REG - Petrel Resources PLC - Preliminary Results for the Year Ended 31 Dec 17
22nd June 2018
Petrel Resources plc
("Petrel" or "the Company")
Preliminary Results for the Year Ended 31st December 2017
Petrel announces its results for the year ended 31st December 2017.
A copy of the Company's Annual Report and Accounts for 2017 will be mailed shortly only to those shareholders who have elected to receive it. Otherwise shareholders will be notified that the Annual Report will be available on the website at www.petrelresources.com. Copies of the Annual Report will also be available for collection from the Company's registered office, 162 Clontarf Road, Dublin 3, Ireland.
The Company's Annual General Meeting will be held on 25th July 2018 in the Gresham Hotel, 23 O'Connell Street Upper, Dublin 1, D01 C3W7 at 10:30 am.
This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.
ENDS
For further information please visit http://www.petrelresources.com/ or contact:
Enquiries:
Petrel Resources
John Teeling, Chairman
+353 (0) 1 833 2833
David Horgan, Director
Nominated Adviser and Broker
Northland Capital Partners Limited
David Hignell / Edward Hutton (Corporate Finance)
+44 (0) 203 861 6625
John Howes
Joint Broker
Novum Securities Limited
Colin Rowbury
+44 (0) 207 399 9400
Public Relations
Blytheweigh
+44 (0) 207 138 3204
Tim Blythe
+44 (0) 781 692 4626
Simon Woods
+44 (0) 746 643 9633
Teneo PSG
Luke Hogg
+353 (0) 1 661 4055
Alan Tyrrell
+353 (0) 1 661 4055
Statement Accompanying the Preliminary Results
The headline figures of a loss for the year of some €4.4 million is likely to be newsworthy, but mostly reflects the €4.1 million impairment of our investment in Iraq. The underlying loss is roughly €300,000.
Iraq
In August 2013, Petrel did a deal with Amira in Iraq whereby, for US$500,000 in cash plus 18,947,368 initial consideration shares (which were to be locked-in until spudding of the first oil well by our partners), Petrel acquired a 5% full free carry in Amira's activities in the Wasit province in Iraq which was then, and still is, a relatively stable Shia dominated province. The expectation was that provinces in Iraq would offer licences in their own right rather than solely through the central government in Baghdad. This did not happen. In fact, nothing happened. As mentioned above, we have therefore impaired our investment.
Proposed buy back and cancellation of shares
We have also reached agreement to buy back the initial consideration shares for a nominal consideration although, as we reported on 15 December 2017, 2.2 million of the shares had been sold in breach of the lock-in agreement. Permission is being sought at the forthcoming AGM to buy back and cancel the remaining 16,747,368 shares. Cancellation of these shares would reduce the number of shares in issue by approximately 17%.
Iraq remains one of the very best oil provinces in the world. The oil exploration potential is outstanding. The improving political situation in Iraq has resulted in Petrel re-awakening an interest. We have been there since 1999 and like the country. We are discussing with Amira, our partner, how best to declare an interest in certain fields. We are also re-establishing contacts in the administration. It is very early days, but it does look as if Iraq is slowly re-opening for business, and we want to be there.
Offshore Ireland
Our main focus in recent times has been the Atlantic Offshore Ireland, particularly the Porcupine Basin. Results are mixed. We did very well in recent licencing rounds, winning two licences seven years ago and another two in 2016. In 2013, we joint ventured our two 2011 licences with Woodside Energy of Australia, recovering our cash investment and getting a carry. They did extensive work including, in 2016, a multi-million euro 3D seismic campaign. Their ongoing work led them to relinquish FEL 4/14 in 2016. The review of the latest seismic has led them to surrender their FEL 3/14 interest as of end August 2018. FEL 3/14 could revert 100% to Petrel if an extension can be negotiated with the authorities. We believe that the ground has potential not recognised by Woodside, and that we can bring in a partner.
In the meantime, as we reported on 27 February 2018, Woodside have offered and Petrel have accepted a 10% participating interest in licence FEL 11/18, thus satisfactorily resolving the prior issues under arbitration in relation to FEL 4/14. Work on FEL 11/18 has identified targets, which are being tested by the state-of-the-art 3D seismic which has recently been acquired.
The two licence options acquired in 2016 (LO 16/24 and LO 16/25) have been analysed and worked up, and potential opportunities identified. Despite extensive work by Petrel, we found no interest from likely partners in joint venturing the two options.
On a wider industry front, oil prices have recovered and majors are making money. It was expected that the results of the 2017 drilling in the Porcupine would have ignited interest but there is little sign of it to date.
Unfortunately there is growing political uncertainty in Ireland in relation to resources. Oil exploration dollars are nomadic. They will go where they are welcome. Ireland is no longer welcoming. A ban on onshore fracking and a bill to outlaw new offshore oil exploration licences currently in the Dáil sends out bad messages. Combine these with the increases in taxation and royalties introduced in 2015 and you have a toxic cocktail.
Exploration in deep hostile expensive waters with unknown potential is high risk. Add political uncertainty to this and the inevitable consequence is reduced interest. The farm out market for early stage projects, whereby junior explorers do the initial work and de-risk the geology, then bring in majors to do the drilling, has thinned out. We are seeking to convert LO 16/24 into a Frontier Exploration Licence as we believe there is potential on the acreage. LO 16/25 was too limited in acreage and structure size to be worth converting.
Ghana
We have been in Ghana since 2008. We signed an oil exploration agreement in 2010. But to date it has not been ratified by cabinet or parliament. Petrel holds a 30% interest in the agreement (held through its interest in Pan Andean Resources Limited), Clontarf Energy, a sister company holds 60% and local interests hold 10%.
Since 2010, there has been a series of obstacles placed in the way of ratification. We believed a court settlement in 2014 would expedite the decision. It has not. Recent changes in government has returned to power the party who first made the agreement with us. There is now renewed energy to attempt to finalise a deal. While there is goodwill on both sides, actually concluding a deal has been difficult.
Future
Petrel is a small tightly held listed company. Shareholders over many years have not been asked to invest new money. In recent years, we have been investing the proceeds of an Iraqi exit in 2009 into Iraq, Offshore Ireland and Ghana. In Ireland, we recovered most of our investment with the Woodside joint venture. Ghana, where we hold 30%, is not a big drain on resources.
Once again, it is time to reassess our strategy. We will continue to work with Woodside in the Atlantic and with our partners in Ghana. We will once more dip our toe into opportunities in the Middle East.
John Teeling
Chairman
22nd June 2018
PETREL RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017
2017
2016
€
€
CONTINUING OPERATIONS
Administrative expenses
(297,381)
(257,675)
Impairment of investments
(4,094,804)
-
OPERATING LOSS
(4,392,185)
(257,675)
Investment revenue
-
1,170
LOSS BEFORE TAXATION
(4,392,185)
(256,505)
Income tax expense
-
-
LOSS FOR THE FINANCIAL YEAR: all attributable
to equity holders of the parent
(4,392,185)
(256,505)
Other comprehensive (expense)/income
-
-
Items that are or may be reclassified
subsequently to profit or loss
-
-
Exchange differences
(321,858)
66,830
TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL YEAR
(4,714,043)
(189,675)
Loss per share - basic and diluted
(4.40c)
(0.26c)
PETREL RESOURCES PLC
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2017
2017
2016
€
€
Assets
Non-Current Assets
Financial asset
-
4,211,123
Intangible assets
2,179,283
2,138,159
2,179,283
6,349,282
Current Assets
Trade and other receivables
27,573
23,003
Cash and cash equivalents
371,380
745,195
398,953
768,198
Total Assets
2,578,236
7,117,480
Current Liabilities
Trade and other payables
(584,693)
(409,894)
Net Current (Liabilities)/Assets
(185,740)
358,304
NET ASSETS
1,993,543
6,707,586
Equity
Called-up share capital
1,246,025
1,246,025
Capital conversion reserve fund
7,694
7,694
Share premium
21,416,085
21,416,085
Share based payment reserve
26,871
26,871
Translation reserve
399,461
721,319
Retained deficit
(21,102,593)
(16,710,408)
TOTAL EQUITY
1,993,543
6,707,586
PETREL RESOURCES PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017
Share
Capital
€
Share
Premium
€
Capital
Conversion
Reserve
fund
€
Share
Based
Payment
Reserve
€
Translation
Reserve
€
Retained
Deficit
€
Total
€
At 1 January 2016
1,246,025
21,416,085
7,694
26,871
654,489
(16,453,903)
6,897,261
Total comprehensive income for the financial year
-
-
-
-
66,830
(256,505)
(189,675)
At 31 December 2016
1,246,025
21,416,085
7,694
26,871
721,319
(16,710,408)
6,707,586
Total comprehensive income for the financial year
-
-
-
-
(321,858)
(4,392,185)
(4,714,043)
At 31 December 2017
1,246,025
21,416,085
7,694
26,871
399,461
(21,102,593)
1,993,543
Share premium
Share premium comprises of the excess of monies received in respect of the issue of share capital over the nominal value of shares issued.
Capital conversion reserve fund
The ordinary shares of the company were renominalised from €0.0126774 each to €0.0125 each in 2001 and the amount by which the issued share capital of the company was reduced was transferred to the capital conversion reserve fund.
Share based payment reserve
The share based payment reserve represents share options granted which are not yet exercised and issued as shares.
Translation Reserve
The translation reserve comprises of foreign exchange movement on translation from US Dollars (functional currency) to Euro (presentation currency).
Retained deficit
Retained deficit comprises accumulated losses in the current and prior financial years.
PETREL RESOURCES PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017
2017
2016
€
€
CASH FLOW FROM OPERATING ACTIVITIES
Loss for the financial year
(4,392,185)
(256,505)
Write off of financial asset
4,094,804
-
Investment revenue recognised in loss
-
(1,170)
OPERATING CASHFLOW BEFORE
MOVEMENTS IN WORKING CAPITAL
(297,381)
(257,675)
Movements in working capital:
Increase in trade and other payables
129,799
49,285
Increase in trade and other receivables
(4,570)
(3,800)
CASH USED IN OPERATIONS
(172,152)
(212,190)
-
1,170
Investment revenue
(172,152)
(211,020)
NET CASH USED IN OPERATING ACTIVITIES
INVESTING ACTIVITIES
Payments for exploration and evaluation assets
(259,161)
(160,699)
Funds on disposal of financial assets
116,319
-
NET CASH USED IN INVESTING ACTIVITIES
(142,842)
(160,699)
NET DECREASE IN CASH AND CASH EQUIVALENTS
(314,994)
(371,719)
Cash and cash equivalents at beginning of financial year
745,195
1,111,257
Effect of exchange rate changes on cash held in
foreign currencies
(58,821)
5,657
Cash and cash equivalents at end of financial year
371,380
745,195
NOTES:
1. ACCOUNTING POLICIES
There were no changes in accounting policies from those used to prepare the Group's Annual Report for financial year ended 31 December 2016. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
2. LOSS PER SHARE
2017
2016
€
€
Loss per share - basic and diluted
(4.40c)
(0.26c)
Basic loss per share
The earnings and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:
2017
2016
€
€
Loss for the financial year attributable to equity holders
(4,392,185)
(256,505)
2017
2016
Number
Number
Weighted average number of ordinary shares for the
purpose of basic earnings per share
99,681,992
99,681,992
Basic and diluted loss per share are the same as the effect of the outstanding share options is anti-dilutive.
3. FINANCIAL ASSET
Investment
2017
2016
€
€
At the beginning of the financial year
4,211,123
4,211,123
Additions
-
-
Disposal
(116,319)
-
Impairment
(4,094,804)
-
At the end of the financial year
-
4,211,123
The Company's investment in its financial asset, held through its wholly owned subsidiary Petrel Resources (TCI) Limited, consisted of a 20 per cent shareholding in Amira Hydrocarbons Wasit B.V.("Amira") which was acquired from Amira Petroleum N.V. on 14 August 2013. Amira is a special purpose vehicle which holds a 25 per cent carried to production interest in an early stage oil opportunity in the large, underexplored and underdeveloped province of Wasit.
The consideration for the acquisition included the issue of 18,947,368 shares in Petrel. The Initial Consideration Shares were agreed to be locked-in until the date of spudding the first conventional oil well in respect of Amira's interest in the Wasit province but that, if the Spudding Date had not occurred by 19 August 2018, Petrel could, amongst other things, elect to re-acquire the Initial Consideration Shares for a nominal amount. As part of the agreement with Amira Petroleum, 2.8 million of the Initial Consideration Shares were, at the direction of Amira Petroleum, issued to its advisers in satisfaction of fees payable by Amira Petroleum and were subject to a lock in agreement as detailed above.
During December 2017, the Directors learnt that 2.2 million of the Adviser Shares had been sold between March and July 2017, notwithstanding the lock-in agreement. The parties reached a settlement and agreed that the vendors of the 2.2 million Adviser Shares make a payment of £100,000 to the Company, which has been received per year end (representing approximately 4.5p per Adviser Share sold). The remaining Adviser Shares shall remain subject to the lock-in agreed in 2013.
As of the date of this announcement, the Spudding Date has not occurred. Accordingly, the directors have decided to write off the investment in Amira Hydrocarbons Wasit B.V. and an impairment charge of €4,094,804 was recorded. No further shares will be issued to Amira and the 16,747,368 shares already issued will be re-acquired for nominal consideration, subject to shareholder approval at the AGM and the shares will be cancelled.
4. INTANGIBLE ASSETS
2017
2016
€
€
Exploration and evaluation assets:
Cost:
Opening balance
2,138,159
1,871,288
Additions
304,159
205,699
Exchange translation adjustment
(263,035)
61,172
Closing balance
2,179,283
2,138,159
Segmental Analysis
2017
2016
€
€
Ghana
843,988
962,377
Ireland
1,335,295
1,175,782
2,179,283
2,138,159
Exploration and evaluation assets at 31 December 2017 represent exploration and related expenditure in respect of projects in Ireland and Ghana. The directors are aware that by its nature there is an inherent uncertainty in relation to the recoverability of amounts capitalised on the exploration projects.
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.
The Group's exploration activities are subject to a number of significant and potential risks including:
· Licence obligations;
· Funding requirements;
· Political and legal risks, including title to licence, profit sharing and taxation;
· Geological and development risks;
· Exchange rate risk;
· Political risk; and
· Financial risk management.
Directors' remuneration of €30,000 (2016: €30,000) and salaries of €15,000 (2016: €15,000) were capitalised as exploration and evaluation expenditure during the financial year.
5. SHARE CAPITAL
2017
2016
€
€
Authorised:
200,000,000 ordinary shares of €0.0125
2,500,000
2,500,000
Allotted, called-up and fully paid:
Number
Share
Share
Capital
Premium
€
€
At 1 January 2016
99,681,992
1,246,025
21,416,085
Issued during the financial year
-
-
-
At 31 December 2016
99,681,992
1,246,025
21,416,085
At 1 January 2017
99,681,992
1,246,025
21,416,085
Issued during the financial year
-
-
-
At 31 December 2017
99,681,992
1,246,025
21,416,085
Movements in share capital
There was no movement in share capital in the current year.
6. POST BALANCE SHEET EVENTS
There were no material post balance sheet events affecting the company or group.
7. ANNUAL GENERAL MEETING
The Company's Annual General Meeting will be held on 25th July 2018 in the Gresham Hotel, 23 O'Connell Street Upper, Dublin 1 , D01 C3W7 at 10:30 am.
8. GENERAL INFORMATION
The financial information set out above does not constitute the Company's financial statements for the year ended 31 December 2017. The financial information for 2016 is derived from the financial statements for 2016 which have been delivered to the Companies Registration Office. The auditors have reported on 2016 statements; their report was unqualified with an emphasis of matter in respect of considering the adequacy of the disclosures made in the financial statements concerning the valuation of intangible assets, investment in subsidiaries and amounts due by group undertakings. The financial statements for 2017 will be delivered to the Companies Registration Office.
A copy of the Company's Annual Report and Accounts for 2017 will be mailed shortly only to those shareholders who have elected to receive it. Otherwise shareholders will be notified that the Annual Report will be available on the website at www.petrelresources.com. Copies of the Annual Report will also be available for collection from the Company's registered office, 162 Clontarf Road, Dublin 3, Ireland.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDFR PGUUWQUPRGUP
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