REG - Reabold Resources - Interim Results for 6 months ended 30 June 2020
23 September 2020
REABOLD RESOURCES PLC
("Reabold" or "the Company")
Unaudited Interim Results for six months ended 30 June 2020
Reabold Resources plc (AIM: RBD), the AIM investing company which focuses on investments in upstream oil and gas projects, announces its unaudited interim results for the six months ended 30 June 2020 (the "Period").
For further information, contact:
Reabold Resources plc
Sachin Oza
Stephen Williams
c/o Camarco
+44 (0) 20 3757 4980
Strand Hanson Limited - Nomad & Financial Adviser
James Spinney
Rory Murphy
James Dance
Stifel Nicolaus Europe Limited - Joint Broker
Callum Stewart
Simon Mensley
Ashton Clanfield
Panmure Gordon - Joint Broker
Hugh Rich
Nick Lovering
+44 (0) 20 7409 3494
+44 (0) 20 7710 7600
+44 (0) 207 886 2733
Camarco
James Crothers
Ollie Head
Billy Clegg
+44 (0) 20 3757 4980
CHAIRMAN'S STATEMENT
The Board is pleased to report on the positive progress in the Company's investment portfolio in the six months ended 30 June 2020, and post-Period end, notwithstanding the considerable disruption to operational activities as a result of the Covid-19 pandemic.
Highlights:
· Site works commenced for drilling of the West Newton B-1 well, with A-2 well test planned to begin following completion of B-1 well.
· Additional commercial discovery on West Brentwood licence in California.
· Opportunistic conditional acquisition of a direct 16.665 per cent. interest in the West Newton field from Humber Oil and Gas Limited ("Humber") for consideration of 350,000,000 new Ordinary Shares and £1.4 million in cash; taking the Company's effective economic interest in West Newton to circa 56.4 per cent. from 39.7 per cent.
· Secured additional liquidity in the form of a £5 million discretionary equity line cash facility to provide the Company with further financial flexibility and strength.
· Commencement of well test operations at the Iecea Mica-1 ("IMIC-1") well in Romania to confirm the suitability of the gas composition for commercial sales.
· Strong cashflow generation from Californian portfolio despite downturn in oil prices with production sales realising $38.1/boe at a low operating cost of $14.4/boe.
Highlights - Post-Period end:
· Commencement of drilling operations for the B-1 well at West Newton, which will appraise the extent of the West Newton A-2 discovery as well as test the deeper Cadeby formation.
· Completion of the acquisition of a direct 16.665 per cent. interest in the West Newton field from Humber.
· Corallian Energy Limited ("Corallian") offered 100 per cent. interests in the Victory gas discovery in block 207/1a, the Laxford gas discovery and Scourie prospects in blocks 214/29c and 214/30c, and the Oulton oil discovery in block 3/11a as part of the UK Oil and Gas Authority's 32nd Offshore Licensing Round.
Rathlin Energy (UK) Limited
The Company has invested a total of £20 million in Rathlin Energy (UK) Limited ("Rathlin") to date, for a 59.5 per cent. interest in Rathlin's issued share capital. Rathlin is the operator and 66.67 per cent. equity interest holder in PEDL183 licence, onshore UK, which contains the significant West Newton field, potentially the largest hydrocarbon discovery onshore UK since 1973.
On 18 August 2020, the Company was pleased to announce that drilling operations for the B-1 well at West Newton ("WNB-1"), which will appraise the extent of the West Newton A-2 discovery ("WNA-2") as well as test the deeper Cadeby formation, had commenced. Reabold has an approximate 56 per cent. economic interest in West Newton. We are delighted to have progressed activity at West Newton to the point of drilling this exciting well, despite the inevitable operational challenges as a result of Covid-19. The WNB-1 well has the dual objective of appraising the Kirkham Abbey formation and evaluating the Cadeby formation which, if successful in achieving one or more of our pre-drill targets, will substantially upgrade the value of West Newton and Reabold.
The WNB-1 well follows the WNA-2 well on the West Newton field. In November 2019, Rathlin, provided updated hydrocarbon initially in-place volumetric estimates in respect of the shallower Kirkham Abbey formation post drilling of the WNA-2 well:
Base Case: - Liquids: 146.4 million barrels ("mmbbl") of oil initially in-place ("OIIP");
- Gas: 211.5 bcf of gas initially in-place ("GIIP")
Upside Case: - Liquids: 283 mmbbl OIIP
- Gas: 265.9 bcf GIIP
A conductor drilling rig has been successfully mobilised to the WNB-1 site and is beginning operations, with a main drilling rig following shortly to appraise the Kirkham Abbey formation and test the Cadeby formation. The conductor rig will drill to a depth of approximately 80 metres into the Cretaceous chalk where steel casing will be installed and cemented to surface. The main drilling rig will then be mobilised to the site in preparation to drill the main borehole to a depth of approximately 2,000 metres. The drilling operations are expected to continue for six to ten weeks.
The WNB-1 well is a crucial well for the West Newton project, as it will evaluate both the Kirkham Abbey and Cadeby formations. We are delighted that the Rathlin team has managed to push ahead with the B site operations despite the extreme challenges posed by events since March this year as a result from the fall-out from the Covid-19 pandemic. We are fortunate to be in a position where the West Newton JV is fully funded for its planned activity.
Despite having received all the key permits, as announced on 27 April 2020, for the WNA-2 well test, activities were delayed due to Covid-19 related issues, notably restrictions of the international movement of equipment and personnel. Whilst these issues are now broadly resolved, the significant progress made at the B site during that period meant that it was more efficient to drill the WNB-1 well first, and subsequently to carry out a testing programme at both WNA-2 and WNB-1. This is expected to result in cost savings via shared testing equipment, and more importantly, allows the drilling of the WNB-1 well to proceed without any delays resulting from testing operations at the WNA-2 site.
The testing operations will provide significant additional information towards improving the understanding of the targeted Kirkham Abbey reservoir particularly following the identification of a potential oil leg overlain by an associated gas cap within the reservoir interval as set out in the Company's announcement on 29 August 2019. The test programme has been optimised to evaluate the identified oil column.
On 20 August 2020, the Company announced that Rathlin had submitted Screening Requests to East Riding of Yorkshire Council for two new potential hydrocarbon wellsites, West Newton C and West Newton D. This is the first step of the planning process to further explore and appraise the West Newton hydrocarbon field and will determine whether planning application submissions for West Newton C and West Newton D will require environmental impact assessments. The Screening Opinions will be available following the consideration of the East Riding of Yorkshire Council planning department, which is currently in progress. Whilst the current focus at West Newton is clearly on the drilling activity at the B-site, and subsequent testing of the WNB-1 and WNA-2 wells, it is important to be thinking ahead about the further development of what could potentially be an asset of significant scale.
On 16 June 2020, the Company was pleased to announce that Gaffney, Cline & Associates, an international petroleum and energy consultancy, has given the West Newton field an AA rating for carbon intensity, the best rating possible. Reabold intends that the development at West Newton will seek to utilise the best fit for purpose technologies, including gas to grid technologies, and tight leak-rate specifications to minimise any venting, flaring or fugitive emissions. This is a considered material development for West Newton, which suggests the field could be a low-carbon energy producer, in line with the UK government's focus on low-carbon efficient energy sources.
Acquisition of 16.665 per cent. direct interest in PEDL 183
On 26 May 2020, Reabold announced the conditional acquisition of an additional 16.665 per cent. interest in PEDL 183 (the "Acquisition"), which contains the West Newton field, from Humber for the consideration of £1.4 million in cash (subject to adjustment) and the issue of 350,000,000 new ordinary shares of 0.1p each in the capital of Reabold ("Ordinary Shares") (the "Consideration Shares").
Pursuant to the Acquisition, Humber agreed to a lock up over 66.67 per cent. of the Consideration Shares for a period of three months from the date of admission to trading on AIM and an orderly market restriction for a further period of three months once the lock-in period expires.
On 29 July 2020, the Company announced the completion of the Acquisition, following the satisfaction of the conditions precedent. As a result of the Acquisition, Reabold now has an effective economic interest in PEDL 183 of approximately 56 per cent., comprising a 39.66 per cent. indirect interest, via the Company's 59.48 per cent. interest in Rathlin, and a 16.665 per cent. direct interest in PEDL 183.
The Acquisition increases the Company's exposure to this potentially significant asset at an attractive transaction value. The Directors of Reabold believe the Acquisition will allow the JV to progress the work programme optimally and thereby unlock the value in the asset. Following the Acquisition, the PEDL 183 joint venture is funded for: the drilling activity at WNB-1; the testing programme at both WNA-2 and WNB-1; and for a further well, for which planning consents are already in place, at the West Newton B site (WNB-2).
On 22 September 2020, the Company announced that that the main drilling rig has been mobilised to the WNB-1 site. The steel conductor casing was set at a depth of 74 meters in the Cretaceous chalk and cemented in place, providing a stable base for the main drilling rig as well as protection for the surface formations during the main drilling operation. As such, the main drilling rig and associated equipment have commenced mobilisation to site today. The equipment will be rigged-up over a period of one to two weeks in preparation to drill the main borehole to a depth of approximately 2,000 metres. Completion is expected to take six to ten weeks. Once completed, the drilling rig will be demobilised from the site over a period of approximately one week.
Danube Petroleum Limited
The Company has invested a total of £5 million in Danube Petroleum Limited ("Danube") to date, for a 50.8 per cent. interest. Danube has a 100 per cent. interest in the 'sole risk area' of the Parta licence ("Parta Sole Risk Area") in Romania, which includes the IMIC-1 discovery and the IMIC-2 prospect. Danube, which currently has a 100 per cent. interest in the broader Parta licence, had agreed to farm out a 50 per cent. interest in the remainder of the licence (excluding the Parta Sole Risk Area) to Tamaska Oil & Gas Limited ("Tamaska"), in exchange for Tamaska funding a US$1.5 million seismic programme to generate high quality appraisal and exploration targets. On 8 September 2020, Tamaska announced that it no longer intends to go ahead with the farm in.
As announced on 9 September 2019, the IMIC-1 well encountered gas across three zones with a 20 BCF 2C contingent resources estimate. The well was suspended for future completion as a producer following testing. Testing had been deferred until down hole well production equipment was manufactured so that the well could be optimally completed utilising underbalanced perforation with a view to maximising well productivity.
In June 2020, the workover rig mobilisation commenced in preparation for production testing of the successful IMIC-1 well, as Covid-19 related restrictions in Romania were eased. The testing programme has been designed to determine the production capacity of the well through multiple flow rate measurements and pressure build up response measurements. Produced gas will be sampled to determine the suitability of the IMIC-1 gas composition for commercial sales.
Testing will concentrate on the PA IV sand, which is a proven reservoir and has the greatest reserves potential of the three reservoir intervals intersected in the IMIC-1 well. This reservoir unit also has a large stratigraphic upside potential, which will be further quantified in the near future with the planned high resolution 2D seismic programme scheduled for the third quarter of 2020.
Engineering studies are ongoing to determine the potential viability of two development options, namely, the delivery of sales gas to the grid at the nearby Satchinez-Calacea Gas Plant or alternately the conversion of produced gas to power and the connection to a high voltage power line located approximately 2km from the IMIC-1 location. The production test results will provide important information required for the finalisation of feasibility studies.
The resource potential of the three gas reservoirs intersected at IMIC-1 will be further assessed utilising high resolution 2D seismic that will be acquired across IMIC-1 and potential IMIC-2 accumulations. The appraisal seismic is expected to better define the extent of gas zones where substantial stratigraphic upside has identified. The appraisal seismic will be acquired in conjunction with the planned exploration 3D seismic programme during the third quarter of 2020 in close proximity to the IMIC-1 and the IMIC-2 wells.
We are looking at ways to commercialise future production in Romania and are encouraged by the potential resource upside across the licence, which will be further assessed during the seismic programme across the IMIC-1 and IMIC-2 accumulations later this year.
The completion of the testing programme at IMIC-1 in Romania is steadily approaching and we look forward to receiving the results of the flow test in due course. As announced on 14 September 2020, IMIC-1 was successfully acidised utilising coiled tubing for pumping the acid to the bottom of the well and then circulating the acid and brine in the well to surface utilising nitrogen to enable lifting liquids. The recovered liquids included a sludge material likely to be a combination of dissolved reservoir material and fine reservoir sediments from the reservoir. Gas flow was observed after approximately 12 hours with a combination of methane and nitrogen coming to surface. The well has now be shut in to observe pressure build up as the reservoir continues to clean up following the acidisation.-
Reabold California
The Company, through its wholly owned subsidiary Reabold California LLC, has interests in oil and gas leases in California with low-cost production and multiple near-term, high-impact drilling opportunities, with low drilling costs and a fast path to monetisation. The leases are operated by Integrity Management Solutions ("IMS"), a Californian operating company that leads direct operational decisions pertaining to the leases.
As announced on 6 January 2020, the VG-6 well located in its West Brentwood licence in California, in which the Company has a 50 per cent. interest, was drilled by IMS to a measured depth of approximately 1,455 metres and encountered oil and gas shows at the target interval, consistent with pre-drill expectations.
We are delighted to have drilled our fifth successful well in California and to see strong rates of production from a previously untested horizon. VG-6 was designed to test a new geological horizon at West Brentwood, the Third Massive, different from the Second Massive which is the producing horizon for the VG-3 and VG-4 wells. Accordingly, success at VG-6 has unlocked a new play with more running room at West Brentwood than we had previously anticipated and therefore additional follow on targets.
Production across Reabold's California licences, being West Brentwood and Monroe Swell, in which Reabold has a 50 per cent. working interest, for the period from 1 January 2020 to 30 June 2020 was 36,991 (gross) and 18,496 (net) barrels of oil equivalent ("boe"). Reabold's net revenue generated from the sales of hydrocarbons in California over the period was US$718,000 (US$575,000 net of royalties). This equates to a realised price of US$38.1/boe (US$30.5/boe net of royalties). The estimated cash operating cost was approximately US$14.4/boe.
Unit
H1 2020
H2 2019
H1 2019
Total 2019
Total Production
Boe*
37,426
50,285
15,407
65,692
Reabold's 50% share of production
Boe*
18,713
25,143
7,703
32,846
Reabold's gross revenue
US$
$718,000
$1,349,000
$505,000
$1,854,000
Reabold's revenue net of royalties
US$
$575,000
$1,079,000
$404,000
$1,483,000
Realised price per boe
US$
$38.1
$57.9
$66.7
$60.0
Realised price per boe net of royalties
US$
$30.5
$46.3
$53.4
$48.0
Cash operating cost per boe
US$
$14.4
$13.1
$15.9
$13.7
* gas equivalence based on 6,000 scf/bbl
Over the Period, Reabold California operations were affected by Covid-19 related issues which delayed IMS's ability to construct permanent facilities and keep certain wells on production. These facilities have now been completed and all wells are on production.
During the reporting period we witnessed a significant drop in oil prices, resulting from the Russia-Saudi Arabia oil price war triggered in March 2020 by Saudi Arabia in response to Russia's refusal to reduce oil production in order to keep prices for oil at moderate level. This economic conflict resulted in a sheer drop of oil price over the spring of 2020. This was further exacerbated by the decline in demand from Covid-19 lockdowns.
The significant decline in oil prices however, highlights the excellent economics of our operations in California, evident from the relatively low cash operating costs per boe.
As part of an evaluation of the current and future potential value associated with its California business, Reabold commissioned Petrotech Resources Company Inc. ("Petrotech"), based in Bakersfield California, to compile a reserves report, prepared in accordance with the 2007 Petroleum Resources Management System, to cover the West Brentwood field.
During the Period, the Company commissioned Petrotech to update the reserves report, in accordance with the 2007 Petroleum Resources Management System, as at 1 February 2020, and attributed an NPV10 value, net to Reabold, of US$20.41 million associated with the PDPs at VG-3 and VG-4 and the PUD at VG-6, as well as the PDPs at the 2A and 2B locations in Monroe Swell that were brought into production. The PUD at the VG-6 location was brought into production in Q1 2020. It is noted that the additional prospectivity associated with other potential drilling locations at West Brentwood and the other locations, along with "Probable" and "Possible" upsides, have not been included in the valuation calculation. These updated reserves correspond to a total capitalised expenditure by Reabold in respect to the PDPs and PUD at West Brentwood and Monroe Swell to 31 December 2019 of US$6.3 million, associated with the drilling and completion.
The Proved Developed Producing ("PDP") and Proved Undeveloped ("PUD") reserves reported for oil and associated gas, net to the Reabold interest, are as follows:
Reserves as at 1 February 2020
Reserves as at 1 August 2019
Mbbl
MMcf
Mboe *
Mbbl
MMcf
Mboe *
PDP (4 wells)
755.10
232.41
793.84
PDP (4 wells)
573.11
612.58
675.21
PUD (1 well)
266.99
363.15
327.52
PUD (1 well)
267.32
363.60
327.92
Total
1,022.09
595.56
1,121.35
840.43
976.18
1,003.13
* gas equivalence based on 6,000 scf/bbl
Corallian
The Company has invested to date a total of £3.65 million in Corallian for a 34.9 per cent. interest. Corallian is a private UK oil and gas exploration and appraisal company, which holds interests in five basins in the UK: Central Graben, Inner Moray Firth, Viking Graben, West of Shetland and Wessex Basin. It has an experienced in-house team to execute its programmes.
On 3 September 2020, the Company was pleased to announce that Corallian has been offered 100 per cent. interests in the Victory gas discovery in block 207/1a, the Laxford gas discovery and Scourie prospects in blocks 214/29c and 214/30c, and the Oulton oil discovery in block 3/11a as part of the UK Oil and Gas Authority's 32nd Offshore Licensing Round.
We are delighted with the success Corallian has had in the 32nd round licence application. We note, in particular, the successful block 207/1a application, which contains the Victory gas discovery. Victory is assessed to be fully appraised, with potential access to infrastructure and expected submission for the field development plan within 18 months from the licence award. The potential upside in block 207/1a, alongside Corallian's successful applications in respect of blocks 214/29c and 214/30c, and the appraisal opportunities they bring, means Reabold, via Corallian, will have exposure to significant low risk resources in the West of Shetland.
Deltic Energy
On 15 July 2020, the Company announced that it was in the process of evaluating a possible all-share offer for the entire issued and to be issued share capital of Deltic Energy plc ("Deltic") (the "Possible Offer").
Reabold believed that the Possible Offer, if made and successfully completed, would deliver clear synergistic benefits and cost savings which should potentially serve to accelerate the delivery of the enlarged group's strategy. In addition, Reabold believed that the complementary nature of the existing Reabold and Deltic portfolios, particularly in the emerging Zechstein oil and gas play underpinned by Reabold's recent West Newton discovery, should facilitate optimal capital deployment both within the proposed enlarged group's expanded portfolio and for potential new project investments. Reabold further believed that on successful completion of a Possible Offer, if made, Deltic shareholders would benefit from, inter alia, a diversified and highly active portfolio, as a result of exposure to the Company's existing assets, whilst current Reabold shareholders would benefit from exposure to Deltic's high-impact, near-term portfolio in the North Sea.
Following initial conversations with a number of Deltic's largest shareholders, Reabold had undertaken preliminary discussions with Deltic to seek such a recommendation from the Board of Directors of Deltic. However, Reabold was disappointed to receive a letter from the Deltic Board unequivocally rejecting the Possible Offer. The exchange ratio in respect of the Possible Offer was determined solely on the basis of publicly available information and Reabold was disappointed that it was not offered the opportunity to undertake market standard confirmatory due diligence, which would also be a pre-condition of making any firm offer for Deltic.
Subsequently on 10 August 2020, the Company announced that it no longer intended to make an offer for Deltic.
Discretionary Finance Facility
On 26 May 2020, the Company announced that it had secured additional liquidity in the form of a £5 million discretionary equity line cash facility (the "Discretionary Facility") that provides additional flexibility and strength to the Company's financial position.
The Company's balance sheet is in a strong position with sufficient financial resources to meet its planned work commitments across its portfolio, including those following completion of the Acquisition. However, current macro circumstances underscore the benefit of ensuring sufficient financial flexibility is available, particularly ahead of a major drilling campaign such as that planned for West Newton this year. Towards this, Reabold enhanced its liquidity position by securing a £5 million discretionary cash facility with Acuitas Capital, LLC ("Acuitas"). This discretionary cash facility was seen, by the Board, as a prudent measure to provide increased liquidity without the need to dilute shareholders unduly by way of an equity fundraise whilst the share price significantly undervalues Reabold's portfolio due to the current low oil price environment and the Covid-19 lock-down.
The Discretionary Facility is in the form of an Equity Line Agreement (the "ELA") for a period of 24 months with Acuitas, whereby Reabold has the right, at its sole election, but not the obligation, to issue new Ordinary Shares to Acuitas at a subscription price as determined under the ELA for an aggregate amount not exceeding £5 million.
In order to drawdown on the Discretionary Facility (an "Advance"), Reabold is required to serve an advance notice to Acuitas ("Advance Notice"). The issue price of any new Ordinary Shares issued pursuant to an Advance will be 90 per cent. of the volume weighted average price ("VWAP") of the Ordinary Shares on AIM over either the 5 or 10 trading days ("Pricing Period"), at Reabold's discretion and to be specified in an Advance Notice, following delivery of an Advance Notice. The discount will be based upon the two lowest and the four lowest VWAPs over a 5 day and 10 day Pricing Period (as applicable) respectively. The Company may set out a minimum acceptable price, if any, in the Advance Notice provided such minimum price must be less than or equal to 96 per cent. of the VWAP of the Ordinary Shares on the trading day immediately preceding the Advance Notice. If no such minimum price is specified by the Company in an Advance Notice, the minimum acceptable price shall be 96 per cent. of the VWAP of the Ordinary Shares on the trading day immediately preceding the Advance Notice. Upon the delivery of an Advance Notice, the Company is required to make a public announcement that it has delivered the Advance Notice, stating the amount of the Advance requested and the dates of the applicable Pricing Period.
The maximum Advance per each Advance Notice shall not exceed 100 per cent. of the average daily value traded of Reabold's Ordinary Shares on AIM ("DVT") in respect of a 5 day Pricing Period or 200 per cent. of the average DVT in respect of a 10 day Pricing Period. In addition, the number of new Ordinary Shares to be issued per Advance shall not exceed 1.5 per cent. of Reabold's then enlarged share capital. Acuitas reserves the right to reduce the amount of an Advance in the event that, during a Pricing Period, the VWAP falls below 0.3 pence or there is no VWAP on any day during a Pricing Period (reductions of 20 per cent. and 10 per cent. per day where the VWAP falls below 0.3p or there is no VWAP, for a 5 day and 10 day Pricing Period respectively).
Acuitas is restricted from selling any Ordinary Shares during a Pricing Period and it, and its affiliates, are banned from engaging in any short selling of the Company's securities. Acuitas is also subject to a daily volume trading restriction not exceeding 20% of the aggregate volume of Ordinary Shares traded on that particular trading day.
In consideration for entering into the ELA, the Company paid Acuitas a commission of £100,000, satisfied by the allotment and issue of 16,351,625 new Ordinary Shares at a price of 0.61156 pence per share, calculated, pursuant to the ELA, as the average of the VWAPs of the Ordinary Shares over the 5 trading days up to and including 21 May 2020.
Financial Review
The Group loss for the 6 months ended 30 June 2020 was £508,000 compared to a loss of £1,699,000 for the corresponding period in 2019, reflecting a significant reduction in the share of losses of associates of £380,000 (2019: £1,023,000) and a reversal of the provision for VAT not claimable in the net amount of £244,000, following a decision by HMRC in favour of the Company's VAT position, post balance sheet date.
During the Period, production from the Group's California assets generated revenues of £570,000 (2019: £390,000) and gross profit of £79,000 (2019: £172,000), reflecting the impacts of Covid related issues which delayed the ability to construct permanent facilities and keep certain wells on production.
Total administration costs for the Period of £253,000 were lower than the corresponding period in 2019 of £368,000, reflecting the positive impacts of foreign exchange gains and the reversal of the provision for VAT not claimable, offsetting increased advisory, legal, staffing costs and Discretionary Facility establishment fees, resulting from increased activity levels.
For the six months ended 30 June 2020, the Group net cash used in operating activities was £567,000 (2019: net used of £175,000). The net cash outflows from investing activities decreased from £4,178,000 for the 6 months ending 30 June 2019 to £227,000 for the 6 months ended 30 June 2020, noting the significant investment activities in the second half of 2019, principally in Rathlin. During the Period, the Group did not have any cash flows from financing activities, as was the case in the corresponding period in 2019.
Cash and cash equivalents as at 30 June 2020 was £5,485,000 (2019: £2,765,000).
The Group total net assets and net current assets as at 30 June 2020 were £39,826,000 (2019: £17,802,000) and £5,962,000 (2019: £2,797,000) respectively.
Outlook
We are highly encouraged by the success we have had so far in the implementation of our strategy to invest in low-risk, high impact, upstream oil and gas projects. With a portfolio that contains interests in the Danube, Corallian and Rathlin prospects, all of which had appraisal campaign drilling in 2019, and the further drilling programmes in California following the success in the US to date, together with a number of other projects currently under review, the Board is confident that its shareholders can look forward to an exciting 2020 and beyond.
This report was approved by the Board and signed on its behalf:
Jeremy Edelman
Chairman
22 September 2020
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2020
Unaudited
Unaudited
Audited
6 months to
6 months to
12 months to
30-Jun-20
30-Jun-19
31-Dec-19
Notes
£'000
£'000
£'000
Revenue
570
390
1,452
Cost of sales
3
(490)
(218)
(856)
Gross profit
80
172
596
Net gain in financial assets measured at fair value through P&L
-
-
-
Other income
35
14
71
Exploration costs
-
(189)
(192)
Impairment
-
(147)
(160)
Administration expenses
(153)
(368)
(1,387)
Share based payments expense
6, 7
(100)
(167)
(192)
Loss on ordinary activities
(138)
(685)
(1,264)
Share of losses of associates
(380)
(1,023)
(2,952)
Finance income
10
9
17
Loss before tax for the period
(508)
(1,699)
(4,199)
Taxation
-
-
-
Loss for the financial period
(508)
(1,699)
(4,199)
Other comprehensive income:
Foreign exchange gain on translation of foreign subsidiaries
107
7
(67)
Other comprehensive income
107
7
(67)
Total comprehensive loss for the financial period
(401)
(1,692)
(4,266)
Attributable to:
Equity holders
(401)
(1,692)
(4,266)
(401)
(1,692)
(4,266)
Earnings per share
Basic and fully diluted loss per share (pence)
2
(0.006)
(0.04)
(0.11)
GROUP STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
Unaudited
Unaudited
Audited
30-Jun-20
30-Jun-19
31-Dec-19
Notes
£'000
£'000
£'000
ASSETS
Non-current assets
Exploration & evaluation assets
3,288
3,114
3,507
Property, plant & equipment
5,369
4,203
4,400
Investments in associates
4
25,233
7,673
25,613
Goodwill on acquisition
329
329
329
Investments in equity instruments
5
15
15
15
34,234
15,334
33,864
Current assets
Inventory
20
11
19
Prepayments
25
8
58
Trade and other receivables
584
658
855
Restricted cash
202
197
341
Cash and cash equivalents
5,485
2,765
6,717
6,316
3,639
7,990
Total assets
40,550
18,973
41,854
EQUITY
Capital and reserves
Share capital
6
6,861
3,937
6,845
Share premium account
19,768
25,314
19,685
Capital redemption reserve
200
200
200
Share based payment reserve
1,746
1,721
1,746
Foreign currency translation reserve
107
74
-
Retained earnings
11,143
(13,444)
11,651
Total shareholders' funds
39,826
17,802
40,127
LIABILITIES
Current liabilities
Trade and other payables
278
346
902
Provisions
-
213
299
Accruals
76
283
130
355
842
1,331
Non-current liabilities
Deferred tax liability
329
329
329
Provision for decommissioning
40
-
67
369
329
396
Total equity and liabilities
40,550
18,973
41,854
GROUP STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2020
Unaudited
Unaudited
Audited
6 months to
6 months to
12 months to
30-Jun-20
30-Jun-19
31-Dec-19
Note
£'000
£'000
£'000
Cash flows from operating activities
Loss for the financial period
(508)
(1,699)
(4,199)
Adjustments:
Net gain on financial assts at FV through profit or loss
-
-
-
Capitalised E&E expenditure expensed to exploration costs
-
189
192
Depreciation
161
47
237
Impairment
-
147
160
Share based payments
6, 7
100
167
192
Operating cash flows before movement in working capital
(247)
(1,149)
(3,418)
(Increase)/decrease in receivables
271
(233)
(430)
Increase/(decrease) in payables and accruals
(677)
108
512
Increase/(decrease) in provisions
(299)
29
115
Increase/(decrease) in provision for decommissioning
(27)
-
67
(Increase)/decrease in prepayments
33
26
(27)
Decrease/(increase) in inventory
(1)
21
13
Cash used in operating activities
(947)
(1,198)
(3,168)
Share of losses of associates
4
380
1,023
2,952
Net cash used in operating activities
(567)
(175)
(216)
Net cash flows from investment activities
Acquisition of investments in associates
4
-
(1,126)
(20,995)
Acquisition of investments in equity instruments
5
-
-
-
Expenditure on oil & gas property
(309)
(2,858)
(3,258)
Expenditure on E&E assets
(57)
(173)
(567)
Cash acquired on acquisition of subsidiary
-
-
-
Additions to restricted cash
139
(21)
(165)
Loan to subsidiary pre-acquisition
-
-
-
Net cash used in investment activities
(227)
(4,178)
(24,985)
Cash flows from financing activities
Share placement net proceeds
-
-
24,873
Net cash generated from financing activities
-
-
24,873
Net increase/(decrease) in cash and cash equivalents
(794)
(4,353)
(328)
Net foreign exchange difference
(438)
6
(67)
Cash and cash equivalents at the beginning of the period
6,717
7,112
7,112
Cash and cash equivalents at the end of the period
5,485
2,765
6,717
Cash and cash equivalents comprises:
Cash and cash equivalents
5,485
2,765
6,717
Overdraft and borrowings
-
-
-
5,485
2,765
6,717
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2020
Share
capital
Share premium
account
Capital Redemp-tion reserve
Share based payments reserve
Foreign currency translat-ion reserve
Retained earnings
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Balance 31 December 2018 - audited
3,935
25,301
200
1,554
67
(11,745)
19,312
Total comprehensive income for period
-
-
-
-
-
(1,699)
(1,699)
Changes in equity for period to
30 June 2019
Issue of share capital
2
13
-
-
-
-
15
Share based payments
-
-
-
167
-
-
167
Revaluation of equity instruments
-
-
-
-
7
-
7
Balance 30 June 2019 - unaudited
3,937
25,314
200
1,721
74
(13,444)
17,802
Total comprehensive income
-
-
-
-
-
(2,500)
(2,500)
Changes in equity for period to
31 December 2019
Issue of share capital
2,908
23,743
-
-
-
-
26,651
Transaction costs on issue of share capital
-
(1,777)
-
-
-
-
(1,777)
Capital reduction
-
(27,595)
-
-
-
27,595
-
Share based payments
-
-
-
25
-
-
25
Other comprehensive income
-
-
-
-
(74)
-
(74)
Balance 31 December 2019 - audited
6,845
19,685
200
1,746
-
11,651
40,127
Total comprehensive income
-
-
-
-
-
(508)
(508)
Changes in equity for period to
30 June 2020
Issue of share capital
16
84
-
-
-
-
100
Other comprehensive income
-
-
-
-
107
-
107
Balance 30 June 2020 - unaudited
6,861
19,768
200
1,746
107
11,143
39,826
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2020
1. Basis of preparation
These interim financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2019 Annual Report. The financial information for the half years ended 30 June 2020 and 30 June 2019 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.
The annual financial statements of Reabold Resources Plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2019 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2019 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2019 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
After making enquiries, the directors have a reasonable expectation that the Company has adequate resources and support from key shareholders to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly financial statements.
The same accounting policies, presentation and methods of computation are followed in these condensed financial statements as were applied in the Company's latest annual audited financial statements, with additional information in respect of significant accounting policies disclosed below.
The IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Company.
2. Loss per share
The calculations of the basic and diluted earnings per share are based on data the following:
Unaudited
6 months to
30-Jun-20
£'000
Unaudited
6 months to 30-Jun-19
£'000
Audited
12 months to 31-Dec-19
£'000
Loss for the year
(401)
(1,692)
(4,266)
Loss for the purpose of basic earnings per share
(401)
(1,692)
(4,266)
Number of shares
Weighted average number of ordinary shares in issue during the year
6,734,224,240
3,822,649,968
3,822,854,007
Loss per share
Basic loss per share (pence)
(0.006)
(0.04)
(0.11)
As the Group is reporting a loss in each period, in accordance with IAS 33, outstanding share options are not considered to be dilutive because the exercise of the share options would have the effect of reducing the loss per share.
3. Cost of sales
Unaudited
Unaudited
Audited
30-Jun-20
30-Jun-19
31-Dec-19
£'000
£'000
£'000
Production costs
215
93
329
Royalties
114
78
290
Depreciation of oil & gas assets
161
47
237
490
218
856
4. Investments in associates
The table below represents the Company's associates, in which it has significant influence:
Holding
Holding
Holding
Country of
Nature of
Class of
Unaudited
Unaudited
Audited
Associate
registration
Registered address
business
shares
30-Jun-20
30-Jun-19
31-Dec-19
Corallian Energy Limited
England & Wales
Blackstable House, Longridge, Sheepscombe, Stroud, Gloucestershire, GL6 7QX
Oil & gas
Ordinary
34.9%
32.9%
34.9%
Danube Petroleum Limited
England & Wales
3 Waterfront Business Park, Brierley Hill, West Midlands, DY5 1LX
Oil & gas
Ordinary
50.8%
37.5%
50.8%
Rathlin Energy (UK) Limited
England & Wales
3rd Floor, 11-12 St James' Square, London, SW1Y 4LB
Oil & gas
Ordinary
59.5%
36.0%
59.5%
All of the Company's associates are unlisted. A breakdown of investments in associates as at 30 June 2020 and comparative periods along with the respective changes during the period then ended are summarised as follows:
Unaudited
Unaudited
Audited
30-Jun-20
30-Jun-19
31-Dec-19
£'000
£'000
£'000
At 1 January
25,613
7,570
7,570
Additions
-
1,126
20,995
Share of profit/(loss) of associates
(380)
(1,023)
(2,952)
At 30 June
25,233
7,673
25,613
During the six months ended 30 June 2020, the Company increased its investment in associates by £Nil (2019: £1,126,000). Reabold's share of loss of associates for the Period was £380,000 (2019: £1,023,000).
5. Investments in equity instruments
Unaudited
Unaudited
Audited
30-Jun-20
£'000
30-Jun-19
£'000
31-Dec-19
£'000
At 1 January
15
-
-
Addition at cost
-
15
15
At 30 June
15
15
15
During the six months ended 30 June 2020, the Company made an investment in equity instruments of £Nil (2019: £15,000).
6. Called up share capital
30-Jun-20
No. shares
30-Jun-19
No. shares
31-Dec-19
No. shares
Ordinary shares
Opening ordinary shares of 0.10 pence each
6,730,630,476
3,821,074,719
3,821,074,719
Issue of new ordinary shares of 0.10 pence each
16,351,265
1,980,000
2,909,555,757
Closing ordinary shares of 0.10 pence each
6,746,981,741
3,823,054,719
6,730,630,476
"A" Deferred Share
Opening "A" Deferred Share of 1.65 pence each
6,915,896
6,915,896
6,915,896
Closing "A" Deferred Share of 1.65 pence each
6,915,896
6,915,896
6,915,896
30-Jun-20
£'000
30-Jun-19
£'000
31-Dec-19
£'000
Ordinary shares
Opening ordinary shares of 0.10 pence each
6,731
3,821
3,821
Issue of new ordinary shares of 0.10 pence each
16
2
2,910
Closing ordinary shares of 0.10 pence each
6,747
3,823
6,731
"A" Deferred Share
Opening "A" Deferred Share of 1.65 pence each
114
114
114
Closing "A" Deferred Share of 1.65 pence each
114
114
114
On 26 May 2020 the Company issued 16,351,265 new Ordinary Shares of 0.1p each at a price of 0.61156 pence per share in consideration for a £100,000 commission payable to Acuitas for arranging a discretionary equity line cash facility.
7. Share options and share based payments
During the six months ended 30 June 2020, the Company granted nil options (2019: nil). At 30 June 2020 there were 315,000,000 share options outstanding (2019: 315,000,000).
Option Holder
At
1 January 2020
No.
Issued during the period
No.
Lapsed / Exercised during the period
No.
At
30 June 2020
No.
Exercise Price
Pence
Vesting Date
Expiry Date
Sachin Oza
30,000,000
-
-
30,000,000
0.50p
19/10/2017
19/10/2021
Sachin Oza
30,000,000
-
-
30,000,000
0.75p
19/10/2018
19/10/2021
Sachin Oza
30,000,000
-
-
30,000,000
1.00p
19/04/2019
19/10/2021
Sachin Oza
20,000,000
-
-
20,000,000
0.60p
19/03/2018
19/03/2022
Sachin Oza
20,000,000
-
-
20,000,000
0.90p
14/03/2019
19/03/2022
Sachin Oza
20,000,000
-
-
20,000,000
1.20p
14/09/2019
19/03/2022
Stephen Williams
30,000,000
-
-
30,000,000
0.50p
19/10/2017
19/10/2021
Stephen Williams
30,000,000
-
-
30,000,000
0.75p
19/10/2018
19/10/2021
Stephen Williams
30,000,000
-
-
30,000,000
1.00p
19/04/2019
19/10/2021
Stephen Williams
20,000,000
-
-
20,000,000
0.60p
19/03/2018
19/03/2022
Stephen Williams
20,000,000
-
-
20,000,000
0.90p
14/03/2019
19/03/2022
Stephen Williams
20,000,000
-
-
20,000,000
1.20p
14/09/2019
19/03/2022
Anthony Samaha
10,000,000
-
-
10,000,000
0.50p
19/10/2017
19/10/2021
Anthony Samaha
5,000,000
-
-
5,000,000
0.60p
19/03/2018
19/03/2022
315,000,000
-
-
315,000,000
The number and weighted average exercise prices of share options are as follows:
At 30 June 2020
At 30 June 2019
Weighted average exercise price
Number of options
Weighted average exercise price
Number of options
Outstanding at 1 January
0.80
315,000,000
0.80
315,000,000
Granted during the period
-
-
-
-
Forfeited during the period
-
-
-
-
Exercised during the period
-
-
-
-
Outstanding at 30 June
-
-
0.80
315,000,000
Exercisable at 30 June
0.80
315,000,000
0.74
275,000,000
The options outstanding at 30 June 2020 have a weighted average contractual life of 1.47 years (2019: 2.47 years).
The closing share price range during the six months ended 30 June 2020 was 0.235p to 0.785p.
For the options granted, IFRS 2 "Share-Based Payment" is applicable, and the fair values were calculated using the Black-Scholes model. The inputs into the model were as follows:
Risk free rate
Share price volatility
Expected life
Share price at date of grant
Granted 14 March 2018
1.05%
120%
4 years
0.65p
Granted 19 October 2017
0.72%
120%
4 years
0.77p
Expected volatility was determined by calculating the historical volatility of the Company's share price.
The Company recognised total expenses relating to equity-settled share-based payment transactions during the period of £100,000 (2019: £167,000).
8. Events after the reporting period
On 29 July 2020, the Company announced the completion of the acquisition of a 16.665 per cent. interest in PEDL 183 from Humber, following the satisfaction of the conditions precedent. Accordingly, the 350,000,000 Consideration Shares were issued to Humber.
On 27 August 2020, the Company was advised by HMRC that following an extensive review of Reabold's activities, it is engaged in taxable activities and thereby entitled to recover input tax which have a direct and immediate link with taxable supplies made by the Company. Accordingly, HMRC advised that it would release payment of the Company's outstanding VAT claims as soon as possible. On 7 September 2020, the Company received a refund from HMRC of £246,000 in respect of VAT.
9. General Information
Reabold Resources Plc is a company registered in England and Wales under the Companies Act. Registered in England number 3542727 at The Broadgate Tower, 8th Floor, 20 Primrose Street, London, England, EC2A 2EW. The principal activity of the Company is that of an investing company in accordance with the AIM Rules for Companies.
10. Availability of this announcement
Copies of this announcement are available from the Company's website www.reabold.com.
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