REG - Petrel Resources PLC - Interim Statement
27/09/2022 07:01
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RNS Number : 6896A Petrel Resources PLC 27 September 2022
27 September 2022
Petrel Resources plc
("Petrel" or "the Company")
Unaudited Interim Statement for the six months ended 30 June 2022
Petrel Resources plc (AIM: PET) today announces unaudited financial results
for the six months ended 30(th) June 2022.
Petrel is a hydrocarbon explorer with interests in Iraq, and Ghana.
Highlights
• Petrel's Iraqi business is being re-built although as explained below
our Iraqi Director, Riadh Ani has had to resign - but requires formation of a
Government for the Company to progress new funding.
• An updated Merjan oil field development proposal has been submitted to the
Ministry.
• Iraqi oil output recovered to 4.65 million barrels daily in August 2022.
• Ratification discussions on Tano 2A block underway with Ghanaian
authorities - though acreage adjustments likely.
• Board considers there are new expansion opportunities presented by oil
price and demand recovery.
Prior to the recent elections, the Iraqi authorities had suggested that Petrel
initially target "exploration of blocks in the western desert of Iraq, and
present past studies done on the Merjan-Kifl-West Kifl discoveries, and
Petrel's work on the Mesozoic and Paleozoic plays in the Western Desert".
Our updated development proposal requires an operating Iraqi Government in
order to proceed.
Following the C-19 pandemic, Petrel Resources plc restored contacts with the
Ghanaian authorities to update the acreage to be explored, and resuscitate the
ratification of our signed Petroleum Agreement on Tano 2A Block. Slowness in
ratification of signed contracts had constrained the development of Ghana's
oil and gas industry. The current Ghanaian government has indicated its
determination to recover momentum. Ghanaian fiscal terms are competitive,
while West African infrastructure steadily improves.
Financial markets and farm-out interest in petroleum had been depressed since
the oil price war starting in 2014, and continuing periodically until 2022.
This had constrained our options for early seismic or wells in Ghana. But
recent oil & price surges show that major new investment is required to
service global demand. Petrel Resources hopes to participate in the coming
boom.
Despite challenges, Iraq offers the best petroleum commercial opportunity.
Iraqi geology is unsurpassed. Oil demand reaches new records - despite high
prices constraining demand - especially in gas. But barriers to rapid
expansion are above-the-ground issues of logistics and contractual weaknesses,
rather than lack of geological potential. The solution is to align
interests, so that capital, technology contracts must be updated for effective
exploration and development.
Many Iraqi decision-makers have reached similar conclusions: they want to
increase output to rival Saudi capacity of circa 13mmbod. Unfortunately, the
success of patriotic candidates in the 2021 elections has not yet led to an
effective Government - without which there cannot be democratically-supported
policy reforms.
But Iraqi oil output has recovered to pre C-19 pandemic levels. The Baghdad
authorities are restoring control over the regions, vindicating Petrel's
longstanding stance of respecting the sovereignty of the elected Government.
Recovering oil & gas demand and prices have opened room to update fiscal
terms and development plans. Some western majors, ignorant of prevailing
circumstances, had bid over-optimistically on service contracts from 2009, and
then found it hard to operate effectively. Many of these have departed
during the recent oil price war and pandemic.
TotalEnergies has withdrawn from Kurdistan, but continues elsewhere in Iraq.
Chinese NOCs continue to expand. Iraq is not for the faint of heart, but
there is considerable upside to be realised provided the elected government
implements necessary reforms.
For several years after the 2003 Iraqi invasion, there was a perception that
contractors close to western governments, and later super-majors, would
dominate Iraqi oil exploration and development. Iraqis had other ideas,
however: they want partners, rather than bosses.
Iraq is sovereign, but so is finance. The investment dollar is an orphan.
It seeks out return, and works to minimise risk - though resolute investors
will carry risk if fairly compensated.
Any investment can be considered to be worth the discounted Present Value of
all cash flows (in and out). Calculations are sensitive to timing and the
discount rate. Foreigners always see higher risks than locals do.
The more uncertainty (political, tax, operational) the higher the discount
rate, & the lower the Present Value.
For capitalism to work, it must reward all the key players, whose interests
should be aligned - rather than in conflict.
The biggest challenge facing Petrel in this new era is not operating
conditions, access to technology or community relations. The biggest
challenge facing agile industry players is outdated contracts and fiscal
terms. The strong resurgence in demand and price will smoothen necessary
reforms.
Our Iraqi Director, Riadh Ani has helped maintain strong relationships with
Ministry of Oil officials, even during the darkest hours of sanctions,
invasion, conflict, and Covid-19. He has now regretfully decided to resign
with immediate effect as a Non-Executive Director in order to enter public
service. Our loss will be society's gain, and we wish him the very best
success in this next challenge. Riadh's insights and introductions will help
Petrel in Iraq for years to come.
Petrel Resources plc Interests (as of May 2022):
Ghana
Tano 2A Petroleum Agreement: 30% Petrel Working Interest. Awaiting
ratification, then exploration periods of 3 years initial term + 2 extension
periods of 3.5 years.
Iraq
Western Desert Block 6: 100% Petrel Interest. Awaiting ratification since
2002. 30 year term, or until early pay-out.
Prior Technical Cooperation Agreement (TCA studies, with 50% Itochu interest)
on the Merjan oil-field.
What should Iraq's oil policy be now?
Unfortunately, the combination of suspicion of foreign oil companies,
sanctions, and wars (including internal sectarian conflict and resistance
since 2003) have held back Iraq's development, including the building of
necessary oil and other infrastructure. Iraq's government earnings and
economy remains dependent on oil.
Have Service Contracts achieved their objectives for companies and Iraq? No:
even at its pre-C-19 peak of c.4.7 million barrels of oil daily (mmbod)
output, Iraq fell short of its 6 to 9 mmbod 1989 plan, and the high hopes of
rivalling Saudi Arabia. There is insufficient incentive for contractors to
boost production, and recoveries - while the Ministry of Oil has been hollowed
out by sanctions and wars, and now unable to fill the gap.
Should the Federal Ministry of Oil negotiate Production Sharing Agreements?
Yes: this would better align the interests of the parties, and create more
wealth, value-added in downstream industries like refined products and
petrochemicals, infrastructure and employment for Iraq.
The success of Qatar in LNG - or even the Emirates and Oman show what can be
done with more pragmatism.
Future
Petrel is confident that necessary funding will be available for medium term
ongoing activities.
David Horgan
Chairman
26 September 2022
For further information please visit http://www.petrelresources.com/
(http://www.petrelresources.com/) or contact:
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/
(http://www.petrelresources.com/) or contact:
Petrel Resources
David Horgan, Chairman +353 (0) 1 833 2833
John Teeling, Director
Nominated Adviser and Broker
Beaumont Cornish - Nominated Adviser +44 (0) 020 7628 3396
Roland Cornish
Felicity Geidt
Novum Securities Limited - Broker
Colin Rowbury
+44 (0) 20 399 9400
BlytheRay - PR +44 (0) 207 138 3206
Megan Ray
Madeleine Gordon-Foxwell +44 (0) 207 138 3553
+44 (0) 207 138 3208
Teneo
Luke Hogg +353 (0) 1 661 4055
Alan Tyrrell +353 (0) 1 661 4055
Petrel Resources plc
Financial Information (Unaudited)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six Months Ended Year Ended
30 June 22 30 June 21 31 Dec 21
unaudited unaudited audited
€'000 €'000 €'000
Administrative expenses (140) (162) (322)
- - -
OPERATING LOSS (140) (162) (322)
LOSS BEFORE TAXATION (140) (162) (322)
Income tax expense - - -
LOSS FOR THE PERIOD (140) (162) (322)
Other comprehensive income] - - -
TOTAL COMPREHENSIVE PROFIT FOR THE PERIOD (140) (162) (322)
LOSS PER SHARE - basic and diluted (0.09c) (0.10c) (0.21c)
CONDENSED STATEMENT OF FINANCIAL POSITION 30 June 22 30 June 21 31 Dec 21
unaudited unaudited audited
€'000 €'000 €'000
ASSETS:
NON-CURRENT ASSETS
Intangible assets 933 932 933
933 932 933
CURRENT ASSETS
Trade and other receivables 12 18 25
Cash and cash equivalents 30 255 102
42 273 127
TOTAL ASSETS 975 1,205 1,060
CURRENT LIABILITIES
Trade and other payables (847) (777) (792)
(847) (777) (792)
NET CURRENT LIABILITIES (805) (504) (665)
NET ASSETS 128 428 268
EQUITY
Share capital 1,963 1,963 1,963
Capital conversion reserve fund 8 8 8
Capital redemption reserve 209 209 209
Share premium 21,786 21,786 21,786
Share based payment reserve 27 27 27
Retained deficit (23,865) (23,565) (23,725)
TOTAL EQUITY 128 428 268
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital Capital Share based
Share Share Redemption Conversion Payment Retained Total
Capital Premium Reserves Reserves Reserves Losses Equity
€'000 €'000 €'000 €'000 €'000 €'000 €'000
As at 1 January 2021 1,963 21,786 209 8 27 (23,403) 590
Total comprehensive income - (162) (162)
As at 30 June 2021 1,963 21,786 209 8 27 (23,565) 428
Total comprehensive income - (160) (160)
As at 31 December 2021 1,963 21,786 209 8 27 (23,725) 268
Total comprehensive income - (140) (140)
As at 30 June 2022 1,963 21,786 209 8 27 (23,865) 128
CONDENSED CONSOLIDATED CASH FLOW Six Months Ended Year Ended
30 June 22 30 June 21 31 Dec 21
unaudited unaudited audited
€'000 €'000 €'000
CASH FLOW FROM OPERATING ACTIVITIES
Loss for the period (140) (162) (322)
Foreign exchange 2 (8) (10)
(138) (170) (332)
Movements in Working Capital 68 83 91
CASH USED IN OPERATIONS (70) (87) (241)
NET CASH USED IN OPERATING ACTIVITIES (70) (87) (241)
INVESTING ACTIVITIES
Payments for exploration and evaluation assets 0 0 (1)
NET CASH USED IN INVESTING ACTIVITIES 0 0 (1)
NET DECREASE IN CASH AND CASH EQUIVALENTS (70) (87) (242)
Cash and cash equivalents at beginning of the period 102 334 334
Exchange gains/(losses) changes on cash and cash equivalent (2) 8 10
CASH AND CASH EQUIVALENT AT THE END OF THE PERIOD 30 255 102
Notes:
1. INFORMATION
The financial information for the six months ended 30 June 2022 and the
comparative amounts for the six months ended 30 June 2021 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 2021.
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 2021, which are available on the Company's
website www.petrelresources.com (http://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. GOING CONCERN
The Group incurred a loss for the period of €140,055 (2021: loss of
€322,077) and had net current liabilities of €804,979 (2021: €664,924)
at the statement of financial position date. These conditions as well as those
noted below, represent a material uncertainty that may cast significant doubt
on the Group and Company's ability to continue as a going concern.
Included in current liabilities is an amount of €812,531 (2021: €767,531)
owed to key management personnel in respect of remuneration due at the
statement of financial position date. Key management have confirmed that they
will not seek settlement of these amounts in cash for a period of at least one
year after the date of approval of the financial statements or until the Group
has generated sufficient funds from its operations after paying its third
party creditors.
The Group and Company had a cash balance of €29,806 (2021: €101,843) at
the statement of financial position date. The directors have prepared cashflow
projections for a period of at least twelve months from the date of approval
of these financial statements which indicate that additional finance may be
required to fund working capital requirements and develop existing projects.
As the Group is not revenue or cash generating it relies on raising capital
from the public market.
These conditions as well as those noted below, represent a material
uncertainty that may cast significant doubt on the Group and Company's ability
to continue as a going concern.
As in previous years the Directors have given careful consideration to the
appropriateness of the going concern basis in the preparation of the financial
statements and believe the going concern basis is appropriate for these
financial statements. The financial statements do not include the adjustments
that would result if the Group and Company were unable to continue as a going
concern.
4. LOSS PER SHARE
Basic loss per share is computed by dividing the loss after taxation for the
year attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue and ranking for dividend during the year. Diluted
earnings per share is computed by dividing the loss after taxation for the
year by the weighted average number of ordinary shares in issue, adjusted for
the effect of all dilutive potential ordinary shares that were outstanding
during the year.
The following table sets out the computation for basic and diluted earnings
per share (EPS):
30 June 22 30 June 21 31 Dec 21
€ € €
Loss per share - Basic and Diluted (0.09c) (0.10c) (0.21c)
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 (140) (162) (322)
Denominator Number Number Number
for basic and diluted EPS 157,038,467 157,038,467 157,038,467
Basic and diluted loss per share are the same as the effect of the outstanding
share options is anti-dilutive.
5. INTANGIBLE ASSETS
30 June 22 30 June 21 31 Dec 21
Exploration and evaluation assets: €'000 €'000 €'000
Opening balance 933 932 932
Additions - - 1
Impairment - - -
________ ________ ________
Closing balance 933 932 933
Exploration and evaluation assets relate to expenditure incurred in
exploration in 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.
During 2018 the Group resolved the outstanding
issues with the Ghana National Petroleum Company (GNPC) regarding a contract
for the development of the Tano 2A Block. The Group has signed a Petroleum
Agreement in relation to the block and this agreement awaits ratification by
the Ghanaian
government.
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;
· Exchange rate risks;
· Uncertainty over development and operational costs;
· Political and legal risks, including arrangements with Governments for
licences, profit sharing and taxation;
· Foreign investment risks including increases in taxes, royalties and
renegotiation of contracts;
· Financial risk management;
· Going concern and
· Ability to raise finance.
Regional 30 Jun 22 30 Jun 21 31 Dec 21
Analysis
€'000 €'000 €'000
Ghana 933 932 933
6. SHARE CAPITAL
2022 2021
€'000 €'000
Authorised:
800,000,000 ordinary shares of €0.0125 10,000 10,000
Issued and fully paid
2022 2021
Number Share Capital Share Premium Number Share Capital Share Premium
€'000 €'000 €'000 €'000
At 1 January 157,038,467 1,963 21,786 157,038,467 1,963 21,786
Share issue - - - - - -
At end of period 157,038,467 1,963 21,786 157,038,467 1,963 21,786
Movements in issued share capital
There was no movement in the issued share capital of the company in the
current or prior year.
7. POST BALANCE SHEET EVENTS
There are no material post balance sheets events affecting the Group.
8. The Interim Report for the six months to 30(th) June 2022 was
approved by the Directors on 26 September 2022.
9. The Interim Report will be available on the Company's website at
www.petrelresources.com (http://www.petrelresources.com) .
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