REG - Challenger Energy - Interim Results for the six months ended 30/06/24
30/09/2024 07:00
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RNS Number : 0823G Challenger Energy Group PLC 30 September 2024
30 September 2024
Challenger Energy Group PLC
("Challenger Energy" or the "Company")
Interim Results for the six months ended 30 June 2024
Challenger Energy (AIM: CEG), the Caribbean and Atlantic-margin focused oil
and gas company, with oil production, appraisal, development and exploration
assets across the region, announces its Interim Results for the six months
period to 30 June 2024.
The Interim Results and Chief Executive Officer's commentary are set out in
full below and are also available on the Company's website
https://www.cegplc.com/ (https://www.cegplc.com/) .
For further information, please contact:
Challenger Energy Group PLC Tel: +44 (0) 1624 647 882
Eytan Uliel, Chief Executive Officer
Zeus Capital Limited - Nomad and Broker Tel: +44 (0) 20 3829 5000
Simon Johnson / Antonio Bossi / Darshan Patel / Isaac Hooper
Gneiss Energy Limited - Financial Adviser Tel: +44 (0) 20 3983 9263
Jon Fitzpatrick / Paul Weidman / Doug Rycroft
CAMARCO Tel: +44 (0) 20 3757 4980
Billy Clegg / Hugo Liddy / Tomisin Ibikunle
Notes to Editors
Challenger Energy is an Atlantic-margin focused energy company, with
production, development, appraisal, and exploration assets in the region. The
Company's primary assets are located in Uruguay, where the Company holds high
impact offshore exploration licences. Challenger Energy is quoted on the AIM
market of the London Stock Exchange.
https://www.cegplc.com (https://www.cegplc.com/)
ENDS
CHIEF EXECUTIVE OFFICER'S REPORT
Dear fellow Shareholders,
I am pleased to report to you on your Company's activities during the first
half of 2024.
Highlights during this period were that we entered into a transformational
farmout to Chevron for our AREA OFF-1 block in Uruguay, our AREA OFF-3 block
in Uruguay was formally awarded allowing value-adding technical work to
commence, we made good progress with our business in Trinidad and Tobago, and
we welcomed a strategic investment in our Company by specialist energy
investment firm Charlestown Energy LLC, which included the appointment of
Robert Bose to our Board. Further details on these highlights are provided
below.
Uruguay - "doing what we said we would do"
Challenger Energy secured the AREA OFF-1 licence, offshore Uruguay, in May
2020. This was in the midst of the Covid-19 pandemic, when Uruguay was not yet
on the global industry's radar, and so at that time we were the sole licence
holder in Uruguay. Since then, offshore Uruguay has emerged as a global
exploration "hotspot", following on from sizeable discoveries made by two
supermajors (TotalEnergies and Shell) from exploration wells drilled in the
conjugate margin offshore Namibia (and subsequently multiple additional
discoveries there by GALP Energia). By the end of 2023 all Uruguayan offshore
blocks had been licenced, with Challenger Energy holding two of the seven
available blocks, and the other five blocks having been awarded to majors /
NOC, including Shell and APA Corporation.
In parallel with the industry's "discovery" of Uruguay, through the course of
2023 Challenger Energy undertook a technical work program for AREA OFF-1, the
result of which was the identification of three primary prospects in the
licence area. In aggregate, we delineated a robust prospect inventory of
approximately 2 billion barrels (Pmean) and up to 5 billion barrels (P10),
thus establishing that AREA OFF-1 is a world-class asset.
Based on this technical work, in 2023 we had also commenced a formal,
adviser-led farmout process, with the objective of securing an industry
"heavyweight" as partner for AREA OFF-1, who could provide the further
expertise and capital needed to rapidly take the block forward to 3D seismic
acquisition and, ultimately, exploration well drilling. The fruits of this
process materialised during the period under review, when in March 2024 we
announced a farmout agreement with Chevron. Under the terms of that agreement,
Chevron will assume a 60% operating interest in AREA OFF-1, will pay the
Company US$12.5 million cash as an entry fee, will carry 100% of the costs of
an agreed accelerated 3D seismic acquisition on the block (up to a total net
cash value to the Company of US$15 million), and thereafter, if the decision
is made to proceed to drilling of an initial exploration well, will carry 50%
of the Company's share of costs associated with that well (up to a total net
cash value to the Company of US$20 million).
Post period end, on 19 September 2024, the farm-out was approved by the board
of directors of ANCAP (the Uruguayan regulatory agency with oversight of
offshore licences). Following this approval, and in accordance with Uruguayan
legal requirements, the process has progressed to its final stage, which
consists of the farmout being notified to the Uruguayan Ministry of Industry,
Energy and Mining, and at the same time the requisite Consortium Agreement
between the Company and Chevron being submitted to the Uruguayan Ministry of
Economy and Finance for registration. Once a 20-day notification period has
elapsed and the Consortium Agreement is registered, we can move to finalising
the farmout, which we now expect will be in the next 4-8 weeks. Chevron will
then immediately assume operatorship of AREA OFF-1, and we are already working
closely with our new partner in anticipation of the transition, as well as
assisting Chevron as they plan for upcoming activity on AREA OFF-1. We share a
common goal with Chevron, which is to see a 3D seismic campaign commence in
the next available shoot window (H1 2025), because it is this activity, and
subsequent well drilling, which we believe will ultimately realise the
considerable upside value we see in this asset.
Shareholders will also recall that during 2023 we made an application for
another offshore exploration block in Uruguay, AREA OFF-3, then the country's
last available offshore acreage. In June 2023 we were awarded the block, on
attractive terms. As with AREA OFF-1, the "size of the prize" that AREA OFF-3
offers is substantial: based on initial assessment, an estimated resource
potential of up to 2 billion barrels and up to 5 trillion cubic feet gas (c. 1
billion barrels equivalent), from multiple exploration plays. But, unlike AREA
OFF-1, the AREA OFF-3 block has not only existing 2D seismic coverage, but 3D
seismic coverage as well, an advantage that will allow for an accelerated work
program focused on 3D seismic reprocessing.
During the period under review, the AREA OFF-3 licence was formally signed
(March 2024), and we immediately began the process of preparing for a
technical work program, which has now commenced. Our strategy for AREA OFF-3
is to follow the same formula that produced a successful outcome for AREA
OFF-1: first, undertake high quality technical work to establish the
prospectivity of the block (we expect to conclude this over the coming 9
months), and second, with the benefit of that technical work, seek to bring in
a partner via a farmout process (we expect to be able to commence a formal
process around mid-2025).
In summary, therefore, insofar as our business in Uruguay is concerned, the
first half of 2024 was truly transformational. We cemented our position as one
of the largest acreage holders in Uruguay, with two high-quality assets. More
importantly, we showed that we do what we promise to do - technically, through
excellent work, commercially, in being able to reach a market-leading farmout
for the AREA OFF-1 block, and strategically, in developing an enviable
position that no other junior player was able to develop, in what has become a
global exploration focus area.
Trinidad and Tobago - "focusing on the nuts and bolts"
In August 2020, the Company completed the acquisition of Columbus Energy
Resources Plc, which gave us a portfolio of assets in Trinidad and Tobago and
Suriname, including onshore oil fields in active production.
Our initial view in assuming ownership of these assets was that we would be
able to generate organic growth in production from the existing fields.
However, despite efforts ranging from application of efficient mature
oilfield management practices and field improvements to enhanced oil
recovery (EOR) initiatives, production growth as we had hoped for did not
materialise, given the age and condition of the fields.
Therefore, during 2023, we switched our operational approach in Trinidad and
Tobago - instead of seeking production growth, our focus became to achieve
consistent and stable production and drive cost savings, with a simple
objective: achieve at least cash-flow breakeven performance from those assets
considered "core" (consisting of the Goudron and Inniss-Trinity fields in
south-east Trinidad and the Icacos field in south-west Trinidad), whilst at
the same time divesting or exiting from all those assets considered "non-core"
(consisting of various other assets in central and south-west Trinidad, and an
appraisal block in Suriname).
Through the first half of 2024 we executed on this revised approach.
Specifically, during the period:
(i) we finalised all aspects of our exits from the
non-core South Erin and Cory Moruga fields in Trinidad and the project in
Suriname, and we began work on an arrangement to fully exit from the Bonasse
licence (a non-producing field since the unsuccessful Saffron-2 well, but
nonetheless with continuing liabilities, lease expenses and potential
exposures, and with no corresponding upside; the specifics of this arrangement
took shape post-period end and it was finalised in August 2024), and
(ii) we continued to focus on achieving baseline
production and improving financial performance from the remaining "core"
fields, with good results. 1H 2024 production from the Goudron, Inniss-Trinity
and Icacos fields was stable (we averaged approximately 283 barrels of oil per
day), revenue remained consistent versus the comparable period, and we were
able to achieve meaningful reductions in the cost base of our Trinidadian
operations. This meant that, in general terms, we saw a marked improvement in
financial metrics - depending on monthly field activity levels the business
was largely self-sustaining on a cash basis, thus meeting our core objective
(in an accounting sense however, certain non-cash charges are included in the
income statement).
Our HSE&S performance during the period under review remained as strong as
ever, and we were once again awarded a two-year STOW-TT ("Safe to Work in
Trinidad & Tobago") certification. STOW certification is a specific
Trinidadian certification for oil field operators that provides a
standardised, independent system for certifying operators and contractors with
respect to Health, Safety and Environmental delivery.
Thus overall, insofar as our Trinidad and Tobago business was concerned, the
first half of 2024 could be described as a period of continuing improvement
and progress.
Corporate
In April 2024 we entered into an agreement for an investment in the Company by
Charlestown Energy Partners LLC ("Charlestown"). Charlestown agreed to invest
£1.5 million, initially in the form of a loan, with that loan converting into
shares in the Company on a pre-agreed basis (and at a premium price), once the
Company completed (i) a share consolidation, and (ii) the AREA OFF-1 farmout
to Chevron. The investment from Charlestown was finalised in May 2024,
providing the Company with finance in the medium term until full completion of
the AREA OFF-1 farmout to Chevron. The first of the requisite conditions - a
share consolidation - was subsequently undertaken in August 2024. As noted, we
expect the Chevron farmout will be fully completed in the next 4-8 weeks, at
which time all conditions for conversion of the Charlestown investment into a
shareholding will have been met. Charlestown's loan will then be
extinguished, and Charlestown will be issued with shares that will result in
Charlestown holding an approximately 8.7% interest in the Company, thus
becoming one of the Company's largest shareholders.
Charlestown is a specialist energy investor that is associated
with Charlestown Capital Advisors, a family office located in New York that
was founded in 2005, and has been making investments globally in E&P
since 2016. Of particular relevance to our Company, Charlestown is the
cornerstone shareholder in Sintana Energy Inc ("Sintana"), a TSX-listed
exploration company since 2019. Sintana maintains an indirect interest in a
portfolio of exploration licenses in Namibia including in the
emerging Orange Basin, where several multi-billion-barrel discoveries have
been made by Shell, TotalEnergies and Galp Energia. Given that we see
potential parallel between what has happened in Namibia in recent years and
what may happen in Uruguay in the coming years, we were very pleased to have
been able to attract an investor such as Charlestown to Challenger Energy.
Consistent with the long-term, strategic nature of Charlestown's investment in
the Company, Mr. Robert Bose was also invited to join the Company's Board,
with that appointment taking effect in May 2024. Robert has been the Managing
Member of Charlestown since 2016, having joined Charlestown Capital
Advisors as a principal in 2014. Prior, he spent 17 years in the Global
Investment Banking Group at the Bank of Nova Scotia, most recently as
Managing Director and Head of the Power & Utilities Group, with a
specifical focus on the energy and power sectors. Robert is currently also
serving as Chief Executive Officer of Sintana, which as noted represents a
significant holding in Charlestown's current portfolio. Robert's addition
to our Board is highly complementary, as it will give us the benefit of his
experience, industry insights highly relevant to Challenger Energy's position
in Uruguay, and network.
Financial Review, Cash Position and Funding
The unaudited interim financial statements for the half year ended 30 June
2024 present details on the financial performance of the Company for the
period. By way of added commentary, I would note that the nature of the
Company's primary business - high impact hydrocarbon exploration activities -
means that a key financial indicator we focus on, and which is not always
readily discernible from the financial statements, is net cash spend (or
"overhead run-rate" or "burn" as it is sometimes also referred to).
In this regard, the Company's net cash spend, after adjusting for various
items such as licence expenses in Uruguay and purchase of property plant and
equipment in Trinidad & Tobago, was in the order of $180,000 per month.
This represents the basic costs of staying in business as a junior AIM-listed
company - corporate expenses, salaries, listing costs, annual audit fees, etc.
We believe that this level of "burn" compares favourably with similar
AIM-listed entities, is consistent with the level of net cash spend in prior
periods, and meets the Company's stated objective of keeping its "burn" under
$200,000 per month.
At balance sheet date the Company had approximately $1.8m of unrestricted cash
(and approximately $0.8m of cash on restricted deposit in support of work
program guarantees for various licences). During the period we sought to defer
expenditure and minimise cash outflows as far as possible in anticipation of
completion of the AREA OFF-1 farmout. As noted, once the farmout of AREA OFF-1
is completed, Challenger Energy will receive a cash $12.5 million payment,
along with Chevron being required to carry our share of certain future work
programme costs. Therefore, subject to completion of the AREA OFF-1 farmout,
the Company expects it will have the cash needed to fund all planned
activities for the foreseeable future, without the need for additional
capital.
Strategic Direction
In our most recent Annual Report, I said I believed that the outlook for our
Company over the coming period is as strong as it has ever been. My belief in
this regard has not changed, and indeed, as each day passes, I become
increasingly excited about what might be achieved from our early entry into
Uruguay. What was initially no more than "option value" has now crystalised
into an opportunity for substantial value-creation.
Thus, in the next 12 months, we expect that we will see Chevron rapidly take
the AREA OFF-1 project forward, first with 3D seismic acquisition that could
see new data for AREA OFF-1 available as soon as the middle of 2025, leading
shortly after that to a decision on exploration well drilling. At the same
time, our technical work program for AREA OFF-3 is underway, primarily
involving reprocessing of legacy 2D and 3D seismic, but also including a
number of other work streams similar to those we found leveraging for the AREA
OFF-1 farmout strategy. As noted, we will be looking to replicate our AREA
OFF-1 farmout success for AREA OFF-3, with a process that we expect will
commence by mid-2025, and with the goal being to secure a partner for AREA
OFF-3 during 2025/early 2026, and exploration well drilling thereafter.
Meanwhile, in Trinidad and Tobago the focus is to continue the good work of
the last year in terms of maintaining current production, driving improved
financial performance, and disposing of or exiting from any remaining
non-core assets. At the same time, with the benefit of the improving operating
position we have been able to achieve, we can also begin to consider the right
way forward for the Trinidadian business over the longer-term: growing it into
one that is profitable and cash-flow generative and/or reducing our exposure
and potentially monetising our position.
Overall, the first half of 2024 has been truly transformational for our
Company, during which time we solidified much of the hard work over the past
several years, produced an outstanding result on our AREA OFF-1 farmout
ambitions, and clearly laid the foundations on which we hope considerable
shareholder value will be built over the coming years. As a significant
shareholder myself I am fully aligned with all shareholders, and can assure
you, my fellow owners of the Company, that everyone on the Challenger Energy
team is laser-focused on delivering our objectives.
Eytan Uliel
Chief Executive Officer
30 September 2024
Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2024
Six months ended 30 June 2024 (Unaudited) Six months Year ended
ended 30 June 2023 (Unaudited) 31 December 2023
(Audited)
Note $000's $ 000's $ 000's
Net petroleum revenue 1,821 1,884 3,588
Cost of sales* (1,882) (2,343) (4,162)
Gross profit/(loss) (61) (459) (574)
Administrative expenses** (2,245) (2,141) (4,362)
Impairment charges - - (12,957)
Operating foreign exchange gains/ (losses) 316 (1,528) (1,969)
Operating loss (1,990) (4,128) (19,862)
Other income 2 67 26 429
Finance costs, net 2 (169) (88) (99)
Loss before taxation (2,092) (4,190) (19,532)
Income tax credit/(expense) 10 - (30)
Loss from continuing operations (2,082) (4,190) (19,562)
Discontinued operations
Gain after tax for the year from discontinued operations - 1,934 6,141
Loss for the year attributable to equity holders of the parent company (2,082) (2,256) (13,421)
Other comprehensive income/(expense)
Items to be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations (230) 958 2,435
Other comprehensive income/(expense) for the period net of taxation (230) 958 2,435
Total comprehensive income/(expense) for the period attributable to equity (2,312) (1,298) (10,986)
holders of the parent company
Earnings/(loss) per share (cents)
Basic (loss) / earnings per share
-From continuing operations (0.99) (0.04) (0.20)
-From discontinued operations - 0.02 0.06
Total (0.99) (0.02) (0.14)
Diluted earnings (loss) per share
-From continuing operations - - -
-From discontinued operations - - -
Total - - -
The accompanying accounting policies and notes form an integral part of these
financial statements.
*Cost of sales includes Trinidadian field staff costs and expenses, and
depletion and depreciation of oil and gas assets of $540,000 (2023 half year:
$632,000; 2023 full year: $1,193,000)
** Administrative expenses include various non-cash items, including
amortisation and depreciation charges of $194,000 (2023 half year: $222,000;
2023 full year: $450,000) and accrual of notional interest charges on taxes
owed in Trinidad of $170,000 (2023 half year: $176,000; 2023 full year:
$343,000) which the Company does not expect to crystalise in cash in view of
submissions made during Trinidadian Tax Amnesty for the offset of taxes owed
against refunds due to the Group (see Note 7)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX MONTHS ENDED 30 JUNE 2024
At At At
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
Note $000's $ 000's $ 000's
Assets
Non-current assets
Intangible exploration and evaluation assets 4 95,885 95,231 95,726
Goodwill 4 - 4,610 -
Tangible assets 5 9,119 18,777 9,734
Escrow and abandonment funds 1,634 1,575 1,601
Deferred tax asset 4,112 7,418 4,637
Total non-current assets 110,750 127,611 111,698
Current assets
Trade and other receivables 7 3,289 2,755 3,202
Inventories 261 221 280
Restricted cash 808 827 825
Cash and cash equivalents 1,836 1,645 1,005
Total current assets 6,194 5,448 5,312
Assets held for sale 6 - 1,114 -
Total assets 116,944 134,173 117,010
Liabilities
Current liabilities
Trade and other payables 7 (9,076) (8,300) (8,182)
Borrowings (1,897) - -
Total current liabilities (10,973) (8,300) (8,182)
Non-current liabilities
Provisions (5,659) (5,657) (5,669)
Deferred tax liability (4,172) (7,459) (4,707)
Total non-current liabilities (9,831) (13,116) (10,376)
Liabilities directly associated with the assets held for sale - (4,364) -
Total liabilities (20,804) (25,780) (18,558)
Net assets 96,140 108,393 98,452
Shareholders' equity
Called-up share capital 8 2,753 2,540 2,753
Share premium reserve 8 180,507 180,240 180,507
Share based payments reserve 5,636 5,635 5,636
Retained deficit (111,754) (98,521) (109,672)
Foreign exchange reserve (4,286) (4,785) (4,056)
Convertible debt option reserve - - -
Other reserves 23,284 23,284 23,284
Total equity attributable to equity holders of the parent company 98,452
96,140 108,393
The accompanying accounting policies and notes form an integral part of these
financial statements.
These Interim Financial Statements were approved and authorised for issue by
the Board of Directors on 30 September 2024 and signed on its behalf by:
Eytan Uliel Iain McKendrick
Director Director
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2024
Six months Six months Year ended
ended 30 June 2024 ended 30 June 2023 (Unaudited) 31 December 2023
(Unaudited) (Audited)
$000's $ 000's $ 000's
Cash flows from operating activities
Loss before taxation (2,092) (4,190) (19,532)
Increase in trade and other receivables (120) (77) (549)
Increase in trade and other payables 904 201 445
Decrease/(Increase) in inventories 19 (56) (115)
Impairment of tangible and intangible assets - - 12,957
Depreciation of property, plant and equipment 721 841 1,617
(Gain)/loss on disposal of property, plant and equipment (12) - 80
Amortisation 13 13 26
Share settled payments - 102
Other income (67) (26) (429)
Finance income/ (costs), net 169 88 99
Share based payments - - 1
Income tax received/(paid) - - -
Foreign exchange (gain)/loss on operating activities (316) 1,528 1,969
Net cash outflow from operating activities (781) (1,678) (3,329)
Cash flows from investing activities
Purchase of property, plant and equipment (105) (37) (93)
Proceeds from sale of property, plant and equipment 13 - -
Payments for exploration and evaluation assets (172) (583) (1,039)
(Increase)/Decrease in restricted cash 18 (2) (1)
Proceeds from sale of subsidiaries, net of - 1,194 2,194
cash sold
Other income received 67 26 67
Net cash outflow from investing activities (179) 598 1,128
Cash flows from financing activities
Issue of ordinary share capital - - -
Share issue costs - - -
Principal elements of lease payments - (22) (22)
Finance costs (6) (9) (19)
Proceeds of borrowings 1,800 - 636
Repayment of borrowings - - (432)
Net cash inflow from financing activities 1,794 (31) 163
Net increase in cash and cash equivalents 834 (1,111) (2,038)
Effects of exchange rate changes on cash and cash equivalents (3) 304 591
Cash and cash equivalents at beginning of period 1,005 2,452 2,452
Cash and cash equivalents included in disposal group - - -
Cash and cash equivalents at end of period 1,836 1,645 1,005
The accompanying accounting policies and notes form an integral part of these
financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2024
Called up share capital Share premium reserve Share based payments reserve Retained deficit Foreign exchange reserve Convertible debt option reserve Other reserves Total Equity
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
Group
At 1 January 2024 2,753 180,507 5,636 (109,672) (4,056) - 23,284 98,452
Loss for the period - - - (2,082) - - - (2,082)
Currency translation differences - - - - (230) - - 230
Total comprehensive expense - - - (2,082) (230) - - (2,312)
Total contributions by and distributions to owners of the Company - - - - - - -
-
Balance at 30 June 2024 2,753 180,507 5,636 (111,754) (4,286) - 23,284 96,140
Called up share capital Share premium reserve Share based payments reserve Retained deficit Foreign exchange reserve Convertible debt option reserve Other reserves Total Equity
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
Group
At 1 January 2023 2,540 180,240 5,635 (96,999) (5,743) - 23,284 108,957
Loss for the period - - - (2,256) - - - (2,256)
Currency translation differences - - - 734 958 - - 1,692
Total comprehensive expense - - - (1,522) 958 - - (564)
Total contributions by and distributions to owners of the Company - - - - - - -
-
Balance at 30 June 2023 2,540 180,240 5,635 (98,521) (4,785) - 23,284 108,393
STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE SIX MONTHS ENDED 30 JUNE 2024
Called up share capital Share premium reserve Share based payments reserve Retained deficit Foreign exchange reserve Convertible debt option reserve Other reserves Total Equity
$ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's $ 000's
Group
At 1 January 2022 218 171,734 5,312 (101,381) (1) 114 23,284 99,280
Profit for the year - - - 4,382 - - - 4,382
Currency translation differences - - - - (5,742) - - (5,742)
Total comprehensive income/ (expense) - - - 4,382 (5,742) - - (1,360)
Share capital issued 2,322 8,506 - - - - - 10,828
Recognition of conversion feature (note 21) - - - - - - - -
Realisation of conversion feature (note 21) - - - - - (114) - (114)
Share based payments - - 323 - - - - 323
Total contributions by and distributions to owners of the Company 2,322 8,506 323 - - (114) - 11,037
At 31 December 2022 2,540 180,240 5,635 (96,999) (5,743) - 23,284 108,957
Loss for the year - - - (13,421) - - - (13,421)
Currency translation differences - - - 748 1,687 - - 2,435
Total comprehensive income /(expense) - - - (12,673) 1,687 - - (10,986)
Share capital issued 213 267 - - - - - 480
Share based payments - - 1 - - - - 1
Total contributions by and distributions to owners of the Company 213 267 1 - - - - 481
At 31 December 2023 2,753 180,507 5,636 (109,672) (4,056) - 23,284 98,452
NOTES TO THE FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED 30 JUNE 2024
1 Basis of preparation
The financial statements have been prepared on the historical cost basis,
except for the measurement of certain assets and financial instruments at fair
value as described in the accounting policies below.
The financial statements have been prepared on a going concern basis, refer to
the Going Concern section below for more details.
The financial statements are presented in United States dollars ($) and all
values are rounded to the nearest thousand dollars ($'000) unless otherwise
stated.
Basis of consolidation
The financial statements incorporate the results of the Company and its
subsidiaries (the "Group") using the acquisition method. Control is achieved
where the Company is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity.
Inter-company transactions and balances between Group companies are eliminated
in full.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used in line with those used by
the Group.
Going Concern
The Group has incurred a comprehensive loss of $2.3 million for the half year
ended 30 June 2024 and the Group's current liabilities exceeded current assets
by approximately $4.8 million as of 30 June 2024, however this includes
approximately $1.8 million in respect of taxes and penalties owed in Trinidad
and Tobago that the Group expects to settle by way of offset against future
tax refunds or are derived from notional estimates of tax penalties dating
back to 2021 that the Group does not expect will be levied or assessed with
final resolution still pending with the local tax authorities. At 30 June 2024
the Group had approximately $1.8 million in unrestricted cash funding and
approximately a further $0.8 million in restricted cash holdings in support of
performance guarantees for the various licences including the minimum work
obligations for AREA OFF-1 in Uruguay ($0.5 million) for which the work has
been completed as at the date of this report.
On 6 March 2024, the Group entered into a farmout agreement with Chevron, a
leading global energy super-major, in relation to the Group's AREA OFF-1
licence offshore Uruguay pursuant to the terms of which the Group will receive
US$12.5 million upfront payment at completion along with Chevron carrying the
Group's share of certain future work programme costs (the "Farmout"). The
Farmout is subject to Uruguayan regulatory approval. Management is highly
confident that the requisite regulatory approvals will be forthcoming in the
near-term: Chevron meets all requirements to operate an energy project in
Uruguay, the submissions for regulatory approvals were made in consultation
with ANCAP, the Uruguayan regulatory body, and on 19 September 2024 the
Farmout was approved by the board of directors of ANCAP, the Uruguayan
state-owned oil company with regulatory responsibility for offshore licences)
- following this approval, and in accordance with Uruguayan legal
requirements, the process has progressed to its final stage, which consists of
the farmout being notified to the Uruguayan Ministry of Industry, Energy and
Mining, and at the same time the requisite Consortium Agreement between the
Company and Chevron being submitted to the Uruguayan Ministry of Economy and
Finance for registration. Once a required 20-day notification period has
elapsed and the Consortium Agreement is registered, the farmout can be
completed, which the Company expects will be within the next 4-8 weeks. When
the Farmout is completed (which as noted, is expected in the near-term)
Chevron will assume a 60% interest in, and operatorship of AREA OFF-1, will
commence carrying the Company's share of costs in the upcoming 3D seismic
acquisition program, and will pay to the Company US$12.5 million in cash. In
addition, the Group expects US$0.3 million of presently restricted cash (in
support of AREA OFF-1 performance bond) to become unrestricted within 90 days
of Farmout completion.
On 18 April 2024 the Group announced that it had entered into a legally
binding term sheet for an investment by Charlestown Energy Partners LLC
("Charlestown"), whereby Charlestown agreed to invest £1.5 million in the
Group, initially in the form of a loan. This investment was completed on 28
May 2024 and provides the Group with finance in the medium term until the
completion of the farmout agreement with Chevron, and, on completion of the
Farmout, the Charlestown investment will convert into a shareholding of
approximately 8.7% in the CEG parent entity.
The Directors have thus prepared these financial statements on a going concern
basis, as based on the Group's cash flow forecasts (which include the proceeds
from the Farmout described above), the Group expects to have adequate
financial resources to support its operations for the next 12 months (and well
into the foreseeable future beyond that). In addition, the Directors note that
the Company is a publicly listed company on a recognised stock exchange, thus
affording the Company the ability to raise capital equity, debt and/or hybrid
financing alternatives as and when the need arises. The Company has a robust
track record in this regard, having raised in excess of US$100 million in
equity and alternative financing in the recent past.
NOTES TO THE FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED 30 JUNE 2024
(CONTINUED)
2 Other income and Finance income
Other income and Finance income predominantly comprise discounts secured from
the Group's historical creditors and a secured financier, as part of
negotiated settlements agreed pursuant to the Group's restructuring and
recapitalisation exercise.
3 Turnover and segmental analysis
Management has determined the operating segments based on the reports reviewed
by the Board of Directors that are used to make strategic decisions. The Board
has determined there is a single operating segment: oil and gas exploration,
development and production. However, there are four geographical segments:
Uruguay (operating), Trinidad & Tobago, including a single operating
segment and a separate disposal group for the period ended 30 June 2023 (refer
to note 6), The Bahamas (operating), and The Isle of Man, UK, Saint Lucia,
Spain and Cyprus (all non-operating).
The Uruguay segment includes the exploration licences and appraisal works
which have commenced in 2022 and are ongoing. The segment including Trinidad
& Tobago has been reported as the Group's direct oil and gas producing and
revenue generating operating segment. The Bahamas segment includes the
Bahamian exploration licences on which drilling activities were conducted in
2020 and 2021. The non-operating segment including the Isle of Man (the
Group's parent) and UK entities which provides management services to the
Group and entities in Saint Lucia, Spain and Cyprus, all of which are
non-operating in that they either hold investments, or are dormant. Their
results are consolidated and reported on together as a single segment. As part
of a group wide rationalisation plan there is an ongoing process to wind up a
number of companies in the Group including those in Spain and Cyprus.
Six months to 30 June 2024 Total
Uruguay Trinidad Operating Bahamas Non-Operating
Operating Operating Entities (*)
$'000 $'000 $'000 $'000 $'000
Operating profit/(loss) by geographical area
Net petroleum revenue (**) - 1,821 - - 1,821
Operating profit/(loss) (38) (740) (46) (1,166) (1,990)
Other income - 20 - 47 67
Finance (costs) / income, net - (71) - (98) (169)
Profit/(loss) before taxation (38) (791) (46) (1,217) (2,092)
Other information
Administration expenses (38) (873) (46) (1,288) (2,245)
Depreciation, amortisation and impairment - (723) - (11) (734)
Capital additions (172) (105) - - (277)
Segment assets
Tangible and intangible assets 1,534 9,185 93,964 321 105,004
Deferred tax asset - 4,112 4,112
Escrow and abandonment funds - 1,634 - - 1,634
Trade and other receivables 6 2,619 500 164 3,289
Inventories - 261 - - 261
Restricted cash - 301 - 507 808
Cash - 310 - 1,526 1,836
Assets held for sale - - - - -
Consolidated total assets 1,540 18,422 94,464 2,518 116,944
Segment liabilities
Trade and other payables (1) (6,243) (1,051) (1,781) (9,076)
Deferred tax liability - (4,172) - - (4,172)
Borrowings - - - (1,897) (1,897)
Provisions - (3,259) - (2,400) (5,659)
Liabilities directly associated with the assets held for sale - - - - -
Consolidated total liabilities (1) (13,674) (1,051) (6,078) (20,804)
NOTES TO THE FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED 30 JUNE 2024
(CONTINUED)
3 Turnover and segmental analysis (continued)
Six months to 30 June 2023 Trinidad Operating Trinidad & Total
Uruguay St Lucia Bahamas Non-Operating
Operating Disposal group Operating Entities (*)
$'000 $'000 $'000 $'000 $'000 $'000
Operating profit/(loss) by geographical area
Net petroleum revenue (**) - 1,884 - - - 1,884
Operating profit/(loss) (3) (2,319) - (32) (1,774) (4,128)
Other income - 5 - 21 - 26
Finance (costs) / income, net - (85) - - (3) (88)
Profit/(loss) before taxation (3) (2,399) - (11) (1,777) (4,190)
Other information
Gain after tax for the year from discontinued operations
- - 1,934 - - 1,934
Administration expenses (4) (913) - (33) (1,191) (2,141)
Depreciation, amortisation and impairment - (828) - (1) (24) (853)
Capital additions (583) (32) - - (5) (620)
Segment assets
Tangible and intangible assets 798 18,734 - 93,964 5,122 118,618
Deferred tax asset - 7,418 - - - 7,418
Escrow and abandonment funds - 1,575 - - - 1,575
Trade and other receivables - 2,192 - 500 63 2,755
Inventories - 221 - - - 221
Restricted cash - 301 - - 526 827
Cash - 638 - 2 1,005 1,645
Assets held for sale - - 1,114 - - 1,114
Consolidated total assets 798 31,079 1,114 94,466 6,716 134,173
Segment liabilities
Trade and other payables - (6,385) - (1,051) (864) (8,300)
Deferred tax liability - (7,459) - - - (7,459)
Lease liabilities - - - - - -
Provisions - (3,224) - - (2,433) (5,657)
Liabilities directly associated with the assets held for sale
- - (4,364) - - (4,364)
Consolidated total liabilities - (17,068) (4,364) (1,051) (3,297) (25,780)
(*) Intercompany balances and transactions between Group entities have been
eliminated.
(**) Sales revenues were derived from a single customer within each of these
operating countries.
NOTES TO THE FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED 30 JUNE 2024
(CONTINUED)
4 Intangible assets - Group
Goodwill Exploration & evaluation assets
$ 000's $ 000's
Cost
As at 1 January 2023 7,045 100,038
Additions - 1,149
Write down - (57)
Foreign exchange difference on translation - (3)
As at 31 December 2023 7,045 101,127
Additions - 172
Foreign exchange difference on translation - 1
As at 30 June 2024 7,045 101,300
Accumulated amortisation and impairment
As at 1 January 2023 2,435 5,378
Amortisation - 26
Impairment 4,610 -
Reclassifications - (3)
As at 31 December 2023 7,045 5,401
Amortisation - 13
Foreign exchange difference on translation - 1
As at 30 June 2024 7,045 5,415
Net book value
As at 30 June 2024 - 95,885
As at 31 December 2023 - 95,726
As at 31 December 2022 4,610 94,660
NOTES TO THE FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED 30 JUNE 2024
(CONTINUED)
5 Tangible assets
Oil and gas assets Property, plant and equipment (*) Decommissioning costs Total
$ 000's $ 000's $ 000's $ 000's
Cost or Valuation
As at 1 January 2023 36,848 7,369 2,914 47,131
Additions 9 84 61 154
Disposals - (426) - (426)
Foreign exchange difference on translation (18) 67 (2) 47
As at 31 December 2023 36,839 7,094 2,973 46,906
Additions 36 69 - 105
Disposals (68) - - (68)
Foreign exchange difference on translation 7 (63) 1 (55)
As at 30 June 2024 36,814 7,100 2,974 46,888
Accumulated depreciation and Impairment
At 1 January 2023 20,011 6,009 1,555 27,575
Depreciation 1,193 285 139 1,617
Disposals - (346) - (346)
Impairment 8,030 - 260 8,290
Foreign exchange difference on translation (26) 65 (3) 36
At 31 December 2023 29,208 6,013 1,951 37,172
Depreciation 540 115 66 721
Disposals (66) - - (66)
Foreign exchange difference on translation 3 (62) 1 (58)
As at 30 June 2024 29,685 6,066 2,018 37,769
Net book value
As at 30 June 2024 7,129 1,034 956 9,119
As at 31 December 2023 7,631 1,081 1,022 9,734
As at 31 December 2022 16,837 1,360 1,359 19,556
(*) Property, plant and equipment includes leasehold improvements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED 30 JUNE 2024
(CONTINUED)
6 Discontinued operations
Insofar as the Company's business and operations in Trinidad and Tobago are
concerned, the Company's stated strategy has been to divest from or otherwise
exit from those assets and projects considered "non-core" in that country. In
this regard, in the past 24 months the Company has entered into a number of
relevant transactions and exit processes, as follows:
Sale of T-Rex (Cory Moruga asset):
On 20 December 2022 the Company announced that it had entered into a legally
binding heads of terms with Predator Oil & Gas Holdings Plc, providing
for the sale of 100% of the share capital in T-Rex Resources (Trinidad)
Limited ("T-Rex"). T-Rex in turn held all of the Company's interest in the
non-producing Cory Moruga licence in Trinidad. The sale of T-Rex was
completed on 6 November 2023. From 30 June 2023 the balances and results of
T-Rex were separately disclosed as assets held for sale, and the results from
the financial period were included in the Gain after Tax from Discontinued
Operations.
Sale of C-Rex (South Erin asset):
On 14 February 2023 the Company announced that it had entered into and
simultaneously completed a transaction for the sale of a St Lucia domiciled
subsidiary company, Caribbean Rex Limited ("C-Rex") which included its
associated assets and subsidiary entities. This included (via interposed
subsidiaries) CEG South Erin Trinidad Limited, a Trinidadian company that is
party to a farmout agreement for, and is the operator of, the South Erin
field, onshore Trinidad. At 30 June 2023 the results from the sale of C-Rex
were included as a Gain after Tax from Discontinued Operations.
Exit from Suriname (Weg Naar Zee project):
During 2023, the Company undertook a detailed "economic basement to surface"
technical review of the Weg Naar Zee project in Suriname, and concluded that
the project did not offer the prospect of long-term commerciality (especially
as compared to the better return potential available from other assets in the
Group's portfolio). Consequently, the Company relinquished the Weg Naar Zee
licence and fully completed a withdrawal from operations in Suriname by the
end of 2023.
Exit from the Bonasse licence (Trinidad South-West Peninsula):
The Bonasse licence is a private petroleum lease located in the south-west
peninsula of Trinidad. In 2022, the Saffron-2 well was drilled in the licence
area, which was not commercial. Subsequently the field was progressively shut
in, such that there has been minimal and (since August 2023) no production
from the licence area. The Company has undertaken various reviews of the
potential of the licence area, concluding that absent substantial investment
in multiple high-risk wells, no evident commercial forward pathway is evident.
At the same time, the licence continued to represent considerable future
exposure for the Group in terms of lease payments, a legal dispute with the
surface landowner as to the quantum of lease payments given the non-commercial
nature of the field, well abandonment obligations, various payables and
provisions, and long-term environmental exposures. Accordingly, on 27 August
2024 the Company entered into an arrangement to secure an orderly and complete
exit from the Bonasse licence. This comprised a settlement agreement with the
surface landowner and in parallel the transfer of 100% of the share capital in
CEG Bonasse Trinidad Limited, a Trinidadian company that holds the Bonasse
licence, to a third-party acceptable to the surface landowner. The transfer
agreement included that third-party assuming and indemnifying the Group
against all liabilities and exposures associated with the Bonasse licence, and
making payment to the surface landholder of an agreed settlement amount, such
that the Company achieved a full exit from the Bonasse licence with no
associated cost or cash impact, and no future exposure.
As the exit from the Bonasse licence occurred subsequent to 30 June 2024, and
was not considered to be highly probable of occurring at balance sheet date,
it is deemed to be a non-adjusting post balance sheet event. Accordingly, CEG
Bonasse Trinidad Limited's assets, liabilities and results for the period were
classified as continuing operations at 30 June 2024 (and were not classified
as a separate disposal group). The 30 June 2024 results for CEG Bonasse
Trinidad Limited are presented below:
NOTES TO THE FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED 30 JUNE 2024
(CONTINUED)
6 Discontinued operations (continued)
Income statement $ 000's
Administration expenses (24)
Operating foreign exchange gains/(losses) 12
Finance costs (12)
(24)
The major classes of assets and liabilities of CEG Bonasse Trinidad Limited at
30 June 2024 are presented below:
Assets $ 000's
Cash and cash equivalent 1
Trade and other receivables 263
Inventories 21
Abandonment fund 3
288
Liabilities
Trade and other payables (631)
Provisions (750)
(1,381)
The major classes of assets and liabilities of CEG Bonasse Trinidad Limited at
30 June 2024 are presented below:
Assets $ 000's
Cash and cash equivalent 1
Trade and other receivables 263
Inventories 21
Abandonment fund 3
288
Liabilities
Trade and other payables (631)
Provisions (750)
(1,381)
7 Trade and other receivable and payables
Trade and other receivables relate almost entirely to operations in Trinidad
and Tobago, and include amounts receivable from Heritage from oil sales, VAT
receivables (i.e., VAT refunds due to the Company's Trinidadian subsidiaries
from the Trinidadian tax authorities), prepayments, and other assets including
assets on deposit. Similarly, trade and other payables (including accruals)
relate primarily to operations in Trinidad and Tobago, and include (i) dues
(amounting to approximately $2.9 million in aggregate) that are considered to
be of a routine working capital nature, and that are being settled in the
ordinary course of business and / or under certain agreed payment plans, and
(ii) approximately $4.4 million in respect of taxes owed in Trinidad and
Tobago by the Company's Trinidadian subsidiaries that the Group expects will
be settled by way of offset against VAT tax refunds due to the Group in
Trinidad and Tobago (included under 'Trade and other receivables' noted
above). This balance also includes a notional estimate of interest that
applies in accordance with the tax laws in Trinidad and Tobago - as at the
date of this report these are notional estimates only and have not been levied
or assessed, and the Group does not expect that they will be levied or
assessed and that ultimately no cash payment will be required as the Group had
claimed the benefit of a tax amnesty during the 2021 tax amnesty period
implemented by the Trinidad and Tobago tax authorities, with the final
resolution of this matter remaining pending.
A smaller portion of trade and other receivables and trade and other payables
relates to legacy operations in The Bahamas, as follows: (i) the Company is
due a refund from the Government of The Bahamas for new licence applications
made but subsequently withdrawn; (ii) the Company has made application for a
renewal of its existing licences in The Bahamas for a 3(rd) exploration
period, and alongside this application the Company is seeking final resolution
on any outstanding fees owing for the 2(nd) licence period (if any, and which
may be partially or fully offset against the refund due from withdrawn licence
applications); (iii) the Company has made an accrual in respect of potential
insurance "top-up" exposure for the Perseverance-1 well in The Bahamas
exceeding the initial estimated cost - however, as at the date of this report,
the matter remains pending resolution with the insurers, and (iv) various
legacy accruals recognised in the financial statements which the Group does
not expect to crystalise for the foreseeable future and expects to be
written-back following lapse of the relevant statute of limitation period. In
aggregate, the Group does not expect any of these will result in material cash
receipts or material incremental cash exposure to the Group.
NOTES TO THE FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED 30 JUNE 2024
(CONTINUED)
8 Share capital - Group & Company
Called up, allotted, issued and fully paid ordinary shares of 0.0002p each Number of shares Nominal value Share premium
$ 000's $ 000's
At 1 January 2023 9,620,199,479 2,540 180,240
Shares issued at average price of 0.06p per share 315,533,332 185 739
Shares issued at average price of 0.04p per share 458,333,333 919 3,366
Shares issued at average price of 0.06p per share 100,000,000 1,218 4,433
At 31 December 2023 before capital reorganisation 10,494,066,144 2,753 180,507
At 31 December 2023 after capital reorganisation 209,881,322 2,753 180,507
At 1 January 2024 209,881,322 2,753 180,507
At 30 June 2024 209,881,322 2,753 180,507
Number of shares Nominal value Share premium
$ 000's $ 000's
As 31 December 2022 9,620,199,279 2,450 180,240
As 31 December 2023 10,494,066,144 2,753 180,507
At 30 June 2024 209,881,322 2,753 180,507
On 6 August 2024, the Company reorganised its share capital and reduced the
number of ordinary shares in issue by a ratio of 50:1. Following the
reorganisation, the nominal value of each ordinary share is 1 pence per share
(pre-reorganisation: 0.02 pence per share).
At the end of the period, the number of shares in issue comprised
approximately 210 million post consolidation ordinary shares (2023
pre-consolidation: approximately 9,620 million).
The total authorised number of ordinary shares at 30 June 2023 was
1,000,000,000 shares with a par value of 1 pence per share (post
consolidation) (2023 pre-consolidation: 50,000,000,000 shares of 0.02 pence
per share). All issued shares of 1 pence are fully paid.
NOTES TO THE FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED 30 JUNE 2024
(CONTINUED)
9 Share based payments reserve
Options and warrants
Share options and/or warrants have been granted to Directors and selected
employees as well as various consultants and service providers to the
Company.
The Group had no legal or constructive obligation to repurchase or settle any
option or warrant in cash. Movements in the number of share options and
warrants outstanding during the half year period under review are as follows:
Average exercise price per share No. Options & Warrants
At 1 January 2024 before capital reorganisation 0.20p 1,791,554,485
At 1 January 2024 after capital reorganisation 10.00p 35,831,090
Expired during the half year period under review - -
Cancelled during the half year period under review - -
Granted during the half year period under review 10.00p 2,100,000
Exercised during the half year period under review - -
Option & warrants on issue as at 30 June 2024 10.00p 37,931,090
Options and warrants exercisable as at 30 June 2024* 10.33p 18,731,090
*Options and warrants for which relevant exercise hurdles and criteria have
been met and that therefore, in accordance with their terms, are able to be
exercised at any time by the holders of those options or warrants.
The fair value of the warrants and options granted in the period was estimated
using the Black Scholes model.
10 Events after reporting date
On 6 August 2024, the Company reorganised its share capital and reduced the
number of ordinary shares in issue by a ratio of 50:1. Following the
reorganisation the nominal value of each ordinary share is 1 pence per share
(pre-reorganisation: 0.02 pence per share).
On 27 August 2024 the Group entered into various agreements to secure an
orderly and complete exit from the Bonasse licence in Trinidad. Refer to note
6 for further information.
On 19 September 2024, the Board of Directors of ANCAP (the Uruguayan
state-owned oil company with regulatory responsibility for offshore licences)
approved the farmout of a 60% interest in the AREA OFF-1 licence in Uruguay to
Chevron. Refer to note 1 (Going Concern) for further information.
11 Other Information
The comparative financial information set out in this report does not
constitute the Group's statutory accounts for the period ended 31 December
2023 but is derived from those accounts.
A copy of this interim statement is available on the Company's website:
www.cegplc.com (http://www.cegplc.com)
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