REG - Molecular Energies - Final Results
28/06/2023 07:15
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RNS Number : 1181E Molecular Energies PLC 28 June 2023
28 June 2023
Molecular Energies PLC
("Molecular", "the Company", or "the Group")
Audited Results for the year ended 31 December 2022
2023 update and outlook
AGM date
Molecular (AIM: MEN), the international energy company is pleased to announce
its audited results for the year ended 31 December 2022 and a 2023 update
and outlook.
The Company's Annual Report will be posted to Shareholders on 30 June 2023
together with the Notice for the Annual General Meeting.
Peter Levine, Chairman, commented:
"The year under report was challenging and volatile in certain ways, rewarding
in others and, considering all the circumstances, the results were sound.
However, activities since the start of the year point to a more stable future
and there is potential for some exciting developments in the Group as a whole
going forward.
"As separately announced today, we are encouraged by the progress made in
Green House Capital and look forward to developing its potential as a separate
listed entity."
Highlights FY2022
Financial
· Adjusted EBITDA contribution from Argentina US$9.8 million (2021:
US$10.5 million) with adjusted Group EBITDA* of US$7.0 million (2021: US$7.5
million).
· Group revenue of US$33.2 million (2021: US$34.1 million) as lower
sales volumes, due in part to the Rio Negro incident, were offset by higher
realised prices in both Argentina and the USA.
· The average price across the Group was US$55.9/boe (2021:
US$40.7/boe) due to the recovery in market prices in the year.
· Net cash generated by operating activities increased by 3% to
US$11.4 million (2021: US$11.1 million).
· Free cash generation from core operations* (excluding workovers)
of US$11.3 million (2021: US$12.8 million).
· Year-end cash balances US$7.9 million (2021: US$2.0 million).
· After depreciation, depletion and amortisation of US$8.8 million
(2021: US$11.5 million) loss after tax of US$10.5 million (2021 profit US$4.6
million).
· Borrowings at year end increased to US$47.5 million (2021:
US$29.3 million). Of this, US$35 million is third party financial debt in
Argentina with no recourse to the Group. The majority of this is dollar-based
debt at low average interest rates of less than 5%. This has no material
impact on the Group as it is a dollar-based business. The balance is in effect
peso-denominated which is advantageous to the Group. The balance of US$11.9
million is owed by the Group to IYA, an affiliate company of Chairman Peter
Levine. The increase in third party debt in Argentina relates to the heavy
capex programme last year and the incident at the Puesto Flores facility. All
borrowings are being serviced in accordance with their terms.
· Since the end of the period, the IYA debt has been converted to
an interest free loan with a maturity now out to the end of 2025 and financial
borrowings in Argentina have been measurably reduced with much of the
remaining debt refinanced and extended on attractive terms.
Corporate
· Name of Company changed from 'President Energy PLC' to 'Molecular
Energies PLC' to reflect the expansion of our interests in alternative
energies and related technologies.
· Capital reorganisation consolidating every 200 existing ordinary
shares into one consolidated share, and the sub-division of every such
consolidated share into one new ordinary share and one deferred share.
· Further tranche of US$3.585 million in bonds issued to the
Argentine market to fund further working capital and capital expenditure. The
interest rate was 3.89% with a 25-month repayment period and an initial
16-month capital repayment holiday.
· Market value of retained 22.5% holding in Atome Energy PLC
("Atome"), the Company's green hydrogen and ammonia affiliate, increased in US
dollar terms by approximately 14% throughout the year, whilst the share price
in GB pound terms increased by approximately 28%.
· Became 75% beneficial shareholder in Green House Capital, an
incubator company for alternative energy projects which is subject to a
separate RNS today regarding the potential forthcoming spin-off.
Operations
· Group net average production 1,708 boepd (2021: 2,473 boepd).
· Production in Argentina adversely impacted by the incident in Rio
Negro concession announced on 11 August 2022 that impacted on production from
the Puesto Flores oil field in the latter parts of the year.
· Three new well drilling programme in Salta, Argentina commenced
late 2021 and successfully completed during the year. All three wells on
stream and now producing.
· Argentina well operating costs per boe in 2022, excluding
royalties and workovers* US$25.9 per boe (2021: US$17.0) due to lower
production.
· Group-wide administrative costs stable at US$4.5m (2021: US$4.4m)
excluding directly attributable Atome expenses in 2021.
· Work on our Paraguay exploration well progressed with our
partners.
· Studies continued regarding potential secondary recovery project
in the Rio Negro concession.
· Exploration planning continued at the Martinez del Tineo field
which, subject to rig availability, is slated to be drilled towards the end of
2023.
· Matorras and Ocultar licences in Salta successfully relinquished.
Production and reserves
· Net 2P (proven and probable) reserves in Argentina at year end,
as confirmed by an independent reserves audit of 18.9 mmboe (2021: 24.4
mmboe).
· Louisiana 1P current proven producing reserves to be written off
completely this year and contingency for liabilities released.
Production Oil (bbls) Natural Gas (mmcf) Total (mmboe)
Country 2022 2021 2022 2021 2022 2021
Argentina 408,999 561,947 1,172.5 1,838.9 604.4 868.4
USA 15,470 19,831 22.6 87.0 19.2 34.3
424,469 581,778 1,195.1 1,925.9 623.6 902.7
Net Reserves (mboe) Argentina USA Total
As at 31 December 2021 24,399.5 723.8 25,123.3
Revisions in reserves (4,894.2) (681.6) (5,575.8)
Production (604.4) (19.2) (623.6)
As at 31 December 2022 18,900.9 23.0 18,923.9
Reserve revisions in Argentina reflect the results of production performance,
drilling and workovers in the year and the subsequent independent auditor's
reserve report by J&R Consultora. It is important to note that the
reserves as at 31 December 2022 do not represent the total of what is present
and/or recoverable in the respective fields in Rio Negro but only what are
present and/or recoverable over the remaining term of Molecular's current
licenses to 2026 / 2027. It is contemplated that, in due course, Molecular's
core licences will be extended for a further 10 years which would then
increase the reserves, ceteris paribus.
* Calculation of all quoted metrics not directly corresponding to GAAP
measures are detailed in the Alternative Performance Measure glossary and
cross referenced to the Notes where applicable
Current Trading
Argentina
With a second separator this month brought up to full capacity in the core
area of Puesto Flores, oil production is climbing, with an anticipated level
from that field by the beginning of July of over 150m3/day. This excludes oil
and gas production from our other fields in Rio Negro such as Estancia Vieja
and Puesto Prado. Production from Salta Province is stable at approximately
60m3/day.
A frac campaign is slated to commence in the Puesto Flores field by September
targeting, on a success case, an initial additional 60m3/day of oil
production. A mobile workover/light drilling rig has been identified to be
acquired by the Group and put into working order within the next few months
which will enable Molecular to react to downhole issues in wells as and when
they arise and reactivate relevant shut-in wells whether in Rio Negro or Salta
Province. The rig, which, if purchased, is expected to cost some US$1.5
million, is intended to be funded without recourse to equity dilution.
A new high-impact exploration well is scheduled to start to be drilled before
the end of the year at the Martinez del Tineo field in the Puesto Guardian
Concession, Salta. Previously considered as a farm-out candidate, Molecular
has decided to go it alone. The well is going through its planning and
permission stages, and it will be targeting both an oil rim with existing 2P
reserves of 1.1 mmboe in the Martinez del Tineo field and a deeper gas
exploration reservoir of a potentially larger size of some 110 mmboe of
unrisked resources (as estimated by Gaffney, Cline) but with a lower chance of
success. The size of the prize is however too big to ignore. The well's cost
is still being assessed but is likely to be in the region of US$5 million and
is intended to be funded without recourse to equity dilution.
With elections coming up later this year, it is hoped that 2024 will see a
more stable macro environment for Argentina with the EBITDA for our Argentine
business expected to increase for Q2 from the US$2 million in Q1.
Paraguay
The high-impact well to be drilled at the Tapir location in the Chaco,
Paraguay is now scheduled to commence mid-August with the further delay due to
a further inspection of the rig by Molecular requiring the drilling company to
make additional repairs with drill safety a paramount concern. The delays
place no further cost burden on Molecular or its partner, CPC.
All other necessary preparations are in hand, and we look forward to at last
getting down to business. I plan to be on site when this happens.
Atome
This spin-out from Molecular has proved to be a great success with the Company
founding Atome from scratch within the last three years. Since the IPO at the
end of 2021, Atome has gone from strength to strength with the share price
increasing approximately 30% since the IPO. With a market capitalisation of
some US$55 million, Molecular retains a solid investment of 22.5% in Atome
after providing Molecular shareholders with a substantial dividend in specie
at the time of the 2021 IPO.
With the recent Baker Hughes investment into Atome, Molecular looks forward to
Atome's future with confidence.
Green House
Following on from the success of the spin-off of Atome, Molecular has
initiated steps towards spinning-off this division in the latter part of this
year to unlock the value in Green House not currently reflected by being part
of the Molecular Group. The spin-off will expose Green House to a wider
investor audience that is more focussed on green-energy solutions in a similar
manner to Atome. Reference is made to the separate announcement made by the
Group in this regard at the same time as announcement of these report and
accounts.
Management
The Board appointed Jordan Coleman as CEO (non-board) of our hydrocarbons
division late last year and these results prove the positive impact he is
having on operations. Similarly, the Board now intends to appoint a CEO of our
Green House division in the near term.
Outlook
The outlook for Molecular is looking a tad brighter. With good traction and
new elections in Argentina this year, two high-impact wells planned, material
progress on the business within Green House, allied with its potential
spin-off later this year, there are many moving parts. Whilst one has to be
severely realistic as to the chances of success in exploration wells, the
Group has positives to look forward to over the next 12 months.
The Company's Annual Report will be posted to shareholders on 30 June 2023.
Annual General Meeting and Investor Q&A
The Annual General Meeting will be held on Tuesday 25 July 2023 at 1.00 p.m.
BST at Carrwood Park, Selby Road, Leeds LS15 4LG.
For further information, please visit www.molecularenergiesplc.com
(http://www.molecularenergiesplc.com) or contact:
Molecular Energies PLC +44 (0) 207 016 7950
Peter Levine, Chairman
Rob Shepherd, Group FD
finnCap (Nominated Advisor and Broker) +44 (0) 207 220 0500
Christopher Raggett, Tim Harper
Notes to Editors
Molecular Energies PLC is an AIM listed company at the forefront of energy
development and has interests across the energy spectrum, from oil and gas
projects to subdivisions in the green and alternative energy sub-sectors.
The Company has oil and gas production in Argentina as well as exploration
assets in both Argentina and Paraguay. The Company has two separate
subdivisions which are focused on early-stage opportunities in the green
and/or alternative energy sub- sector.
Activities in the green and alternative energy space are being carried out
under the Green House Capital brand and through AIM listed Atome Energy PLC, a
green hydrogen, ammonia, and fertiliser company operating in Paraguay, Costa
Rica and Iceland, in which Molecular currently has 22.5%.
With a strong strategic and institutional base of support, an in-country
management team as well as the Chairman whose interests as the largest
shareholder are aligned to those of its shareholders, Molecular gives UK
investors access to an energy growth story combined with world class standards
of corporate governance, environmental and social responsibility.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the
European Union (Withdrawal) Act 2018 ("UK MAR"). The person who arranged for
the release of this announcement on behalf of the Company was Peter Levine,
Chairman.
Detailed Financial Review
2022 has proved a challenging year as production decline in both Argentina and
USA hydrocarbon businesses have impacted on the financial returns. While world
oil prices have been higher than 2021, controlled prices in Argentina and
restricted access to export markets has limited the ability of the Group to
benefit from these. However, efforts have continued to focus on developing
alternative energy businesses with the establishment of Green House Capital to
pursue opportunities akin to that achieved with Atome in 2021 which will
assist in rebalancing the assets and business of the Group going forward. The
Group retains a 22.5% stake in Atome, with the accounting rules governing
consolidation of investments in associate undertakings with significant
influence, shareholders will need to look to the Company Balance Sheet to see
the improvement in the market value of the investment in the period as
highlighted in Note 9.
Revenue fell by 3% to US$33.2 million (2021: US$34.1 million) as lower sales
volumes were offset by higher realised prices in both Argentina and the USA;
the average Group product price was US$55.9/boe (2021: US$40.7/boe) due to the
recovery in market prices in the year. Overall Group production fell by 31% to
1,708 boepd (2021: 2,473 boepd).
Production in Argentina was adversely impacted by an incident in our Rio Negro
concession that impacted on production from the Puesto Flores oil field in the
latter part of the year although the financial impact was partially offset by
a successful insurance claim.
Cost of sales decreased to US$30.3 million (2021: US$33.4 million) due to
lower production related depreciation and a one-off credit arising on the
release of an abandonment provision.
Free cash generation from core operations excluding changes in working
capital, administrative expense and non-recurring workovers fell by 12% to
US$11.3 million (2021: US$12.8 million).
After depreciation, depletion and amortisation of US$8.8 million (2021:
US$11.5 million) and administrative expenses of US$4.5 million (2021: US$5.8
million), the Group recorded a reduced operating loss of US$1.6 million (2021:
loss US$5.0 million).
Included within administrative expenses in 2021 were US$1.4 million of
directly attributable Atome expenses largely offset by the US$1.3 million
non-operating gain arising on migration to an associate investment, and
directly linked to the US$1.3 million receivable ultimately recovered in 2022.
The overall impact of Atome related expenses was essentially neutral in 2021.
An impairment of US$10.0 million (2021: US$0.1 million) was recognised in the
period. Following a decision to focus exploration efforts the Hernadarias
concession was relinquished in 2023 resulting in an impairment of the carrying
value at the end of 2022 of US$8.5 million. While the reduction in USA
reserves triggered an impairment review and an impairment of US$1.4 million.
Non-operating gains largely arising on recoveries of previously impaired
costs, insurance proceeds and asset disposals resulted in a US$1.3 million
gain (2021: gain US$14.5 million) in contrast to the Atome related gains in
the prior period. Higher interest on Argentina related borrowings were offset
by foreign exchange gains including related treasury income. Loss before tax
for the year was US$12.2 million (2021: profit US$5.7 million) with loss after
tax totalling US$10.5 million (2021 profit: US$4.6million).
Argentine operating performance
Production in Argentina decreased by 30% to 604,411 boe (2021: 868,427 boe) or
1,656 boepd (2021: 2,379 boepd). Average realised sales prices in Argentina
rose by 35% to US$54.7 per boe (2021: US$40.6 per boe) benefitting from
partial exposure to world market prices on export sales.
Well operating costs in Argentina before non-recurring items* rose by 52% to
US$25.9/boe (2021: US$17.0/boe) on lower volumes associated with production
decline. Depreciation fell during the year to US$12.1/boe (2021: US$12.9/boe)*
reflecting changes in future reserve development cost estimates. The extension
of the Rio Negro licence period and/or the secondary recovery project which
are both under discussion with the Neuquén Province would lead to a
significant reduction in depreciation rates. Overall, following the annual
independent review, proved and probable reserves in Argentina decreased by 21%
largely on the Rio Negro assets. This change triggered an impairment review
for these cash generating units, but no impairment was considered necessary.
USA operating performance
Overall production from the Group's working interest in US operations fell by
44% to 53 boepd (2021: 94 boepd). Despite production rates returning to
previous levels in May 2022, production stagnated in middle of the year
requiring a two-month shut-in and further workover of the well. Production
resumed in early November, but it became apparent by the end of the year that
future performance from the new reservoir zone would be materially below
historic levels triggering a reduction in future reserves and an impairment
review. Subsequent to the higher depreciation charge, an impairment of US$1.4
million was recognised.
Average realised prices in the US more than doubled over the prior year to
US$87.8/boe (2021: US$43.1/boe). Well operating costs excluding royalty
related expenses and non-recurring workovers* rose to US$44.1 /boe (2021:
US$14.3 /boe) due to lower production levels. Depreciation rose during the
year to US$72.4/boe (2021: US$6.3/boe)* due to the reduction in future
reserves estimates.
This asset has now been sold by the Group and the accounts for 2023 will show
a release of the associated contingent liabilities.
Corporate
While much of the focus in 2021 was on the value creation in bringing Atome to
the market, development drilling in Argentina and concluding the farm out of
the Pirity Concession in Paraguay, activity through 2022 focused on
transition. The Group changed its name to Molecular Energies plc and with the
sub-division of shares in October 2022, the emphasis was on preparing the
business for the future. New entities have been created under the Green House
Capital division that are expected to develop new alternative energy
opportunities in future periods. Argentina remains the core hydro-carbon
division and continues to self-fund through access to local capital markets.
Through 2022, preparations to drill the exploration well on the Pirity
concession in 2023 continued. Accordingly, management consider that it is
appropriate to continue to capitalise the balance of US$46 million at 31
December 2022 (2021: US$54 million).
Investment in the Oil & Gas Assets component of Property, Plant and
Equipment in the year amounted to US$24.2 million (2021: US$ 14.7 million)
with the completion and re-entry of four wells in the Salta Concession in
Argentina, installation of new facilities in Rio Negro following fire damage
and capitalised workovers in Argentina. In the USA, ownership of the Pacific
Enterprises well was acquired for future use as a saltwater disposal well.
Overall, Trade and Other Payables increased to US$24.1 million (2021: US$22.0
million) due to obligations arising on drilling commitments.
Trade and Other Receivables decreased to US$11.7 million (2021: US$11.9
million). In financing Argentine drilling activity, the Group managed currency
exposure by prepaying for US$1.6 million (2021: US$3.2 million) of drilling
costs to be discharged on future activity. Under borrowing arrangements,
proceeds are received net of interest earned in future periods resulting in a
prepayment of interest.
At the end of the year, the Group had a net current liability of US$19.4
million (2021: US$9.2 million). However, after deducting the liabilities on
drilling and capital accruals, which are periodic in nature as detailed in
Note 19, the underlying net current liability from ongoing operations is lower
at US$7.1 million (2021: US$3.2 million). Year-end cash balances were US$7.9
million (2021: US$2.0 million).
Key Performance Indicators
Key Performance Indicators are used to measure the extent to which Directors
and management are reaching key business objectives for the Group. The
principal methods by which the Directors monitor the Group's performance are
volumes of net production, well operating costs and the extent of exploration
success. The Directors also carry out a regular review of cash available for
exploration and development and review actual capital expenditure and
operating expenses against forecasts and budgets.
2022 2021 Increase/ (Decrease)
Production mboe
USA 19.2 34.3 -44.0%
Argentina 604.4 868.4 -30.4%
Total net hydrocarbons 623.6 902.7 -30.9%
Well operating costs US$000*
USA 1,000 488 104.9%
Argentina 15,917 15,538 2.4%
Total operating costs 16,917 16,026 5.6%
Well operating costs per boe US$*
USA 52.1 14.2 266.1%
Argentina 26.3 17.9 47.2%
Total well operating costs per boe US$ 27.1 17.8 52.8%
* calculation of all quoted metrics not directly corresponding to GAAP
measures are detailed in the Alternative Performance Measure glossary and
cross referenced to the Notes where applicable
Underlying operating costs excluding non-recurring items have been calculated
and detailed in the Alternative Performance Measure section of this report.
Consolidated Statement of Comprehensive Income
Year ended 31 December 2022
Note 2022 2021
US$000
US$000
Continuing Operations
Revenue 33,233 34,147
Cost of sales 2 (30,344) (33,431)
Gross profit/(loss) 2,889 716
Administrative expenses 3 (4,543) (5,764)
Operating profit /(loss) before impairment and non-operating gains/(losses) (1,654) (5,048)
Presented as:
Adjusted EBITDA 6,947 7,526
Non-recurring items (407) (751)
EBITDA excluding share options 6,540 6,775
Release of abandonment provision 711 -
Depreciation, depletion & amortisation (8,790) (11,456)
Share based payment expense (115) (367)
Operating profit / (loss) (1,654) (5,048)
Non-operating gains / (losses) 4 1,270 14,494
Loss on investment in associate undertaking (25) -
Impairment credit / (charge) 5 (10,016) (51)
Profit / (loss) after impairment and non-operating gains/(losses) (10,425) 9,395
Finance income 4,907 1,633
Finance costs (6,649) (5,324)
Profit / (loss) before tax (12,167) 5,704
Income tax (charge)/credit comprises:
Current tax income tax (charge)/credit (59) -
Deferred tax: foreign exchange arising on provision for future taxes (3,409) (1,341)
Deferred tax being underlying provision for future taxes 5,137 216
Total income tax (charge)/credit 1,669 (1,125)
Profit / (loss) for the year from continuing operations (10,498) 4,579
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations 5 -
Total comprehensive profit /(loss) for the year attributable
to the equity holders of the parent (10,493) 4,579
Earnings / loss per share 6 US cents US cents
Basic profit/(loss) per share from continuing operations (102.02) 45.07
Diluted profit(loss) per share from continuing operations (102.02) 44.17
The accompanying accounting policies and notes form an integral part of these
financial statements.
Consolidated Statement of Financial Position
31 December 2022
ASSETS 2022 2021
US$000
US$000
Non-current assets
Intangible exploration & evaluation assets 45,721 54,304
Goodwill 705 705
Property, plant and equipment 71,937 59,148
Investment in associate - 25
Deferred tax 45 350
Other non-current assets 103 103
118,511 114,635
Current assets
Trade and other receivables 11,710 11,887
Stock - 1,336
Cash and cash equivalents 7,941 2,014
19,651 15,237
TOTAL ASSETS 138,162 129,872
LIABILITIES
Current liabilities
Trade and other payables 20,708 17,424
Borrowings 18,391 7,014
39,099 24,438
Non-current liabilities
Trade and other payables 3,362 4,580
Long-term provisions 7,854 7,480
Borrowings 29,134 22,250
Deferred tax 250 2,283
40,600 36,593
TOTAL LIABILITIES 79,699 61,031
EQUITY
Share capital 36,179 36,179
Share premium 48 48
Translation reserve (50,235) (50,240)
Profit and loss account 64,647 75,145
Reserve for share-based payments 7,824 7,709
TOTAL EQUITY 58,463 68,841
TOTAL EQUITY AND LIABILITIES 138,162 129,872
Consolidated Statement of Changes in Equity
Year ended 31 December 2022
Reserve
Profit for share-
Share Share Translation and loss based
capital premium reserve account payments Total
US$000 US$000 US$000 US$000 US$000 US$000
Balance at 1 January 2021 35,708 257,992 (50,240) (174,631) 7,538 76,367
Share-based payments - - - - 367 367
Debt conversion 82 58 - - - 140
Subscription 241 254 - - - 495
Exercise of options 148 48 - - (196) -
Capital reduction - (258,304) - 258,304 - -
Dividend in specie - - - (13,130) - (13,130)
Transactions with the owners 471 (257,944) - 245,174 171 (12,128)
Profit for the year - - - 4,579 - 4,579
Other comprehensive income
Exchange differences on
translation - - 23 - - 23
Reclassified to profit and loss - - (23) 23 - -
Total comprehensive income for
the year - - - 4,602 - 4,602
Balance at 1 January 2022 36,179 48 (50,240) 75,145 7,709 68,841
Share-based payments - - - - 115 115
Transactions with the owners - - - - 115 115
Loss for the year - - - (10,498) - (10,498)
Other comprehensive income
Exchange differences on
translation - - 5 - - 5
Total comprehensive income for
the year - - 5 (10,498) - (10,493)
Balance at 31 December 2022 36,179 48 (50,235) 64,647 7,824 58,463
Attributable to the owners of the Company
Consolidated Statement of Cash Flows
Year ended 31 December 2022
2022 2021
US$000
US$000
Cash flows from operating activities
Cash generated by operating activities (note 7) 11,366 11,078
Interest received 244 145
11,610 11,223
Cash flows from investing activities
Expenditure on exploration and evaluation assets - (1,652)
Expenditure on development and production assets (21,832) (19,431)
Proceeds from asset sales - 29
Insurance proceeds 1,289 -
Recovery of previously impaired costs 748 -
Proceeds from Paraguay farmout - 4,000
Acquisition & licence extension in Argentina - (284)
USA acquisition (450) -
Deposits with state authorities - (1)
(20,245) (17,339)
Cash flows from financing activities
Loan drawn 40,345 11,731
Proceeds from issue of shares (net of expenses) - 495
Repayment of obligations under leases (1,067) (1,332)
Repayment of borrowings (21,747) (3,130)
Payment of interest and loan fees (4,366) (1,338)
13,165 6,426
Net increase/(decrease) in cash and cash equivalents 4,530 310
Opening cash and cash equivalents at beginning of year 2,014 1,144
Exchange gains/(losses) on cash and cash equivalents 1,397 560
Closing cash and cash equivalents 7,941 2,014
Notes
1. Accounting policies and preparation
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ended 31 December 2022 or 2021
but is derived from the 2022 accounts.
A copy of the statutory accounts for the year to 31 December 2021 has been
delivered to the Registrar of Companies and is also available on the Company's
website. Statutory accounts for 2022 will be delivered in due course. The
auditors have reported on those accounts; their report was (i) unqualified,
(ii) did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies Act 2006 in
respect of the accounts for 2021 nor 2022.
Whilst the financial statements from which this preliminary announcement is
derived have been prepared in accordance with International Financial
Reporting Standards ("IFRS") and applicable law, this announcement does not
itself contain sufficient information to comply with IFRS. The Annual Report,
containing full financial statements that comply with IFRS, will be sent out
to shareholders by the end of June.
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future.
Therefore, in the preparation of the 2022 financial statements they continue
to adopt the going concern basis.
2022 2021
2 Cost of sales US$000 US$000
Depreciation 8,686 11,374
Release of abandonment provision (711) -
Royalties & production taxes 5,452 6,031
Well operating costs 16,917 16,026
30,344 33,431
Well operating costs include US$407,000 (2021: US$751,000) in non-recurring
workover costs expensed in the period.
2022 2021
3 Administrative expenses US$000 US$000
Directors and staff costs (including non-executive Directors) 2,519 2,530
Share-based payments 115 367
Depreciation 104 82
Other 1,805 2,785
4,543 5,764
Attributable to Atome business included above - (1,397)
4,543 4,367
To allow for meaningful comparison, staff costs, share based payments and
depreciation expenses are reflected gross before the effect of allocations to
operating costs or balance sheet assets. Other expenses are shown net of the
effect of allocations totalling US$1.3 million (2021: US$1.3 million).
Included with administrative expenses in 2021 are US$1.4 million directly
attributable to the Atome businesses which are no longer part of the Group
following the flotation at the end of December 2021.
4 Other non-operating (gains)/losses 2022 2021
US$000 US$000
Gain on dividend in specie of Atome shares - (13,130)
Recovery of impaired costs (748) -
Gain on insurance proceeds net of costs derecognized (115) -
Gain on termination of leases (52) (18)
Other (gains)/losses arising on asset disposals (355) (29)
Gain on Atome transition to an associate investment - (1,317)
(1,270) (14,494)
Gains on insurance proceeds recovered in December 2022 relate to an incident
at a facility in Argentina and are net of the cost of the asset impaired.
2022 2021
5 Impairment (credit) / charge US$000 US$000
Matorras & Ocultar in Argentina (intangible) - 51
Hernandarias concession in Paraguay (intangible) 8,583 -
USA operations (tangible) 1,433 -
10,016 51
6 Earnings / (Loss) per share 2022 2021
US$000 US$000
Net profit / (loss) for the period attributable to
the equity holders of the Parent Company (10,498) 4,579
Number Number
'000 '000
Weighted average number of shares in issue 10,290 10,159
US cents US cents
Earnings /(loss) per share
Basic earnings / (loss) per share from continuing operations (102.02) 45.07
Diluted earnings / (loss) per share from continuing operations (102.02) 44.17
Following the conversion and subdivision of shares in October 2022 the
weighted average number of shares for 2021 have been adjusted based on the
conversion 200 to 1 share ratio duly approved.
At 31 December 2022, 134,255 (2021: 207,544) share option and share warrant
awards were in issue that, if exercised, would dilute earnings per share in
the future. No dilution per share was calculated for 2022 as with the reported
loss they are anti-dilutive.
7 Notes to the consolidated statement cash flows 2022 2021
US$000 US$000
Profit / (loss) from operations before taxation (12,167) 5,704
Interest on bank deposits (244) (145)
Interest payable and loan fees 6,649 5,324
Depreciation of property, plant and equipment 8,790 11,456
Impairment (credit)/charge 10,016 51
Release of abandonment provision (711) -
(Gain) / loss on non-operating transaction (1,270) (14,494)
Loss on investment in associate undertaking 25 -
Share-based payments 115 367
Foreign exchange difference (4,663) (1,488)
Operating cash flows before movements in working capital 6,540 6,775
Decrease / (increase) in receivables (3,137) (2,430)
Movement in stock 1,691 -
Increase / (decrease) in payables 6,272 6,733
Net cash generated by operating activities 11,366 11,078
8 Segment reporting
Argentina Paraguay USA UK Total
2022 2022 2022 2022 2022
US$000 US$000 US$000 US$000 US$000
Revenue 31,463 - 1,686 84 33,233
Cost of sales
Depreciation 7,296 - 1,390 - 8,686
Release of abandonment provision (711) - - - (711)
Royalties & production taxes 4,968 - 484 - 5,452
Well operating costs 15,917 - 1,000 - 16,917
Administrative expenses 1,126 11 473 2,933 4,543
Segment costs 28,596 11 3,347 2,933 34,887
Segment operating profit/(loss) 2,867 (11) (1,661) (2,849) (1,654)
Argentina Paraguay USA UK Total
2021 2021 2021 2021 2021
US$000 US$000 US$000 US$000 US$000
Revenue 32,669 - 1,478 - 34,147
Cost of sales
Depreciation 11,158 - 216 - 11,374
Royalties & production taxes 5,612 - 419 - 6,031
Well operating costs 15,538 - 488 - 16,026
Administrative expenses 1,889 64 389 3,422 5,764
Segment costs 34,197 64 1,512 3,422 39,195
Segment operating profit/(loss) (1,528) (64) (34) (3,422) (5,048)
Segment assets Argentina Paraguay USA UK Total
2022 2022 2022 2022 2022
US$000 US$000 US$000 US$000 US$000
Intangible assets 129 45,592 - - 45,721
Goodwill 705 - - - 705
Investment in associate - - - - -
Property, plant and equipment 71,785 - 152 - 71,937
72,619 45,592 152 - 118,363
Other assets 9,533 1,657 584 84 11,858
82,152 47,249 736 84 130,221
Argentina Paraguay USA UK Total
2021 2021 2021 2021 2021
US$000 US$000 US$000 US$000 US$000
Intangible assets 129 54,175 - - 54,304
Goodwill 705 - - - 705
Investment in associate - - - 25 25
Property, plant and equipment 57,022 - 2,126 - 59,148
57,856 54,175 2,126 25 114,182
Other assets 10,257 1,350 582 1,487 13,676
68,113 55,525 2,708 1,512 127,858
Segment assets can be reconciled to the Group as follows:
2022 2021
US$000 US$000
Segment assets 130,221 127,858
Group cash 7,941 2,014
Group assets 138,162 129,872
Segment liabilities Argentina Paraguay USA UK Total
2022 2022 2022 2022 2022
US$000 US$000 US$000 US$000 US$000
Total liabilities 50,710 8,892 1,956 18,141 79,699
Argentina Paraguay USA UK Total
2021 2021 2021 2021 2021
US$000 US$000 US$000 US$000 US$000
Total liabilities 39,095 4,056 1,963 15,917 61,031
9 Atome Energy plc
Selected key financial extracts 2022 2021
US$000 US$000
Group Statement of Comprehensive Income
Administrative expense per Note 3 - (1,397)
Gain on Atome transition to an associate investment per Note 4 - 1,317
Gain on dividend in specie of Atome shares per Note 4 - 13,130
Loss on investment in associate undertaking (25) -
(25) 13,050
Group Statement of Financial position
Non-current Investment in associate at cost - 25
Current receivable due from Atome - 1,291
Company Profit & Loss Statement
Gain on dividend in specie of Atome shares per Note 4 - 13,096
Gain arising on mark to market of investment 1,414 10,150
1,414 23,246
Company Statement of Financial position
Investment in Atome Energy plc at market value 11,589 10,175
Alternative Performance Measures
The Group uses certain measures of performance that are not specifically
defined under IFRS or other generally accepted accounting principles. These
non-IFRS measures include net debt and well operating and underlying well
operating costs per boe and free cash flow. Where used in the context of
segmental disclosure the metrics are calculated in the same manner.
Net debt
Net debt is a useful indicator of the Group's indebtedness, financial
flexibility, and capital structure because it indicates the level of cash
borrowings after taking account of cash and cash equivalents within the
Group's business. Net debt is defined and calculated as follows:
2022 2021
Net debt US$000 US$000
Borrowings Current (18,391) (7,014)
Borrowings Non-current (29,134) (22,250)
Cash 7,941 2,014
Net (debt)/ net cash (39,584) (27,250)
Total operating cost and underlying well operating cost per boe
Total operating cost per boe is a useful straight forward indicator of the
Group's costs incurred to produce oil and gas including all relevant expenses.
However, since royalty, production taxes and similar expenses are not
controllable these have been disaggregated to allow well operating costs to be
measured.
2022 2021
Total operating cost per boe US$000 US$000
Royalties & production taxes (Note 2) 5,452 6,031
Well operating costs (Note 2) 16,917 16,026
Total operating costs 22,369 22,057
Production (mmboe) 623.6 902.7
Total operating costs per boe US$ 35.87 24.43
Where one-off or cyclical costs, such as workovers, are material these have
been disclosed and the underlying well cost per boe referred to show the core
performance. These have been defined and calculated as follows:
2022 2021
Underlying well operating cost per boe US$000 US$000
Well operating costs (Note 2) 16,917 16,026
Less workover costs (per text in Note 2) (407) (751)
16,510 15,275
Production (mmboe) 623.6 902.7
Underlying well operating costs per boe US$ 26.48 16.92
Core operating performance arose in Argentina and was calculated as follows:
2022 2021
US$000 US$000
Well operating costs (Note 2) 15,917 15,538
Less workover costs (252) (751)
15,665 14,787
Production (mmboe) 604.4 868.4
Underlying well operating costs per boe US$ 25.92 17.03
Administrative cost per barrel
Underlying administrative expense excluding non-recurring items is calculated
as follows:
2022 2021
Administrative cost per boe US$000 US$000
Administrative expense (note 3) 4,543 5,764
Attributable to Atome business included above (note 3) - (1,397)
4,543 4,367
Production (mmboe) 623.6 902.7
Administrative cost per boe 7.29 4.84
Adjusted EBITDA
The calculation is detailed on the Income Statement with further details on
the non-recurring items include below. The Adjusted EBITDA for Argentina is
calculated as follows:
2022 2021
Adjusted EBITDA Argentina US$000 US$000
Operating profit / (loss) 2,867 (1,528)
Release of abandonment provision (711) -
Depreciation, depletion & amortisation 7,400 11,278
EBITDA excluding share options 9,556 9,750
Non-recurring items 252 751
Adjusted EBITDA 9,808 10,501
Non-recurring items
Where referred to in the calculation of Adjusted EBITDA and in alternative
performance measures these comprise the following:
2022 2021
Non-recurring US$000 US$000
Workover costs (per text in Note 2) 407 751
407 751
Free cash generation from core operations
A measure of cash generation from operations excluding changes in working
capital, administrative expense and non-recurring workovers. Used by
management as an indication of cash generation at asset level.
2022 2021
US$000 US$000
Sales 33,233 34,147
Royalties & production taxes (Note 2) (5,452) (6,031)
Well operating costs (Note 2) (16,917) (16,026)
Add back non-recurring workovers 407 751
11,271 12,841
Included within the foreign exchange gains of US$4.7 million (2021: US$1.5
million) as detailed in Note 9 are gains of US$ 1.4 million which arise on the
treasury management of cash resources ("treasury income") takes the cash
generation in the period to US$12.7 million (2021: US$14.3 million).
Reconciliation to cash flow from operations
The reported cash flow generated from operating activities can be reconciled
to free cashflows from core operations as follows:
2022 2021
US$000 US$000
Net cash generated by operating activities 11,366 11,078
Working capital movement (4,826) (4,303)
Add back administrative expense per Note 3 4,543 5,764
Add back non cash depreciation in admin expense (Note 3) (104) (82)
Add back non cash share based payments in admin expense (Note 3) (115) (367)
Add back non-recurring workovers 407 751
11,271 12,841
Depreciation per boe
Depreciation per barrel of oil equivalent can change between accounting
periods due to costs incurred, changes in reserves or changes in future costs
and hence is a useful metric for reporting purposes.
Where calculated on at a group or segment level the calculation is as follows:
· Reported depreciation charge as reported in Cost of Sales per
Note 2 in accordance with IFRS GAAP reporting.
· Divided by the barrel of oil equivalent of production reported in
the Chairman's Statement in accordance with industry standards and state
reports.
Glossary
Boe barrels of oil equivalent
Bopd barrels of oil per day
Boepd barrels of oil equivalent per day
M³/day cubic metres of oil per day
MMscf/d million standard cubic feet of gas production per day
1P proven hydrocarbon reserves
2P proven and probable hydrocarbon reserves
Contingent Resources quantities of hydrocarbons estimated to be potentially recoverable from known
accumulations
Prospective Resources quantities of hydrocarbons estimated to be potentially recoverable from
undiscovered accumulations
NPV10 net present value over the life of the concessions/licences discounted by 10%
-ends-
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