REG - Petrel Resources PLC - Interim Statement
21st September 2020
Petrel Resources plc
("Petrel" or "the Company")
Interim Statement for the six months ended 30 June 2020
Petrel Resources plc (AIM: PET) today announces financial results for the six months ended 30th June 2020.
Petrel is a hydrocarbon explorer with interests in Iraq, Ghana and offshore Ireland. The world oil and gas industry has taken a public relations hammering in recent times yet world demand continues, and will continue, to grow. Society is very dependent on oil, gas and petrochemicals.
As an example, the world in 2020 relies on sterile plastic packaging for syringes, PPE, etc.
Our daily lives are improved by a multitude of hydrocarbon based products. Renewables are growing and will continue to grow, but for the coming decades, oil and gas will be the dominant source of energy. This will require new discoveries, Petrel will play a part in this.
Petrel has three areas of interest. Iraq, where we have had a presence since 1999, Ghana, where discussions are ongoing since 2008 and offshore Ireland, where Petrel operated in the 1980s and re-entered six years ago.
Iraq
Petrel is active once more in Iraq after a hiatus since 2010 due to political and financial instability. We negotiated a large exploration block, Block 6, in the Western Desert in 2005. Nothing has happened there in the recent past. In discussions in early 2020, before the Covid-19 pandemic, with Ministry officials we renewed our Block 6 interest and re-presented the technical slides done by the Company on the Merjan-Kefl-West Kifl oil discoveries which remain undeveloped. We did extensive work under a Technical Co-operation Agreement on possible ways to develop these discoveries.
With appropriate terms and pipeline access, the Merjan oil-field seems poised for early development: it was discovered, as an oil reservoir, by Mobil in 1982, but work did not proceed, mainly for political reasons. Petrel's work on Merjan did not suggest that the area was gas-prone. The discovery well - Me-1- was located using 2D seismic on a Jurassic reef. No reef or oil was found in the Jurassic, but the well discovered oil in the Upper Cretaceous Hartha Formation. Recent analysis of 3D data focusses on the Jurassic seismic feature, and does not discuss the nature of any hydrocarbons in the well or the area. The Hartha reservoir in the well tested oil and water, without a significant flow of gas.
Given the scope to reduce emissions through gas development, we should also bear Iraq's gas potential in mind: a staggering 16 billion cm (0.6 tcf) of gas are flared yearly (including valuable liquids), which is about half Iraq's gas output. We proposed gas and condensate recovery on Subba & Luhais, at various times, from 2004 through 2010, but the necessary legal framework was not then in place. With appropriate terms and infrastructure, gas economics are also attractive.
As lowest cost oil producer Iraq is well poised to benefit from the development of the oil market. Their output can easily double in size.
Tano 2A Offshore Block - Ghana
Petrel holds a 30% interest in the Tano 2A block (Clontarf 60% and local interests 10%) Negotiations began in 2008, were finalised in 2010 and ratification was expected shortly thereafter. The saga has dragged on for close to a decade. In the past year high level contacts were reopened. A series of meetings proposed for March 2020 were cancelled indefinitely due to the pandemic.
Despite low oil prices, offshore Ghana remains attractive with good geology and acceptable financial terms. In recent weeks the country is re-opening from lockdown so the cancelled meetings are expected to occur by year end.
Offshore Ireland
This is sad scene. State policy has effectively stymied offshore exploration. All new licences are banned and while existing licences may proceed it is highly probable that any discovery will not be commercialised, it will likely take years to get an exploration permit, if ever, and maybe decades to get planning permission in the face of a small vociferous objecting minority
Petrel holds a 10% working interest in Licence FEL 11/18 in the Porcupine. Excellent work has been done by the operator Woodside Petroleum but it is difficult to see how Woodside will commit the tens of millions to drill.
Tamraz Group
The acquisition of a 29% stake by the Tamraz group in July 2019 was widely welcomed by shareholders followed by approval to go to 51%.
The new investors were unable to complete the purchase of the additional shares while the ownership of most of the 29% became uncertain. High Court proceedings stopped any dealings in shares held by the Tamraz Group. This position persists though there is ongoing contact.
Future
Petrel is well funded for ongoing activities. The focus is once again Iraq.
John Teeling
Chairman
18th September 2020
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement. In addition, market soundings (as defined in MAR) were taken in respect of the matters contained in this announcement, with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the company and its securities.
ENDS
For further information please visit http://www.petrelresources.com/ or contact:
Petrel Resources
John Teeling, Chairman
+353 (0) 1 833 2833
David Horgan, Director
Nominated Adviser and Broker
Beaumont Cornish - Nominated Adviser
Roland Cornish
Felicity Geidt
+44 (0) 020 7628 3396Novum Securities Limited - Broker
Colin Rowbury
+44 (0) 20 399 9400
Blytheweigh - PR
Megan Ray
Madeleine Gordon-Foxwell+44 (0) 207 138 3206
+44 (0) 207 138 3553
+44 (0) 207 138 3208
Teneo
Luke Hogg
Alan Tyrrell
Ross Murphy
+353 (0) 1 661 4055
+353 (0) 1 661 4055
+353 (0) 1 661 4055
Petrel Resources plc
Financial Information (Unaudited)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six Months Ended
Year Ended
30 June 20
30 June 19
31 Dec 19
unaudited
unaudited
audited
€'000
€'000
€'000
Administrative expenses
(243)
(115)
(345)
Impairment of deferred development costs
-
-
(1,614)
OPERATING LOSS
(243)
(115)
(1,959)
LOSS BEFORE TAXATION
(243)
(115)
(1,959)
Income tax expense
-
-
-
LOSS FOR THE PERIOD
(243)
(115)
(1,959)
Items that are or may be reclassified subsequently to profit or loss
Exchange differences
(9)
24
(119)
TOTAL COMPREHENSIVE PROFIT FOR THE PERIOD
(252)
(91)
(2,078)
LOSS PER SHARE - basic and diluted
(0.16c)
(0.11c)
(1.50c)
CONDENSED CONSOLIDATED BALANCE SHEET
30 June 20
30 June 19
31 Dec 19
unaudited
unaudited
audited
€'000
€'000
€'000
ASSETS:
NON-CURRENT ASSETS
Intangible assets
985
2,593
984
985
2,593
984
CURRENT ASSETS
Trade and other receivables
49
59
38
Cash and cash equivalents
409
178
368
458
237
406
TOTAL ASSETS
1,443
2,830
1,390
CURRENT LIABILITIES
Trade and other payables
(654)
(643)
(630)
(654)
(643)
(630)
NET CURRENT LIABILITIES
(196)
(406)
(224)
NET ASSETS
789
2,187
760
EQUITY
Share capital
1,963
1,307
1,867
Capital conversion reserve fund
8
8
8
Capital redemption reserve
209
209
209
Share premium
21,786
21,601
21,601
Share based payment reserve
27
27
27
Translation reserve
367
519
376
Retained deficit
(23,571)
(21,484)
(23,328)
TOTAL EQUITY
789
2,187
760
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital
Capital
Share based
Share
Share
Redemption
Conversion
Payment
Translation
Retained
Total
Capital
Premium
Reserves
Reserves
Reserves
Reserves
Losses
Equity
€'000
€'000
€'000
€'000
€'000
€'000
€'000
€'000
As at 1 January 2019
1,307
21,601
209
8
27
495
(21,369)
2,278
Total comprehensive income
-
24
(115)
(91)
As at 30 June 2019
1,307
21,601
209
8
27
519
(21,484)
2,187
Shares issued
1,360
0
1,360
Shares cancelled
(800)
0
(800)
Total comprehensive income
-
(143)
(1,844)
(1,987)
As at 31 December 2019
1,867
21,601
209
8
27
376
(23,328)
760
Shares issued
96
185
281
Total comprehensive income
-
(9)
(243)
(252)
As at 30 June 2020
1,963
21,786
209
8
27
367
(23,571)
789
CONDENSED CONSOLIDATED CASH FLOW
Six Months Ended
Year Ended
30 June 20
30 June 19
31 Dec 19
unaudited
unaudited
audited
€'000
€'000
€'000
CASH FLOW FROM OPERATING ACTIVITIES
Loss for the period
(243)
(115)
(1,959)
Impairment charge
0
0
1,614
(243)
(115)
(345)
Movements in Working Capital
13
9
(28)
CASH USED IN OPERATIONS
(230)
(106)
(373)
NET CASH USED IN OPERATING ACTIVITIES
(230)
(106)
(373)
INVESTING ACTIVITIES
Payments for exploration and evaluation assets
(2)
(47)
(151)
NET CASH USED IN INVESTING ACTIVITIES
(2)
(47)
(151)
FINANCING ACTIVITIES
Shares issued
281
0
560
NET CASH GENERATED FROM FINANCING ACTIVITIES
281
0
560
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
49
(153)
36
Cash and cash equivalents at beginning of the period
368
330
330
Effect of exchange rate changes on cash held in foreign currencies
(8)
1
2
CASH AND CASH EQUIVALENT AT THE END OF THE PERIOD
409
178
368
Notes:
1. INFORMATION
The financial information for the six months ended 30 June 2020 and the comparative amounts for the six months ended 30 June 2019 are unaudited.
The interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. The interim financial statements have been prepared applying the accounting policies and methods of computation used in the preparation of the published consolidated financial statements for the year ended 31 December 2019.
The interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the audited consolidated financial statements of the Group for the year ended 31 December 2019, which are available on the Company's website www.petrelresources.com
The interim financial statements have not been audited or reviewed by the auditors of the Group pursuant to the Auditing Practices board guidance on Review of Interim Financial Information.
2. No dividend is proposed in respect of the period.
3. LOSS PER SHARE
30 June 20
30 June 19
31 Dec 19
€
€
€
Loss per share - Basic and Diluted
(0.16c)
(0.11c)
(1.50c)
Basic and diluted loss per share
The earnings and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:
€'000
€'000
€'000
Loss for the period attributable to equity holders
(243)
(115)
(1,959)
Weighted average number of ordinary shares for the purpose of basic earnings per share
150,821,396
104,557,246
130,647,568
Basic and diluted loss per share are the same as the effect of the outstanding share options is anti-dilutive.
4. INTANGIBLE ASSETS
30 June 20
30 June 19
31 Dec 19
Exploration and evaluation assets:
€'000
€'000
€'000
Opening balance
984
2,523
2,523
Additions
2
47
196
Impairment
-
-
(1,614)
Exchange translation adjustment
(1)
23
(121)
________
________
________
Closing balance
985
2,593
984
Exploration and evaluation assets relate to expenditure incurred in exploration in Ireland and Ghana. The directors are aware that by its nature there is an inherent uncertainty in Exploration and evaluation assets and therefore inherent uncertainty in relation to the carrying value of capitalized exploration and evaluation assets.
Due to legislative uncertainty since 2017, exacerbated by the Taoiseach's public statements in September 2019 against the issue of new Atlantic oil exploration licences, Petrel has discontinued farm-out discussions with a gas super-major. Also, the board reluctantly dropped our 100% owned and operated Frontier Exploration Licence (FEL) 3/14, despite multiple identified targets. Similarly, the board decided not to apply to convert our prospective Licensing Option (LO) 16/24 into a Frontier Exploration Licence. Accordingly, the directors have impaired in full all expenditure relating to the above mentioned licences, resulting in an impairment charge of €1,613,591 in the prior year.
Petrel continues as a 10% working interest partner with Woodside in Frontier Exploration Licence (FEL) 11/18, in the Irish Atlantic's Porcupine Basin.
Relating to the remaining exploration and evaluation assets at the financial year end, the directors believe there were no facts or circumstances indicating that the carrying value of the intangible assets may exceed their recoverable amount and thus no impairment review was deemed necessary by the directors. The realisation of these intangible assets is dependent on the successful discovery and development of economic reserves and is subject to a number of significant potential risks, as set out below:
· Licence obligations;
· Funding requirements;
· Political and legal risks, including title to licence, profit sharing and taxation;
· Exchange rate risk;
· Financial risk management;
· Geological and development risks;
Directors' remuneration of €Nil (2019: €30,000) and salaries of €Nil (2019: €15,000) were capitalised as exploration and evaluation expenditure during the financial year.
Regional Analysis
30 Jun 20
€'000
30 Jun 19
€'000
31 Dec 19
€'000
Ghana
932
918
931
Ireland
53
1,675
53
_______
_______
_______
985
2,593
984
5. SHARE CAPITAL
2019
2019
€'000
€'000
Authorised:
800,000,000 ordinary shares of €0.0125
10,000
10,000
Allotted, called-up and fully paid:
Number
Share Capital
Premium
€'000
€'000
At 1 January 2019
104,557,246
1,307
21,601
Issued during the period
-
-
At 30 June 2019
104,557,246
1,307
21,601
Issued during the period
108,824,869
1,360
-
Cancellation of shares subsequent to year end
(64,035,976)
(800,450)
-
At 31 December 2019
149,346,159
1,867
21,601
Issued during the period
7,692,308
96
185
At 30 June 2020
157,038,467
1,963
21,786
Movements in issued share capital
On 30 July 2019 a total of 44,788,913 shares ("tranche 1 shares") were placed at a price of 1.25 cents per share. Proceeds were used to provide additional working capital and fund development costs.
*On 21 November 2019 the company held an Extraordinary General Meeting and received shareholder approval for the following transaction:
"64,035,976 Ordinary Shares of 1.25 cent each were to be issued to the Tamraz group at the placing price of 1.25 cent each."
These shares (known as the "tranche 2 shares") were issued and allotted to the Tamraz group on 21 November. The share certificates were retained by the Company until payment was received from the Tamraz group.
It became known to Petrel that prior to 31 December 2019 the Tamraz group had offered the tranche 1 shares in Petrel as collateral to lenders. This was in breach of lock in terms which were attached to those shares. In addition during December part of the tranche 1 shares were transferred to a third party, further breaching the terms of the lock in agreement in relation to those shares.
The Tamraz group also failed to pay proceeds due in relation to the tranche 2 shares within the timeline required by Petrel. As a result of these factors the tranche 2 shares were considered forfeited and were cancelled by the Group subsequent to year end.
Although the shares were not legally cancelled until after year end, they are considered to be forfeited as of year-end given the circumstances noted above and in particular, the fact that Tamraz were considered to be in default of funding arrangements and lock in terms.
Had these circumstances been known to the Group on 21 November 2019 the shares would not have been allotted or issued. The Group did not suffer any economic loss due to the transaction as they were able to cancel the tranche 2 shares. As a result the shares are considered to be economically forfeited at year end and have been deducted from share capital on the balance sheet.
On 18 May 2020 the Company announced that the tranche 2 shares have now been cancelled.
On 26 May 2020 a total of 7,692,308 shares were placed at a price of 3.25 pence per share. Proceeds were used to provide additional working capital and fund development costs.
6. POST BALANCE SHEET EVENTS
There are no material post balance sheets events affecting the Group.
7. The Interim Report for the six months to 30th June 2020 was approved by the Directors on 18th September 2020.
8. The Interim Report will be available on the Company's website at www.petrelresources.com.
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