: 58:42)
Net effect
The net effect of the above was a doubling of revenue, despite the reduction in production volumes.
The cost of sales fell broadly in line with the decline in production volumes to $2.3 million (2020: $2.6 million)
Gross profit
The increase in revenues and the fall in the costs of sales resulted in gross profit increasing by approximately 200% to $7.7 million (2020: $2.4 million)
Selling expenses
Selling expenses in the period were $2.1 million (2020: $1.7 million) and relate to export and customs duties, which are calculated on revenue rather than volume.
General administrative expenses
General administrative expenses were steady at $1.7 million (2020: $1.7 million).
Profit / Loss for the year before tax
The profit for the period before tax was $3.9 million (2020: a loss of $1.4 million).
Tax charge
The tax charge for the period increased to $1.1 million (2020: $0.7 million).
Oil and gas assets
Unproven oil & gas assets
The carrying value of unproven oil and gas assets was $61.6 million (2020: $57.8 million).
Plant, property and equipment
The value of plant property and equipment increased to approximately $51.5 million (2020: $50.0 million).
Other receivables
Other receivables were steady at $4.4 million (2020: 4.5 million)
Cash
At the period-end we had cash balances of approximately $0.3 million (2020: $0.2 million).
Current Liabilities
Trade and other payables were broadly steady at $13.2 million (2020: $13.6 million), short term borrowings increased to $5.9 million (2020: $4.1 million). The provision for the BNG historic costs in the next 12 months stays constant at $3.2 million with other current provisions steady at $6.2 million (2020: $6.1 million).
Non-current liabilities
The deferred tax provision reduced to $6.5 million (2020: $7.8 million.
The provision for the BNG historic costs fell to $20.6 million (2020: $23.8 million) as the result of payments made.
Other non-current provisions and payables were $13.1 million (2020: $12.8 million).
Cashflows
During the period under review approximately $8.5 million was received from customers and approximately $8.3 million paid out to suppliers, creditors and staff with a further $0.6 million spent on unproven oil and gas assets.
Funding
Policy
Our approach to funding the business since our IPO in 2007 has been where possible to minimise the issuance of equity and to use other forms of funding to develop our assets. In this way we have sought to preserve the upside for existing shareholders, even if this was at the expense of higher costs in the short term.
In particular we have used local oil trader financing wherever possible rather than issue equity for day to day trading activities. We have also borrowed heavily from the Oraziman family on arm's length commercial terms when alternative funding was not available.
As the Group matures and as income increases we need to move away from these either expensive sources of funding in the case of local oil traders or funding dependent on large shareholders, which we would struggle to repay if called to do so.
Recent experience
The principal constraint on the Group's activities has been the shortage of funding to develop our assets at the pace they deserve.
For much of 2020 we were operating only a very limited development programme focused on maximising existing revenues at the expense of further developing our assets.
Despite the extremely tight financial position over the past few years the Group has, with the exception of the amounts due to the Oraziman family, no external debt.
Steps taken to improve our financial position.
In addition to the benefits from increased oil prices and increased production we have taken or plan to take the following actions to improve our financial position to allow an increase in the pace of the development of our principal asset, a 99% stake in the BNG Contract Area.
Proposed conversion of Oraziman family loans
During the period under review the support from the Oraziman family in the form of subordinated loans increased from $5.6 million to $5.9 million and at the date of this report stand at $6.2 million.
Following the period end the Oraziman family and the Independent Directors agreed to convert the debt into equity at a price of 3.2p per share, premium at the time of approximately 12%. The proposed conversion is dependent on regulatory approval and the approval of independent shareholders. A circular convening a meeting to consider and if thought fit approve the proposed conversion will be issued in due course.
Own equipment
The move to own the drilling rigs and much of the other equipment previously rented has significantly improved operational efficiency and is reducing operating costs.
Since the period end we have acquired a further workover rig with the $750,000 consideration satisfied by the issue of approximately 19 million new shares.
Administrative cost cutting
The cost cutting undertaken during the peak of the Covid impacted first half of 2020 remain in force with the board's pay at approximately 25% of previous levels.
Caspian Explorer
The annual costs of the Caspian Explorer when not operational are approximately $600,000. When operational all operating costs are typically met by the hirer.
The contributions from the first safety related charter, which is now complete, more than covered these annual costs.
Based on our expectations of drilling activity over the next few years in the shallow north Caspian Sea we look forward to either a significant annual contribution to general funds, or in the event we receive an acceptable offer to sell a large one-off boost.
3A Best
At 3A Best the responsibility to fund the next stage of development will rest with our new partners once the updated licence is issued.
Outlook
With stronger finances and an increasing production base we are now much better placed to develop our existing assets at a sensible pace.
The successful use of horizontal drilling has increased production from the MJF structure and we intend to use this approach in the coming months to increasing production from existing shallow wells 153, and 146.
The prize remains bringing one or more of deep wells into commercial production. We will continue to work on the four wells already drilled and on a new fifth deep well 802, which is expected to spud before the year end.
At current oil prices the future looks much brighter than for some time.
Clive Carver
Chairman
21 September 2021
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT
Six months
ended 30
June 2021
Unaudited
Six months
ended 30 June 2020 Unaudited
US$000s
US$000s
Revenue
10,055
5,030
Cost of sales
(2,341)
(2,613)
Gross Profit
7,714
2,417
Selling expense
(2,129)
(1,669)
Share-based payments
-
(22)
Other administrative expenses
(1,733)
(1,687)
Total administrative expenses
(1,733)
(1,709)
Operating Profit / (Loss)
3,852
(961)
Finance cost
4 (447)
(466)
Finance income
11
-
Profit/(Loss) before taxation
3,416
(1,427)
Taxation
(1,065)
(744)
Profit / (Loss) after taxation
2,351
(2,171)
Income (Loss) attributable to owners of the parent
2,389
(2,169)
Loss attributable to non-controlling interest
(38)
(2)
Income (Loss) for the year
2,351
(2,171)
Earnings (Loss) per share
3
Basic income (loss) per ordinary share (US cents) 0.11 (0.12)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended
30 June 2021
Unaudited
Six months ended
30 June 2020
Unaudited
US$000s
US$000s
Income (Loss) after taxation 2,351 (2,171)
Other comprehensive loss:
Items to be reclassified to profit or loss in subsequent periods
Exchange differences on translating
foreign operations
(2,103)
(3,106)
Total comprehensive loss for the period
248
(5,277)
Total comprehensive loss attributable to: Owners of the parent
286
(5,275)
Non-controlling interest
(38)
(2)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2021
Unaudited
Share capital
Share premium
Deferred shares
Cumulative translation reserve
Capital contribution reserve
Retained deficit
Total
Non-controlling interests
Total equity
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
At 1 January 2021
30,804
248,950
64,702
(55,240)
(2,362)
(223,868)
62,986
(5,809)
57,177
Income after taxation
-
-
-
-
-
2,389
2,389
(38)
2,351
Exchange differences on translating foreign operations
-
-
-
(2,103)
-
-
(2,103)
-
(2,103)
Total comprehensive
income for the period
-
-
-
(2,103)
-
2,389
286
(38)
57,425
Shares issue
43
57
-
-
-
-
100
-
100
At 30 June 2021
30,847
249,007
64,702
(57,343)
(2,362)
(221,479)
63,372
(5,847)
57,525
For the six months ended 30 June 2020
Unaudited
Share capital
Share premium
Deferred shares
Cumulative translation reserve
Capital contribution reserve
Retained deficit
Total
Non-controlling interests
Total equity
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
At 1 January 2020
28,120
246,299
64,702
(55,643)
(2,362)
(220,477)
60,639
(5,729)
54,910
Loss after taxation
-
-
-
-
-
(2,169)
(2,169)
(2)
(2,171)
Exchange differences on translating foreign operations
-
-
-
(3,106)
-
-
(3,106)
-
(3,106)
Total comprehensive
income for the period
-
-
-
(3,106)
-
(2,169)
(5,275)
(2)
(5,277)
Arising on employee share options
-
-
-
-
22
22
-
22
At 30 June 2020
28,120
246,299
64,702
(58,749)
(2,362)
(222,624)
55,386
(5,731)
49,655
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
Shares to be issued Amount received in respect of shares which are yet to be issued
Other reserves Fair value of warrants issued and gain/losses from the purchase of NCI
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
30 June
As at
31 December
As at
30 June
Note
2021
US$000s
2020
US$000s
2020
US$000s
Assets
Non-current assets
Unproven oil and gas assets
5
Unaudited
61,634
Audited
61,413
Unaudited
57,776
Property, plant and equipment
6
51,549
52,845
50,069
Other receivables
7
6,848
4,246
7,763
Restricted use cash
241
241
242
Total non-current assets
120,272
118,745
115,850
Current assets
Inventories
1,219
392
1,336
Other receivables
4,376
6,195
4,507
Cash and cash equivalents
262
329
214
Total current assets
5,857
6,916
6,057
Total assets
126,129
125,661
121,907
Equity and liabilities
Equity
Share capital
8
30,847
30,804
28,120
Share premium
249,007
246,299
246,299
Deferred shares
8
64,702
64,702
64,702
Other reserves
(2,362)
(2,362)
(2,362)
Retained earnings
(221,479)
(223,868)
(222,624)
Cumulative translation reserve
(57,343)
(55,240)
(58,749)
Shareholders' equity
63,372
62,986
55,386
Non-controlling interests
(5,847)
(5,809)
(5,731)
Total equity
57,525
57,177
49,655
Current liabilities
Trade and other payables
13,194
11,012
13,653
Short-term borrowings
9
5,871
5,600
5,517
Provision for BNG license payment
3,178
3,178
3,178
Other current provisions
6,173
6,117
6,091
Total current liabilities
28,416
25,907
28,439
Non-current liabilities
Deferred tax liabilities
6,529
6,629
7,772
Provision for BNG license payment
20,578
21,887
23,247
Other non-current provisions
406
413
406
Other payables
12,675
13,648
12,388
Total non-current liabilities
40,188
42,577
43,813
Total liabilities
68,604
68,484
72,252
Total equity and liabilities
126,129
125,661
121,907
This financial information was approved and authorised for issue by the Board of Directors on 21 September 2021 and was signed on its behalf by:
Clive Carver
Chairman
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended
30 June 2021
Six months ended
30 June 2020
Unaudited
US$000s
Unaudited
US$000s
Cash flow provided by operating activities
Cash received from customers
8,480
2,286
Payments made to suppliers
and employees
(8,252)
(6,984)
Net cash used by
operating activities
228
(4,698)
Cash flow used in investing activities
Additions to unproven oil and gas assets
(566)
(410)
Cash flow used in investing
activities
(566)
(410)
Cash flow used by financing activities
Loans provided
271
1,262
Repayment of borrowings
-
-
Net cash used by financing
activities
271
1,262
Net decrease in cash and
cash equivalents
(67)
(3,846)
Cash and cash equivalents at
the start of the period
329
4,060
Cash and cash equivalents
at the end of the period
262
214
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1. STATUTORY ACCOUNTS
The interim financial results for the period ended 30 June 2021 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 2021 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 2020. 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 2020. The 2020 annual report and accounts, which received an unqualified 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 2020 except for the effect of new standards effective from 1 January 2021 as explained below. These are expected to be consistent with the financial statements of the Group as at 31 December 2020 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 2021, but do not have an impact on the interim consolidated financial statements of the Group as well.
Going Concern
The Group's Financial Statements for the year ended 31 December 2020, which were published on 29 June 2021, contained reference to the existence of a material financial uncertainty, which only some three months 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 2022. 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 its domestic production and receive advances from oil traders with $2.2m currently advanced and the continued availability of such arrangements is important to working capital. Whilst the Board anticipate such facilities remaining available given its trader relationships and recent increases, should they be withdrawn or reduced more quickly than forecast cash flows allow then additional funding would be required.
· The Group has $5.9m of loans due on demand or within the forecast period to its largest shareholder and his connected companies. Whilst the Board has received assurances that the facilities will not be called for payment unless sufficient liquidity exists, there are no binding agreements currently in place to this effect and if repayment was required additional funding would be needed.
· The forecasts remain sensitive to oil prices, which have shown significant volatility. Independent of the factors above, if international oil prices fell below $30/bbl additional actions would be required including further cost reductions, additional payment deferrals and raising funds.
3. INCOME PER SHARE
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year including shares to be issued.
There is no difference between the basic and diluted loss per share as the Group made a loss for the current and prior year. Dilutive potential ordinary shares include share options granted to employees and directors where the exercise price (adjusted according to IAS33) is less than the average market price of the Company's ordinary shares during the period.
The calculation of loss per share is based on:
Six months
ended 30 June 2021 Unaudited
Six months
ended 30 June 2020 Unaudited
The basic weighted average number of ordinary
shares in issue during the period*
2,088,973,983
1,882,660,885
The income (loss) for the year attributable to owners of the parent (US$'000)
2,389
(5,966)
* There were 3,000,000 potentially dilutive instruments in the period (2020: 3,000,000).
4. FINANCIAL EXPENSE
The Group incurred US$447,000 financial expenses during the 6 months to 30 June 2021, of which US$130,000 was the interest expense on loans provided by Kuat Oraziman and the companies controlled by him (2020: US$115,000). US$317,000 is the provision for historical costs obligation (2020: US$351,000).
5. UNPROVEN OIL AND GAS ASSETS
During the six months period ended June 30, 2020, the value attributed to the Company's oil and gas assets increased by US$ 221,000 (2020: decrease on US$2.2 million).
6. PROPERTY, PLANT & EQUIPMENT
Group
Proved oil
and gas assetsMotor Vehicles
Other
Total
US$'000
US$'000
US$'000
US$'000
Cost at 1 January 2020
43,318
56
8,334
51,708
Additions
1,366
-
19
1,385
Change in estimate
(233)
-
-
(233)
Acquisitions
-
-
2,837*
2,837
Foreign exchange difference
(728)
-
(14)
(742)
Cost at 31 December 2020
43,723
56
11,176
54,955
Additions
-
-
-
-
Disposals
-
(14)
-
(14)
Foreign exchange difference
(39)
-
(553)
(592)
Cost at 30 June 2021
43,684
42
10,624
54,349
Depreciation at 1 January 2020
130
39
213
382
Charge for the year
1,230
8
450
1,688
Disposals
30
-
-
30
Foreign exchange difference
10
10
Depreciation at 31 December 2020
1,390
47
673
2,110
Charge for the year
385
4
300
689
Disposals
-
(14)
-
(14)
Foreign exchange difference
10
-
5
15
Depreciation at 30 June 2021
1,785
37
978
2,800
Net book value at:
01 January 2020
43,188
17
8,121
51,326
31 December 2020
42,333
9
10,503
52,845
30 June 2021
41,899
5
9,646
51,549
* During the six months of 2020 The Group made the capital contribution into its subsidiary Caspian Technical Services LLP using the drilling rigs and other equipment on the balance of Eragon Petroleum FZE. The contribution has been made in Kazakh tenge after the formal assets valuation by the local company. The difference in values has been charged to the consolidated profit and loss account.
7. OTHER NON-CURRENT RECEIVABLES
During the six months period ended June 30 2021 the Company has provided advances related to its drilling operations in the amount of US$1.48 million (2020: US$1.95 million). Total prepayments made for drilling services as at 30.06.2021 was US$ 1,482,000 (2020: US$ 4,397,000). VAT recoverable at the Group level as at 30.06.2021: US$4,031,000 (2020: US$3,363,000).
8. CALLED UP SHARE CAPITAL
Number of ordinary shares
$'000
Number of deferred shares
$'000
Balance at 30 June 2021
2,088,219,494
30,804
373,317,105
64,702
Balance at 30 June 2021
2,091,237,450
30,846
373,317,105
64,702
9. BORROWINGS
Six months
ended 30 June
2021
Year ended 31
December 2020
US$'000
Unaudited
US$'000
Audited
Amounts payable within one year
Mr Oraziman (a)
1,420
3,624
Akku Investments (b)
3,745
-
Other borrowings (c)
706
1,976
5,871
5,600
a) As at the date of the report Eragon Petroleum FZE, a wholly owned subsidiary, had an outstanding loan of US$ 1,160,000 from Kuat Oraziman. Total US$ 260,000 were provided by Mr. Oraziman to Kazakh LLPs directly are interest free and repayable during 2021.
b) During 2021 Kuat Oraziman and the companies controlled by him have assigned their loans receivable from Caspian Sunrise and the group companies to Akku Investments LLP, the entity registered at Kazakhstan and controlled by Oraziman family. Total US$ 3,745,000 is payable to Akku at 30.06.2021, including the loan to Caspian Sunrise plc of US$ 802,000 provided earlier by Kuat Oraziman, loan of US$ 710,000 payable by Caspian Sunrise plc to Kernhem International B.V., loan of US$ 629,000 payable by Caspian Sunrise plc to Vertom International N.V. Another US$ 1,604,000 that had been assigned by Mr. Kuat Oraziman to Akku, at 31.12.2020 were the payables to him by Kazakh LLPs (BNG LLP: US$ 566,000, CTS LLP: US$ 516,000, and Roxi Petroleum LLP: US$ 522,000).
c) During July 2016 Fosco BV, a company controlled by Mr Oraziman, therefore a related party of the Group, provided an on demand loan to BNG LLP in the amount of US$ 0.63 million. The loan is interest bearing with the rate of Libor+ 1%. During 2021 Kernhem International B.V., the company controlled by Kuat Oraziman, provided the Company with US$28,000 short term interest free loan. In August 2021 the loan has been repaid by Caspian Sunrise in full.
10. SUBSEQUENT EVENTS
Acquisition of new drilling rig
On 6 August 2021, the Company announced the Group's acquisition of a new drilling rig for a consideration of $750,000, to be satisfied by the issue of 18,972,164 new Ordinary Shares at an effective issue price of 2.844p per share.
Conditional conversion of $6.2 million Oraziman Family debt
Also on 6 August 2021, the Company announced the conversion of approximately $6.2 million of loans from the Oraziman family into 139,729,451 new Ordinary Shares at an effective price of 3.2p per share, a premium of approximately 12.5%. The conversion is subject to both regulatory and independent shareholder approval.
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