REG - Reabold Resources - Unaudited HY Results for 6 months ended 30/06/22
30/09/2022 07:01
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RNS Number : 2502B Reabold Resources PLC 30 September 2022
30 September 2022
REABOLD RESOURCES PLC
("Reabold" or the "Company")
Unaudited Interim Results for six months ended 30 June 2022
Reabold Resources plc (AIM: RBD), the AIM quoted investing company with a
portfolio of upstream oil and gas projects, announces its unaudited interim
results for the six months ended 30 June 2022. The results are included below
and are also available at
https://reabold.com/investor-relations/reports-and-presentations/
(https://reabold.com/investor-relations/reports-and-presentations/) .
Highlights
· Offer from an oil and gas major for Corallian and its Victory
licence, in which Reabold holds a 49.99% interest:
o Conditional sale agreed post period end in September 2022 1 (#_ftn1) ;
total gross cash consideration for Corallian of £32 million in staged
payments; Reabold's share of net proceeds c.£12.7 million
o Reabold a key facilitator in progressing the Victory gas asset to the
point of development and monetisation; valuation achieves significant uplift
on Reabold's investment
· Acquisition of remaining Corallian assets for £250,000 with economic
effective date of 4 May 2022 - completion announced in September 2022 2
(#_ftn2) ; six North Sea licences acquired with attractive development and
monetisation prospects
· Encouraging developments at West Newton in first half and post period
end
o Planning granted for drilling and production at Rathlin's West Newton A
site, as well as a time extension to allow for further exploratory drilling at
the West Newton B site, paving the way for the next phase of activity at West
Newton towards development
o Rigorous internal and external technical testing throughout 2021 and the
first half of 2022 underpins strong economic and strategic value of West
Newton; CoreLab analysis demonstrates actual reservoir fluid flow through
several reservoir samples
o First horizontal appraisal well planned for 2023 as part of phased
investment programme to considerably de-risk the project
o Post period end CPR published in September 2022 confirms gross 2C unrisked
technically recoverable resources of 197.6 bcf of sales gas, with an estimated
86% geological chance of success
· Converted drilling and production success in subsidiary Reabold
California LLC into a 42% stake in Daybreak Oil & Gas Inc ("Daybreak"), an
OTC traded, Californian oil and gas operator; the transaction in May 2022
creates liquidity for Reabold and forms a new, cash flow producing business
with good growth prospects
· Net cash of £3.6m at 30 June 2022; financial flexibility and funding
of development opportunities will be further improved with Corallian sale
proceeds
· On 28 September 2022, Reabold announced it has agreed to
conditionally acquire the entire issued share capital of Simwell Resources
Limited, which includes interests in four Southern North Sea licences(1)
· Appointment of CFO Chris Connolly in May 2022; former Finance
Director Anthony Samaha appointed Non-Executive Director
1 See Note 14 for further information
2 An additional £93,000 was paid on 14 September 2022 to reflect interim
period cashflows between the economic effective date of 4 May 2022 and
completion
Financial Results
· As at 30 June 2022, the company had no borrowings and cash and cash
equivalents of £3.6 million
· Capital expenditure in the first half of the year was £451,000 (H1
2021: £599,000)
· Net cash used in operating activities was £844,000 in H1 2022 (H1
2021: £550,000). The increase was driven largely as a result of higher
operating costs in the US and adverse working capital movements
· Upon completion of the equity exchange with Daybreak, Reabold
derecognised its interest in Reabold California LLC in exchange for
recognising an investment in Daybreak as a financial asset measured at fair
value. Within the first half results, the loss on disposal and subsequent gain
in fair value led to a net charge of £1.2 million 3 (#_ftn3)
(3)See Note 3 for further information
Sachin Oza and Stephen Williams, Co-CEOs of Reabold, commented:
"We made good progress in the first half of 2022 and have confidence in the
value creation opportunities that lie ahead for Reabold and its shareholders.
The impending monetisation of the Victory asset is a major milestone for us.
The sale has demonstrated the cycle of our investment strategy, attracting an
oil & gas major to acquire the asset we identified at the early stage of
development as low-risk, under-valued and strategically important. The
transaction also provides us with greater financial capacity to fund
development and subsequent value realisation in our other investments,
primarily the excellent prospect of West Newton in the near-term.
Reabold has continued to invest in the development of new UK hydrocarbon
resources, acquiring six new North Sea licences from Corallian, and agreeing
to acquire interests in another four North Sea Licences via the transaction to
buy Simwell Resources post period end. We recognise the important role we can
take in contributing to the security and affordability of the UK's energy
supplies.
Reabold can look forward to an exciting future. We will continue with our
disciplined strategy to allocate capital to undervalued oil & gas assets
where their development benefits from being close to existing infrastructure."
Enquiries:
Reabold Resources plc c/o Camarco
Sachin Oza +44 (0) 20 3757 4980
Stephen Williams
Strand Hanson Limited - Nominated & Financial Adviser +44 (0) 20 7409 3494
James Spinney
Rory Murphy
James Dance
Stifel Nicolaus Europe Limited - Joint Broker +44 (0) 20 7710 7600
Callum Stewart
Simon Mensley
Ashton Clanfield
Panmure Gordon - Joint Broker +44 (0) 207 886 2733
Hugh Rich
Nick Lovering
Camarco
James Crothers +44 (0) 20 3757 4980
Rebecca Waterworth reabold@camarco.co.uk
Billy Clegg
Forward looking statements
This disclosure contains certain forward-looking statements with respect to
the business of Reabold and certain of the plans and objectives of Reabold
that involve substantial known and unknown risks and uncertainties. By their
nature, forward-looking statements involve risk and uncertainty because they
relate to events and depend on circumstances that will or may occur in the
future and are outside the control of Reabold. Actual results or outcomes, may
differ materially from those expressed in such statements, depending on a
variety of factors, including: the impact of general economic conditions where
Reabold operates, industry conditions, changes in consumer preferences and
societal expectations, the pace of development and adoption of alternative
energy solutions, changes in laws and regulations including the adoption of
new environmental laws and regulations and changes in how they are interpreted
and enforced, increased competition, the timing of bringing new fields
onstream, fluctuations in foreign exchange or interest rates, stock market
volatility, the success or otherwise of partnering, Reabold's access to future
credit resources, and other risk factors discussed in Reabold's 2021 Annual
Report. Accordingly, no assurances can be given that any of the events
anticipated by the forward looking statements will transpire or occur, or if
any of them do so, what benefits, including the amount of proceeds, that
Reabold will derive therefrom.
Review of Operations
UK Onshore
Rathlin Energy (UK) Limited and West Newton - PEDL183
West Newton is an onshore hydrocarbon discovery located north of Hull,
England. To date, three wells have been drilled at West Newton (A-1, A-2 and
B-1Z) confirming a major discovery - potentially one of the largest
hydrocarbon fields discovered onshore UK. Rathlin Energy (UK) Limited
(Rathlin) is the operator of the licence and holds a 66.67% interest.
Reabold has a 59.5% shareholding in Rathlin and a direct 16.67% in the licence
giving the company an aggregate c. 56% economic interest in West Newton.
In March 2022, the Company announced that planning applications for drilling
and production at Rathlin's West Newton A site were approved. A time extension
to allow for further exploratory drilling at the West Newton B site was also
granted. These approvals pave the way for the next phase of activity at West
Newton and the partnership continues to move the project forward towards
development.
In the first half of the year, the conceptual development plan for West Newton
progressed well, following extensive third-party technical analysis and
confirmation of the resource potential. The development plan consists of an
initial five well development drilling campaign with first gas anticipated
mid-2026. The Joint Operation consisting of Reabold, Rathlin and Union Jack
Oil plc, intends to drill the low-cost wells in a manner which phases the
development cost, significantly de-risking the financial profile of the
project. The first development well, planned for 2023, will materially de-risk
the project at modest cost.
In addition, Rathlin commissioned a CPR effective 30 June 2022 to evaluate the
oil and gas resources contained within PEDL 183. The report was finalised and
announced on 29 September 2022. The CPR identified the following:
· Estimated geological chance of success at West Newton of 86%
· Gross 2C unrisked technically recoverable resource of 197.6 bcf of
sales gas
· Prospective resource potential from adjacent sites at Spring Hill,
Withernsea and Ellerby of a combined gross 2U unrisked recoverable resource of
363.7 bcf of sales gas
· Estimated geological chance of success at Spring Hill, Withernsea and
Ellerby of 43%
· NPV10 of US$396 million on a 100% basis for West Newton equating to
US$222 million net for Reabold's economic interest.
The full CPR can be found on our website: www.Reabold.com
(http://www.Reabold.com) .
UK Offshore
Corallian Energy Limited - P2596 (Victory), P2605, P2493, P2464, P2504, P2396
(all 100%) and P2478 (36%)
Reabold holds a 49.99% interest in Corallian. As at 30 June 2022, Corallian
had interests in seven licences in the North Sea, including the Victory gas
discovery in the West of Shetland. A draft Field Development Plan for the
Victory gas field was submitted by Corallian at the end of 2021.
On 4 May 2022, Reabold announced that Corallian had received a non-binding,
conditional offer from a credible party for the acquisition of its entire
issued share capital (the "Potential Sale"). Corallian's board considered the
Potential Sale to be sufficiently attractive to seek to conclude a sale
process and has been progressing negotiations with the oil and gas major. The
terms of the conditional Potential Sale were announced on 14 September 2022.
The Potential Sale is due to complete in Q4 2022 and will be a major milestone
for the Company in demonstrating the execution of its strategy by way of
monetising its investment. See Note 14 for further information.
As part of the Potential Sale process, Reabold entered into a conditional Sale
and Purchase Agreement ("SPA") to acquire Corallian's working interest in all
the non-Victory licences within the Corallian portfolio. The initial cash
consideration of £250,000 was paid on 4 May 2022 being the economic effective
date for the transaction. The acquisition completed on 15 September 2022 with
an additional payment made of £93,000 to reflect interim period cashflows
between the economic effective date and completion. The newly acquired
licences are close to infrastructure and hold promising prospects with
development potential.
USA
Daybreak Oil and Gas Inc
On 26 May 2022, Reabold announced the completion of the equity exchange
agreement with Daybreak.
Reabold California LLC, which holds, inter alia, licence interests in
California, became a wholly owned subsidiary of Daybreak, which, in exchange,
issued 160,964,489 new Daybreak shares to Reabold equating to 42% of
Daybreak's currently issued share capital. The transaction has created a
self-funded, OTC traded, Californian oil and gas operator with significant
growth potential. Daybreak will utilise its existing in-state management team
and expertise to grow the portfolio through development of existing licences
as well as considering strategic acquisition opportunities. The value of
Reabold's investment in Daybreak had increased by £1.3 million between
initial investment and 30 June 2022. For more information see Note 3 and Note
13.
Production from the Californian licences West Brentwood and Monroe Swell, in
which Reabold had a 50% working interest, for the period from 1 January 2021
to 25 May 2022 (the day prior to the completion of the equity exchange
agreement) was 7,628boe net to Reabold, generating revenues of US$736,000 (or
£560,000 using the average rate between 1 January 2022 and 25 May 2022).
Romania
Danube Petroleum Limited - Parta licence
Reabold has a 50.8% equity position in Danube Petroleum Limited ("Danube"),
with ASX listed ADX Energy Ltd ("ADX") holding the remaining 49.2%. Danube
has a 100% interest in the Parta licence in Romania, which includes the IMIC-1
discovery and the IMIC-2 prospect.
Activity in Romania, conducted via our investment alongside ADX in Danube, was
deferred in the first half of 2022 which enabled Reabold to direct its
near-term strategic priorities on activities in the UK such as adding to our
acreage position in the North Sea, technical analysis at West Newton and
closing out the sale of Corallian.
Financial Review
Group Income Statement
The Group's loss for the first half of 2022 was £2.7 million (1H 2021 - loss
of £1.4 million).
Net sales volumes for the half year comprised 7,628boe (1H 2021: 12,606boe).
The reduced volumes were primarily due to well workovers and also reflected
the fact that Reabold held a direct 50% working interest in the Californian
licences for the first five months only in 2022 as a result of the completion
of the equity exchange agreement in May 2022. The sales volumes generated
total 1H 2022 revenues of US$736,000/£560,000 (1H 2021:
US$777,000/£560,000). This represented an average realised sales price of
US$96/boe (1H 2021: US$61/boe).
The gross loss for 1H 2022 of £274,000 (1H 2021: gross loss of £7,000) was
after overall cost of sales of £834,000 (1H 2021: £567,000). This comprised
£404,000 of production costs (1H 2021: £338,000), royalties of £112,000 (1H
2021: £112,000) and £318,000 of non-cash depreciation charges on oil and gas
assets (1H 2021: £117,000). The increase in depreciation charges largely
reflected revisions in reserves estimates.
As a result of the completion of the equity exchange agreement with Daybreak
on 26 May 2022, Reabold no longer consolidates Reabold California LLC from
that date. On the date of completion Reabold recognised the fair value of its
investment in Daybreak, treating it prospectively as a financial asset at fair
value. The resulting loss attributable to the equity exchange agreement was
£2.3 million. This charge was offset by a gain of £1.2 million in the
period, representing the increase in fair value of Reabold's investment in
Daybreak since completion.
Reabold's share of loss of associates was £1.2 million (1H2021: £0.4
million). The increase was largely due to non-cash impairment charges in
Corallian. See Note 11 for more information
The Group's administrative expenses for the period were £722,000 (1H 2021:
£868,000), whilst currency gains of £695,000 (1H 2021: losses of £79,000)
arose on US dollar denominated loan receivables and financial assets.
Group Balance Sheet
During the first half of 2022, net assets decreased by £2.7 million. At
completion of the equity exchange agreement, Reabold no longer had "control"
over Reabold California as set out under IFRS. As a result, net assets of
£7.7 million including exploration and evaluation assets of £3.3 million and
oil and gas assets of £4.5 million were derecognised from the balance sheet
and the fair value of the investment in Daybreak was recognised at completion
at £5.3 million. At the end of the period, the value of Reabold's
investment in Daybreak had increased to £6.6 million.
Exploration and evaluation assets of £6.3 million showed a decrease from
£9.1 million at the end of 2021 reflecting the divestment of Reabold
California.
Property, plant and equipment decreased from £4.3 million at year end of 2021
to £nil as a result of the divestment of Reabold California.
Other balance sheet items that showed significant reductions since December
2021 as a result of the equity exchange with Daybreak were goodwill (decrease
of £329,00), restricted cash (decrease of £186,000), trade and other
payables (decrease of £183,000) and deferred tax liabilities (decrease of
£329,000).
Trade and other receivables increased by £144,000 in the period as a result
of the £250,000 advance payment to acquire six North Sea Licences from
Corallian. This amount was reclassified to E&E assets at completion on 15
September. The 1H2022 increase in trade and other receivables was offset by
the derecognition of trade and other receivables in the USA segment as a
result of the disposal of Reabold California LLC.
Cash balances and Future commitments
The cash balance at 30 June 2022 was £3.6m, a decrease of £1.3m since 31
December 2021. Net cash used in operating activities was £844,000 compared
with £550,000 for the same period last year. Capital expenditure for the
period was £451,000 which included £125,000 at West Newton and £250,000 for
the acquisition of six exploration licences from Corallian. The Group has no
debt. As at 30 June 2022, Reabold's share of authorised capital expenditure
for West Newton for the remainder of 2022 was c.£0.2 million. In August 2022,
Reabold authorised a further £0.2 million of capital expenditure for its
share of preliminary work on the development well at West Newton expected to
be drilled in 2023.
Second Half Outlook
For the second half of the year, Reabold will continue with preliminary work
on the West Newton development well. The sale of Corallian positions us well
to take advantage of the opportunities to develop our portfolio and we
continue to work on a number of opportunities to grow the Company.
Approved on behalf of the Board
Sachin Oza and Stephen Williams
Co-Chief Executive Officers
29 September 2022
Reabold Resources plc
Group Income Statement
For the period ended 30 June 2022
Six months ended 30 June 2022 £000 Six months ended 30 June 2021 £000 Year ended 31 Dec 2021 £000
(Unaudited) (Unaudited) (Audited)
Notes
Revenue 560 560 1,160
Cost of sales 6 (834) (567) (1,312)
Gross profit (274) (7) (152)
Net gain in financial assets measured at fair value through profit or loss 3 1,165 30 55
Other income 26 27 51
Other expenses (89) - -
Loss on sale of business 3 (2,345) - -
Administration expenses (722) (868) (1,710)
Share based payments expense 12 (17) (70) (152)
Foreign exchange gain/(loss) 695 (79) 47
Loss on ordinary activities (1,561) (967) (1,861)
Share of losses of associates 11 (1,185) (411) (801)
Finance costs - unwinding of discount on decommissioning provisions (9) (7) (14)
Finance income 39 1 1
Loss before tax for the period (2,716) (1,384) (2,675)
Taxation - - -
Loss for the period (2,716) (1,384) (2,675)
Attributable to:
Reabold shareholders (2,716) (1,384) (2,675)
(2,716) (1,384) (2,675)
Earnings per share
Basic and fully diluted loss per share (pence) (0.03) (0.02) (0.03)
Reabold Resources plc
Group statement of comprehensive income
For the period ended 30 June 2022
Six months ended 30 June 2022 £000 Six months ended 30 June 2021 £000 Year ended 31 Dec 2021 £000
(Unaudited) (Unaudited) (Audited)
Notes
Loss for the period (2,716) (1,384) (2,675)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Currency translation differences 71 1 48
Exchange (gains) on translation of foreign operations reclassified
to loss on sale of business 3 (80) - -
Other comprehensive income/(loss) (9) 1 48
Total comprehensive loss (2,725) (1,383) (2,627)
Attributable to
Reabold Shareholders (2,725) (1,383) (2,627)
Reabold Resources plc
Group balance sheet
As at 30 June 2022
30 June 2022 30 June 2021 31 Dec 2021
£000 £000 £000
Notes (Unaudited) (Unaudited) (Audited)
ASSETS
Non-current assets
Exploration & evaluation assets 8 6,300 8,131 9,123
Property, plant & equipment - 4,411 4,303
Investments in associates 11 22,663 28,106 27,716
Goodwill on acquisition - 329 329
Other investments 13 6,633 545 570
35,596 41,522 42,041
Current assets
Loans 3 217 - -
Inventory - 21 20
Prepayments 96 - 79
Trade and other receivables 316 201 172
Other investments 13 603 - -
Restricted cash 25 206 211
Cash and cash equivalents 3,554 6,398 4,883
4,811 6,826 5,365
Assets classified as held for sale 5 3,868 - -
8,679 6,826 5,365
Total assets 44,275 48,348 47,406
EQUITY
Capital and reserves
Share capital 10 9,044 9,044 9,044
Share premium account 29,033 29,033 29,033
Capital redemption reserve 200 200 200
Share based payment reserve 12 1,915 1,816 1,898
Foreign currency translation reserve - (38) 9
Retained earnings 3,592 7,599 6,308
Total shareholders' funds 43,784 47,654 46,492
LIABILITIES
Current liabilities
Trade and other payables 131 186 314
Accruals - - 83
131 186 397
Non-current liabilities
Deferred tax liability - 329 329
Provision for decommissioning 360 179 188
360 508 517
Total equity and liabilities 44,275 48,348 47,406
Reabold Resources plc
Group statement of changes in equity
For the period ended 30 June 2022
Share Share premium Capital Redemp-tion reserve Share based payments reserve Foreign currency translat-ion reserve Retained earnings Total
capital account
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 7,211 20,819 200 1,746 (39) 8,983 38,920
Loss for the year - - - - - (1,384) (1,384)
Other comprehensive income - - - - 1 - 1
Total comprehensive loss for the period - - - - 1 (1,384) (1,383)
Issue of share capital, net of direct issue costs 1,833 8,214 - - - - 10,047
Share based payment - - - 70 - - 70
At 30 June 2021 9,044 29,033 200 1,816 (38) 7,599 47,654
Loss for the period - - - - - (1,291) (1,291)
Other comprehensive income - - - - 47 - 47
Total comprehensive loss for the period - - - - 47 (1,291) (1,244)
Share based payment - - - 82 - - 82
At 31 December 2021 (audited) 9,044 29,033 200 1,898 9 6,308 46,492
Loss for the period - - - - - (2,716) (2,716)
Other comprehensive loss - - - - (9) - (9)
Total comprehensive loss for the period - - - - (9) (2,716) (2,725)
Share based payment - - - 17 - - 17
Balance 30 June 2022 (unaudited) 9,044 29,033 200 1,915 - 3,592 43,784
Reabold Resources plc
Group cash flow statement
For the period ended 30 June 2022
Six months ended 30 June 2022 £000 Six months ended 30 June 2021 £000 Year ended 31 Dec 2021 £000
(Unaudited) (Unaudited) (Audited)
Note
Operating activities
Loss for the period (2,716) (1,384) (2,675)
Adjustments to reconcile loss for the period to net cash used in operating
activities
Depreciation 6 318 117 358
Net (gain) loss on financial assts at fair value through profit or loss (1,165) 30 (55)
Net loss on sale of business 3 2,345 - -
Share of losses from associates 11 1,185 411 801
Net finance (income) costs (30) 6 13
Share-based payments 12 17 70 152
Other non-cash movements 89 - -
Unrealised currency translation (gains) (695) - -
(Increase) decrease in receivables (220) 263 214
(Increase) decrease in inventories (22) 13 14
Increase (decrease) in payables 50 (76) 140
Net cash used in operating activities (844) (550) (1,038)
Investing activities
Expenditure on oil and gas assets (8) (16) (40)
Expenditure on exploration & evaluation assets (193) (583) (1,497)
Acquisition of North Sea Licences (250) - -
Investments in associates - - (16)
Total cash capital expenditure (451) (599) (1,553)
Interest received 1 1 1
Acquisition of convertible loan notes - (1,000) (1,000)
Sale of convertible loan notes - 500 500
Movements in restricted cash (19) - -
Net cash disposed from sale of business (16) - -
Net cash used in investment activities (485) (1,098) (2,052)
Financing activities
Share placement net proceeds - 6,881 6,881
Net cash provided by financing activities 6,881 6,881
Currency translation differences relating to cash and cash equivalents - 26 (47)
(Decrease) increase in cash and cash equivalents (1,329) 5,259 3,744
Cash and cash equivalents at the beginning of the period 4,883 1,139 1,139
Cash and cash equivalents at the end of the period 3,554 6,398 4,883
Reabold Resources plc
Notes to the unaudited interim condensed consolidated financial statements
1. Corporate information
The interim condensed consolidated financial statements of Reabold Resources
plc and its subsidiaries (collectively, the "Group") for the six months ended
30 June 2022 were authorised for issue in accordance with a resolution of the
directors on 29 September 2022. Reabold Resources plc (the "Company") is a
public limited company, incorporated and domiciled in England & Wales,
whose shares are traded on AIM in London. The registered office is located at
20 Primrose Street, London, EC2A 2EW. The Group is principally engaged in the
investment in pre-cash flow upstream oil and gas projects.
2. Basis of preparation
The interim condensed consolidated financial statements for the six months
ended 30 June 2022 have been prepared in accordance with IAS 34 Interim
Financial Reporting. The Group has prepared the financial statements on the
basis that it will continue to operate as a going concern. The Directors
consider that there are no material uncertainties that may cast significant
doubt over this assumption. They have formed a judgement that there is a
reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future, and not less than 12 months
from the end of the reporting
period.
The interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements, and
should be read in conjunction with the Group's annual consolidated financial
statements as at 31 December 2021.
There are no new or amended standards or interpretations adopted from 1
January 2022 onwards that have a significant impact on the financial
information.
The financial information presented herein has been prepared in accordance
with the accounting policies expected to be used in preparing Reabold's annual
consolidated financial statements for the year ended 31 December 2022 which
are the same as those used in preparing Reabold's annual consolidated
financial statements for the year ended 31 December 2021, except for the
following new accounting policy.
Non-current assets held for sale
Non-current assets and disposal groups classified as held for sale are
measured at the lower of carrying amount and fair value less costs to sell.
Significant non-current assets and disposal groups are classified as held for
sale if their carrying amounts will be recovered through a sale transaction
rather than through continuing use. This condition is regarded as met only
when the sale is highly probable and the asset of disposal group is available
for immediate sale in its present condition subject to terms that are usual
and customary for sales of such assets. Management must be committed to the
sale, which should be expected to qualify for recognition as a completed sale
within one year from the date of classification as held for sale, and actions
required to complete the sale should indicate that it is unlikely that
significant changes to the plan will be made or that the plan will be
withdrawn.
Property, plant and equipment and intangible assets are not depreciated or
amortised, and equity accounting of associates and joint ventures is ceased
once classified as held for sale.
Significant accounting judgements and estimates
Reabold's significant accounting judgements and estimates were disclosed in
Reabold's Annual Report 2021. These have been subsequently considered at the
end of the period to determine if any changes were required to those
judgements and estimates.
Investment in Daybreak
Following Reabold's announcement on 26 May 2022 regarding the completion of
the equity exchange agreement with Daybreak, Reabold assessed whether it has
significant influence over Daybreak. Judgement is required in assessing the
level of control or influence over another entity in which the Group holds an
interest. For Reabold, the judgement that the Group does not have significant
influence over Daybreak even though it holds 42% of the voting rights is
significant. As a consequence of this judgement, Reabold accounts for its
interest in Daybreak as a financial asset measured at fair value within 'Other
investments'.
Significant influence is defined in IFRS as the power to participate in the
financial and operating policy decisions of the investee but is not control or
joint control of those policies. Significant influence is presumed when an
entity owns 20% or more of the voting power of the investee. Significant
influence is presumed not to be present when an entity owns less than 20% of
the voting power of the investee.
Reabold owns 42% of the voting shares in Daybreak. IFRS identifies several
indicators that may provide evidence of significant influence, including
representation on the board of directors of the investee and participation in
policy-making processes. Reabold does not have any directors on the Board of
Daybreak and does not actively participate in the financial and operating
policy decisions of Daybreak. Reabold does not exchange technical information
with Daybreak nor is there any interchange of managerial personnel. Reabold is
a passive investor and does not have the ability to exercise significant
influence over the operating and financial policies of Daybreak. Reabold's
management considers, therefore, that the group does not have significant
influence over Daybreak, as defined by IFRS. See Note 3 for further
information.
3. Investment in Daybreak
On 26 May 2022, Reabold announced the completion of the equity exchange
agreement with Daybreak. At completion of the equity exchange agreement,
Reabold no longer had "control" over Reabold California as set out under IFRS.
As a result, net assets of £7.7 million were derecognised from the balance
sheet of the Group and the fair value of the investment in Daybreak was
recognised at completion at £5.3 million. In addition, accumulated exchange
gains of £80,000 which were previously charged to equity were reclassified to
the income statement resulting in a loss on sale of business of £2.3 million.
This charge was offset by a gain of £1.3 million in the period representing
a £1.2 million increase in fair value of Reabold's investment in Daybreak
since completion and favourable foreign exchange movements of £0.1 million.
At the end of 1H 2022, the value of Reabold's investment in Daybreak was £6.6
million, and there was a loan outstanding from Reabold plc to Reabold
California of £217,000/$264,000. The loan is due to be repaid at the end of
Q3 2022. The results of the USA segment for the period are shown in Note 4.
4. Segmental information
The Directors consider the Group to have two segments, being Business Stream 1
(which encompasses the UK/European based investments in Corallian, Danube,
Rathlin and PEDL183) and Business Stream 2 (which encompasses the USA).
Corporate costs relate to the administration and financing costs of the
Company and are not directly attributable to the individual investments and
projects. The following tables present revenue and profit/(loss) information
for the Group's operating segments for the six months ended 30 June 2022 and
2021 and year ended 31 December 2021, respectively.
Period ended 30 June 2022 Business Stream1 UK/Europe Business Stream 2 USA Corporate Consolidation adjustments and eliminations Total
£000 £000 £000 £000 £000
Revenue 560 - 560
Segment loss (1,192) (1,382) (141) (1) (2,716)
Period ended 30 June 2021 Business Stream1 UK/Europe Business Stream 2 USA Corporate Consolidation adjustments and eliminations Total
£000 £000 £000 £000 £000
Revenue 560 - 560
Segment loss (416) (59) (909) - (1,384)
Year ended 31 December 2021 Business Stream1 UK/Europe Business Stream 2 USA Corporate Consolidation adjustments and eliminations Total
£000 £000 £000 £000 £000
Revenue - 1,160 - - 1,160
Segment loss (815) (244) (1,616) - (2,675)
The following table presents assets and liabilities information for the
Group's operating segments as at 30 June 2022, 30 June 2021 and 31 December
2021, respectively:
Business Stream1 UK/Europe Business Stream 2 USA Corporate Consolidation adjustments and eliminations Total
£000 £000 £000 £000 £000
Assets
30 June 2022 33,724 6,618 3,933 - 44,275
30 June 2021 33,756 7,872 12,960 (6,240) 48,348
31 December 2021 34,279 8,044 9,873 (4,790) 47,406
Business Stream1 UK/Europe Business Stream 2 USA Corporate Consolidation adjustments and eliminations Total
£000 £000 £000 £000 £000
Liabilities
30 June 2022 360 - 131 - 491
30 June 2021 141 6,420 373 (6,240) 694
31 December 2021 146 5,129 429 (4,790) 914
5. Non-current assets held for sale
As announced in May 2022, Corallian, an associate of Reabold, received a
non-binding, conditional offer from a credible party for the acquisition of
its entire issued share capital. Subject to regulatory and other approvals,
the transaction is expected to complete during the fourth quarter of 2022.
Reabold currently holds a 49.99% interest in Corallian. Assets of £3.9
million are classified as held for sale in the Group balance sheet at 30 June
2022. See Note 14 for further information.
6. Cost of Sales
Six months ended 30 June 2022 £000 Six months ended 30 June 2021 £000 Year ended 31 Dec 2021 £000
Production costs 404 338 722
Royalties 112 112 232
Depreciation of oil & gas assets (note 9) 318 117 358
834 567 1,312
7. Loss per share
Basic loss per ordinary share is calculated by dividing the loss for the
period attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period. 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.
Six months ended 30 June 2022 Six months ended 30 June 2021 Year ended 31 Dec 2021
Results for the period (£000)
Loss for the period attributable to Reabold shareholders (2,716) (1,384) (2,675)
Number of shares (thousand)
Basic weighted average number of shares outstanding 8,929,613 8,292,101 8,599,375
Basic loss per share (pence) (0.03) (0.02) (0.03)
Diluted loss per share (pence) (0.03) (0.02) (0.03)
8. Exploration and Evaluation Assets
Total
£000
Cost:
At 1 January 2021 7,586
Exchange adjustments 40
Additions 1,497
At 31 December 2021 9,123
Exchange adjustments 240
Additions 400
Disposals (3,463)
At 30 June 2022 6,300
The disposal of £3.5 million in 1H 2022 represents the derecognition of
E&E assets in California as a result of the equity exchange agreement with
Daybreak.
9. Property, Plant and Equipment
Oil and gas properties
£000
Cost
At 1 January 2021 5,502
Exchange adjustments 71
Additions 40
At 31 December 2021 5,613
Exchange adjustments 429
Additions 179
Disposals (6,221)
At 30 June 2022 -
Depreciation
At 1 January 2021 933
Exchange adjustments 19
Charge for the period (note 6) 358
At 31 December 2021 1,310
Exchange adjustments 114
Charge for the period (note 6) 318
Disposals (1,742)
At 30 June 2022 -
Net book amount
At 30 June 2022 -
At 31 December 2021 4,303
At 1 January 2021 4,569
The entire disposal amount in 1H 2022 represents the derecognition of oil and
gas properties in California as a result of the equity exchange agreement with
Daybreak.
10. Called-up Share Capital
As at 30 June 2022, the share capital of the Company comprised 8,929,612,550
ordinary shares of 0.1p each and 6,915,896 "A" Deferred shares of 1.65p. The
"A" deferred shares do not carry voting rights.
Allotted, issued and fully paid: Share Capital
Number £000
Ordinary shares of 0.1p each
At 1 January 2021 7,096,982,101 7,097
Shares issued 1,832,630,449 1,833
At 31 December 2021 8,929,612,550 8,930
At 30 June 2022 8,929,612,550 8,930
"A" Deferred shares 6,915,896 114
9,044
11. Investments in associates
The table below represents the Company's associates, in which it has
significant influence:
Associate As at June 2022 As at June 2021 As at 31 Dec 2021
% % %
Corallian Energy Limited 49.99% 49.99% 49.99%
Danube Petroleum Limited 50.8% 50.8% 50.8%
Rathlin Energy (UK) Limited 59.5% 59.5% 59.5%
All of the Company's associates are unlisted. A breakdown of investments in
associates as at 30 June 2022 and comparative periods along with the
respective changes during the period then ended are summarised as follows:
30 June 2022 30 June 2021 31 Dec 2021
£000 £000 £000
Balance at the beginning of the period 27,716 25,335 25,335
Additions - 3,182 3,182
Share of loss of associates (1,185) (411) (801)
Reclassified as assets held for sale (note 5) (3,868)
22,663 28,106 27,716
Reabold's share of loss of associates for the six months ended 30 June 2022
was £1.2 million (2021: £0.4 million). The increase in losses was mainly
attributable to non-cash charges in the Corallian business as a result of
writing down the 'non-Victory' assets to their recoverable amount in light of
the disposal proceeds received from Reabold for the acquisition of the
licences as detailed on pages 4 and 5 - UK offshore.
At 30 June 2022, Reabold's investment in Corallian was reclassified as an
asset held for sale. See note 5.
12. Share-Based payments
On 17 February 2022, the Company announced amendments to the terms of certain
existing options currently held by the Executive Directors. In common with
many businesses, the COVID-19 pandemic significantly constrained the Company's
activities, delaying management's ability to continue the successful
implementation of its medium-term strategy. Therefore, to further incentivise
the executive management of the Company and further align their interests with
shareholders, Reabold's Remuneration Committee amended the following existing
options such that their expiry dates are extended by 12 months, to 19 March
2023, and additional extended vesting terms are applicable, as outlined below.
The exercise prices of the existing options remain unchanged. The incremental
fair value granted as a result of the modifications was £10,833.
Executive Position Existing Options Held Exercise Price Current Expiry Amended Expiry Current Vesting Status Amended Vesting Dates
Sachin Oza Co-CEO 20,000,000 0.60p 19-Mar-22 19-Mar-23 Vested 30-Sep-22
20,000,000 0.90p 19-Mar-22 19-Mar-23 Vested 31-Dec-22
20,000,000 1.20p 19-Mar-22 19-Mar-23 Vested 31-Dec-22
Stephen Williams Co-CEO 20,000,000 0.60p 19-Mar-22 19-Mar-23 Vested 30-Sep-22
20,000,000 0.90p 19-Mar-22 19-Mar-23 Vested 31-Dec-22
20,000,000 1.20p 19-Mar-22 19-Mar-23 Vested 31-Dec-22
Anthony Samaha Finance Director* 5,000,000 0.60p 19-Mar-22 19-Mar-23 Vested 30-Sep-22
*Anthony Samaha assumed the role of Non-Executive Director on 1 July 2022
No options were granted in 1H 2022.
At 30 June 2022 there were 325,000,000 share options outstanding, as
summarised in the table below.
Option Holder At Exercise Price Vesting Date Expiry Date
1 January 2022 and 30 June 2022 Pence
No.
Sachin Oza 30,000,000 0.50p 30/09/2021 19/10/2022
Sachin Oza 30,000,000 0.75p 31/12/2021 19/10/2022
Sachin Oza 30,000,000 1.00p 31/03/2022 19/10/2022
Sachin Oza 20,000,000 0.60p 30/09/2022((1)) 19/03/2023((1))
Sachin Oza 20,000,000 0.90p 31/12/2022((1)) 19/03/2023((1))
Sachin Oza 20,000,000 1.20p 31/12/2022((1)) 19/03/2023((1))
Stephen Williams 30,000,000 0.50p 30/09/2021 19/10/2022
Stephen Williams 30,000,000 0.75p 31/12/2021 19/10/2022
Stephen Williams 30,000,000 1.00p 31/03/2022 19/10/2022
Stephen Williams 20,000,000 0.60p 30/09/2022((1)) 19/03/2023((1))
Stephen Williams 20,000,000 0.90p 31/12/2022((1)) 19/03/2023((1))
Stephen Williams 20,000,000 1.20p 31/12/2022((1)) 19/03/2023((1))
Anthony Samaha 10,000,000 0.50p 30/09/2021 19/10/2022
Anthony Samaha 5,000,000 0.60p 30/09/2022((1)) 19/03/2023((1))
Anthony Samaha 10,000,000 1.00p 31/12/2021 19/10/2022
325,000,000
((1)) The Company amended the expiry date and vesting conditions of
125,000,000 existing options on 17 February 2022, such that their expiry dates
are extended by 12 months to 19 March 2023.
The following table illustrates the number and weighted average exercise
prices of share options:
Weighted average exercise price Number of options
Outstanding at 31 December 2021 and 30 June 2022 0.78p 325,000,000
Exercisable at 30 June 2022 0.71p 200,000,000
The options outstanding at 30 June 2022 have a weighted average contractual
life of 0.5 years.
The Company calculates the value of share-based compensation using a
Black-Scholes option pricing model to estimate the fair value of share options
at the date of grant. There are no cash settlement alternatives. The estimated
fair value of options is amortised to expense over the options' vesting
period.
For the six months ended 30 June 2022, the Group has recognised £17,000 of
share-based payment expense in the income statement (30 June 2021: £70,000).
13. Other investments
Six months ended Six months ended 30 June 2021 £000 Year ended 31 Dec 2021 £000
30 June 2022
£000
Current Non-Current Non-Current Non-Current
Investment in Connaught Oil & Gas Ltd - 15 15 15
Convertible loan notes 603 - 530 555
Investment in Daybreak (note 3) - 6,618 - -
603 6,633 545 570
The convertible loan notes issued by Corallian are financial assets measured
at fair value through profit or loss and are considered a level 3 valuation
under the fair value hierarchy. The loan notes have been reclassified to
current assets in 1H2022 as the notes are expected to convert within one year
from the date of these financial statements. The movement in the period
represents accrued interest of £38,000 and a fair value gain of £10,000.
The investment in Daybreak completed on 26 May 2022. On the date of completion
Reabold recognised the fair value of its investment in Daybreak, treating it
prospectively as a financial asset at fair value. The increase in fair value
of the investment in Daybreak between completion and 30 June 2022 was £1.2
million.
14. Events after the reporting period
As announced on 4 May 2022 Reabold entered into a conditional sale and
purchase agreement to acquire six North Sea licences from Corallian for a cash
consideration of £250,000. On 15 September 2022, Reabold announced the
completion of the acquisition of the licences being P2396, P2464, P2493, P2504
and P2605 (all at 100% working interest) and P2478 (36% working interest)
During the period, Rathlin commissioned a CPR effective 30 June 2022 to
evaluate the oil and gas resources contained within PEDL 183. The report was
finalised and announced on 29 September and estimated the geological chance of
success at West Newton to be 86% and a gross 2C unrisked technically
recoverable resource of 197.6 bcf of sales gas. The full CPR can be found on
our website: www.Reabold.com (http://www.Reabold.com) .
As announced on 4 May 2022, Reabold's investee company, Corallian received a
non-binding, conditional offer from a credible party for the acquisition of
its entire issued share capital. The terms of the conditional sale with the
oil and gas major were announced on 14 September 2022. The Board of Directors
of Corallian have agreed to sell the entire issued share capital of Corallian
for a gross consideration of £32 million, with Reabold's share of net
proceeds being c. £12.7 million.
The payment of the consideration from the oil and gas major will be staged,
related to progress of the Victory gas field development. On completion of the
transaction, the oil and gas major will pay an initial consideration of £10
million. This will be followed by a further single payment of £22 million,
assuming the development and production consent for the Victory gas field is
secured from the North Sea Transition Authority, on or before 1 December 2023.
If consent has not been granted by this date, then the oil and gas major will
have the option to either: i) pay £12 million, with the remaining £10
million being paid at a later consent date; or ii) offer to transfer-back the
Victory licence to the current Corallian shareholders for £1 consideration.
The transfer-back offer protection has been added for Corallian shareholders'
benefit, to mitigate against the unlikely event of the Victory project not
being progressed sufficiently. For the licence to be returned to shareholders,
a new entity will be created to receive the licence prior to the completion of
the sale of Corallian to the oil and gas major, which will mirror the
shareholdings in Corallian. At the point of the return of the licence, the
Victory licence will still have a year to run, and the Corallian Board is
confident that this will provide sufficient time for an alternative
development or transaction to be secured.
On 28 September, Reabold announced it has agreed to acquire Simwell Resources
Limited, which includes interests in four Southern North Sea licences - P2332
(Reabold 30%, Shell U.K Ltd 70%, operator) and P2329, P2427 and P2486 (Reabold
10%, Horizon Energy Partners Ltd 77.5%, operator and Ardent Oil Ltd 12.5%).
The transaction substantially increases Reabold's footprint in the emerging
Zechstein trend, complementing its onshore position in PEDL183, including the
West Newton project. The licences have a number of prospects covered with high
quality 3D seismic data and licence P2332 has prospects to be derisked by
success at the Pensacola well.
The SPA between the shareholders of Simwell ("Sellers") and Reabold provides
for the conditional sale of the entire issued share capital of Simwell to
Reabold. Concurrently, Reabold will settle the outstanding
creditors/liabilities of Simwell. Reabold has agreed to pay the following
amounts for the acquisition:
· An initial consideration of £361,840.93 to the Sellers to be
satisfied by the issue of 134,105,159 new ordinary shares in the capital of
the Company at a price of 0.27 pence per share, being the closing price on the
last practicable trading day prior to signing of the SPA (the "Issue Price").
· The sum of £305,157.71 payable to certain Simwell creditors which
shall be satisfied by the issue of 113,021,374 new ordinary shares at the
Issue Price.
· The sum of £333,001.36 payable to certain Simwell creditors to be
satisfied in cash from the Company's existing cash resources.
· A contingent deferred consideration of £150,000 ("Deferred
Consideration Amount") payable to the Sellers to be satisfied by the issue of
new Ordinary Shares ("Deferred Consideration Shares"):
o The contingent deferred consideration will be payable to the Sellers if,
inter alia, the operator of licence P2332 undertakes to the NSTA that the
licensees will commit to drill a well pursuant to a defined work programme and
within the applicable timescales.
o The number of Deferred Consideration Shares to be issued to the Sellers
will be calculated by dividing the Deferred Consideration Amount by the
prevailing share price based on the ten-day volume weighted average price of
an ordinary share, as reported by Bloomberg, immediately preceding the date on
which all of the applicable conditions are satisfied.
The transaction is conditional on, inter alia, customary conditions for a
transaction of this nature, including approval by the NSTA. If the
conditions are not satisfied or waived (as applicable) within 12 months of the
date of the SPA, the SPA shall terminate.
15. Non-Statutory accounts
The financial information shown in this publication, which was approved by the
Board of Directors on 29 September 2022, is unaudited and does not constitute
statutory financial statements. Audited financial information will be
published in Reabold's 2022 Annual Report. Reabold's 2021 Annual Report has
been filed with the Registrar of Companies in England and Wales.
GLOSSARY
2C resources, 2C
Best estimate contingent resource, being quantities of hydrocarbons which are
estimated, on a given date, to be potentially recoverable from known
accumulations but which are not currently considered to be commercially
recoverable.
2U resources, 2U
Unrisked best estimate prospective resource, being quantities of hydrocarbons
which are estimated on a given date, to be potentially recovered from
undiscovered accumulations.
bcf
Billion standard cubic feet.
boe
Barrels of oil equivalent.
Capital expenditure
Total cash capital expenditure as stated in the group cash flow statement.
CPR
Competent Persons Report.
IFRS
International Financial Reporting Standards.
Joint arrangement
An arrangement in which two or more parties have joint control.
Joint control
Contractually agreed sharing of control over an arrangement, which exists only
when decisions about the relevant activities require the unanimous consent of
the parties sharing control.
Joint operation
A joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for the liabilities,
relating to the arrangement.
NPV10
Net Present Value using a 10% discount factor.
NSTA
North Sea Transition Authority
OTC
Over-the-counter
1 (#_ftnref1) See Note 14 for further information
2 An additional £93,000 was paid on 14 September 2022 to reflect interim
period cashflows between the economic effective date of 4 May 2022 and
completion
(#_ftnref2)
(#_ftnref3) 3 See Note 3 for further information
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