REG - Prospex Energy PLC - Half-year Report
20/09/2023 07:00
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RNS Number : 9690M Prospex Energy PLC 20 September 2023
Prospex Energy Plc / Index: AIM / Epic: PXEN / Sector: Energy
20 September 2023
Prospex Energy Plc ("Prospex" or the "Company")
Half-Year Report
Prospex Energy Plc, the AIM quoted investment company, is pleased to announce
its unaudited Interim Results for the six months ended 30 June 2023.
H1 2023 Financial and Corporate Overview:
Financial
· The Company reports a £888,473 loss after taxation from continuing
operations for the six-months ended 30 June 2023 (H1 2022 profit:
£5,120,408).
· This includes a £489,037 unrealised loss on revaluation of financial
assets at fair value (H1 2022 unrealised gain: £7,645,980).
· The loss on revaluation in the current reporting period takes account
of forward gas prices and exchange rates at 30 June 2023. The revaluation
gain in H1 2022 was attributable to the revaluation, on a basis consistent
with the 17% already held, of the additional 20% working interest in Selva
Malvezzi production concession acquired during that period.
· The revaluation at 30 June 2023 resulted in a reduction in the net
book value of investments to £15,575,603 (31 December 2022: £16,064,640).
· Administrative expenses during the period were £461,322 (H1 2022:
£501,967).
· Loan capital repayments in the period were £107,227 and interest
payments were £162,739. Convertible loan notes converted to equity in the
reporting period totalled £195,006.
· In April 2023, the Company strengthened the board of directors with
the appointment of Andrew Hay as a Non-Executive Director.
· Fox-Davies Capital appointed as Joint Corporate Broker in June 2023.
Post period end:
· First gas sales receipts from gas sales in Italy during July were
received in August 2023.
· As at 12 September 2023, a further £1,407,723 of convertible loan
notes have been converted to equity.
· The Company and its investment vehicles are expected to be fully
funded to meet all existing operational and financial commitments.
Mark Routh, CEO of Prospex, said:
"During the first half of 2023, Prospex laid the groundwork for the Company to
become an onshore gas producer in its second European country. Post
period-end, we delivered gas through our new gas processing facilities at the
Selva field in Italy and the Joint Venture is selling the gas via BP Gas
Marketing. Being a gas producer from two assets in stable countries puts
Prospex on a sound footing both operationally and financially to enable
further growth opportunities to be evaluated.
"The El Romeral power plant in Carmona is already a significant producer of
gas for electricity generation in southern Spain with the ability to Increase
this further once the necessary permits to drill further wells are granted.
The permits to drill five further wells on the concessions are currently with
the Spanish regulatory authorities and we hope to update shareholders in the
not so distant future.
"We also have the opportunity to develop our assets on the Selva Malvezzi
production concession near Bologna in Italy and the Joint Venture is actively
pursuing the necessary steps to drill at least three further wells on the
concession to boost our proven developed producing reserves.
"Prospex is very conscious of its HSE responsibilities, and it is notable that
operations both in Italy and in Spain have been executed this year with no
Health and Safety events, lost time incidences nor any reportable
environmental issues."
Operational Highlights:
The company made significant progress in the first six months of the financial
year:
Selva
· In February 2023, the Operator of the Selva Malvezzi production
concession in the Po Valley region of northern Italy, in which Prospex has a
37% working interest, signed an 18-month gas sales agreement ("GSA") with BP
Gas Marketing Limited to offtake and sell gas from the Selva field in Italy.
· During the period, development work was also completed at Selva field
by Po Valley Energy (ASX:PVE) ("Po Valley" or the "Operator"). Construction
of the new gas plant facilities at the Podere Maiar-1 ("PM-1") well site was
completed on schedule and with just a 3% cost difference to budgeted
expenditure. The connections to the gas grid operated by SNAM were completed,
enabling the delivery of gas to the Italian gas grid.
· With the SNAM connection and transmission arrangements finalised, Po
Valley Operations recovered the €757,000 performance bond funds (€280,090
net to Prospex), previously deposited with SNAM.
· Final inspection and production commencement at the new gas plant was
delayed due to severe flooding in the Emilia Romagna region. Inspections and
approvals were finally received at the end of June 2023.
· In February 2023, the 12-month background seismic monitoring
programme was completed - the final environmental regulatory hurdle prior to
the commencement of gas production.
El Romeral
· Operations continued at El Romeral in Andalucía, southern Spain
where the Company's investment is in the operator, Tarba Energía s.l.
· The Romeral power plant continues to be cash generative and
self-sustaining. However, no further development can be committed to in
Spain until progress is made with the relevant Spanish authorities on the
permitting of up to five new wells on the Romeral licenses.
· Significant effort is focussed on securing permitting for additional
wells at Romeral as well as conversion of the Tesorillo exploration permit to
an exploitation permit. Drilling permit applications were resubmitted in
early 2023.
· Gross monthly electricity sales from the El Romeral power plant
averaged €160,677 between January and June 2023.
· The El Romeral production concessions officially run until 28 July
2024. On 12 May 2021, Tarba requested, under the provisions of article 36 of
Law 21/1974, the extension of the El Romeral production concessions for two
successive periods of ten years. On 9 December 2022, Tarba received a draft
of the Royal Decree in which the first ten-year extension was granted until 28
July 2034. The draft Royal Decree was approved by the Spanish Ministry and
forwarded to the Council of Ministers on 4 April 2023, and we are now waiting
for the official publication. This step has not yet been taken by the
Council of Ministers and we look forward to an early completion of this
matter.
Post period end:
· PM-1 commenced gas production and delivered first gas on 4 July 2023.
· The four-week ramp-up and commissioning programme at the PM-1
production facility was completed during the week ended 4 August 2023 and
daily production of about 72,000 standard cubic metres per day (scm/d)
achieved since.
Business Development
The Company is actively evaluating a number of assets for potential
investment. The assets under consideration are all onshore in North-West
Europe and include high impact exploration targets. The Company will keep
shareholders updated as these projects come to fruition.
CHAIRMAN'S STATEMENT
Operational Report
The first six months of 2023 was a period of consolidation for the Company.
The main event was the completion of construction and permitting of the new
gas processing facilities at the PM-1 well site of the Selva field in northern
Italy. This secured the delivery of first gas sales post period end
commencing on 4 July 2023, with first receipts the following month.
In Spain, electricity generation continued at El Romeral with prices achieved
during the period averaging more than €100/MWh. This is more than double
the price of electricity at the time of the El Romeral asset acquisition in
March 2021. Further investments made at the power plant have increased
revenue, improved efficiency and have diversified the source of electricity
being generated to include photovoltaic. Surplus funds generated since
acquisition are being retained in the joint-venture vehicle (Tarba Energía)
to fund future development and diversification.
Prospex is now a company with a reliable income stream from onshore assets in
Europe. As a result, the Company is expected to be fully funded to meet all
existing operational and financial commitments.
Financial Review
For the six months ended 30 June 2023, the Company is reporting a net loss
after taxation from continuing operations of £888,473 (H1 2022: profit
£5,120,408). Included in this is an unrealised loss of £489,037 arising on
revaluation of financial assets at fair value (H1 2022: gain £7,645,980).
The 2023 unrealised loss results from a revaluation of the Company's share in
its subsidiary PXOG Marshall Limited in which the assets in the Podere Gallina
licence in Italy are held. This loss reflects the impact on the underlying
asset valuation caused by the decline in the forward curve of European gas
prices and a weaker EUR:GBP exchange rate at 30 June 2023. Applying a
conservative view on European gas prices in valuations performed at prior
reporting dates has successfully limited the impact of extreme volatility seen
in this market since 2021.
Administrative expenses of £461,322 were incurred in H1 2023, compared with
£501,967 in the same period last year.
At 30 June 2023, the Company held cash and cash equivalents of £395,202 (30
June 2022: £181,628).
Outlook
Subsequent to 30 June 2023, a further significant proportion of the
interest-bearing debt of the Company in the form of convertible loan notes has
been converted to equity. As a result and combined with a return of funds
invested in Italy enabled by first gas sales there, we expect a strengthening
of the Company's balance sheet during the course of 2023.
The Board and management continues to focus on developing and growing the
Company's portfolio of assets and income streams, both by increasing the
productivity and profitability of existing assets, and through active search
and investigation of new investment opportunities which meet the Company's
discerning investment criteria.
Bill Smith
Non-Executive Chairman
Prospex Energy Plc
Interim results
For the six months ended 30 June 2023
Statement of profit or loss and other comprehensive income
Six months ended Six months ended Year ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£ £ £
CONTINUING OPERATIONS
Other income 36,936 - -
Administrative expenses (461,322) (501,967) (975,725)
Share-based payment charge (191,757) (201,774) (187,417)
OPERATING LOSS (616,143) (703,741) (1,163,142)
(Loss)/gain on revaluation of investments and loans (489,037) 7,645,980 9,367,435
(1,105,180) 6,942,239 8,204,293
Finance income 257,187 116,314 324,052
Finance costs (162,739) (26,200) (173,023)
(LOSS)/PROFIT BEFORE INCOME TAX (1,010,732) 7,032,353 8,355,322
Income tax 122,259 (1,911,945) (1,218,415)
(LOSS)/PROFIT AND TOTAL COMPREHENSIVE (LOSS)/PROFIT FOR THE PERIOD (888,473) 5,120,408 7,136,907
(Loss)/profit per share
- Basic earnings (note 4) (0.31)p 2.24p 2.88p
- Diluted earnings (note 4) (0.31)p 2.18p 2.66p
Statement of financial position - As at 30 June 2023
30 June 2023 30 June 2022 31 Dec 2022
(unaudited) (unaudited) (audited)
£ £ £
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment - - -
Investment (note 5) 15,575,603 14,343,285 16,064,640
Trade and other receivables - 3,463,038 -
15,575,603 17,806,323 16,064,640
CURRENT ASSETS
Trade and other receivables 6,229,986 710,447 5,515,237
Investments 100 - 100
Cash and cash equivalents 395,202 181,628 1,482,762
6,625,288 892,075 6,998,099
TOTAL ASSETS 22,200,891 18,698,398 23,062,739
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 7,232,065 7,200,272 7,225,893
Share premium account 15,100,654 14,051,552 14,850,928
Capital redemption reserve 43,333 43,333 43,333
Merger reserve 2,416,667 2,416,667 2,416,667
Fair value reserve 14,388,954 11,801,302 14,755,732
Retained earnings (20,471,890) (19,181,498) (20,141,952)
TOTAL EQUITY 18,709,783 16,331,628 19,150,601
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
Bank loans - 28,768 -
Interest bearing loans and borrowings - 107,226 799,145
Deferred taxation 1,136,550 1,952,339 1,258,809
1,136,550 2,088,333 2,057,954
CURRENT LIABILITIES
Trade and other payables 44,902 51,566 41,440
Financial liabilities - borrowings
Bank loans - 9,736 -
Interest bearing loans and borrowings 2,309,656 217,135 1,812,744
2,354,558 278,437 1,854,184
TOTAL LIABILITIES 3,491,108 2,366,770 3,912,138
TOTAL EQUITY AND LIABILITIES 22,200,891 18,698,398 23,062,739
Statement of changes in equity
For the six months ended 30 June 2023
Capital
Share Share Retained redemption Merger Fair value
capital premium earnings reserve reserve reserve Total
£ £ £ £ £ £ £
Unaudited
At 1 January 2023 7,225,893 14,850,928 (20,141,952) 43,333 2,416,667 14,755,732 19,150,601
Total comprehensive income for the period - - (888,473) - - - (888,473)
Issue of shares 6,172 249,726 - - - - 255,898
Share-based payment charge - - 191,757 - - - 191,757
Transfer to fair value reserve - - 366,778 - - (366,778) -
At 30 June 2023 7,232,065 15,100,654 (20,471,890) 43,333 2,416,667 14,388,954 18,709,783
Unaudited
At 1 January 2022 7,124,355 11,599,333 (18,748,005) 43,333 2,416,667 6,067,267 8,502,950
Total comprehensive income for the period - - 5,120,408 - - - 5,120,408
Issue of shares 75,917 2,542,682 - - - - 2,618,599
Costs of shares issued - (112,103) - - - - (112,103)
Share-based payment charge - 21,640 180,134 - - - 201,774
Transfer to fair value reserve - - (5,734,035) - - 5,734,035 -
At 30 June 2022 7,200,272 14,051,552 (19,181,498) 43,333 2,416,667 11,801,302 16,331,628
Audited
At 1 January 2022 7,124,355 11,599,333 (18,748,005) 43,333 2,416,667 6,067,267 8,502,950
Total comprehensive income for the year - - 7,136,907 - - - 7,136,907
Issue of shares 101,538 3,333,893 - - - - 3,435,431
Costs of shares issued - (112,104) - - - - (112,104)
Lapse of share options - 29,806 (29,806) - - - -
Share-based payments charge - - 187,417 - - - 187,417
Transfer to fair value reserve - - (8,688,465) - - 8,688,465 -
At 31 December 2022 7,225,893 14,850,928 (20,141,952) 43,333 2,416,667 14,755,732 19,150,601
Statement of Cash Flows
For the six months ended 30 June 2023
Six months ended Six months ended Year ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
£ £ £
Operating activities
(Loss)/profit before income tax (1,010,732) 7,032,353 8,355,322
Loss/(gain) on revaluation of investments and loans 489,037 (7,645,980) (9,367,435)
Finance income (257,187) (116,314) (324,052)
Finance costs 162,739 26,200 173,023
Operating loss (616,143) (703,741) (1,163,142)
Increase in trade and other receivables (461,870) (1,990,099) (3,126,358)
Increase/(decrease) in trade and other payables 3,462 (1,326) (11,454)
Share-based payment charge 191,757 201,774 187,417
Net cash outflow from operating activities (882,794) (2,493,392) (4,113,537)
Cash flows from investing activities
Interest received 4,308 - 2,247
Interest paid (159,862) (26,200) (124,338)
Net cash outflow from investing activities (155,554) (26,200) (122,091)
Cash flows from financing activities
New loan notes - - 2,370,000
Bank loan repayment - (3,890) (42,394)
Loan repayments (107,227) (21,446) (131,353)
Issue of share capital 58,015 2,618,599 3,414,181
Costs in respect of share issue - (112,103) (112,104)
Net cash (outflow)/generated from financing activities (49,212) 2,481,160 5,498,330
Net (decrease)/increase in cash and cash equivalents (1,087,560) (38,432) 1,262,702
Cash and cash equivalents at start of period 1,482,762 220,060 220,060
Cash and cash equivalents at end of period 395,202 181,628 1,482,762
Notes to the interim financial statements
1 General information
Prospex Energy Plc is a company incorporated in the United Kingdom, which is
listed on the Alternative Investment Market of the London Stock Exchange
Plc. The address of its registered office is 60 Gracechurch Street, London
EC3V 0HR. The Group is primarily involved in the development, exploration
and the production of natural gas and the generation of electricity.
2 Financial information
The interim financial information for the six months ended 30 June 2023 and
2022 has not been audited or reviewed and does not constitute statutory
accounts within the meaning of Section 434 of the Companies Act 2006. The
comparative financial information for the year ended 31 December 2022 has been
derived from the audited financial statements for that period. A copy of
those statutory financial statements for the year ended 31 December 2022 has
been delivered to the Registrar of Companies. The report of the independent
auditors on those financial statements was unqualified, drew attention to a
material uncertainty relating to going concern and did not contain a statement
under Sections 498 (2) or (3) of the Companies Act 2006.
The interim financial statements have been prepared in accordance with
International Accounting Standards in conformity with the requirements of the
Companies Act 2006 as they apply to the financial statements of the Company
for the six months ended 30 June 2023 and as applied in accordance with the
provisions of the Companies Act 2006 and under the historical cost convention
or fair value where appropriate. They have also been prepared on a basis
consistent with the accounting policies expected to be applied for the year
ending 31 December 2023 and which are also consistent with those set out in
the statutory accounts of the Company for the year ended 31 December 2022.
The interim financial statements are presented in pounds sterling because that
is the currency of the primary economic environment in which the company
operates.
3 Taxation
On the basis of these accounts the only charge to taxation is the deferred
taxation arising on the revaluation of the company's investments.
4 Loss/earnings per share
The loss/earnings and number of shares used in the calculation of earnings per
share are as follows:
Six months ended Six months ended Year ended
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
Basic EPS
(Loss)/profit for the financial period (888,473) 5,120,408 7,136,907
Effect of dilutive securities on loss /profit
Options and warrants - - -
Convertible loan notes - - 129,734
Adjusted (loss)/earnings (888,473) 5,120,408 7,266,641
Basic EPS
Weighted average number of shares for basic EPS 283,657,000 228,138,764 247,635,519
Effect of dilutive securities on number of shares
Options and warrants - 6,807,636 3,057,387
Convertible loan notes - - 22,291,906
Weighted average number of shares for diluted EPS 283,657,000 234,946,400 272,984,812
Basic (loss)/earnings per share (0.31)p 2.24p 2.88p
Diluted (loss)/earnings per share (0.31)p 2.18p 2.66p
The exercisable share options and warrants are deemed to be dilutive in nature
where their exercise price is less than the average share price for the period
and the dilution would reduce the earnings per share or increase the loss per
share.
5 Non-current investment
Shares in
group Unlisted
undertakings investments Total
£ £ £
Unaudited
At 1 January 2023 16,014,640 50,000 16,064,640
Revaluations (489,037) - (489,037)
At 30 June 2023 15,525,603 50,000 15,575,603
Unaudited
At 1 January 2022 6,647,305 50,000 6,697,305
Revaluations 7,645,980 - 7,645,980
At 30 June 2022 14,293,285 50,000 14,343,285
Audited
At 1 January 2022 6,647,305 50,000 6,697,305
Revaluations 9,367,435 - 9,367,435
Reclassified to current asset investments (100) - (100)
At 31 December 2022 16,014,640 50,000 16,064,640
The investments in subsidiary undertakings are accounted for at fair value
through the profit and loss, as the Company is deemed to be an Investment
Entity.
6 Dividends
The directors do not propose to declare a dividend for the period.
7 Copies of interim results
Copies of the interim results can be obtained from the website
www.prospex.energy (http://www.prospex.energy) . From this site you may
access our financial reports and presentations, recent press releases and
details about the company and its operations.
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward
looking statements. Forward looking statements are identified by their use
of terms and phrases such as ''believe'', ''could'', "should" ''envisage'',
''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect",
''will'' or the negative of those, variations or comparable expressions,
including references to assumptions. These forward-looking statements are
not based on historical facts but rather on the Directors' current
expectations and assumptions regarding the Company's future growth, results of
operations, performance, future capital and other expenditures (including the
amount, nature and sources of funding thereof), competitive advantages,
business prospects and opportunities. Such forward looking statements
reflect the Directors' current beliefs and assumptions and are based on
information currently available to the Directors.
Such statements are based on current expectations and assumptions and are
subject to a number of risks and uncertainties that could cause actual events
or results to differ materially from any expected future events or results
expressed or implied in these forward-looking statements. Persons receiving
and reading this announcement should not place undue reliance on
forward-looking statements. Unless otherwise required by applicable law,
regulation or accounting standard, the Company does not undertake to update or
revise any forward-looking statements, whether as a result of new information,
future developments or otherwise.
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