REG - Petro Matad Ltd - Interim Results & Operational Update
22/09/2022 07:00
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RNS Number : 2289A Petro Matad Limited 22 September 2022
Petro Matad Limited
('Petro Matad' or the 'Company' or the 'Group')
Interim results for the six months ended 30 June 2022 and Operational Update
LONDON, 22 September 2022: Petro Matad Limited, the AIM quoted Mongolian oil
company, announces its unaudited interim results for the six months ended 30
June 2022 and provides an operational update.
Key Company Updates
· The Company has finalised the detailed Heron 1 completion plan with
expert engineering input.
· Contract in place with DQE Drilling (DQE) and negotiations underway
to substantially expand the size of the programme in order to accelerate
development drilling and further reduce costs.
· Heron 1 surface facilities and power generation equipment is either
at the border or ready to be shipped from China, subject to Covid-19 related
lockdowns.
· Petro Matad continues to push government on the land access issue
with the Company urging the Ministry of Mining and Heavy Industry to expedite
certification.
Financial Summary 1H 2022
The Group posted a loss of USD 1.62 million for the 6-month period ended 30
June 2022, which compares to a loss of USD 1.02 million for the comparable
period in 2021. The Company's cash balance at 30 June 2022 was USD 6.62
million (USD 3.10 million in cash and USD 3.52 million in Financial Assets),
which compares to a cash balance of USD 0.40 million (USD 0.38 million in cash
and USD 0.02 million in Financial Assets) on 30 June 2021.
As previously announced, a successful fundraise totalling USD 10.4 million
gross proceeds was completed in August 2021 to develop and further appraise
the Heron oil field with the goal of commencing production in the second half
of 2022. During the first half of 2022, the Company has used part of the
proceeds raised to place orders for essential equipment required to put the
Heron 1 well into production. The remaining funds received from the fundraise
have been invested in relatively safe high yielding term deposits waiting on
the ramping up of work programme activities. Throughout, the Company has
continued with aggressive cost control measures including maintaining a small
but highly active workforce with the necessary operational capability.
Operational Summary 1H 2022
Progress on preparations for operations in 2022 was good through the first
half of the year but the Company's ability to execute was impacted by China's
continuing Covid-19 response and from issues arising from Mongolian land law.
Extremely stringent restrictions imposed by China during the global pandemic
to control the spread of Covid-19 were extended into 2022 and have
significantly impacted the oil sector in Mongolia where almost all of the oil
field service providers are Chinese. Mongolia's oil export was stopped for
most of the first half of 2022 due to the Chinese restrictions. Chinese rigs
in Mongolia's major producing fields were on standby and international border
crossings were closed on the Chinese side or severely restricted, complicating
and delaying imports and exports. Restrictions began to ease in June and the
Chinese contractors in Mongolia were able to gradually restart operations on
the country's main producing fields in the middle of the year.
Petro Matad's long struggle with local and central government authorities to
have its land access rights restored as per the Production Sharing Contract
(PSC) and Petroleum Law continued. Contradictions in the Land Law have caused
issues for all PSC operators in recent years to varying degrees due to land
management regulations introduced in late 2017. The impact of these is
particularly prevalent in the province where Mongolia's major oil fields and
Petro Matad's Heron discovery are located. Multiple requests by the Company
and other operators for land access permission have been rejected without
explanation by the local authorities. Anticipating this situation at the local
level, Petro Matad pushed for central government to take action to certify the
Company's Block XX Exploitation Area as a Special Purpose Area, streamlining
the approvals process, and to remedy the contradictions in the land law.
In late April the Cabinet of the Mongolian government gave instruction to the
relevant Ministers to expedite matters reflecting the fact that Mongolia has a
high-profile project underway to construct a domestic oil refinery that will
need Heron production. Additionally, the government's post-Covid-19 economic
recovery plan highlights the importance of the upstream hydrocarbon sector in
achieving Mongolia's goal of greater energy independence. This high-level
intervention from the Cabinet was very welcome as progress on the matter has
been far too slow. The Company continues to push all governmental bodies
involved to generate and maintain the necessary momentum.
During the first half of 2022 and despite the problems impacting the oil
sector in-country and in China, Petro Matad pressed ahead with its
preparations to be ready to commence field operations as soon as conditions
allow. To this end, the company completed geodetic surveying over the Heron
development area and prepared detailed construction plans as required by the
regulations in place. The Company designed and selected surface production
equipment including the Heron 1 beam pump and related equipment plus the
necessary power generation package. The equipment orders were successfully
tendered and awarded. The Company signed contracts for the downhole completion
services for Heron 1 including fracking and the installation of the completion
equipment. All environmental permits were approved and in place by mid-year to
facilitate the commencement of operations once the land issue is resolved.
Operational Update
Since mid-year there has been further easing of the Covid-19 restrictions in
China although some major cities have been put under lockdown when cases are
reported. Daqing has been one such city which is home to the PetroChina
subsidiary operating in Mongolia and to DQE, Mongolia's most active oil field
drilling contractor. Despite the problems in China, DQE currently has 3 rigs
in operation in Mongolia with another scheduled to start soon. Petro Matad has
a valid contract with DQE for new wells on Heron with prices reduced compared
to 2019. Negotiations are also underway to expand substantially the size of
the drilling programme incorporating further price reductions and economies of
scale. These discussions have taken much longer than DQE originally proposed
due in part to DQE management changes but the negotiations are continuing
despite the Daqing lockdown.
Whilst Petro Matad's field operations remain on hold pending progress on the
land issue, the Heron 1 power generation equipment is at the border waiting to
cross. The other equipment for Heron 1 that was manufactured in Daqing has
been held up by the lockdown but there are indications that the lockdown will
shortly be eased or lifted allowing this equipment to be shipped. PetroChina's
Mongolian operating company has offered Petro Matad some storage tanks already
in-country at very low cost and discussions are ongoing for other items.
Meanwhile, the Company has finalised the detailed Heron 1 completion plan with
expert engineering consultant input. Discussions regarding provision of
operational services and oil export with PetroChina continue, complicated
recently by the Daqing lockdown, but these are planned to resume fully as soon
as the relevant PetroChina personal are able to return to Mongolia.
The land issue has yet to reach a resolution. The Company has submitted
another application to the local authorities for land access whilst at the
same time, in response to pressure from Petro Matad, the legal process for
Special Purpose certification is underway at the relevant ministries.
Amendments to the Land Law are due to be debated in the next session of the
Mongolian parliament and although this represents the best opportunity for an
all-encompassing long-term solution, Petro Matad is urging the Ministry of
Mining and Heavy Industry, under the newly appointed Minister, to help
expedite the special purpose certification for Block XX as a priority in order
to allow the Company's in-field operations to commence as quickly as possible.
Mike Buck, CEO of Petro Matad, said:
"I fully appreciate that the lack of resolution on the land access issue will
not be welcomed by shareholders. At this stage we have submitted an additional
application to local authorities, are pushing for short and long-term
solutions to speed up approval and continue to receive the support of the
relevant ministries and the Cabinet of the Mongolian government to expedite
the matter. We continue to work, day and night for a resolution.
In the first half of this year, we have made substantial progress on getting
our production capability ready in order to ensure we can complete Heron 1 as
soon as the land issue is resolved."
Further operational updates will be provided in due course.
- Ends -
Further information please contact:
Petro Matad Limited
Mike Buck, CEO +976 7014 1099 / +976 7575 1099
Shore Capital (Nominated Adviser and Broker)
Toby Gibbs +44 (0) 20 7408 4090
John More
Arden Partners (Joint Broker) +44 (0) 20 7416 4900
Simon Johnson
FTI Consulting (Communications Advisory Firm)
Ben Brewerton +44 (0) 20 3727 1000
Christopher Laing
About Petro Matad
Petro Matad is the parent company of a group focussed on oil exploration, as
well as future development and production in Mongolia. At the current time,
Petro Matad holds 100% working interest and the operatorship of two Production
Sharing Contracts with the Government of Mongolia. Block XX has an area of 218
square kilometres in the far eastern part of the country and Block V has an
area of 7,937 square kilometres in the central western part of the country.
Petro Matad Limited is incorporated in the Isle of Man under company number
1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle
of Man, IM1 1EQ.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF-YEAR ENDED 30 JUNE 2022
Consolidated
30 Jun 2022 30 Jun 2021
$'000 $'000
Continuing Operations
Revenue
Interest Income 20 1
Other Income - 12
20 13
Expenditure
Consultancy fees (79) (40)
Depreciation and amortisation (73) (102)
Employee benefits expenses (874) (331)
Exploration expenditure (75) (70)
Other expenses (542) (486)
Profit/(Loss) from continuing operations before income tax (1,623) (1,016)
Income tax expense - -
Profit/(Loss) from continuing operations after income tax (1,623) (1,016)
Net Loss (1,623) (1,016)
Other comprehensive income/(loss)
Exchange rate differences on translating foreign operations (82) -
Other comprehensive income/(loss), net of income tax (82) -
Total comprehensive loss (1,705) (1,016)
Profit/(Loss) attributable to owners of the parent (1,623) (1,016)
Total comprehensive income/(loss) attributable to owners of the parent (1,705) (1,016)
Earnings/(loss) per share (cents per share)
- Basic and diluted earnings/(loss) per share (0.18) (0.15)
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
Consolidated
30 Jun 2022 31 Dec 2021 30 Jun 2021
$'000 $'000 $'000
ASSETS
Current Assets
Cash and cash equivalents 3,096 1,162 376
Trade and other receivables 9 21 1
Prepayments 183 176 135
Financial assets 3,524 7,045 23
Inventory 218 221 225
Total Current Assets 7,030 8,625 760
Non-Current Assets
Exploration and evaluation 15,275 15,275 15,275
Property, plant and equipment 90 99 113
Right-of-Use asset 30 93 25
Total Non-Current assets 15,395 15,467 15,413
TOTAL ASSETS 22,425 24,092 16,173
LIABILITIES
Current liabilities
Trade and other payables 392 371 898
Lease liability - 6 26
Total Current Liabilities 392 377 924
TOTAL LIABILITIES 392 377 924
NET ASSETS 22,033 23,715 15,249
EQUITY
Issued capital 154,057 154,057 144,011
Reserves 93 182 996
Accumulated losses (132,117) (130,524) (129,758)
TOTAL EQUITY 22,033 23,715 15,249
CONDENSED CASH FLOW STATEMENT
FOR THE HALF-YEAR ENDED 30 JUNE 2022
Consolidated
30 Jun 2022 30 Jun 2021
$'000 $'000
Cash flows from operating activities
Payments to suppliers and employees (1,509) (493)
Interest received 20 1
Net cash flows from/(used in) operating activities (1,489) (492)
Cash flows from operating activities
Purchase of property, plant and equipment (16) (9)
Proceeds of financial assets 3,521 (12)
Proceeds from the disposal of plant and equipment - -
Net cash flows from/(used in) investing activities 3,505 (21)
Cash flows from financing activities
Proceeds from issue of shares - -
Capital raising costs - -
Payments of lease liability principal - (50)
Net cash flows from/(used in) financing activities - (50)
Net increase/(decrease) in cash and cash equivalents 2,016 (563)
Net foreign exchange differences (82) -
Cash and cash equivalents at beginning of period 1,162 939
Cash and cash equivalents at end of period 3,096 376
STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 30 JUNE 2022
Consolidated
Attributable to equity holders of the parent
Issued Capital Accumulated Losses Other
$'000 $'000 Reserves $'000 Total
$'000
As at 1 January 2021 144,011 (128,930) 1,392 16,473
Income/(Loss) for the period - (1,016) - (1,016)
Other comprehensive income - - - -
Total comprehensive income/(loss) for the period 144,011 (129,946) 1,392 15,457
Transactions with owners in their capacity as owners
Issue of share capital - - - -
Cost of capital raising - - - -
Share based payments - 188 (396) (208)
As at 30 June 2021 144,011 (129,758) 996 15,249
As at 1 January 2022 154,057 (130,524) 182 23,715
Income/(Loss) for the period - (1,623) - (1,623)
Other comprehensive income - - (82) (82)
Total comprehensive income/(loss) for the period 154,057 (132,147) 100 22,010
Transactions with owners in their capacity as owners
Issue of share capital - - - -
Cost of capital raising - - - -
Share based payments - - 23 23
Expiry of Options - 30 (30) -
As at 30 June 2022 154,057 (132,117) 93 22,033
1. CORPORATE INFORMATION
The financial report covers the consolidated entity of Petro Matad Limited and
its controlled entities.
Petro Matad Limited, a company incorporated in the Isle of Man on 30 August
2007 has five wholly owned subsidiaries, including Capcorp Mongolia LLC and
Petro Matad LLC (both incorporated in Mongolia), Central Asian Petroleum
Corporation Limited ("Capcorp") and Petromatad Invest Limited (both
incorporated in the Cayman Islands) and Petro Matad Singapore Pte Ltd
(incorporated in Singapore). Its major shareholder is Petrovis Matad Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The half-year financial report does not include all of the notes of the type
normally included within the annual financial report and therefore cannot be
expected to provide as full an understanding of the financial performance,
financial position and financing and investing activities of the consolidated
entity as the full financial report.
The half-year financial report should be read in conjunction with the annual
Financial Report of Petro Matad Limited as at 31 December 2021. The half-year
consolidated financial statements have been prepared using the same accounting
policies as used in the annual financial statements for the year ended 31
December 2021.
It is also recommended that the half-year financial report is considered
together with any public announcements made by Petro Matad Limited and its
controlled entities during the half-year ended 30 June 2022.
(a) Basis of Preparation
The half-year consolidated financial report is a general purpose financial
report, which has been prepared in accordance with the requirements of
International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ('IASB'). The half-year financial
report has been prepared on a historical cost basis, except where stated.
The financial report is presented in US dollars and all values are rounded to
the nearest thousand dollars ($'000).
For the purpose of preparing the half-year financial report, the half-year has
been treated as a discrete reporting period.
(b) Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Group as at 31 December each year.
Subsidiaries are entities controlled by the Group. Control exists when the
Group has the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable or convertible are
taken into account. The financial statements of the subsidiaries are included
in the consolidated financial statements from the date that control commences
until the date that control ceases.
The financial statements of subsidiaries are prepared for the same reporting
period as the parent company, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies
that may exist.
A change in the ownership interest of a subsidiary that does not result in a
loss of control is accounted for as an equity transaction.
All intercompany balances and transactions, including unrealised profits
arising from intra-group transactions, have been eliminated in full.
Unrealised losses are eliminated unless costs cannot be recovered.
3. CONTRIBUTED EQUITY
CONSOLIDATED
30 Jun 2022 31 Dec 2021
$'000 $'000
Ordinary shares (i) 154,057 154,057
898,761,649 shares issued and fully paid
(31 Dec 2021: 898,761,649)
154,057 154,057
(i) Ordinary shares
Fully paid ordinary shares carry one vote per share and carry the right to
dividends.
4. RESERVES
A detailed breakdown of the reserves of the Group is as follows:
Equity benefits reserve Foreign currency translation Total
Merger reserve
Consolidated $'000 $'000 $'000 $'000
As at 1 July 2021 831 1,384 (1,219) 996
Currency translation differences - - - -
Share based payments - (814) - (814)
As at 31 December 2021 831 570 (1,219) 182
Currency translation differences - - (82) (82)
Expiry of Options - (30) - (30)
Share based payments - 23 - 23
As at 30 June 2022 831 563 (1,301) 93
5. (LOSS) PER SHARE
The following reflects the income and share data used in the total operations
basic and diluted (loss) per share computations:
CONSOLIDATED
30 Jun 30 Jun
2022 2021
Basic (loss) per share
Total basic (loss) per share (US$ cents per share) (note a) (0.18) (0.15)
Diluted (loss) per share
Total diluted (loss) per share (US$ cents per share) (note b) (0.18) (0.15)
(a) Basic (loss) per share
The (loss) and weighted average number of ordinary shares used in the
calculation of basic loss per share are as follows:
Net (loss) attributable to ordinary shareholders (US$'000) (1,623) (1,016)
Weighted average number of ordinary shares for the purposes of basic earnings 898,762 681,422
per share ('000)
(b) Diluted (loss) per share
The (loss) and weighted average number of ordinary shares used in the
calculation of diluted earnings per share are as follows:
Net (loss) attributable to ordinary shareholders (US$'000) (1,623) (1,016)
Weighted average number of ordinary shares for the purposes of basic earnings 898,762 681,472
per share ('000)
Share Options and Conditional Share Awards could potentially dilute basic loss
per share in the future, however they have been excluded from the calculation
of diluted loss per share because they are anti-dilutive for both years
presented.
6. EVENTS AFTER THE REPORTING DATE
None.
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