REG - Longboat Energy PLC - Interim Results to 30 June 2023
27/09/2023 07:00
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RNS Number : 7519N Longboat Energy PLC 27 September 2023
Longboat Energy plc
("Longboat Energy", the "Company" or "Longboat")
Interim Results to 30 June 2023
London, 27 September 2023 - Longboat Energy, the emerging full-cycle E&P
company, is pleased to announce its unaudited interim results for the period
to 30 June 2023.
Helge Hammer, Chief Executive Officer of Longboat Energy, commented:
"Earlier this year, Longboat announced a transaction with Japan Petroleum
Exploration Co, Ltd ("JAPEX") to form a joint venture company in Norway which
involved JAPEX making a substantial investment in our Norwegian subsidiary and
providing a financing facility, thereby significantly strengthening the
Company's financial position. The transaction completed in mid-July and the
now jointly controlled company was renamed Longboat JAPEX Norge AS ("Longboat
JAPEX").
Longboat JAPEX will pursue a growth-led strategy on the Norwegian Continental
Shelf to create value predominantly through the acquisition of production and
development projects and growing 2P reserves to reach a significant production
level within three to five years. Furthermore, the joint venture will continue
to pursue exploration and appraisal opportunities with the target of drilling
one to three wells per year.
In early August the drilling of the OMV operated Velocette well commenced
targeting a large gas-condensate prospect on the eastern flank of the Utgard
High in the Norwegian Sea. In mid-September we announced a minor gas discovery
where the well encountered hydrocarbons in the primary target in Cretaceous
turbidite sands in the Nise formation. While the discovery is not considered
to be a commercial prospect, the licence contains numerous other prospects
which have been de-risked by the presence of gas in good quality reservoir in
the Velocette well.
Earlier this month we announced an expansion of our operations in SE Asia
through the acquisition of privately held Topaz Number One Limited, thereby
increasing our interest in Malaysian 2A PSC to 52.5% which includes the giant
Kertang target, with James Menzies and Pierre Eliet also joining the Company
to lead our growth in the region."
Operational Highlights
● Formed a joint venture company in Norway with Japan Petroleum Exploration Co,
Ltd ("JAPEX"). JAPEX made a significant investment with an initial $16 million
subscription, with a further $4 million contingent payment, and providing a
$100 million financing facility
● Entered into an agreement through the new Norwegian joint venture to acquire
its first producing assets in Norway
o 4.80% unitised interest in the Statfjord Øst Unit
o 4.32% unitised interest in the Sygna Unit
This acquisition, when completed, represents long-term cash flow with the
fields expected to produce until late 2030s
● Expanded our business in SE Asia with the entrance into Malaysia through the
award of a production sharing agreement for Block 2A. Later announced the
acquisition of a further interest in Block 2A and the employment of two senior
executives, James Menzies and Pierre Eliet
● Announced a small non-commercial discovery in the Velocette well which,
through the presence of reservoir and hydrocarbons, has de-risked the other
prospects on the licence
● Announced the award in the APA licensing round of a 30% licence interest in a
firm well on the Kjøttkake Lotus prospect, building our position in the
prolific Kveikje area
Financial Summary
● Longboat Energy plc had gross cash at 30 June 2023 of £2.1 million (30 June
2022: £22.5 million), which excludes cash of £2.2 million in Longboat Energy
Norge AS (shown on the balance sheet as "held for sale" pending completion of
JAPEX JV (completed post period end, 14 July 2023)
● Longboat Energy Norge AS had exploration financing facility ("EFF") drawings
of £33.7 million (30 June 2022: £15.7 million) resulting in a net debt
position of £31.5 million. The majority of EFF drawings (£32.0 million) will
be repaid from the Norwegian Government's tax rebate of £35.5 million, due in
November 2023
● Longboat Energy plc's post-tax loss for the period was £6.2 million (30 June
2022: £1.6 million), total comprehensive loss for the period of £7.9 million
(30 June 2022: £1.7 million). Includes write off of Egyptian Vulture of
£10.5 million
This announcement does not contain inside information
Enquiries:
Longboat Energy via FTI
Helge Hammer, Chief Executive Officer
Jon Cooper, Chief Financial Officer
Nick Ingrassia, Corporate Development Director
Stifel (Nomad and Joint Broker) Tel: +44 20 7710 7600
Callum Stewart
Jason Grossman
Ashton Clanfield
Cavendish Capital Markets Limited (Joint Broker) Tel: +44 20 7397 8900
Neil McDonald
Pete Lynch
Leif Powis
FTI Consulting (PR adviser) Tel: +44 20 3727 1000
Ben Brewerton longboatenergy@fticonsulting.com (mailto:longboatenergy@fticonsulting.com)
Rosie Corbett
Catrin Trudgill
Standard
Estimates of reserves and resources have been prepared in accordance with the
June 2018 Petroleum Resources Management System ("PRMS") as the standard for
classification and reporting with an effective date of 31 December 2020.
Review by Qualified Person
The technical information in this release has been reviewed by Hilde Salthe,
Managing Director Longboat JAPEX Norge AS, who is a qualified person for the
purposes of the AIM Guidance Note for Mining, Oil and Gas Companies. Ms Salthe
is a petroleum geologist with more than 20 years' experience in the oil and
gas industry. Ms Salthe has a Masters Degree from Faculty of Applied Earth
Sciences at the Norwegian University of Science and Technology in Trondheim
Glossary
Mmboe Millions of barrels of oil equivalent
NCS Norwegian Continental Shelf
scf Standard cubic feet
stb Stock tank barrel
LONGBOAT ENERGY PLC
STRATEGIC REPORT
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
CEO Introductory Statement
In early May we announced a transaction with Japan Petroleum Exploration Co,
Ltd ("JAPEX") to form a joint venture company in Norway which involved JAPEX
making a significant investment in our Norwegian subsidiary and providing a
financing facility, thereby significantly strengthening the Company's
financial position.
The transaction completed in mid-July, just after the period end, and the now
jointly controlled company was renamed Longboat JAPEX Norge AS ("Longboat
JAPEX"). As part of the arrangements, JAPEX committed to make an initial cash
investment of US$16 million, which was paid on completion, with a further
contingent consideration of US$4 million, payable on the successful completion
of the acquisition of the Statfjord satellites. Following the results of the
Velocette well, the further related contingent consideration has fallen away.
From the initial US$16 million, US$4.6 million was utilised by Longboat JAPEX
to repay the intercompany loan owed to Longboat Energy plc.
In addition to these investments, JAPEX has also provided the joint venture
with a five-year US$100 million Acquisition Bridge Facility to finance
acquisitions and associated development costs in Norway. Longboat JAPEX will
pursue a growth-led strategy on the Norwegian Continental Shelf to create
value predominantly through the acquisition of development projects, growing
2P reserves and reaching a significant production level within three to five
years. Furthermore, the joint venture will continue to pursue exploration and
appraisal opportunities with the target of drilling one to three wells per
year.
The Statfjord satellite acquisition was announced in early-July and is yet to
complete. This is a significant acquisition as it represents not only
Longboat's first production acquisition but also demonstrates the ability of
the Longboat JAPEX joint venture to access and transact opportunities. The
4.80% unitised interest in the Statfjord Øst Unit and 4.32% unitised interest
in the Sygna Unit represent long-term cash flow with the fields expected to
produce until the late 2030s. Initial production of ~300 boepd net to Longboat
JAPEX is anticipated to approximately double in 2024 following a five well
in-fill drilling programme, which is currently underway, and gas-lift
installation which is complete. The cash consideration of $12.75 million is
anticipated to be paid back in under two years and will be fully funded by
JAPEX's initial investment in Longboat JAPEX and by drawing on the JAPEX
facility.
Operationally, the first half of 2023 has been a quiet period without
exploration drilling compared to 2021 and 2022 when the Company participated
in one of the most active independent exploration drilling campaigns. In
early-August the drilling of the OMV operated Velocette well commenced
(Longboat JAPEX 20%) targeting a large gas-condensate prospect on the eastern
flank of the Utgard High in the Norwegian Sea. On 20 September 2023 we
announced a minor gas discovery where the well encountered hydrocarbons in the
primary target in Cretaceous turbidity sands in the Nise formation. The
Velocette volumes are at the lower end of pre-drill expectations and the
discovery is not considered to be commercial in isolation. However, the
licence contains numerous other prospects which have been de-risked by the
presence of gas in good quality reservoir in the Velocette well. The remaining
prospectivity has significant size potential in multiple structures and with
slightly different trapping geometries. Further assessment of the licence
prospectivity together with other opportunities in the area could impact the
commercial potential of the licence. High quality data and gas and fluid
samples were collected in the exploration well and these will be integrated
into the updated prospect evaluations.
Building our position in the prolific Kveikje area where multiple discoveries
have been made this year, we announced early in the year the award in the APA
licensing round of a 30% license interest in a firm well on the Lotus
prospect, which lies 4km southeast of the Kveikje discovery and is expected to
contain analogous injectite sands to the sand encountered in Kveikje. Based on
company estimates Lotus has gross mean prospective resources of 27 mmboe with
an upside of 44 mmboe. The estimated chance of success is 56%. At the end of
May we announced that the Lotus prospect will be drilled using the
semi-submersible Deepsea Yantai and is expected to be drilled during Q3 2024.
In February, we announced that Longboat had entered into Malaysia through the
award of a production sharing agreement for Block 2A, a large exploration
block covering an area of more than 12,000 km(2) offshore Sarawak with
material exploration opportunities including the giant 'Kertang' prospect.
Longboat is operator (36.75%) of the block which already has significant 2D
and 3D seismic coverage and the partnership includes PETRONAS and Petroleum
Sarawak Exploration & Production. This potentially significant opportunity
has been acquired without a material initial cost obligation and with three
years until a drilling commitment decision has to be made. We are very excited
about the opportunity set in Malaysia which in many ways resembles the North
Sea a decade ago. Establishing a presence in Malaysia and building an
excellent relationship with PETRONAS provides Longboat with a significantly
expanded opportunity set and improved growth potential.
In September we announced a transaction to expand our business in SE Asia
through the acquisition of privately-held Topaz Number One Limited, increasing
our working interest to 52.5% in Block 2A. This transaction will simplify the
process towards making a positive well decision on the prospect and the
potential introduction of an additional funding partner prior to drilling.
Consideration for this acquisition will be in three tranches: an initial
$100,000 through an issue of new ordinary shares in the Company; a further
US$125,000 in cash or shares payable upon an exploration well being committed
on Block 2A or a farm-out; and up to US$3,000,000 in cash or shares payable
upon a discovery being made on Block 2A, depending on the resource size and
the growth in the price of the Company's shares over a two year period.
Furthermore, the Topaz team, which comprise James Menzies and Pierre Eliet,
will join Longboat Energy bringing extensive regional expertise and an
established SE Asia network, thereby strengthening Longboat's team and our
ability to grow a full cycle E&P business in SE Asia.
Strategy and Outlook
Longboat is committed to building a full-cycle E&P business both in Norway
and in SE Asia. The creation of the Longboat JAPEX joint venture in Norway has
the potential to deliver significant value creation and growth and brings
together two companies with strong complimentary qualities. The Longboat team
has significant technical experience and expertise in the Norwegian E&P
sector and strong local industry relationships, while JAPEX is a
long-established E&P company with a strong balance sheet and significant
worldwide technical competence including E&P in the North Sea. The two
companies also share the ambition to have strong ESG credentials and play
roles in the energy transition, where JAPEX already has experience with a
Carbon Capture Utilisation and Storage (CCUS) pilot project. By joining
forces, we will have greater access to opportunities and financing. We believe
that this agreement has laid the foundations for exciting growth in Norway in
the coming years.
In a situation where access to energy is becoming increasingly important and
particularly gas in North West Europe, Norway plays a critical role as the
country continues to offer attractive opportunities for E&P companies.
Exploration results in Norway remain good and the country continues to offer
high quality acreage in regular licensing rounds. According to the latest
Resource Report by the Norwegian Petroleum Directorate, only half of the total
estimated resources of 100 billion boe have so far been produced and sold.
Longboat, with its highly skilled geological and geophysical team and
extensive industry network, is uniquely positioned to find business
opportunities and exploration prospects.
Norway also continues to offer an attractive regulatory framework. A new
Norwegian Petroleum Tax System was introduced during 2022, which was generally
positive for Longboat. The main elements of the updated tax system are an
unchanged marginal rate at 78%, a move to immediate expensing of investments,
71.8% repayment of all losses in the following year (compared to previously
72% of exploration losses only) with corporate tax at 6.2% carried forward
against future profits. In early 2023, Longboat JAPEX increased its
exploration finance facility ("EFF") to NOK 800 million from NOK 600 million
and extended the availability period for drawing by one year through to 31
December 2024. Longboat JAPEX will use these EFF credit facilities to assist
with the working capital requirement for future exploration expenditure.
The North Sea M&A market for production and development remains highly
competitive. We believe the establishment of the Longboat JAPEX joint venture
will bring more access to financeable opportunities. To make use of our highly
skilled team and to accelerate growth Longboat expanded its activities to
include Southeast Asia. Longboat identified the Malaysian market as having
many of the characteristics required to fast track the development of a full
cycle E&P Company, including a large and active E&P industry,
significant existing infrastructure, stable regulatory framework, supportive
authorities and an active M&A market. Accordingly, in February 2023,
Longboat announced its first licence award in Malaysia which has many
similarities to what the Norwegian North Sea had 15-20 years ago, and Longboat
is in a strong position to exploit this opportunity due to our subsurface and
M&A expertise and industry relationships. In order to accelerate this
ambition, James Menzies and Pierre Eliet will join Longboat Energy to help
grow a full cycle E&P business in SE Asia.
Financial Results
On 14 July 2023, our Norwegian subsidiary became a joint venture with JAPEX.
At 30 June 2023, the completion of this transaction was considered highly
probable and as this would result in Longboat Energy plc sharing control of
its subsidiary, it would be deemed a sale in the parent company accounts.
Therefore, the results of our Norwegian subsidiary are classified as
discontinued operations in the Income Statement, with comparatives restated to
be consistent with this approach. The assets and liabilities of our Norwegian
subsidiary are disclosed as held for sale in the Balance sheet. These
calculations and disclosures are in line with IFRS 5 "Non-current assets held
for sale and discontinued operations".
Longboat Energy plc had gross cash at 30 June 2023 of £2.1 million (30 June
2022: £22.5 million), which excludes cash of £2.2 million in Longboat Energy
Norge AS, that was shown on the balance sheet as held for sale. Longboat
Energy Norge AS had EFF drawings of £33.7 million (30 June 2022:
£15.7million) resulting in a net debt position of £31.5 million. The EFF
drawings disclosed in Note 21 are shown net of prepaid loan fees of £0.5
million, which are being amortised over the life of the facility. The majority
of EFF drawings (£32.0 million) will be repaid from the Norwegian
Government's tax rebate of £35.5 million, due in November 2023. Longboat
Energy plc's post-tax loss for the period was £6.2 million (30 June 2022:
£1.6 million), total comprehensive loss for the period of £7.9 million (30
June 2022: £1.7 million). During the period our Norwegian subsidiary had a
much less active drilling campaign compared to the prior period with £0.4
million (30 June 2022: £14.6 million) of exploration drilling costs and £0.3
million (30 June 2022: £14.2 million) of exploration carry costs. In the
period, Egyptian Vulture was relinquished and the intangible asset of £10.5
million pre-tax and £2.3 million post tax was written off. The post-tax write
off is included in the loss from discontinued operations of £4.1 million.
On 20 September we announced Velocette (PL1016) as a small non-commercial gas
discovery. The failure of the Velocette well to find commercial hydrocarbons
means that the Velocette Tranche under the JAPEX investment agreement will not
be payable. The results and follow up potential are being evaluated. As at the
30 June 2023 the intangible asset in relation to licence PL1016 was £1.6
million with anticipated net pre-tax drilling and carry cost estimates of
£19.9 million (net post tax costs of £5.6), based on operator pre-drill
estimates. The intangible carrying value will be updated as the operator's
invoices are issued and the ability to carry these amounts will be assessed
again at the year end.
Longboat Energy plc's continuing operations administrative expenses in the
period were £2.0 million (30 June 2022: £1.3 million). Wages and salaries
for continuing operations in the period were £0.7 million (30 June 2022:
£0.8 million).
Going concern
The Directors have completed the going concern assessment, including
considering cash flow forecasts up to the end of 2024, sensitivities, and
stress tests to assess whether the Group is a going concern. Base case
scenarios include completion of the Statfjord Satellites acquisition. Having
undertaken careful enquiry, the Directors are of the view the Group will need
to access additional funds during 2024 in order to fund on-going operations
and pursue growth opportunities. This is in line with the Company's current
activities of exploring, maturing its discoveries and seeking acquisitions. In
the absence of such funding, the Group is forecasted to have limited or no
liquidity by early 2025 and, in some reasonably possible downside scenarios
during 2024. It is anticipated that these funds will be sourced through asset
disposals / farm downs, issuing new equity or a combination of these actions.
To the extent that growth opportunities will support debt, this will be
considered where appropriate for example to support production
acquisitions. The financial statements for the period to 30 June 2023 have
been prepared assuming the Group will continue as a going concern. In support
of this, the Directors believe the liquid nature of asset market combined with
historical shareholder support, adequate funds can be accessed if and when
required. However, the ability to continue as a going concern is not
guaranteed at the date of signing these financial statements. As a
consequence, this funding requirement represents a material uncertainty that
may cast significant doubt on the Group's ability to continue as a going
concern. The financial statements do not include any adjustments that would
result from the basis of preparation being inappropriate.
On behalf of the board
…………………………………………..
Helge Ansgar Hammer
Director
26 September 2023
LONGBOAT ENERGY PLC
DIRECTORS' RESPONSIBILITES STATEMENT
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
The directors are responsible for preparing the interim report in accordance
with applicable law and regulations.
The directors have elected to prepare the financial statements in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the
United Kingdom. The directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and of the profit or loss of the Group for that period. The
directors are also required to prepare the financial statements in accordance
with the rules of the London Stock Exchange for companies trading securities
on AIM.
In preparing these financial statements, the directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and accounting estimates that are reasonable and
prudent;
· state whether they have been prepared in accordance with IFRSs as
adopted by the United Kingdom, subject to any material departures disclosed
and explained in the financial statements; and
· prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the company's transactions and disclose with
reasonable accuracy at any time the financial position of the company. They
are also responsible for safeguarding the assets of the company and hence for
taking reasonable steps for the prevention and detection of fraud and other
irregularities.
Website publication
The directors are responsible for ensuring the annual and interim reports and
financial statements are made available on a website. Financial statements are
published on the company's website in accordance with legislation in the
United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the company's website is the responsibility of
the directors. The directors' responsibility also extends to the ongoing
integrity of the financial statements contained therein.
LONGBOAT ENERGY PLC
INDEPENDENT REVIEW REPORT
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with the London Stock Exchange AIM Rules for
Companies.
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 which comprises consolidated statement of comprehensive income,
consolidated statement of financial position, consolidated statement of
changes in equity, consolidated statement of cash flows and notes to the
consolidated interim financial information.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in a form consistent with that which will be adopted
in the Company's annual accounts having regard to the accounting standards
applicable to such annual accounts.
Material uncertainty related to going concern
We draw attention to note 1.2 to the condensed set of financial statements
which indicates that the Group requires additional funding which is not
secured. These events or conditions, along with other matters as set out in
note 1.2, indicate that a material uncertainty exists which may cast
significant doubt over the Group's ability to continue as a going concern. Our
conclusion is not modified in respect of this matter.
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.
Directors' responsibility for the interim financial statements
The directors are responsible for preparing the half-yearly financial report
in accordance with the London Stock Exchange AIM Rules for Companies which
require that the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Company's annual accounts
having regard to the accounting standards applicable to such annual accounts.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the rules of the London
Stock Exchange AIM Rules for Companies for no other purpose. No person is
entitled to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior written
consent. Save as above, we do not accept responsibility for this report to
any other person or for any other purpose and we hereby expressly disclaim any
and all such liability.
BDO LLP
Chartered Accountants
London, UK
26 September 2023
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
LONGBOAT ENERGY PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
Restated Restated
6 months ended 30 June 6 months ended to 30 June Year
to 31 December
2023 2022 2022
unaudited unaudited audited
Notes £ £ £
Administrative expenses (1,966,497) (1,294,745) (2,660,910)
Operating loss 6 (1,966,497) (1,294,745) (2,660,910)
Investment income 5 51,492 - 42,374
Net foreign exchange gain/(loss) (134,845) 8,858 26,063
Loss before taxation from continuing operations (2,049,850) (1,285,887) (2,592,473)
Income tax credit 8
Loss for the period from continuing operations (2,049,850) (1,285,887) (2,592,473)
Loss for the period from discontinued operations 9 (4,132,511) (358,477) (12,880,134)
Loss for the period (6,182,361) (1,644,364) (15,472,607)
Items that may be reclassified to profit or loss
Currency translation differences from discontinued operations (1,716,511) (23,989) (19,754)
Total items that may be reclassified to profit or loss (1,716,511) (23,989) (19,754)
Total comprehensive loss (7,898,872) (1,668,353) (15,492,360)
Loss per share 10
Basic and diluted - continuing operations (3.62) (2.27) (4.57)
Basic and diluted - discontinued operations (7.29) (0.63) (22.73)
Loss per share is expressed in pence per share.
LONGBOAT ENERGY PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
30 June 30 June 31 Dec December
2023 2022 2022
unaudited unaudited audited
Notes £ £ £
Non-current assets
Exploration and evaluation assets 11 - 55,191,851 34,661,436
Property, plant and equipment 11 12,718 74,817 66,107
Right of use assets 11 - 498,806 447,396
Trade and other receivables 13 - - 98,368
Non-current tax receivable 14 - 20,960,554 -
12,718 76,726,028 35,273,307
Current assets
Cash and cash equivalents 2,100,622 22,492,722 12,059,561
Inventories 12 - 104,502 123,432
Trade and other receivables 13 224,961 991,174 934,918
Current tax recoverable 14 - - 40,755,157
2,325,583 23,588,398 53,873,068
Assets in disposal group held for sale 21 61,645,759 - -
Total assets 63,984,060 100,314,426 89,146,375
Current liabilities
Trade and other payables 15 282,562 8,668,246 5,225,497
Lease liabilities 16 - 119,219 122,612
Exploration Finance Facility - - 36,761,340
282,562 8,787,465 42,109,449
Liabilities in disposal group held for sale 21 50,515,795 - -
Net current assets 2,043,021 14,800,933 11,763,619
Non-current liabilities
Lease liabilities 16 - 422,822 366,968
Deferred tax liabilities 17 - 41,146,691 25,736,898
Bank loans and borrowings - 15,328,609 -
- 56,898,122 372,709 26,103,866
Total liabilities 50,798,357 65,685,587 68,213,315
Net assets 13,185,703 34,628,839 20,933,060
Equity
Called up share capital 18 5,666,665 5,666,665 5,666,665
Share premium account 35,570,411 35,570,411 35,570,411
Own shares 450,000 450,000 450,000
Currency translation reserve (1,155,269) 557,007 561,242
Share based payment reserve 811,964 532,220 660,449
Retained earnings (28,158,068) (8,147,464) (21,975,707)
Total equity 13,185,703 34,628,839 20,933,060
Total equity and liabilities 64,500,911 100,314,426 89,146,375
The financial statements were approved by the board of directors and
authorised for issue on 26 September 2023 and are signed on its behalf by:
…...........................
Helge Ansgar Hammer
Director
Company Registration No. 12020297
LONGBOAT ENERGY PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
Share Share premium account Currency translation reserve Share based payment reserve
capital
Own Retained earnings
shares Total
£ £ £ £ £ £ £
Balance at 1 January 2022 5,666,665 35,570,411 580,996 353,550 450,000 (6,503,100) 36,118,522
Period ended 30 June 2022
Loss for the period - - - - - (1,644,364) (1,644,364)
Other comprehensive loss for the period - - (23,989) - - - (23,989)
Credit to equity for equity settled share-based payments - - - 178,670 - - 178,670
Balance at 30 June 2022 5,666,665 35,570,411 557,007 532,220 450,000 (8,147,464) 34,628,839
Period ended 31 December 2022
Loss for the period - - - - - (13,828,243) (13,828,243)
Other comprehensive income for the period - - 4,235 - - - 4,235
Credit to equity for equity settled share-based payments - - - 128,229 - - 128,229
Balance at 31 December 2022 5,666,665 35,570,411 561,242 660,449 450,000 (21,975,707) 20,933,060
Period ended 30 June 2023
Loss for the period - - - - - (6,182,361) (6,182,361)
Other comprehensive income for the period - - (1,716,511) - - - (1,716,511)
Credit to equity for equity settled share-based payments - - - 151,515 - - 151,515
Balance at 30 June 2023 5,666,665 35,570,411 (1,155,269) 811,964 450,000 (28,158,068) 13,185,703
LONGBOAT ENERGY PLC
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
Restated Restated
30 30 31 December 2022
June June
2023 2022
unaudited unaudited audited
Notes £ £ £
Cash flows from operating activities
Cash absorbed by continuing operations 20 (1,990,241) (1,430,178) (2,616,492)
Cash absorbed by operating activities from discontinued operations (1,300,256) (1,559,951) (4,957,680)
Net cash (outflow) from operating activities (3,290,497) (2,990,129) (7,574,172)
Investing activities
Purchase of property, plant and equipment (3,500) (2,800) (4,998)
Interest received 51,492 - 42,486
Investing activities from discontinued operations 22 (4,577,757) (15,794,167) (43,116,021)
Net cash used in investing activities (4,529,765) (15,796,967) (43,078,533)
Financing activities
Interest paid - - (112)
Financing activities from discontinued operations 22 166,313 14,922,731 35,179,319
Net cash generated from financing activities 166,313 14,922,731 35,179,207
Net (decrease)/increase in cash and cash equivalents (7,653,949) (3,864,365) (15,473,498)
Cash and cash equivalents at beginning of period 12,059,561 26,282,067 26,282,067
Effect of foreign exchange rates (88,051) 75,020 1,250,992
Cash and cash equivalents at end of period 4,317,561 22,492,722 12,059,561
Cash held in continuing operations 2,100,622 22,492,722 12,059,561
Cash classified as held for sale 2,216,939 - -
Relating to:
Bank balances and short term deposits 2,100,622 22,492,722 12,059,561
LONGBOAT ENERGY PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023
1 Accounting policies
Company information
Longboat Energy plc is a public company limited by shares incorporated in
England and Wales. The registered office is 5th Floor One New Change, London,
EC4M 9AF. The Company's principal activities and nature of its operations are
disclosed in the directors' report.
1.1 Accounting convention
The financial statements have been prepared in accordance with UK adopted
international accounting standards and with those parts of the Companies Act
2006 applicable to companies reporting under IFRS, except as otherwise stated.
The same accounting policies, presentation and methods of computation are
followed in the interim consolidated financial information as were applied in
the Gr'up's latest annual audited financial statements except for those that
relate to new standards and interpretations effective for the first time for
periods beginning on (or after) 1 January 2023 and will be adopted in the 2023
annual financial statements.
This interim financial information does not constitute statutory accounts
within the meaning of section 434 and of the Companies Act 2006. The
information for the year ended 31 December 2022 included in this report was
derived from the statutory accounts for that year, which were prepared in
accordance with UK adopted international accounting standards and with
those parts of the Companies Act 2006 applicable to companies reporting under
IFRS, a copy of which has been delivered to the Registrar of Companies. The
report of the auditors on those accounts was unqualified and did not contain
statements under s498(2) or (3) Companies Act 2006, but it did contain a
material uncertainty in relation to going concern. The ISRE 2410 review
conclusion on the consolidated interim financial statements as of and for the
six-month period ended 30 June 2022 included a material uncertainty in respect
of the going concern paragraph.
The financial statements are prepared in sterling, which is the functional
currency of the company. Monetary amounts in these financial statements are
rounded to the nearest £.
The financial statements have been prepared under the historical cost
convention.
The Group interim financial statements consolidate the financial statements of
the parent company and the held for sale subsidiary undertaking drawn up to 30
June 2023.
1.2 Going concern
The Directors have completed the going concern assessment, including
considering cash flow forecasts up to the end of 2024, sensitivities, and
stress tests to assess whether the Group is a going concern. Base case
scenarios include completion of the Statfjord Satellites acquisition. Having
undertaken careful enquiry, the Directors are of the view the Group will need
to access additional funds during 2024 in order to fund on-going operations
and pursue growth opportunities. This is in line with the Company's current
activities of exploring, maturing its discoveries and seeking acquisitions.
In the absence of such funding, the Group is forecast to have limited or no
liquidity by early 2025 and, in some reasonably possible downside scenarios
during 2024. It is anticipated that these funds will be sourced through asset
disposals / farm downs, issuing new equity or a combination of these
actions. To the extent that growth opportunities will support debt, this
will be considered where appropriate for example to support production
acquisitions. The financial statements for the period to 30 June 2023 have
been prepared assuming the Group will continue as a going concern. In
support of this, the Directors believe the liquid nature of asset market
combined with historical shareholder support, adequate funds can be accessed
if and when required. However, the ability to continue as a going concern is
not guaranteed at the date of signing these financial statements. As a
consequence, this funding requirement represents a material uncertainty that
may cast significant doubt on the Group's ability to continue as a going
concern. The financial statements do not include any adjustments that would
result from the basis of preparation being inappropriate.
1.3 Discontinued operations and assets held for sale
In accordance with IFRS 5 "Non-current assets held for sale and discontinued
operations" the net results relating to the assets held for sale are presented
within discontinued operations in the income statement, for which the
comparatives have been restated. The assets and liabilities of these
operations are presented separately on the balance sheet. Please refer to
note 21 for further details.
2 Adoption of new and revised standards and changes in accounting policies
The accounting policies adopted in the preparation of the consolidated
financial statements are consistent with those followed in the preparation of
the Group's annual consolidated financial statements for the year ended 31
December 2022, except for the adoption of new standards effective as of 1
January 2023. The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
Several amendments and interpretations apply for the first time in 2023, but
do not have an impact on the interim financial statements of the Group.
3 Critical accounting estimates and judgements
In the application of the Group's accounting policies, the directors are
required to make judgements, estimates and assumptions about the carrying
amount of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised, if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both current
and future periods.
Exploration and evaluation assets
Judgement is required to determine whether impairment indicators exist in
respect of the Group's exploration assets recognised in the statement of
financial position. The Group has to take into consideration whether the
assets have suffered any impairment, taking into consideration the results of
the drilling to date, and the likelihood of reserves being found. The Group
relies upon information from third parties to take these decisions and can be
subject to change if future information becomes available. At 30 June 2023
all exploration and evaluation assets were classified as held for sale. See
notes 11 and 21 for more detail.
Share based payments
Estimation was required in determining inputs to the share-based payment
calculations including share price volatility as detailed in the annual
accounts for the year to 31 December 2022.
Under the Founder Incentive Plan, judgment was required in determining the
point at which the Company and recipients had a shared mutual understanding of
the terms of the awards. Whilst the awards were legally granted in July
2020, the Board consider that the IPO Admission Document provided such a
shared mutual understanding given the detailed disclosure of the terms of the
scheme.
Under the Long-Term Incentive Plan, judgement was required in determining the
fair value of the shares awarded. The Board has taken advice from external
parties and has determined the fair value per share.
4 Employees
The average monthly number of persons (including directors) employed by the
Group during the period was:
Restated Restated
Six month period ended Six month period ended Year
ended
30 June 30 June 31 Dec
2023 2022 2022
Number Number Number
Executive Directors 3 3 3
Non-Executive Directors 4 4 4
Staff 2 2 2
Total 7 8 8
Their aggregate remuneration comprised:
Restated Restated
Six month Six month Year
period ended period ended ended
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Wages and salaries (including directors' remuneration) 526,820 526,815 1,036,481
Social security costs 66,250 83,134 160,616
Pension costs 28,750 27,500 55,000
Share based payment charge 85,582 119,671 157,756
707,402 757,120 1,409,853
5 Investment Income
Restated Restated
Six month Six month Year
period ended period ended ended
30 June 30 June to 31 Dec
2023 2022 2022
£ £ £
Interest income
Bank deposits 51,492 - 42,374
Total interest income for financial assets that are not held at fair value
through profit or loss is £NIL (2022: £NIL).
6 Operating Loss
Restated Restated
Six month Six month Year
Period ended period ended ended
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
(crediting):
Operating loss for the period is stated after charging/(crediting):
Exchange losses/(gains) 134,845 (8,858) (26,063)
Fees payable to the company's auditor for the audit of the company's financial 47,750 - 65,000
statements
Depreciation of property, plant and equipment 5,047 5,050 10,300
Share-based payments 85,582 119,671 157,756
7 Auditor's remuneration
Restated Restated
Six month Six month period ended Year
period ended ended
30 June 30 June 31 Dec
2023 2022 2022
Fees payable to the company's auditor and associates: £ £ £
For audit services
Audit of the financial statements of the company and consolidated financial 47,750 - 65,000
statements
Audit of the financial statements of the company's subsidiaries* 15,237 - 18,304
62,987 - 83,304
*This fee is in relation to the audit of Longboat Energy Norge AS, which was
held for sale as at 30 June 2023.
For non-audit services
Interim review 26,250 23,000 23,000
Other services - - -
Total non-audit fees 26,250 23,000 23,000
During the period the auditor provided non-audit services of £26,250 (2022:
£23,000) for their role in review of the interim accounts.
8 Income tax credit
Restated Restated
Six month period ended Six month Year
period ended ended
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Current tax
UK corporation tax on profits for the current period - - -
Deferred tax
UK deferred taxation - - -
Total tax - - -
No deferred tax asset has been recognised in the UK because there is
uncertainty of the timing of suitable future profits against which they can be
recovered. The Company has losses carried forward of £6,457,841 (Dec 22:
£4,783,533). A deferred tax liability has been recognised relating to Norway,
further details of which can be found in Note 17 and Note 21.
9 Loss for period from discontinued operations
On 28 April 2023 an Investment Agreement was entered into whereby Japan
Petroleum Exploration Co.Ltd agreed to made a significant investment in
Longboat Energy Norge AS to form a joint venture. As this investment will
result in sharing control of the subsidiary, Longboat Energy Norge AS is
considered as held for sale and the results of the entity are disclosed under
discontinued operations. See Note 21 for more details.
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Expenses excluding exploration write offs (3,061,498) (901,120) (3,918,853)
Exploration write off (10,496,796) (309,338) (42,877,022)
Loss before tax (13,558,294) (1,210,458) (46,795,875)
Current tax on discontinued operations 1,775,778 23,788,540 41,029,956
Deferred tax on discontinued operations 7,650,005 (22,936,559) (7,114,215)
Loss after tax on discontinued operations (4,132,511) (358,477) (12,880,134)
Loss per share impact from discontinued: operations
Basic and diluted impact (7.29) (0.63) (22.73)
10 Loss per share Restated Restated
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Weighted average number of ordinary shares for basic loss per share 56,666,666 56,666,666 56,666,665
Losses:
Continued operations
Loss for the period from continued operations (2,049,850) (1,285,887) (2,592,473)
Discontinued operations
Loss for the period from discontinued operations (4,132,511) (358,477) (12,880,134)
Basic and diluted loss per share (pence per share)
From continuing operations (3.62) (2.27) (4.57)
From discontinued operations (7.29) (0.63) (22.73)
(10.91) (2.90) (27.30)
11 Non-current assets
Exploration and Computers Total
evaluation assets Right Fixtures
of Use and
Asset Fittings
£ £ £ £ £
Cost
At 1 January 2022 23,988,754 580,044 3,340 37,033 24,609,171
Additions 53,588,635 - 42,570 17,333 53,648,538
Foreign currency adjustments (38,932) 3,516 21 55 (35,340)
Exploration write off (42,877,021) - - - (42,877,021)
At 31 December 2022 34,661,436 583,560 45,931 54,421 35,345,348
Additions* - - - 3,500 3,500
Additions** 715,329 - - - 715,329
Foreign currency adjustments ** (3,679,984) (45,839) (5,728) (2,941) (3,734,492)
Exploration write off ** (10,496,796) - - (10,496,796)
Assets held for sale (21,199,985) (537,721) (38,796) (19,923) (21,796,425)
At 30 June 2023 - - 1,407 35,057 36,464
Accumulated depreciation and impairment
At 1 January 2022 - 19,335 167 10,606 30,108
Charge for the year - 117,099 7,772 16,787 141,658
Foreign currency adjustments - (270) (343) (744) (1,357)
At 31 December 2022 - 136,164 7,596 26,649 170,409
Charge for the six month period * - - 235 4,813 5,048
Charge for the six month period ** 35,253 1,669 3,407 40,329
Foreign currency adjustments** - (19,589) (189) (2,468) (22,246)
Assets held for sale - (151,828) (8,607) (9,359) (169,794)
At 30 June 2023 - - 704 23,042 23,746
Carrying amount
At 30 June 2023 * - - 703 12,015 12,718
At 30 June 2023 ** 21,199,985 385,893 30,189 10,564 21,626,631
At 30 June 2022 55,191,851 498,806 42,447 32,370 55,765,474
At 31 December 2022 34,661,436 447,396 38,335 27,772 35,174,939
*Relates to continuing operations
**Relates to discontinued operations and assets held for sale
12 Inventories
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Materials and supplies - 104,502 123,432
Closing inventories are equal to their net realisable value.
13 Trade and other receivables
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Non-current
Prepayments - - 98,368
Current
Trade receivables - 177,245 14,073
VAT recoverable 115,182 184,855 182,160
Prepayments and other receivables 109,779 629,074 738,685
224,961 991,174 934,918
224,961 991,174 1,033,286
14 Current and non-current tax receivable
Tax receivables relate to Longboat Energy Norge AS, which is classified as
held for sale as at 30 June 2023.
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Current tax receivable - - 40,755,157
Non-current tax receivable - 20,960,554 -
- 20,960,554 40,755,157
15 Trade and other payables
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Trade payables 4,822 3,568,526 2,840,806
Accruals 165,848 4,757,033 1,373,031
Social security and other taxation 95,750 336,911 302,900
Other payables 16,142 5,776 708,760
Trade and other payables 282,562 8,668,246 5,225,497
Exploration Financing Facility - - 36,761,340
16 Lease liabilities
The Group has lease contracts for buildings used in its operations, which are
held by Longboat Energy Norge AS, which is now classified as held for sale.
The Group's obligations under its leases are secured by the lessor's title to
the leased assets.
Set out below are the carrying amounts of right of use assets recognised and
the movements during the period:
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Opening balance 489,580 - 582,802
Additions 25,163 - -
Repayments (66,939) (43,694) (103,812)
Interest (13,898) 8,131 14,510
Foreign exchange (58,112) (5,198) (3,920)
Liabilities held for sale 403,591 - -
Closing balance - 542,041 489,580
Lease liabilities:
Within 1 year - 119,219 122,612
In two to five years - 422,822 366,968
- 542,041 489,580
Maturity analysis
Within one year - 115,109 134,971
In two to five years - 383,697 382,419
Total undiscounted liabilities - 498,806 517,390
Future finance charges and other adjustments - 43,235 (27,810)
Lease liabilities in the financial statements - 542,041 489,580
Lease liabilities held for sale 403,591 - -
Deferred taxation
The following are the major deferred tax liabilities and assets recognised by
the company and movements thereon during the current and prior reporting
period.
All the deferred tax balance relates to Longboat Energy Norge AS, which was
held for sale as at 30 June 2023.
ACAs Total
£ £
Deferred tax balance at 1 January 2022 18,766,424 18,766,424
Deferred tax movements
Differences in tax basis for depreciation in Norway 22,380,267 22,380,267
Deferred tax liability at 30 June 2022 41,146,691 41,146,691
Deferred tax movements
Differences in tax basis for depreciation in Norway (15,266,051) (15,266,051)
Foreign exchange (143,742) (143,742)
Deferred tax liability at 31 December 2022 25,736,898 25,736,898
Deferred tax movements
Foreign exchange (2,859,585) (2,859,585)
Differences in tax basis for depreciation in Norway (7,663,789) (7,663,789)
Change in other temporary differences (13,784) (13,784)
Deferred tax liability moved to held for sale (15,199,740) (15,199,740)
Deferred tax liability at 30 June 2023 - -
Deferred tax assets and liabilities are offset in the financial statements
only where the company has a legally enforceable right to do so. In Norway,
deferred tax assets and liabilities occur mainly because of prepayment of
Exploration spend. Exploration spend is fully tax refundable when incurred.
18 Share Capital
£
Balance at 1 January 2022 5,666,665
Balance at 30 June and 31 December 2022 5,666,665
Balance at 30 June 2023 5,666,665
19 Related party transactions
Remuneration of key management personnel
Members of the Board of Directors are deemed to be key management personnel.
Key management personnel compensation for the financial period is the same as
the Director remuneration which is disclosed in the Annual Report and
accounts.
Other information
Directors' and PDMR interests in the shares of the Company as at 30 June 2023,
including family interests, were as follows:
Ordinary shares
Helge Hammer 837,023
Jonathan Cooper 333,432
Graham Stewart 350,000
Jorunn Saetre 51,667
Nick Ingrassia 179,023
Julian Riddick (PDMR) 272,648
Hilde Sathe (PDMR) 11,805
In addition, at 30 June 2023 the following conditional awards have been made
to the Executive Directors and Company Secretary under the prior period FIP
which are expressed as a percentage of the total maximum potential award,
being 10% of the Company's issued share capital:
Founder Percentage entitlement of Initial Award pool Maximum percentage entitlement of growth in value from IPO Maximum percentage of issued share capital
% % %
Helge Hammer 23.50% 3.53% 1.48%
Graham Stewart 19.75% 2.96% 0.62%
Jonathan Cooper 19.13% 2.87% 0.59%
Julian Riddick 18.50% 2.78% 0.48%
The Group does not have one controlling party.
20 Cash used by continuing operations
Restated Restated
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Loss for the six month period after tax - continuing operations (2,049,850) (1,285,887) (2,592,473)
Add back:
Depreciation 5,047 5,050 10,300
Interest payable - - 112
Interest receivable (51,492) (42,486)
Share based payments expense 85,582 119,671 157,757
Movements in working capital:
Trade payables 15,391 (80,205) (40,032)
VAT recoverable (5,709) (11,161) (74,121)
Prepayments and other receivables 21,267 (22,728) (70,805)
Accruals (17,843) (151,209) (5,823)
Social security and other taxation 735 (5,603) 35,452
Other payables 6,631 1,893 5,627
Cash flow from continuing operating activities (1,990,241) (1,430,178) (2,616,492)
21 Assets and liabilities classified as held for sale
30 June 2023
£
Intangible assets 21,199,985
Tangible assets 426,647
Tax recoverable 37,264,850
Other current assets held for sale 2,754,277
Total assets classified as held for sale 61,645,759
Exploration finance facility - short term 32,032,314
Other current liabilities held for sale 1,835,332
Exploration finance facility - long term* 1,157,131
Deferred tax 15,199,740
Other long term liabilities held for sale 291,278
Total liabilities classified as held for sale 50,515,795
*Disclosed net of £0.5 million prepaid loan fees, being amortised over the
life of the facility.
At the date of authorisation of the financial statements the deal resulting in
the sharing of control of Longboat Energy Norge AS had completed. See Note
22 for more details. The short term EFF liability will be settled by the tax
receivable included in the current assets held for sale of £37.2 million, due
to be received in November 2023.
22 Cash flow for discontinued operations
Restated Restated
30 June 30 June 31 Dec
2023 2022 2022
£ £ £
Investing activities from discontinued operations:
Tax receipts - 10,538,406 7,120,899
E&E additions (4,631,603) (26,279,513) (50,289,195)
PP&E additions (311) (53,060) (56,108)
Interest received 54,157 - 108,382
Cash flow from investing activities (4,577,757) (15,794,167) (43,116,021)
Finance activities from discontinued operations:
Receipt of loan 1,417,944 15,328,609 36,462,022
Interest paid (1,088,344) (180,898) (938,121)
EFF commitment fee (163,287) (224,980) (344,583)
Cash flows from financing activities 166,313 14,922,731 35,179,319
23 Events after the reporting date
On 14 July 2023 Longboat Energy Norge AS issued 3,386,430 new shares,
representing 49.9% of its total share capital to Japan Petroleum Exploration
Co. In the newly formed partnership both the Company and Japan
Petroleum Exploration Co hold equal voting rights and joint control over
Longboat Energy Norge AS under the terms of the associated shareholder
agreement. Therefore, despite the 50.1% shareholding, this new arrangement
constitutes shared control of Longboat Energy Norge AS and establishes a new
Joint Venture partnership with Longboat Energy Norge AS renamed Longboat JAPEX
Norge AS.
As a result of the transaction, Longboat JAPEX Norge AS will be accounted for
as an equity accounted joint venture prospectively and the Company with record
an investment in equity accounted joint venture in the statement of financial
position and its share of profit or loss and other comprehensive income and
expense. In accordance with accounting requirements the retained interest will
be revalued with reference to the fair value of consideration paid for the
49.9%. Consideration is in three tranches: the initial tranche consisted of a
cash investment of US$16 million; the second tranche two of US$4 million is
payable contingent on the successful completion of the Statfjord satellites;
and the final tranche of up to US$30 million, payable contingent upon a
successful discovery on the Velocette exploration well, has since fallen away.
From the initial US$16 million, US$4.6 million was utilised by Longboat JAPEX
to repay the intercompany loan owed to Longboat Energy plc.
The Company is currently finalising the accounting for the transaction but it
is anticipated that the transaction will give rise to a gain of approximately
£8.7 million based on net assets disposed at 14 July of £6.7 million, fair
value of retained ownership based on the cash consideration of £12.6 million
and the estimated contingent consideration of £2.7 million. The contingent
consideration relates to the Statfjord satellites acquisition and is dependent
on the estimated probability of completion. The failure of the Velocette well
to find commercial hydrocarbons means that the Velocette Tranche under the
JAPEX investment agreement will not be payable.
On 20 September 2023 the Company announced a minor gas discovery in the
Velocette exploration well (Longboat JAPEX Norge AS 20%). The well encountered
hydrocarbons in the primary target in Cretaceous turbidity sands in the Nise
formation. The Velocette volumes are at the lower end of pre-drill
expectations and the discovery is not considered to be commercial in
isolation. However, the licence contains numerous other prospects which have
been de-risked by the presence of gas in good quality reservoir in the
Velocette well. The remaining prospectivity has significant size potential in
multiple structures and with slightly different trapping geometries. Further
assessment of the licence prospectivity together with other opportunities in
the area could impact the commercial potential of the licence. As at the 30
June 2023 the intangible asset in relation to licence PL1016 was £1.8 million
with anticipated net pre-tax drilling and carry cost estimates of £19.9
million (net post tax costs £5.6 million), based on operator pre-drill
estimates. The intangible carrying value will be updated as the operator's
invoices are issued and the ability to carry these amounts will be assessed
again at the year end.
Post the period end Longboat announced the purchase of an interest in the
Statfjord satellites, which is yet to complete. The Statfjord satellite
acquisition is significant as it represents not only Longboat's first
production acquisition but also evidences the ability of the Longboat JAPEX
joint venture to assess and transact opportunities. The 4.80% unitised
interest in the Statfjord Øst Unit and 4.32% unitised interest in the Sygna
Unit represent long-term cash flow with the fields expected to produce until
late 2030s. Initial production of ~300 boepd net to Longboat JAPEX is
anticipated to approximately double in 2024 following a five well in-fill
drilling programme, which is currently underway, and gas-lift installation
which is complete. The cash consideration of $12.75 million, contingent on
completion, is anticipated to be paid back in under two years and will be
fully funded by JAPEX's initial investment, and drawdown under the JAPEX
acquisition bridge facility agreement.
Post the period end, Longboat Energy plc announced the acquisition of
privately held Topaz Number One Limited ("Topaz"), increasing its working
interest in the Production Sharing Contract over Block 2A offshore Sarawak,
Malaysia ("Block 2A") to 52.5%. Topaz's sole asset is a 15.75% working
interest in Block 2A Consideration for this purchase will be in three
tranches: an initial $100,000 through an issue of new ordinary shares in the
Company; a further US$125,000 in cash or shares payable upon an exploration
well being committed on Block 2A or a farm-out; and up to US$3,000,000 in
cash or shares payable upon a discovery being made on Block 2A, depending on
the resource size and the growth in the price of the Company's shares over a
two year period
24 Other information
A copy of this interim report and financial statements is available on the
Company's website www.longboatenergy.com.
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