REG - United Oil & Gas PLC - Half-year 2023 results
28/09/2023 07:00
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RNS Number : 9118N United Oil & Gas PLC 28 September 2023
United Oil & Gas PLC / Index: AIM / Epic: UOG / Sector: Oil & Gas
28 September 2023
United Oil & Gas Plc
("United" "the Group" or the "Company")
Half-year 2023 results
United Oil & Gas PLC (AIM: "UOG"), the full cycle oil and gas company
with a portfolio of production, development, exploration and appraisal assets
is pleased to announce its unaudited financial and operating results for the
half year ended 30 June 2023. A shareholder call will take place this
morning, details are below.
Brian Larkin, CEO commented:
"We are pleased to be able to report progress across our portfolio as we seek
to explore further opportunities for growth to deliver greater value to our
shareholders.
Looking at Egypt, we successfully drilled and brought 2 development wells
onstream during the first half of 2023. Notably, we maintained our excellent
safety record throughout these operations. Our active drilling programme
continues with the drilling of a further near field exploration well planned
for the fourth quarter of the year. Simultaneously, we continue to work with
our JV partners to optimise production from our existing well stock through a
comprehensive programme of workovers and well intervention activity. Whilst
the macroeconomic situation In Egypt remains challenging, we do continue to be
paid a portion of our receivables in US dollars.
In Jamaica we are engaged in discussions with the Government and with
high-quality potential farm-in partners on our exciting high-impact
exploration asset. Identifying a partner with the right skillset to complement
our work is of paramount importance to advancing this project and we expect to
move forward to commercial discussions with a preferred partner over the
coming weeks.
Whilst Quattro have not yet completed their funding process and are likely to
require a further extension to the long stop date on the sale agreement for
licence P2519, we are hopeful that this transaction will complete over the
coming weeks, given the renewed interest in the North Sea
We enter the last quarter of 2023 well placed, and will continue to work hard
on delivering on our strategy in order to return value to our shareholders."
1H 2023 Operational summary
· 1H 2023 Group net 22% working interest production
averaged 1,051 bopd and 93 boepd gas with full year average net production
forecast to be in the range of 930 to 1,030 boepd.
· In Egypt
- Active drilling programme continues with two wells drilled in
1H, and one additional exploration well planned for H2
- Successful ASH-8 development well brought onstream in March
- Successful ASD-3 development well brought onstream in May
- Zero - Lost Time Incident Frequency rate and Fatal Accident
Frequency rate. No environmental spills, Restricted Work Incidents or Medical
Treatment Incidents
- We continue to have a portion of our Egyptian receivable balance
settled in USD
· In Jamaica, discussions continuing with the Ministry and with
potential farm-in partners with commercial discussions with a preferred
partner expected to commence in Q4.
· In the UK, whilst the current deadline for completion of the
deal with Quattro has been extended to 30th September, this is likely to be
extended further as Quattro have not yet completed their funding process.
1H 2023 Financial summary
· Group revenue for the first half of 2023 was $6.4m((1)) (1H
2022:$9.8m)
· Realised oil price of $78.19/bbl (1H 2022:$105.5/bbl)
· Gross Profit (excluding Egypt tax gross up) $2.2m (1H 2022:
$5.6m)
· Cash Operating Expenses of $10.65/boe (1H 2022: $8.40/boe)
· Profit After Tax of $0.6m (1H 2022: $2.4m)
· Cash collections in the six-month period of $7.0m (1H 2022:
$8.7m)
· Repayments on BP Pre-payment facility of $1.2 (1H 2022: $1.6m)
· A 30% reduction in Corporate G&A to $830k (1H 2022: $1.2m)
and on target to deliver the 15% full year reduction.
· Group cash balances at period end were $0.6m (1H 2022: $3.8m)
((1) ) 22% working interest net of Government Take
1H 2023 Corporate summary
· Jonathan Leather, Executive Director and Chief Operating Officer
stepped down from the Board on 31 August 2023. Jonathan will continue to
provide support to the company on the Jamaican farm out process on a
consultancy basis.
Outlook
· In Egypt we look forward to drilling the ASD-S-1X near-field
exploration well, which we expect to spud in October. This is an exciting
exploration well located to the south of the prolific ASD Field. The well is
targeting an estimated gross in-place mean volume of 10.1 million barrels of
oil in multiple stacked reservoir targets across the productive Abu Roash and
Bahariya reservoirs.
· The ASD-S-1X exploration well will be followed by additional
development drilling on the Abu Sennan concession - likely targeting an
undrained crestal area that has been identified on the ASH Field.
· In Jamaica, we continue discussions with high-quality potential
partners and expect to commence commercial discussions with a preferred party
over the coming weeks. We will provide further updates to the markets in due
course.
· In the UK, we are looking to complete the transaction with
Quattro on the P2519 licence containing the Maria discovery.
CEO Statement
The first half of the year saw us deliver positive results from our Egyptian
drilling programme, with notable success from both the ASH-8 and ASD-3
development wells. The high initial rates at ASH-8 demonstrates the
productivity and rapid payback, that can be delivered from development wells
drilled into this field. This success was followed up with a good result from
the ASD-3 well which was drilled 1.1 km to the west of the prolific ASD-2 well
and was brought onto production In May. The results of ASD-3 significantly
improved our understanding of the ASD field and has led to a significant
increase in our in-place volumetric estimates for the field by 16% from 11.4
to 13.2 MMBO in the mid case. Both new wells had strong initial production
rates when they came online and overall have performed in line with
expectations. Our year-to-date average production to September 2023 was 1,067
boepd net on the Abu Sennan concession. We continue to work with the operator
and Joint Venture partners on initiatives to offset the natural production
decline in the wells and re-instate production from temporarily shut in wells.
Safety will always be of the highest priority within our business and we are
pleased to report that during the period the operator has achieved an
excellent record of safety in Egypt and has reported zero Lost Time Incidents,
Medical Treatment Injuries, Restricted Work Injury, Spills, fires or
environmental incidents.
In the short term, the macroeconomic issues in the Egyptian economy have
resulted in reduced USD liquidity, which in turn has impacted our ability to
repatriate funds from Egypt. Whilst we have been successful in repatriating
some USD the liquidity constraints imposed by the Egyptian Central bank has
resulted in increased foreign exchange charges being incurred by the company.
As announced in January 2023, the Company has entered into an agreement with
Quattro Energy Limited ("Quattro") for the sale of our UK North Sea licence
that contains the Maria discovery. The parties have agreed to extend the long
stop date on the agreement to the end of September to provide Quattro with
sufficient time to raise the additional funding needed to complete this
transaction. Whilst Quattro have not yet completed their funding process and
are likely to require a further extension to the long stop date on the sale
agreement for licence P2519, we are hopeful that this transaction will
complete over the coming weeks, given the renewed interest in the North Sea.
From a financial perspective, we have continued to apply our free cashflow
from operations to fully fund our capital programme and also the repayment of
debt, with net debt reduced to $1.1m at 30 June and period end cash balances
of $0.6m. We continue to receive both USD and EGP in payment for our
receivable balances with our steady cashflows from the Egypt production being
leveraged to the current high commodity prices. We maintain a disciplined
approach to capital allocation in parallel to a close focus on optimising
G&A and operating costs. Our drilling and workover program in Abu Sennan
has yielded robust operational results, positioning us well to maximize
returns for all stakeholders.
Looking to the second half of the year, the third well of our fully funded
drilling programme in Egypt is the ASD-S-1X exploration well which is due to
spud in October. Although the spud of the well experienced delays due to rig
availability, we are pleased to confirm that the ECDC-6 drilling rig has been
secured by the joint venture for this operation. This is an exciting
exploration well located to the south of the recently drilled ASD Field. The
exploration well is targeting 10.1 million barrels of oil in place in multiple
stacked reservoir targets across the productive Abu Roash and Bahariya
reservoirs. A successful outcome on this well has the potential to increase
production levels, add reserves, and boost the longer-term value from the Abu
Sennan licence.
In Jamaica, we remain incredibly focussed on delivering a farmout partner to
participate alongside us in the drilling of an exploration well on this highly
prospective acreage. We are continuing to make progress towards securing a
partner to move forward with us to the next stage of the licence and we expect
to commence commercial discussions with a preferred party over the coming
weeks. We remain confident that a successful outcome can be ultimately
delivered and further updates will be provided in due course. In parallel to
our farmout discussions, we continue to engage with the Jamaican authorities
as we work together to deliver the long-term value of this licence to all
stakeholders.
I would like to extend the Company's gratitude to United's former Chief
Operating Officer, Jonathan Leather, for his dedicated eight years of service
with United. While he embarks on new endeavours outside our company, we are
excited to continue building upon the foundation of success we've achieved
together. Jonathan will continue to provide support to the Company on the
Jamaican farm out process on a consultancy basis.
Our strategy remains the same to create value by actively managing our
existing assets whilst growing our business through additional high-margin
opportunities. This growth strategy is supported by four pillars;
- the strength of our assets;
- commitment to managing a responsible business;
- effective financial and risk management; and
- an experienced and capable team
United is well placed to deliver on our strategy and with solid assets, a
dynamic team, and supportive shareholders, we look forward to embracing the
opportunities towards continued growth and success that lie ahead.
Brian Larkin
Chief Executive Officer
28 September 2023
Operations Update
Operations Update
Egypt, Abu Sennan (22% non-operated working interest, operated by Kuwait
Energy Egypt)
1H 2023 Production
Oil production from the Abu Sennan Licence in H1 2023 averaged 1,051 bopd (net
to United's 22% working interest) with an additional 93 boepd net gas. The
exit rate from the first half was 1,011 bopd net, plus 111 boepd net gas with
Group working interest production forecast to average between 930 and 1,030
boepd for the full year 2023.
2023 Work Programme
Two development wells, ASH-8 and ASD-3, were drilled in the first half of the
year. Both of these wells were successful and came onstream in March and May
respectively.
In parallel to the development drilling, a number of workovers have also been
completed, and we have enhanced production from existing wells through
low-cost interventions. Further workovers are planned as we continue through
the second half of 2023.
After producing for a number of months at rates in excess of 2,800 bopd (616
bopd net) and producing 390,000 barrels to end of August, production from the
ASH-8 well is now declining, and is currently producing at a flow rate of 601
bopd (132 bopd net). This decline is broadly in line with expectations and the
performance of the other production wells in the ASH Field. Based on our
previous experience of the field, the impact of the decline is expected to be
partially mitigated by the installation of artificial lift in the well during
H2, and by continued production-enhancing workover activity across the Abu
Sennan Licence.
The results of ASD-3 significantly improved our understanding of the ASD field
and has led to a significant increase in our in-place volumetric estimates for
the field by 16% from 11.4 to 13.2 MMBO in the mid case. This well also had
strong initial production rates which have now declined in line with
expectations.
We continue to work with the operator and Joint Venture partners on
initiatives including additional drilling, water injection, and stimulation to
offset the natural production decline in the wells and re-instate production
from temporarily shut in wells.
Additional drilling in 2H 2023 has now been agreed by the JV partners and is
expected to commence in October with the drilling of the ASD-S-1X exploration
well. This exciting exploration prospect lies to the south of the prolific ASD
Field and is expected to take approximately 40 days to drill. The exploration
well is targeting a gross mean in-place volume of 10.1 million barrels of oil
in multiple stacked reservoir targets across the productive Abu Roash and
Bahariya reservoirs.
Once ASD-S-1X has been completed, additional development drilling is planned
and will likely target an undrained crestal area that has been identified on
the ASH Field. Subject to rig availability, this well is expected to spud in
Q1 2024.
Jamaica, Walton Morant Licence (100% working interest)
The farm-out campaign remains a key focus for United, as we seek to take this
potentially transformational project forward into the next phase of the
Licence. We have continued to engage with potential partners to participate
alongside us in drilling an exploration well and have been encouraged by the
quality of the companies who have undertaken in-depth evaluations. The initial
deadline for indicative offers that was set at the end of 1H was extended to
allow these evaluations to be completed. Commercial discussions with a
preferred partner are now expected to commence in Q4. Additional updates will
be provided in due course.
UK Central North Sea, Maria Discovery, Licence P2519 (100% working interest)
United entered into a binding Asset Purchase Agreement ("APA") on the licence
with Quattro Energy Limited ("Quattro") on 18(th) January 2023. This APA had a
long-stop date of 31(st) July 2023, and although the NSTA approval was
received for this transaction, Quattro had not completed the required
fundraising by this long-stop date.
After receiving further assurances from Quattro and a non-refundable deposit
of $0.1m, the parties subsequently agreed an extension of the long stop date
in the APA to 30(th) September 2023. It was also agreed that a further
extension may be required for all conditions precedent to be met to allow
completion of the sale, namely regulatory approvals to enable the transfer of
funds to United, and the Licence assignment to Quattro, with such extension to
be automatically granted on the satisfaction of the Quattro funding condition
being met by 30 September 2023. Whilst we understand that Quattro has made
progress towards completing their funding process it is likely that they will
require a further extension to the long stop date to facilitate this process.
A further update will be provided in due course.
UK Onshore, Licence PL090 (26.25% non-operated working interest, operated
by Egdon Resources UK Ltd)
Licence PL090 contains the shut-in Waddock Cross Field, situated in the
onshore Wessex Basin, UK. Work continues on securing planning and permitting
consents, finalising the site facilities and well designs, ahead of a
potential 2024 drilling campaign. There is clearly value within this asset,
and United will continue to evaluate all the options for realising this
potential, including the option of participating in a well in 2024.
Financial Update
Highlights
1H 2023 1H 2022
Net average production volumes (boepd) 1,144 1,552
Oil price realised ($/bbl) $78.19 $105.5
Revenue((1)) $6.4m $9.8m
Gross profit((2)) $2.2m $5.6m
Profit after tax $0.6m $2.4m
Cash from operating activities $4.4m $4.9m
Capital expenditure $3.5m $3.4m
Debt repayments $1.2m $1.6m
Cash operating cost per boe $10.65 $8.40
( )
((1)) 22% working interest stated net of government take
((2)) Gross profits excluding Egypt tax gross up
Group Production and Commodity Prices
Total group working interest production for 1H 2023 was 1,144 boepd. The
average realised oil price was $78.19/bbl and the average realised gas price
was $2.61/mmbtu.
Revenues
Group Revenues for the six month period ending 30 June 2023 was $6.4m (1H 2022
$9.8 m), due to a 26% reduction in average production and a 26% reduction in
realised oil prices in the period. The entire revenue for the Group is
generated from our 22% interest in the Abu Sennan concession in Egypt and is
stated after accounting for government entitlements under each of the
production sharing contracts. The 1H 2023 average realised oil price per
barrel achieved was $78.19/bbl (representing a discount to Brent of circa
$2.37/bbl).
Group Operating costs, Depreciation, Depletion & Amortisation
("DD&A"), and expenses
Cash Operating costs amounted to $10.65/boe (1H 2022: $8.40/boe). The increase
in the per barrel cost is being primarily driven by the predominantly fixed
nature of the cost base, and the reduction in average daily production in the
period. DD&A charges on production and development assets amounted to
$2.1m for the six months to 30 June 2023.
Administrative Expenses
Group administrative expenses for the six month period ending 30 June 2023 was
$1.6m (1H 2022 $1.8 m). Adjusted for the non-cash items under IFRS Share Based
payments and IFRS 16 leases, the administrative expense is $1.4m (2022 $1.6m)
Included in Administrative expenses are foreign exchange losses of $0.5m
(2022: $0.2m) with the increase being due primarily to realised losses on the
devaluation of the Egyptian pound versus the USD during the year and the
additional costs to translate EGP to USD.
As previously announced in January 2023, the Group is currently implementing a
number of initiatives to further reduce General and Administration costs
whilst ensuring continuity of operational capability. In 1H 2023 other
Administrative Expenses have been reduced by approximately 30% to $0.8m from
$1.2m in 1H 2022. This decrease has been delivered primarily through a
reduction in Corporate Headcount and reduction in the size of the Board. The
Company remains on track to deliver the overall 15% reduction for the full
year compared to 2022.
Derivative Financial Instrument
In 2022 the Group extended the final maturity date on the BP facility from 30
September 2022 to 31 December 2023. This amendment required the Group to
recognise a fair value loss on the derivative of $1.5m in the prior year
period, rather than recognising the charge over the remaining maturity of the
facility. No additional charge to the income statement in relation to the fair
value of the derivative arose in the period as the prevailing oil price
remained above $70 per barrel throughout the period.
Exploration Costs
There were no exploration costs written off in the period; $302K has been
spent assessing New Venture activities and has been expensed as these costs
are pre-licence.
Impairment
There were no impairment triggers in the period.
Taxation and other income
In Egypt under the terms of the Production Sharing Agreement all corporate
taxes are paid by EGPC who receive production entitlements from the licence.
The Egypt concession is subject to corporate income tax at the standard rate
of 40.55%. However, responsibility for payment of corporate income taxes falls
upon EGPC on behalf of UOG Egypt Pty Ltd. The Group records a tax charge with
a corresponding increase in other income for the tax paid by EGPC on its
behalf. Due to accumulated tax- deductible balances there was no tax due in
the prior period.
Cash
US$'000
Opening Cash at 1 January 2023 1,345
Net cash inflow from operations 3,463
Movements in working capital 909
Exploration Expenditure (492)
Development Expenditure (2,992)
Repayment of Debt facility (1,158)
Exchange movements and other (521)
Closing Cash at 30 June 2023 554
The continued effect of macroeconomic challenges on the broader Egyptian
economy has resulted in both a devaluation of the Egyptian Pound and
restrictions on outgoing US Dollar transfers by the Central Bank of Egypt.
This has resulted in businesses in Egypt suffering from reduced and
occasionally unpredictable USD liquidity.
As previously announced, we have continued to receive a portion of our USD
receivable balances in USD with the remainder received in EGP, the latter of
which are primarily used to fund our active drilling and operations programme
in country. The Group continues to manage its cash and working capital
position through this period with the continued support of our joint venture
partners in Egypt and our strategic long term financing partner BP.
Capital Expenditure
The Group continues to engage in an active work programme across our portfolio
of assets with forecast cash capital expenditure for the full year 2023 of c.
$6m of which $3.5m was incurred in 1H 2023, including $3.2m on the drilling
programme in Egypt and workover activity in addition to $0.3m on Jamaica and
UK assets.
Events today
Management is hosting a shareholder call at 1100 BST today. Investors that
wish to participate in the event, please click on this link to register
https://bit.ly/46rS2FF (https://bit.ly/46rS2FF)
Confirmation email with the details of the dialling in process will be sent to
your email address.
A presentation will be available today on www.uogplc.com.
ENDS
This announcement contains inside information for the purposes of Article 7 of
Regulation 2014/596/EU which is part of domestic UK law pursuant to the
Market Abuse (Amendment) (EU Exit) regulations (SI 2019/310).
Glossary:
1H- first half
bbl - barrel of crude oil
boe - barrel of oil equivalent
bopd - barrels of oil per day
boepd - barrels of oil equivalent per day
EGP - Egyptian pound
EGPC - Egyptian General Petroleum Corporation
JV - Joint Venture
mmbbls - million barrels of oil
m- million
NSTA - Noth Sea Transition Authority
USD - US Dollar
Enquiries
United Oil & Gas Plc (Company)
Brian Larkin, CEO brian.larkin@uogplc.com (mailto:brian.larkin@uogplc.com)
Peter Dunne, CFO peter.dunne@uogplc.com (mailto:brian.larkin@uogplc.com)
Beaumont Cornish Limited (Nominated Adviser)
Roland Cornish | Felicity Geidt | Asia Szusciak +44 (0) 20 7628 3396
Tennyson Securities (Joint Broker)
Peter Krens +44 (0) 20 7186 9030
Optiva Securities Limited (Joint Broker)
Christian Dennis +44 (0) 20 3137 1902
Camarco (Financial PR)
Andrew Turner | Emily Hall | Sam Morris +44 (0) 20 3757 4983
|uog@camarco.co.uk (mailto:uog@camarco.co.uk)
Notes to Editors
United Oil & Gas is a high growth oil and gas company with a portfolio of
low-risk, cash generative production, development, appraisal and exploration
assets across Egypt, UK and a high impact exploration licence in Jamaica.
The business is led by an experienced management team with a strong track
record of growing full cycle businesses, partnered with established industry
players and is well positioned to deliver future growth through portfolio
optimisation and targeted acquisitions.
United Oil & Gas is listed on the AIM market of the London Stock
Exchange. For further information on United Oil and Gas please
visit www.uogplc.com (http://www.uogplc.com)
CONSOLIDATED INCOME STATEMENT
Period ended 30 June 2023
Note Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
$ $ $
Revenue 6,401,660 9,782,239 15,831,237
Other income 1,167,603 3,360,093 5,181,458
Cost of sales 4 (4,159,685) (4,172,012) (8,143,910)
3,409,578 8,970,320 12,868,785
Gross profit
Administrative expenses:
Other administrative expenses (830,823) (1,167,226) (1,773,154)
Impairment of intangible assets - - (483,611)
Exploration and New Venture write offs (301,656) (122,793) (284,275)
Decommissioning provision on impaired exploration licence - (290,609) -
Foreign exchange (losses) / gains (499,892) (158,346) (1,106,614)
(Loss) / gain on disposal of business / non-current assets held for sale - (21,768) -
Operating profit 1,777,207 7,209,578 9,221,131
Finance expense (10,690) (1,467,980) (1,690,896)
Profit before taxation 1,766,517 5,741,598 7,530,235
Taxation (1,167,603) (3,360,093) (5,181,458)
Profit for the financial period attributable to the Company's equity 598,914 2,381,505 2,348,777
shareholders
Earnings per share from continuing operations expressed in cents per share:
Basic 3 0.09 0.37 0.36
Diluted 3 0.09 0.35 0.36
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
$ $ $
Profit for the financial period 598,914 2,381,505 2,348,777
Foreign exchange difference 45,512 (241,389) 337,866
Profit for the financial period attributable to the Company's equity 644,426 2,140,116 2,686,643
shareholders
CONSOLIDATED BALANCE SHEET
On 30 JUNE 2023
Note 30 June 2023 30 June 2022 31 December 2022
Unaudited Unaudited Audited
$ $ $
NON-CURRENT ASSETS
Intangible assets 5 7,937,945 6,104,920 7,385,326
Property, plant and equipment 6 22,317,006 18,261,905 20,368,299
30,254,951 24,366,825 27,753,625
CURRENT ASSETS
Inventory 373,918 272,341 268,859
Trade and other receivables 7 3,789,268 6,334,151 4,469,493
Derivative financial instruments - - 120,168
Cash and cash equivalents 553,920 3,806,121 1,345,463
4,717,106 10,412,613 6,203,983
CURRENT LIABILITIES
Trade and other payables (5,173,107) (3,923,213) (3,709,667)
Derivative financial instruments - (1,229,802) -
Borrowings 9 (1,728,712) (1,413,983) (2,964,225)
Lease liabilities (42,092) (28,517) (83,985)
(6,943,911) (6,595,515) (6,757,877)
NON-CURRENT LIABILITIES
Borrowings 9 - (709,753) -
Decommissioning Provisions (249,244) (274,262) (233,630)
Derivative financial instruments - (611,199) -
Lease liabilities (7,356) (24,495) (7,356)
(256,600) (1,619,709) (240,986)
NET ASSETS 27,771,546 26,564,214 26,958,745
CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY -
HOLDERS OF THE COMPANY 8
Share capital 8,839,679 8,416,182 8,839,679
Share premium 8 16,798,823 16,215,361 16,798,823
Share-based payment reserve 2,716,063 2,376,659 2,547,688
Merger reserve (2,697,357) (2,697,357) (2,697,357)
Translation reserve (962,625) (799,493) (1,008,137)
Retained earnings 3,076,963 3,052,862 2,478,049
TOTAL EQUITY 27,771,546 26,564,214 26,958,745
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Period ended 30 June 2023
Share- based payment reserve Retained Translation reserve Merger reserve
earnings
Share capital Share premium Total
equity
$ $ $ $ $ $ $
For the period ended 30 June 2023
Balance at 1 January 2023 8,839,679 16,798,823 2,547,688 2,478,049 (1,008,137) (2,697,357) 26,958,745
Profit for the period - - - 598,914 - - 598,914
Foreign exchange difference - - - - 45,512 - 45,512
Total comprehensive income for the period - - - 598,914 45,512 - 644,426
Contributions by and distributions to owners:
Share based payments - - 168,375 - - - 168,375
Total contributions by and distributions to owners - - 168,375 - - - 168,375
Balance at 30 June 2023 (Unaudited) 8,839,679 16,798,823 2,716,063 3,076,963 (962,625) (2,697,357) 27,771,546
For the period ended 30 June 2022
Balance at 1 January 2022 8,416,182 16,215,361 2,247,465 671,357 (558,104) (2,697,357) 24,294,904
Profit for the period - - - 2,381,505 - - 2,381,505
Foreign exchange difference - - - - (241,389) - (241,389)
Total comprehensive income for the period - - - 2,381,505 (241,389) - 2,140,116
Contributions by and distributions to owners:
Share based payments - - 129,194 - - - 129,194
Total contributions by and distributions to owners - - 129,194 - - - 129,194
Balance at 30 June 2022 (Unaudited) 8,416,182 16,215,361 2,376,659 3,052,862 (799,493) (2,697,357) 26,564,214
For the period ended 31 December 2022
Balance at 1 January 2022 8,416,182 16,215,361 2,247,465 201,543 (558,104) (2,697,357) 23,825,090
Profit for the period - - - 2,348,777 - - 2,348,777
Foreign exchange difference - - - - 337,866 - 337,866
Total comprehensive income for the year - - - 2,348,777 337,866 - 2,686,643
Contributions by and distributions to owners:
Foreign exchange adjustment arising on change of parent company functional 283,278 523,376 53,516 (72,271) (787,899) - -
currency to USD
Shares issued 140,219 60,086 - - - - 200,305
Share-based payments - - 246,707 - - - 246,707
Balance at 31 December 2022 (Audited) 8,839,679 16,798,823 2,547,688 2,478,049 (1,008,137) (2,697,357) 26,958,745
CONSOLIDATED STATEMENT OF CASHFLOWS
Period ended 30 June 2023
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December 2022
Unaudited Unaudited Audited
$ $ $
Cash flows from operating activities
Profit before taxation 1,766,517 5,741,598 7,530,235
Adjustments for:
Share-based payments 168,375 129,194 246,707
Depreciation & amortisation 2,185,290 1,860,040 3,309,940
Fair value loss on derivatives - 1,457,545 1,562,467
Impairment, decommissioning and NV costs - 413,403 483,611
Gain on non-current assets / disposal groups held for sale - 57,926 -
Interest expense 10,690 10,435 128,429
Foreign exchange movements 499,892 158,344 1,106,614
Tax paid (1,167,603) (3,417,339) (5,238,704)
3,463,161 6,411,146 9,129,299
(Increase) in inventories (105,058) (126,771) (123,289)
Decrease / (increase) in trade and other receivables 680,225 (132,129) 732,529
(Decrease) / increase in trade and other payables 334,163 (1,224,657) (1,032,853)
Net cash from operating activities 4,372,491 4,927,589 8,705,686
Cash flows from investing activities
Proceeds received on disposal of non-current assets - 3,887,275 4,887,275
Purchase of property, plant & equipment (2,992,206) (2,138,247) (5,610,924)
Spend on exploration activities (492,145) (1,318,314) (2,972,201)
Net cash used in investing activities (3,484,351) 430,714 (3,695,850)
Cash flows from financing activities
Issue of ordinary shares (net of expenses) - - 200,305
Repayments on swap financing arrangement (1,118,250) (710,824) (1,452,118)
Payments on oil price derivatives - (922,286) (1,522,892)
Capital payments on lease (45,829) (46,195) (90,096)
Interest paid on lease (3,213) (3,888) (86,669)
Net cash used in financing activities (1,167,292) (1,683,193) (2,951,470)
Increase / (decrease) in cash and cash equivalents (279,152) 3,675,110 2,058,366
Cash and cash equivalents at beginning of period / year 1,345,463 397,308 397,308
Effects of exchange rate changes (512,391) (266,297) (1,110,211)
Cash and cash equivalents at end of period / year 553,920 3,806,121 1,345,463
Notes to the financial information
Period ended 30 June 2023
1. GENERAL
The interim financial information for the period to 30 June 2023 is unaudited.
2. ACCOUNTING POLICIES
The interim financial information in this report has been prepared on the
basis of the accounting policies set out in the audited financial statements
for the period ended 31 December 2022, which complied with International
Financial Reporting Standards as adopted for use in the European Union
("IFRS").
IFRS is subject to amendment and interpretation by the International
Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and
there is an on-going process of review and endorsement by the European
Commission.
The financial information has been prepared on the basis of IFRS that the
Directors expect to be applicable as at 31 December 2023.
The Directors have adopted the going concern basis in preparing the financial
information. In assessing whether the going concern assumption is
appropriate, the Directors have taken into account all relevant available
information about the foreseeable future.
The condensed financial information for the year ended 31 December 2022 set
out in this interim report does not comprise the Group's statutory accounts as
defined in section 434 of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2022, which were
prepared under IFRS, have been delivered to the Registrar of Companies. The
auditors reported on these accounts; their report was unqualified and did not
contain a statement under section 498(2) or 498(3) of the Companies Act 2006.
Foreign currency
The Group's presentation currency is USD with its functional currency being
the Egyptian Pound.
Going Concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the CEO's
statement.
United regularly monitors its business activities, financial position, cash
flows and liquidity through the preparation and review of detailed forecasts.
Scenarios and sensitivities are also regularly presented to the Board,
including changes in commodity prices and in production levels from the
existing assets, plus other factors which could affect the Group's future
performance and position. A base case forecast has been considered which uses
budgeted commitments and prevailing forward curve assumptions for oil prices.
The directors have also considered the potential impacts of a delay in the
payment of receivables in Egypt, a reduction in forecasted revenue and an
increase in forecast capital expenditure in Egypt. The cashflow forecasts
incorporates a scenario whereby the sale of Maria P2519 to Quattro does not
complete in the period.
The likelihood of all these 'downside sensitivities' taking place
simultaneously and lasting for the entire forecast period is considered to be
remote. If required, we have identified appropriate mitigating actions,
including the deferral of additional uncommitted capital expenditure, seeking
a restructuring of debt arrangements and adjustment of the Group cost base,
which would be available to us and have been demonstrated as effective
strategies in previous periods of low oil prices. Our business in Egypt
remains stable given cash operating costs of less than $11/boe, flexible
drilling contracts and gas contracts that are fixed price in nature. There are
limited capital commitments in the other assets in our portfolio. The
forecasts outlined above show that the Group will have sufficient financial
resources for the 12 months from the date of approval of the interim financial
statements. Based on this analysis, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. Therefore, they continue to use the
going concern basis of accounting in preparing the annual Financial
Statements.
Revenue
Revenue comprises invoiced sales of hydrocarbons to customers, excluding value
added and similar taxes. Also disclosed within revenue is tariff income
recognised, excluding value added and similar taxes, for gas transportation
facilities provided to third parties.
Revenue from hydrocarbon sales represents the Group's share of sales from its
producing interest in Egypt, at the point in time when ownership of the oil
has passed to the buyer. This includes adjustments to invoiced quantities for
entitlement share adjustments calculated on a licence-by-licence basis that
arise in the period. The Group does not have performance obligations
subsequent to delivery.
Other Income - Tax Entitlement Volumes
Under the concession agreements in Egypt, income tax due on taxable profit is
paid on the Group's behalf by EGPC. To achieve this through the agreements,
the Group notionally receive a greater share of hydrocarbon production in
excess of the Group's entitlement interest share of production equal to the
amount required to cover the tax payable. The oil is produced and sold on the
Group's behalf and proceeds remitted to the tax authorities. This income does
not fall within the definition of revenue and is therefore shown as other
income with an equal and opposite tax charge recorded through current
taxation.
Exploration and evaluation assets
The group accounts for oil and gas expenditure under the full cost method of
accounting.
Costs (other than payments to acquire the legal right to explore) incurred
prior to acquiring the rights to explore are charged directly to the profit
and loss account. All costs incurred after the rights to explore an area have
been obtained, such as geological, geophysical, data costs and other direct
costs of exploration and appraisal are accumulated and capitalised as
intangible exploration and evaluation ("E&E") assets.
E&E costs are not amortised prior to the conclusion of appraisal
activities. At the completion of appraisal activities if technical feasibility
is demonstrated and commercial reserves are discovered, then following
development sanction, the carrying value of the relevant E&E asset will be
reclassified as a development and production asset within tangible fixed
assets.
If after completion of appraisal activities in an area, it is not possible to
determine technical feasibility or commercial viability, then the costs of
such unsuccessful exploration and evaluation are impaired to the Income
Statement. The costs associated with any wells which are abandoned are fully
amortised when the abandonment decision is taken.
Development and production assets are accumulated generally on a field
by-field basis and represent the costs of developing the commercial reserves
discovered and bringing them into production, together with the E&E
expenditures incurred in finding commercial reserves which have been
transferred from intangible E&E assets.
The net book values of development and production assets are depreciated
generally on a field-by-field basis using the unit of production method based
on the commercial proven and probable reserves. Assets are not depreciated
until production commences.
Depreciation of production assets
Production assets are accumulated into cash generating units (CGUs) and the
net book values are depreciated on a prospective basis using the unit-of
production method by reference to the ratio of production in the year and the
related economic commercial reserves, taking into account future development
expenditures necessary to bring those reserves into production.
The gain or loss arising on disposal or scrapping of an asset is determined as
the difference between the sales proceeds, net of selling costs, and the
carrying amount of the asset and is recognised in the income statement.
Each asset's estimated useful life has been assessed with regard to both its
own physical life limitations and the present assessment of economically
recoverable reserves of the oil and gas asset at which the item is located,
and to possible future variations in those assessments. Estimates of remaining
useful lives are made on a regular basis for all oil and gas assets, machinery
and equipment, with annual reassessments for major items. Changes in estimates
which affect unit production calculations are accounted for prospectively.
Classification and measurement of financial liabilities
The Group's financial liabilities include borrowings, trade and other payables
and embedded derivative financial instruments.
Financial liabilities are initially measured at fair value, and, where
applicable, adjusted for transaction costs unless the Group designated a
financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the
effective interest method except for derivatives and financial liabilities
designated at FVTPL, which are carried subsequently at fair value with gains
or losses recognised in profit or loss.
All interest-related charges and, if applicable, changes in an instrument's
fair value that are reported in profit or loss are included within finance
costs or fair value gains/(losses) on derivative financial instruments.
Embedded derivative financial instruments
A borrowing arrangement structured as a prepaid commodity swap with monthly
repayments over 30 months has embedded in it a derivative that is indexed to
the price of the commodity. This is considered to be a separable embedded
derivative of a loan instrument.
At the date of issue, the fair value of the embedded derivative is estimated
by considering the derivative as a series of forward contracts with modelling
of the fixed and floating legs to determine a repayment schedule and derive a
net present value for the forward contract embedded derivative.
This amount is recognised separately as a financial liability or financial
asset and measured at fair value through the income statement. The residual
amount of the loan is then recorded as a liability on an amortised cost basis
using the effective interest method until extinguished upon conversion or at
the instrument's maturity date.
3. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period.
Basic and diluted earnings per share
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 June 2023 30 June 2022 31 December 2022
Profit for the period ($) 598,914 2,381,505 2,348,777
Weighted average number of ordinary shares for the purposes of basic earnings 656,353,969 644,803,969 649,550,544
per share(number)
Dilutive shares - 37,200,000 6,803,425
Weighted average number of ordinary shares for the purposes of diluted 656,353,969 682,003,969 656,353,969
earnings per share(number)
Basic earnings per share from continuing operations (cents per share) 0.09 0.37 0.36
Diluted earnings per share from continuing operations (cents per share) 0.09 0.35 0.36
4. COST OF SALES
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 June 2023 30 June 2022 31 December 2022
$ $ $
Production Operating costs 2,026,203 2,360,166 4,930,038
Depreciation, depletion and amortisation 2,133,482 1,811,846 3,213,872
Inventories - - -
4,159,685 4,172,012 8,143,910
5. INTANGIBLE ASSETS
Intangible assets comprise the Group's exploration and evaluation projects
which are pending determination.
Management review the intangible exploration assets for indications of
impairment at each balance sheet date based on IFRS 6 criteria. Commercial
reserves have not yet been established and the evaluation and exploration work
is ongoing. The Directors do not consider that any indications of impairment
have arisen and accordingly the assets continue to be carried at cost.
6. PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment assets primarily consist of the group's
producing assets in the Abu Senan concession in Egypt, plus some office assets
and right of use leased office space.
Management reviews the property, plant and equipment for indications of
impairment at each balance sheet date in accordance with IAS 36. No
indications of impairment have been identified at either 30 June 2023 or 31
December 2022.
7. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December 2022
$ $ $
Trade receivables 2,640,577 1,545,991 3,549,051
Prepayments and deposit 34,802 6,739 6,941
Accrued income 1,078,232 3,732,373 873,206
Other tax receivables 35,657 49,048 40,295
Crown disposal proceeds due - 1,000,000 -
3,789,268 6,334,151 4,469,493
8. SHARE CAPITAL & SHARE PREMIUM
Allotted, issued, and fully paid:
30 June 2023
Share capital Share premium
No $ $
Ordinary shares of £0.01 each
Opening balance 656,353,969 8,839,679 16,798,823
At 30 June 656,353,969 8,839,679 16,798,823
30 June 2022
Share capital Share premium
No $ $
Ordinary shares of £0.01 each
Opening balance 644,803,969 8,416,182 16,215,361
At 30 June 644,803,969 8,416,182 16,215,361
31 December 2022
Share capital Share premium
No $ $
Ordinary shares of £0.01 each
Opening balance 644,803,969 8,416,182 16,215,361
Effect of Parent company functional currency change - 283,278 523,376
Allotments:
Share issued for cash (exercise of warrants) 11,550,000 140,219 60,086
At 31 December 656,353,969 8,839,679 16,798,823
9. BORROWINGS AND DERIVATIVES
Summary of borrowing arrangements:
In February 2020, the Group entered into a prepaid commodity swap arrangement
for $8m to part-finance the acquisition of Rockhopper Egypt Pty Ltd. The funds
were to be repaid through 30 monthly repayments which are structured as a
fixed notional amount with variations based on movements in oil prices. Due to
the price structure, the arrangement includes an embedded derivative (a
forward contract). For financial reporting purposes, this must be separately
accounted for at fair value at each balance sheet date. The balance of
proceeds that did not relate to the derivative were treated as the opening
carrying amount of the loan which will then be measured at amortised cost over
its life, with finance charges recognised to give an even return over the loan
life and repayments of capital allocated appropriately.
In January 2022, the Group refinanced the swap arrangement, with the remaining
balance to be repaid through a further 24 monthly repayments which are
structured as a fixed notional amount with variations based on movements in
oil prices. The refinanced swap arrangement is a substantial modification and
has therefore been accounted for as a termination of the old debt and
commencement of a new arrangement. This has again been accounted for as a loan
at amortised cost with an embedded derivative which is separately accounted
for at fair value.
The amount outstanding at the period end was c$1.7m (1H 2022: $4m), included
in current liabilities in the balance sheet.
10. EVENTS AFTER THE BALANCE SHEET DATE
There have been no events since the Balance Sheet date that have any material
impact on the half year results for the period ended 30 June 2023.
Glossary
Non-IFRS measures
The Group uses certain measures of performance that are not specifically
defined under IFRS or other generally accepted accounting principles.
Cash-operating costs per barrel
Cash operating costs are defined as cost of sales less depreciation, depletion
and amortisation, and movements in inventories. The cash operating costs are
then divided by barrels of oil equivalent produced to demonstrate the cash
cost of producing oil and gas from the Group's producing assets.
Period ended Period ended 30 June 2022 Year ended 31 December 2022
30 June 2023
Unaudited Unaudited Audited
$ $ $
Cost of Sales 4,159,685 4,172,012 8,143,910
Less:
Depreciation, depletion, and amortisation (2,133,482) (1,811,846) (3,213,872)
Inventories - - -
Cash Operating costs * 2,026,203 2,360,166 4,930,038
Production (BOEPD) * 1,051 1,552 1,312
Cash Operating cost per BOE ($) 10.65 8.40 10.29
EBITDAX
EBITDAX is a non-IFRS measure that represents earnings (exclusive of Egypt
income relating to tax entitlement volumes) before Interest, tax,
depreciation, amortisation, exploration expense and impairment.
Exploration expense excluded as write off is one-off in nature and not normal
annual activity.
Presented to help users understand the cash profitability of the Group.
Period ended Period ended 30 June 2022 Year ended 31 December 2022
30 June 2023
Unaudited Unaudited Audited
$ $ $
Operating Income (Excl. Egypt tax gross-up) 609,604 3,849,486 9,221,131
Depreciation, Depletion & Amortisation 2,185,290 1,858,201 3,307,462
Exploration/NV, Impairment & Decommissioning Expense 301,656 413,402 767,886
EBITDAX 3,096,550 6,121,089 13,296,479
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