Wentworth Resources - Final Results for the Year Ended 31 December 2022
30/06/2023 07:00
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RNS Number : 4614E Wentworth Resources PLC 30 June 2023
PRESS RELEASE
30 June
2023
WENTWORTH RESOURCES PLC
("Wentworth" or the "Company")
Final Results for the Year Ended 31 December 2022
Wentworth (AIM: WEN), the independent, Tanzania-focused natural gas producer
is pleased to announce its audited financial results for the year ended 31
December 2022. All values are expressed in US dollars unless stated otherwise.
Wentworth confirms, following release of its 2022 Financial Results today that
both its 2022 Annual Report and Sustainability Report will be available
shortly on the Company's website at www.wentplc.com (http://www.wentplc.com) .
On 5 December 2022, the boards of Wentworth and Établissements Maurel &
Prom S.A. ("M&P") announced that they had reached agreement on the terms
of a recommended all cash offer by M&P for the entire issued, and to be
issued, share capital of Wentworth (the "Acquisition"). The outcome of the
Acquisition is still pending and as such details of Wentworth's 2023 Annual
General Meeting ("AGM") will be announced in due course. It is anticipated
that the AGM will be held no later than 15 December 2023.
HIGHLIGHTS
2023 Outlook
· 2023 production guidance increased to 90 - 100 MMscf/d for Mnazi Bay,
up from previous guidance 85 - 95 MMscf/d issued in March 2023 (2022
production 90 MMscf/d)
· The contracted price for gas produced at Mnazi Bay has increased from
$3.44/MMbtu to $3.71/MMbtu; effective from 1 January 2023
· Balance sheet strengthened; remaining debt free with current cash (as
at 15 June 2023) of $38 million
· The Company anticipates, given the absence of recent investment in the
Mnazi Bay field and continued cost recovery, that H2 2023 production will
include significant periods where costs have been fully recovered, leading to
substantially lower revenues
· The Government's re-examination of the historic cost pool audit for
the years 2013 - 2015 is ongoing; any reduction in the current expected cost
pool balance as a result is likely to further impact revenue going forward
· Continued strong track record of safe operations; no LTIs reported in
2023 to date
Financial
· Mnazi Bay gas sales revenue of $30.8 million, an increase of 30%
(2021: $23.8 million), underpinned by long-term fixed gas price contracts and
strong production
· Adjusted earnings before interest, tax, depreciation and amortisation
("EBITDAX") of $25.7 million, an increase of 89% (2021: $13.6 million)
excluding non-recurring expenses of $335k (2021: $502k)
· E&E and PPE assets impairment of $25.0 million (2021: nil) driven
by technical accounting revision in light of the pending Acquisition resulting
in net loss of $13 million for 2022 (2021: net profit of $6.1 million)
· Debt free with total cash at year-end of $30.9 million (2021: $22.8
million)
· Strong balance sheet, together with the enhanced operational
performance of the Mnazi Bay gas field supported the Company's ongoing
dividend programme, with an interim dividend declared of $1.45 million, up 10%
from H1 2021
· Whilst a final dividend for FY22 would normally be declared, this is
currently suspended pending the outcome of the Acquisition; should the
Acquisition not proceed, the Board intend to consider reinstating a final
dividend for FY22
Operational
· No Lost Time Incidents ("LTI") in 2022, with a total of 6 years and
151 days without an LTI
· 2022 average gross daily gas production increased by 10% to 90.0
MMscf/d from 81.6 MMscf/d in 2021, higher than mid-year guidance
· Gross 2P Reserves of 137 Bscf as at 31 December 2022 (2021: 135.2
Bscf)
Corporate
· In December 2022, the Company announced it had reached agreement on
the terms of a recommended acquisition by M&P (Wentworth's JV partner and
operator of the Mnazi Bay Gas Production Facility) of the entire issued and to
be issued share capital of Wentworth
· The Acquisition was approved by Wentworth Shareholders at the Court
Meeting and the General Meeting which were held on 23 February 2023, but
remains subject to the satisfaction or (where capable of being waived) waiver
of the other conditions to the Acquisition as set out in Part III (Conditions
to and certain further terms of the Acquisition and the Scheme) of the Scheme
Document
· Representatives of the Company and M&P attended a preliminary
hearing before the Fair Competition Commission (the "FCC") (the "Hearing") in
Tanzania on 7 June 2023, at which various Tanzanian governmental parties were
present. A number of concerns were raised at the Hearing, which may impact
the likelihood of the FCC approving the Acquisition in its current form. A
ruling is expected within the coming weeks
· On 9 June 2023, the Company received a letter from TPDC in which TPDC
notified Wentworth Gas Limited, the Company's main operating subsidiary, of
its decision purportedly to exercise its right of first refusal in respect of
Wentworth's interest in the Mnazi Bay asset pursuant to section 86 (7) of the
Tanzanian Petroleum Act, Cap 392 (the "ROFR")
· M&P and Wentworth intend to consult with relevant Tanzanian
government stakeholders about how the above concerns may be satisfactorily
addressed and how TPDC intends the ROFR to apply to the Acquisition
· There can be no certainty that the Acquisition conditions will be
satisfied or (where capable of being waived) waived by M&P. In the light
of these developments the Company now expects that, if the conditions are
satisfied or (where capable of being waived) waived by M&P, the
Acquisition will complete in H2 2023
Sustainability
· Commenced ESG reporting alignment with Taskforce on Climate-related
Financial Disclosures ("TCFD")
· 4.1 million tonnes saved in CO(2) emissions from the use of natural
gas from Mnazi Bay compared to diesel over the life of the Mnazi Bay gas
production project
· 5.6 billion litres of diesel and heavy fuel oils displaced by natural
gas from Mnazi Bay Concession over the life of the Mnazi Bay gas production
project
· The Company reduced its Scope 1 emissions by 8% from 2021, to 428t
CO(2)e
· Wentworth's carbon intensity per boe of 0.29 kg CO(2)e/boe is one of
the lowest reported in the London E&P sector
· Continued commitment to our local communities through our corporate
social responsibility efforts and dedicated foundation programmes
· Wentworth's domestic natural gas continues to play a critical role in
increasing energy access to communities across Tanzania and remains a key
partner for the Government of Tanzania to deliver on its ambition to provide
universal energy access in Tanzania by 2030 in line with the UN Sustainable
Development Goals
Katherine Roe, CEO, commented:
"2022 was a landmark year for Wentworth, representing the culmination of years
of hard work. Tanzania's increasing demand for energy, continued good
performance from the Mnazi Bay reservoirs and impeccable operational safety
record all contributed to 2022's strong performance. H1 2023 continued in the
same vein, although we expect 2023's financial outcome to be heavily first
half weighted.
"We are incredibly proud of what we achieved throughout the year and we would
like to thank our stakeholders for their ongoing support. We continue to
work with M&P and our stakeholders towards a successful completion of the
Acquisition. We believe this will represent a considerable value realisation
for shareholders."
Enquiries:
Wentworth
Katherine Roe, katherine.roe@wentplc.com
Chief Executive Officer
+44 (0) 7841 087 230
Stifel Nicolaus Europe Limited
AIM Nominated Adviser and Joint Broker
+44 (0) 20 7710 7600
Callum Stewart
Ashton Clanfield
Simon Mensley
Peel Hunt LLP
Joint Broker
+44 (0) 20 7418 8900
Richard Crichton
Georgia Langoulant
FTI Consulting Communications Adviser +44 (0) 20 3727 1000
Sara Powell
Ben Brewerton
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year-ended 31 December
Note 2022 2021
$000 $000
Total revenue 5 37,709 23,818
Production costs (4,273) (3,800)
Depletion 13 (7,962) (6,267)
Total cost of sales (12,235) (10,067)
Gross profit 25,474 13,751
Recurring administrative costs 6 (7,721) (6,424)
Acquisition costs 6 (1,256) -
New venture and pre - licence costs 6 (335) (502)
Value Added Tax write-off 6 (607) -
Share-based payment charges 19 (1,108) (537)
Depreciation 13 (98) (50)
Total administrative costs (11,125) (7,513)
Impairment of E&E and PPE 12;13 (25,000) -
(Loss)/profit from operations (10,651) 6,238
Finance income 9 625 139
Finance expense 9 (237) (369)
(Loss)/profit before tax (10,263) 6,008
Current tax expense 23 (8,574) (1,321)
Deferred tax income 23 5,857 1,380
(2,717) 59
Net and comprehensive (loss)/profit after tax (12,980) 6,067
Net (loss)/profit per ordinary share
Basic (US$/share) 21 (0.07) 0.03
Diluted (US$/share) 21 (0.07) 0.03
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 31 December 31 December
2022 2021
$000 $000
ASSETS
Current assets
Cash and cash equivalents 30,916 22,820
Trade and other receivables 10 11,101 5,550
42,017 28,370
Non-current assets
Exploration and evaluation assets 12 - 8,129
Property, plant and equipment 13 41,814 66,465
Deferred tax asset 23 14,097 8,239
55,911 82,833
Total assets 97,928 111,203
LIABILITIES
Current liabilities
Trade and other payables 15 5,623 2,503
5,623 2,503
Non-current liabilities
Decommissioning provision 16 1,818 1,929
Lease liability 17 - 36
1,818 1,965
Equity
Share capital 20 414,676 414,919
Equity reserve 27,803 26,695
Accumulated deficit (351,992) (334,879)
90,487 106,735
Total liabilities and equity 97,928 111,203
The accompanying notes form part of these financial statements
The financial statements of Wentworth Resources plc, registered number 127571
were approved by the Board of Directors and Authorised for issue on 29 June
2023.
Signed on behalf of the Board of Directors.
Katherine Roe
Chief Executive Officer
29 June 2023
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Number of shares Share capital Equity reserve Accumulated Total
Note deficit equity
$000 $000 $000 $000
Balance at 31 December 2020 186,488,465 416,426 26,656 (337,049) 106,033
Dividends 22 - - - (3,920) (3,920)
Net profit and comprehensive profit - - - 6,067 6,067
Share based compensation 19 - - 537 - 537
Cancelled Shares (939,326) (318) 295 23 -
Repurchase of own shares 18 (4,500,000) (1,189) (793) - (1,982)
Balance at 31 December 2021 181,049,139 414,919 26,695 (334,879) 106,735
Dividends 22 - - - (4,133) (4,133)
Net loss and comprehensive loss - - - (12,980) (12,980)
Share based compensation 19 - - 1,108 - 1,108
Cancelled shares (866,572) (243) - - (243)
Balance at 31 December 2022 180,182,567 414,676 27,803 (351,992) 90,487
The accompanying notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year-ended 31 December
Note 2022 2021
$000 $000
Operating activities
Net (loss)/profit for the year (12,980) 6,067
Adjustments for:
Impairment E&E and PPE 12;13 25,000 -
Depreciation and depletion 13 8,060 6,317
Finance costs, net 26 (448) 172
Income tax expense 23 2,717 (59)
Share based compensation 19 1,108 537
23,457 13,034
Change in non-cash working capital:
Trade and other receivables (5,549) (695)
Trade and other payables 3,553 33
Cash generated from operating activities 21,461 12,372
Current tax paid (7,181) (159)
Withholding tax paid (1,393) (1,162)
Net cash generated from operating activities 12,887 11,051
Investing activities
Additions to property, plant and equipment 13 (519) (62)
Interest income 178 36
Proceed from sales of property, plant and equipment 16 -
Net cash used in investing activities (325) (26)
Financing activities
Dividends paid 22 (4,133) (3,920)
Repurchase of own shares 18 (243) (1,982)
Lease payment 17 (57) (50)
Renewal fee on overdraft facility - (19)
Bank charges 9 (33) (21)
Net cash used in financing activities (4,466) (5,992)
Net change in cash and cash equivalents 8,096 5,033
Cash and cash equivalents, beginning of the period 22,820 17,787
Cash and cash equivalents, end of the period 30,916 22,820
( )
( )
( )
The accompanying notes form part of these financial statements.
1. Incorporation and basis of preparation
Wentworth Resources plc ("Wentworth" or the "Company") is an East
Africa-focused upstream natural gas production company. These audited
consolidated financial statements include the accounts of the Company and its
subsidiaries (collectively referred to as "Wentworth Group of Companies" or
the "Group"). The Company is actively involved in oil and gas exploration,
development and production operations. Wentworth is incorporated in Jersey and
shares of the Company as at 31 December 2022 were held and listed on the AIM
Market of the London Stock Exchange (ticker: WEN).
The Company's registered office is located at 4th Floor, St Paul's Gate, 22 -
24 New Street, St Helier, Jersey, JE1 4TR. The Group maintains offices in
Jersey and Tanzania.
Basis of presentation and statement of compliance
These consolidated financial statements have been prepared on a historical
cost basis and have been prepared using the accrual basis of accounting. The
consolidated financial statements are prepared in accordance with UK-adopted
International Financial Reporting Standard ("IFRS"), as issued by the
International Accounting Standards Board (IASB) in conformity with the
requirements of the Companies (Jersey) Law 1991.
The consolidated financial statements were approved by the Board of Directors
on 29 June 2023.
The Group continue to apply the judgement that the business will continue as a
going concern for the foreseeable future, further discussion on which is noted
below.
Functional and presentation currency
These consolidated financial statements are presented in US dollars which is
the functional currency of the majority of its subsidiaries.
Basis of consolidation
These consolidated financial statements include the accounts of the Company
and its subsidiaries. Subsidiaries are entities that the Company controls.
An investor controls an investee when it is exposed, or has rights, to
variable returns from its involvement with the investee and can affect those
returns through its authority over the investee. The existence and effect of
potential voting rights are considered when assessing whether a company
controls another entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Company. They are deconsolidated from the
date that control ceases. The legal entities within the Wentworth Group of
Companies are disclosed within note 14. All intercompany transactions,
balances and unrealised gains on transactions between the parent and
subsidiary companies are eliminated on consolidation.
The Group holds a 31.94% participation interest in the Mnazi Bay Concession
through two subsidiaries. Wentworth Gas Limited ("WGL"), which is a wholly
owned subsidiary, owns a 25.40% participation interest and Cyprus Mnazi Bay
Limited ("CMBL") owns a 16.38% participation interest of which the Group's
proportionate share is 6.54% (i.e. Wentworth's interest of 39.925% in CMBL
multiplied by 16.38% participation interest). CMBL is considered a jointly
controlled entity and accounted for as a joint operation rather than a joint
venture. The Group accounts for its share of CMBL assets and liabilities as
CMBL has contractual agreements which establish that the parties to the joint
arrangement have rights to the assets and obligations for the liabilities of
ownership in proportion to their interest in the arrangement.
Going Concern
Wentworth's business activities, together with the factors likely to affect
any future development, performance and position are set out in the Strategic
Report. The financial position of the Group, its cash flows and liquidity
position are described in the Financial Review contained within that report.
2022 saw Wentworth achieve its best operating and financial results in our
history, despite unprecedented upward inflationary pressures on our
expenditures. Given the essential nature of services provided and the
forecasted impact of recent world events on both international capital markets
and production operations in the United Republic of Tanzania, the Group
notes that an interruption to production remains remote.
On 5 December 2022, Wentworth received, and the Board of Directors
subsequently recommended the acceptance of a cash offer for 100% of the issued
and to be issued share capital of the Company for 32.5 pence per share by
M&P. M&P is the ultimate parent company of the Operator of the Mnazi
Bay licence. On 23 February 2023, shareholders voted in favour of a scheme of
arrangement at a court meeting held the same day. Following this meeting,
shareholders voted to pass the resolution in connection with the amendment of
Wentworth's Articles in order to implement the scheme of arrangement once the
Jersey Court sanctions this.
Following the ratification of the proposed acquisition by shareholders there
were certain legal and administration consents to be obtained, including the
consent of the Tanzanian government to the proposed transaction, the waiver of
any right of first refusal or pre-emption right to which TPDC may be entitled
in respect of the Mnazi Bay Asset and approval from the Tanzanian Fair
Competition Commission (FCC).
At a preliminary hearing held by the FCC on 7 June 2023 a number of concerns
were raised which may impact the likelihood of the FCC approving the proposed
acquisition in its current form. On 9 June 2023 TPDC informed the Group of its
decision to exercise its right of first refusal (ROFR) for Wentworth's
interest in the Mnazi Bay asset pursuant to section 86(7) of the Tanzanian
Petroleum Act, Cap 392. Discussions with TPDC and the FCC on the way forward
and resolution of these issues are ongoing as at the date of this report.
It is acknowledged that the above developments introduce uncertainty as to the
timing and manner in which an acquisition (if any) of the Group will be
finalised. The Directors expect that the Group would continue to operate in
its existing state if none of the proposed arrangements set out above proceed
during the going concern period. Should an acquisition proceed, it is
uncertain how the acquirer intends to integrate Wentworth's interest in the
Mnazi Bay asset with its own operations and whether the legal entities in
which the Group operates will remain in their current form or cease to
operate, in which case the Group will no longer be a going concern.
Apart from the uncertainty noted above, the Directors view the continued
timely settlement of gas-sales invoices by the Government of Tanzania to be
the most significant financial risk currently faced by the Group with respect
to its ongoing operations.
The Directors have prepared base and sensitised cash flow information for a
period of at least 12 months from the date of their approval of these
financial statements (the going concern assessment period) on the assumption
that the group continues in its current form. Based on the application of
severe but plausible down-side scenarios, which include non- settlement of
future gas sales, potential changes in demand, capital spend and operating
costs, the Directors believe that if the Group were to continue in its present
structure it is well placed to manage the Group's financial exposures and has
sufficient cash resources for working capital needs, committed capital and
operational expenditure programs for the going concern assessment period.
Based on the above factors and with respect to the going concern assessment
period, the Directors believe that it remains appropriate to prepare the
financial statements on a going concern basis. However, the uncertainty
regarding the proposed acquisition and the subsequent integration of the
Group's operations into that of the acquirer`s should the acquisition proceed,
indicates the existence of a material uncertainty related to events or
conditions that may cast significant doubt on the Group's ability to continue
as a going concern and, therefore, that the group may be unable to realise its
assets and discharge their liabilities in the normal course of business in a
plausible situation that the Group is reorganised by the acquiring entity. The
Group, in its current form, does have the resources to be able to satisfy its
expected obligations as they fall due. The financial statements do not include
any adjustments that would result from the basis of preparation being
inappropriate.
Changes in accounting policies
A number of new standards are effective from 1 January 2022, but they do not
have material effect on the Group's financial statements.
New and amended standards
The following amended standards and interpretation are effective for financial
years commencing on or after 1 January 2023. The Group does not intend to
adopt the standards below, before their mandatory application date.
Standard Description IASB Issue Date IASB Effective Date Secretary of State Adoption Date
IAS 1 (amendments) Classification of Liabilities as Current or Non-current. 23 January 2020 1 January 2023 Endorsed
IFRS 17 Insurance contracts. 25 June 2020 1 January 2023 Endorsed
IAS 12 (Amendments) Deferred tax related to assets and liabilities arising from a single 7 May 2021 1 January 2023 Endorsed
transaction.
IAS 8 (amendments) Definition of accounting estimates. 12 February 2021 1 January 2023 Endorsed
IAS 1 and IFRS Practice Statement 2 (amendments) Disclosure of accounting policies. 12 February 2021 1 January 2023 Endorsed
IFRS 16 (amendments) Lease Liability in a Sale and Leaseback 1 January 2024
Future accounting pronouncements
The Company intends to adopt the above listed standards and interpretations in
our financial statements for the annual period beginning 1 January 2023. The
Company does not expect the interpretation to have a material impact on the
financial statements.
2. Summary of accounting policies
The principal accounting policies applied in the preparation of these Company
and Group consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise
stated.
Joint arrangements
The analysis of joint arrangements requires management to analyse numerous
agreements and the requirements of IFRS 10 and IFRS 11. Judgements made by
management include whether joint control exists and the extent of exposure to
the underlying assets and liabilities of the joint arrangement. By virtue of
the provisions contained within the underlying shareholder agreements, to
which Cyprus Mnazi Bay Limited (see below for accounting considerations of
this entity) and Wentworth Holdings Gas Limited, a wholly owned subsidiary of
Wentworth Resources plc, are parties to, management have assessed that the
Company has a joint arrangement through its 31.94% ownership in the licence
and accounts for this interest as a joint operation as no single individual
shareholder may exercise absolute control over the entity. The agreement is
bilateral, with Maurel & Prom Mnazi Bay Holdings SAS (M&P) and whilst
the Operator may make day-to-day decisions, the overall strategic direction of
the partnership requires unanimous consent between M&P and Wentworth.
M&P hold 48.06% share in the licence and 20% is owned by TPDC. As such
the Group is entitled to its share of production from the licence and
therefore revenue generated from the sale of this output. Wentworth also
recognise its share of all expenses incurred by the joint arrangement, its
right to the assets, as well as its share of the liabilities and obligations.
Accounting treatment of CMBL
The Group holds a 31.94% participation interest in the Mnazi Bay Concession
through two subsidiaries. WGL is a wholly owned subsidiary, which owns a
25.40% participation interest and Wentworth Holdings (Jersey) Limited is a
wholly owned subsidiary that holds 39.925% in CMBL, which owns a 16.38%
participation interest, of which the Group's proportionate share is therefore
6.54% (i.e. Wentworth's interest of 39.925% interest in CMBL, multiplied by
16.38% participation interest). CMBL is considered a jointly controlled entity
and accounted for as a joint operation rather than a JV. The Group recognises
its share of the following:
• Assets, including its share of any assets held jointly;
• Liabilities, including its share of any liabilities incurred jointly;
• Revenues arising from the joint operation;
• Other revenues from the joint operation; and
• Expenses, including its share of any expenses incurred jointly.
Financial instruments
The Group recognises financial assets and liabilities on its balance sheet
when it becomes a party to the contractual provisions of the instrument.
(i) Financial assets
Classification and initial measurement
Financial assets within the scope of IFRS 9 are classified as financial assets
at amortised cost, fair value through profit or loss or fair value through
(OCI). The Group determines this classification at initial recognition
depending on the business model for managing the financial asset and the
contractual terms of the cash flows.
The Group's financial assets include cash and cash equivalents, Trade and
other receivables.
When financial assets are initially recognised, they are measured at fair
value being the consideration given or received plus directly attributable
transaction costs. Any gain or loss at initial recognition is recognised in
the income statement.
The Group's financial assets measured at amortised cost are held for the
collection of contractual cash flows where those cash flows have specified
dates and represent solely payments of principal and interest, such as cash
and cash equivalents or trade receivables.
The Group's financial assets are initially measured at fair value where the
contractual cash flows do not solely represent payments of principal and
interest, such as trade and other receivables.
Subsequent measurement
Financial assets held for the collection of contractual cash flows that are
solely payments of principal and interest (and classified as amortised cost)
are subsequently measured at amortised cost using the effective interest rate
method ("EIR"). Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part
of the EIR. The EIR amortisation is included in finance income in the income
statement. Allowance for impairment is estimated on a case-by-case basis.
A gain or loss on a financial asset measured at fair value through profit or
loss is recognised in the income statement in the period in which it arises.
Derecognition
A financial asset is derecognised when the Group loses control over the
contractual rights that comprise that asset. This occurs when the rights are
realised, expire or are surrendered.
Impairment of financial assets
The Group assesses on a forward-looking basis the expected credit losses that
might arise on financial assets measured at amortised cost. This assessment
considers the probability of a default event occurring that could result in
the expected cash flows due from a counterparty falling short of those
contractually agreed.
Expected credit losses are estimated for default events possible over the
lifetime of a financial asset measured at amortised cost. However, where the
financial asset is not a trade receivable measured at amortised cost and there
have been no significant increases in that financial asset's credit risk since
initial recognition, expected credit losses are estimated for default events
possible within 12 months of the reporting date.
(ii) Financial liabilities
Classification and initial measurement
Financial liabilities within the scope of IFRS 9 are classified as financial
liabilities at amortised cost or fair value through profit or loss. The Group
determines the classification of its financial liabilities at initial
recognition.
The Group's financial liabilities include trade and other payables, other
liabilities and borrowings which are classified as amortised cost. Trade
payables may be designated and measured at fair value through profit or loss
when doing so eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise from measuring assets or liabilities
on a different basis.
All financial liabilities are recognised initially at fair value while
financial liabilities at amortised cost additionally include directly
attributable transaction costs.
Subsequent measurement
Trade and other payables, borrowings and other financial liabilities are
subsequently measured at amortised cost using the EIR method after initial
recognition. Gains and losses are recognised in the income statement through
the EIR amortisation process. Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included in finance costs in
the income statement.
A gain or loss on a financial liability measured at fair value through profit
or loss is recognised in the income statement in the period in which it
arises.
Derecognition
A financial liability is de-recognised when the obligation under the liability
is discharged or cancelled or expires. When an existing financial liability is
replaced by another on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the
recognition of a new liability, and the difference in the respective carrying
amounts is recognised in the income statement.
(iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount
reported in the balance sheet when there is an enforceable legal right to
offset the recognised amounts and there is an intention to settle on a net
basis, or to realise the assets and settle the liabilities simultaneously.
(iv) Fair value of financial instruments
At each reporting date, the fair value of financial instruments that are
traded in active markets is determined by reference to quoted market prices,
without any deduction for transaction costs. For financial instruments not
traded in an active market, the fair value is determined using appropriate
valuation techniques. Such techniques may include using recent arm's length
market transactions, reference to the current fair value of another instrument
that is substantially the same, discounted cash flow analysis or other
valuation models.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, term deposits and short-term
highly liquid investments with the original term to maturity of three months
or less, which are convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
Exploration Assets ("E&E")
E&E costs, including costs of licence acquisition, technical services and
studies, exploratory drilling, whether successful or unsuccessful, and testing
and directly attributable overhead, are capitalised as E&E assets
according to the nature of the assets acquired. These costs are accumulated in
cost centres by well, field or exploration area pending determination of
technical feasibility and commercial viability.
E&E assets are assessed for impairment if (i) sufficient data exists to
determine technical feasibility and commercial viability, and (ii) facts and
circumstances suggest that the carrying amount exceeds the recoverable amount.
The technical feasibility and commercial viability of extracting a resource is
generally considered to be determinable when proven and/or probable reserves
are determined to exist. A review of each exploration licence or field is
carried out, at least annually, to ascertain whether it is technically
feasible and commercially viable. Upon determination of technical feasibility
and commercial viability, intangible E&E assets attributable to those
reserves are first tested for impairment with the unimpaired amounts
reclassified from E&E assets to a separate category within tangible assets
within Property, Plant and Equipment referred to as oil and gas interests.
Once the commercial viability of a resource has been proven and/or probable
and reserves have been determined to exist, the intangible E&E asset
attributable to those reserves are then transferred to oil and natural gas
properties within PP&E and then depleted over its useful life on a unit of
production basis.
Costs incurred prior to the legal awarding of petroleum and natural gas
licences, concessions and other exploration rights are recognised in profit or
loss as incurred.
Property Plant and Equipment ("PP&E") - oil and natural gas properties
Items of PP&E, which include oil and gas development and production
assets, are measured at cost less accumulated depletion and depreciation and
accumulated impairment losses. PP&E assets include costs incurred in
developing commercial reserves and bringing them into production, such as
drilling of development wells, tangible costs of facilities and infrastructure
construction, together with the E&E expenditures incurred in finding the
commercial reserves that have been reclassified from E&E assets as
outlined above, the projected cost of retiring the assets and any directly
attributable general and administrative expenses. Expenditures on developed
oil and natural gas properties are capitalised to PP&E when it is probable
that a future economic benefit will flow to the Company as a result of the
expenditure and the cost can be reliably measured. The initial cost of an
asset is comprised of its purchase price or construction cost, any costs
directly attributable to bringing the asset into operation, the initial
estimate of any decommissioning obligations associated with the asset and
borrowing costs on qualifying assets. When significant parts of an asset
with PP&E, including oil and gas interests, have different useful lives,
they are accounted for as separate items (major components).
Costs incurred after the determination of technical feasibility and commercial
viability and the costs of replacing parts of PP&E are recognised as
capitalised oil and gas interests only when they increase the future economic
benefits embodied in the specific asset to which they relate. Subsequent
changes in estimated decommissioning obligation due to changes in timing,
amounts and discount rates are included in the cost of the asset. Such
capitalised oil and gas interests generally represent costs incurred in
developing proved and/or probable reserves and bringing in or enhancing
production from such reserves and are accumulated on a field or geotechnical
area basis. The carrying amount of any replaced or sold component is
derecognised. The costs of the day-to-day operating of PP&E are recognised
in profit or loss as incurred.
Depletion
The net carrying amount of PP&E is depleted on a field-by-field unit of
production method by reference to the ratio of production in the year to the
related proven and probable reserves. These reserves represent full field
recoverable reserves and not just those recoverable to the end of the current
licence period. If the useful life of the asset is less than the reserve
life, the asset is depreciated over its estimated useful life using the
straight-line method. Future development costs are estimated considering the
level of development required to produce the proven and probable reserves.
These estimates are reviewed by third party independent reserves engineers.
Changes in factors such as estimates of reserves that affect
unit-of-production calculations are dealt with on a prospective basis. Capital
costs for assets under construction included in development and production
assets are excluded from depletion until the asset is available for use, that
is, when it is in the location and condition necessary for it to be capable of
operating in the manner intended by management.
Disposals
Oil and natural gas properties are derecognised upon disposal or when no
future economic benefits are expected to arise from the continued use of the
asset. Any gain or loss on derecognition of the asset, including farm out
transactions or asset sales or asset swaps, is calculated as the difference
between the proceeds on disposal, if any, and the carrying value of the asset,
is recognised in profit or loss in the period of derecognition.
PP&E - office and other equipment
Office and other equipment are carried at cost less accumulated depreciation
and impairment losses. Depreciation of the cost of these assets less
residual value is charged to profit and loss on a straight-line basis over
their estimated useful economic lives of between three and five years.
Leases
IFRS 16 Leases applies to all leases, including subleases, except for leases
to explore for or use minerals, oil, natural gas and similar non-regenerative
resources.
The Company has not elected to recognise right-of-use assets and lease
liabilities for lease of low-value assets and short-term leases. The Company
recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
Decommissioning obligation
Decommissioning obligations are recognised for legal obligations related to
the decommissioning of long-lived tangible assets that arise from the
acquisition, construction, development or normal operation of such assets. A
liability for decommissioning is recognised in the period in which it is
incurred and when a reasonable estimate of the liability can be made with the
corresponding decommissioning provision recognised by increasing the carrying
amount of the related long-lived asset. The recognised decommissioning
provision is subsequently allocated in a rational and systematic method over
the underlying asset's useful life. The initial amount of the liability is
accreted by charges to the profit or loss to its estimated future value.
Impairment
The carrying values of production assets, E&E expenditures that have been
capitalised and property, plant and equipment (PPE) are assessed for
impairment when indicators of such impairment exist. In performing impairment
reviews, assets are categorised into the smallest identifiable groups, cash
generating units (CGU), that generate cash flows independently. If any
indication of impairment exists, the estimated recoverable amount of the asset
or CGU is calculated. If the carrying amount of the asset or CGU exceeds its
recoverable amount, it is impaired with the loss charged to the income
statement to reduce the carrying amount to its recoverable amount. Impairment
losses are recognised in the income statement in those expense categories
consistent with the function of the impaired asset or CGU. An assessment is
made at each reporting date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may have
decreased. If such indication exists, the Group makes an estimate of the
recoverable amount.
(i) Calculation of recoverable amount
The recoverable amount of an asset or CGU is the greater of its value in use
and fair value less costs to sell. In assessing value in use, the estimated
future cash flows of the asset or CGU in its present condition are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset. In determining fair value less costs to sell, consideration will be
given to whether the value of the asset or CGU can be determined from an
active market (e.g. recognised exchange) or a binding sale agreement which are
classified as level 1 in the fair value hierarchy under IFRS 13 'Fair Value
Measurements'. Where this is not determinable, fair value less costs to sell
for a CGU is usually estimated with reference to a discounted cash flow model,
similar to the method used for value in use, but may include estimates of
future production, revenues, costs and capital expenditure not currently
included in the economic model. Additionally, cash flow estimates include the
impact of tax and are discounted using a post-tax discount rate. An estimate
made on this basis is classified as level 3 in the fair value hierarchy.
(ii) Reversals of impairment
A previously recognised impairment loss is reversed only if there has been a
change in the estimates used to determine the asset's recoverable amount since
the last impairment loss was recognised. If this is the case, the carrying
amount of the asset is increased to its recoverable amount. An impairment loss
is reversed only to the extent that the asset's carrying amount does not
exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised for
the asset in prior years. Such reversals are recognised in the income
statement. Impairment losses recognised in relation to goodwill are not
reversed for subsequent increases in the recoverable amount.
Share capital
The proceeds from the exercise or vesting of share options and the issuance of
shares from treasury are recorded as share capital in the amount for which the
option, warrant, or treasury share enables the holder to purchase a share in
the Company.
Proceeds for shares in excess of the nominal value are recorded within share
premium.
Share issuance costs
Commissions paid to underwriters, and other related share issue costs, such as
legal, auditing and advisory, on the issue of the Company's shares, are
charged directly to share capital, net of tax within the share premium
account.
Share based payments
The fair value of the options at the date of the grant is determined using the
Black-Scholes option pricing model and share based compensation is accrued and
charged to profit or loss, with an offsetting credit to equity reserve over
the vesting periods. A forfeiture rate is estimated on the grant date and is
adjusted to reflect the actual number of options that vest.
Capitalisation of interest
The Company capitalises interest expense incurred during the construction
phase of the projects, except E&E assets which were funded by the related
financing.
Revenue recognition
Natural gas revenues are recognised upon the transfer of control over its gas
to its customers, TPDC and TANESCO, which is when delivery is made to them
through the offtake network.
Interest income is accrued on a time basis by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that discounts estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying value.
Other revenue relating to the recovery of corporate income tax, in line with
the Production Sharing Agreement, are recognised in the period the in which
the recovery is made. These recoveries are affected through adjustments to
TPDC's gas sales entitlements.
Income taxes
Tax expense comprises current and deferred tax. Tax is recognised in the
profit or loss except to the extent it relates to items recognised in other
comprehensive income ("OCI") or directly in equity.
Current income tax
Current tax expense is based on the results for the period as adjusted for
items that are not taxable or not deductible. Current tax is calculated using
tax rates and laws that were enacted or substantively enacted at the end of
the reporting period. Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax regulation is
subject to interpretation. Provisions are established where appropriate on the
basis of amounts expected to be paid to the tax authorities.
Deferred income tax
Deferred taxes are the taxes expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in the
consolidated statement of financial position and their corresponding tax
basis. Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are recognised to the extent that
it is probable that future taxable profits are expected to be available
against which deductible temporary differences to the tax basis can be
utilised. Deferred income tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of goodwill, if any,
or from the initial recognition (other than in a business combination) of
other assets in a transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and joint arrangements except where the
reversal of the temporary difference can be controlled, and it is probable
that the difference will not reverse in the foreseeable future.
Deferred tax assets are reviewed at each reporting period and reduced to the
extent that it is no longer probable that sufficient future taxable profits
are expected to be available to allow all or part of the asset to be
recovered. Deferred tax assets are recognised for taxable temporary
differences arising on investments in subsidiaries to the extent that it is
probable that the temporary difference will reverse in the foreseeable future
and future taxable profits are expected to be available against which the
temporary difference can be utilised.
Foreign currency translation
Items included in the financial statements of the Company and its subsidiaries
are measured using the currency of the primary economic environment in which
the legal entity operates (the "functional currency"). Foreign currency
transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transaction. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities not denominated in the
functional currency of an entity are recognised in profit or loss.
The functional currency of all Wentworth subsidiaries is US dollars except for
Wentworth Resources (UK) Limited which is Pound Sterling. The assets and
liabilities of this Company are translated into US dollars at the period-end
exchange rate. The income and expenses of the Company are translated to US
dollars at the average exchange rate for the period.
Translation gains and losses are included in OCI; however, Wentworth Resources
(UK) Limited has limited operations so there is no significant amount of
foreign exchange gains and losses to include in OCI. All other foreign
exchange gains and losses are recognised in profit or loss.
Earnings or loss per share (EPS)
Basic earnings or loss per share is calculated by dividing profit or loss
attributable to owners of the Company (the numerator) by the weighted average
number of ordinary shares outstanding (the denominator) during the period. The
denominator is calculated by adjusting the shares outstanding at the beginning
of the period by the number of shares bought back or issued during the period,
multiplied by a time-weighting factor.
Diluted EPS is calculated by adjusting the earnings and number of shares for
the effects of all dilutive potential ordinary shares deemed to have been
converted at the beginning of the period or if later, the date of issuance.
The effects of anti-dilutive potential ordinary shares are ignored in
calculating diluted EPS.
3. Accounting judgements and key sources of estimation uncertainty
In applying the Group's accounting policies, the preparation of consolidated
financial statements requires management to make estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual amounts may differ materially
from these estimates due to changes in general economic conditions, changes in
laws and regulations, changes in future operating plans and the inherent
imprecision associated with estimates. Significant estimates and judgments
used in the preparation of these consolidated financial statements include the
assessment of impairment triggers related to E&E and PP&E assets and
recognition of a deferred tax asset.
3.1 Significant accounting judgements and estimates
Recoverable value of Mnazi Bay E&E and Natural Gas Properties costs
Significant accounting Judgements
Oil and gas assets are inherently judgemental to value. The Directors review
the carrying value of the Groups assets to determine whether there are any
indicators of impairment such that the carrying values of the assets may not
be recoverable. The assessment of whether an indicator of impairment or
reversal thereof has arisen requires considerable judgement, taking account of
factors such as future operational and financial plans, commodity prices and
the competitive environment. Indicators of impairment also include but are not
limited to; declines in market value; company net assets in excess of market
capitalisation; obsolescence or physical damage; economic performance worse
than expected; or substantive expenditure in the specific area is neither
budgeted nor planned. The outcome of ongoing production and exploration
activities and whether their carrying values will ultimately be recovered is
inherently uncertain and requires significant judgement.
Management performs impairment testing on the Group's producing and
non-producing assets when indicators of impairment are present. The assessment
of impairment indicators is subjective and considers the various internal and
external factors such as the financial performance of individual CGUs, market
capitalisation and industry trends.
The period over which future cash flows are considered for impairment testing
is an area of judgment. Impairment testing was conducted over the licence
term, which expires in 2031.
Judgement was applied in determining the fair value less cost of disposal for
the natural gas properties. The offer price for the shares of the Group by
M&P provides the basis for the fair market value of the business.
Judgement is involved in deriving the fair value of the natural gas asset from
the fair value of the business based on the offer price for the Group's
shares.
Key sources of estimation uncertainty
The preparation of discounted cash flows used to assess the recoverable amount
of the Groups CGU includes management's estimates of future operating costs,
economic and regulatory environments, capital expenditures requirements, cost
recovery estimates, long term field plans and other factors including discount
rates and the total level of reserves deemed to be commercial.
The valuation underpinning the carrying value of producing and non-producing
assets are largely dependent on supply and demand variables.
The gas sales price is fixed, subject to an annual inflation index linked to
the US consumer prices index to 2031 and the cost base of production
operations is also largely fixed in nature. Whilst the benefits of increased
production volumes are clear, the opposite is equally true during operational
downtime, prolonged or permanent gas supply outages which may in turn impact
upon the commerciality of the field. Mnazi Bay currently has 5 producing wells
and formally signed the Commercialisation of Discovery making all terms
contained within the Mnazi Bay GSA legally binding and fully in effect from 10
September 2019. Mnazi Bay is committed to supplying a minimum quota of natural
gas to TPDC and TANESCO of 90 MMscf/day rising to 130 MMscf/day for the entire
remaining term of the GSA and is guaranteed of future revenue streams via a
take or pay provision of 85% of these amounts. This greatly strengthens and
formally ratifies the long-term commerciality of the Mnazi Bay asset.
Sensitivities were run on the following variables:
· Field production per well, noting that the engineering solutions
utilised on Mnazi Bay allow for the production of multiple hydrocarbon bearing
horizons from certain wells;
· The operating and development costs of producing gas from Mnazi bay.
· The impact of increased sales invoice delinquency upon future cash
flows;
· Currency settlement denomination variables, currently in US dollars,
noting that in certain circumstances an election for settlement in Tanzanian
Shillings may be made by TPDC; and
The above sensitivities impact the value in use of the cash generating unit,
which was found to be lower than the fair market value. Given that the fair
value less cost to sell was used as the recoverable amount, the Directors have
not indicated the quantitative impact of the above sensitivity analysis.
Summary of PPE &EE impairment
At the year-end, a full impairment test was conducted on the Mnazi Bay cash
generating unit, which comprises the production asset and the evaluation and
exploration asset, as there was an indication of impairment with respect to
the discrepancy between the market capitalisation of the Company as at 31
December 2022 of $66.1 million and the net asset of the group of $90.5million.
Given the existence of impairment indicators, the Group determined the of
Value- in -use (VIU) and the Fair value less cost to sell (FVLCS) of the cash
generating unit and have selected the higher of the two as the recoverable
amount.
The full impairment testing ultimately determined that the recoverable amount
was lower than the carrying value at the year-end, which resulted in an
impairment of $25 million. Due to there being no formal agreement between
Mnazi Bay partners to sanction further expenditure on non-producing assets,
$8.1m of the impairment loss has been applied against the carrying value of
the E&E assets reducing the carrying value down to $nil. At such time as
the Group, alongside its JV partners in Mnazi Bay, undertake future
exploration activities, this provision will be reviewed and dependent upon the
outcome of these activities may be reversed in part or in full. A total of
$16.9 million has been provided against the producing asset in Mnazi Bay,
reducing the carrying value down to $41.8 million from $58.7 million.
Irrespective of the above accounting treatment, the asset continues to
outperform expectations and 2022 remains the strongest performing year in its
production history. (See notes 12 and 13).
Reserves estimates
Significant accounting judgements
The Directors use judgement and experience to determine the timing and quantum
of volumes expected to be recovered from producing fields to be able to
calculate a probabilistic base-case value-in-use for its assets. This
valuation may vary in response to changes in field performance over time and
the Company expects that there will likely be revisions upward or downward
based on updated information such as the results of future drilling, oil and
gas production levels and reservoir performance.
Key sources of estimation uncertainty
Oil and natural gas reserves, prepared by an external independent reserve
evaluator as at 31 December 2022, are used in the calculation of depletion,
impairment and impairment reversal determinations and recognition of deferred
tax asset. Reserve estimates are based on engineering data, estimated future
prices and costs, expected future rates of production and the timing of future
capital expenditures; all of which are subject to many uncertainties and
certain input assumptions.
3.2 Other accounting judgements and estimates
Taxes
Other accounting judgements
The Directors make judgements in relation to the recognition of various taxes
levied on the Group, which are both payable and recoverable. Judgement applies
as the Group operates in countries where the legal and tax systems are less
developed, which increases the requirement for management to make assumptions
as to whether certain payments will be required related to matters such as
income taxes, value added taxes, and other indirect taxes as well as outcomes
of any tax disputes which would affect the recognition of tax liabilities and
deferred tax assets. A provision is recognized in the financial statements for
such matters if it is considered probable that a future outflow of cash
resources will be required. The provision, if any, is subject to management
estimates and judgements with respect to the outcome of the event, the costs
to defend, the quantum of the exposure and past practice in the country.
Key sources of estimation uncertainty
Estimates may be made to determine the amount of taxes recoverable,
principally deferred tax assets. Commercial production and gas sales under the
Gas Sales Agreement, allows for the recognition of a deferred tax asset within
the financial statements. The amount that the company recognizes is subject to
the following estimates:
· The timing of future profits for the utilization of tax losses from
the current tax pools which are based on management assessments and forecasts
of future performance.
· The effective tax rate at which the losses will be utilised
throughout the Group which is currently the tax rate of Tanzania as this is
where all of the Group's operations are;
· The status of any current tax assessments and disputes and their
impact on the deferred tax pool on a probabilistic basis;
· Any material changes in legislation that may impact upon the fiscal
regime on which the deferred tax asset is computed.
Changes in these estimates within a reasonably possible range in the next 12
months are not expected to significantly alter the carrying amount of the
Groups taxes that are recoverable.
The Group engages early with tax authorities where it has or will enter into a
large or complicated transaction that is subject to interpretation and, in
Tanzania, completed its most recent Tanzanian Revenue Authority (TRA) audit
for the years of 2018 to 2020in January 2021, the result of which was an
agreed assessment for taxes totalling $9k. Recently, the TRA issued a
determination for disputed 2018 to 2020 CIT assessments totalling $126k and we
are awaiting revised assessments to establish the liability which remains.
The tax audit for the fiscal year 2021 was completed in October 2022, with an
agreed assessment of $1.1 million for CIT which has been recognised within
revenue and also trade and other receivables, the amount will ultimately be
recovered from TPDC profit gas. An assessment for VAT of $9k was also made by
the TRA. Recently, the TRA issued a determination on disputed assessments for
2021 employment taxes totalling $121k of which assessments for employment
taxes totalling $115k have been dropped leaving a tax liability of $6k.
4. Segment information
The Company conducts its business through the Tanzania ("Mnazi Bay
Concession") segment. Gas operations include the exploration, development, and
production of natural gas and other hydrocarbons. The Corporate segment
activities include investment income, interest expense, financing related
expenses, share based compensation relating to corporate activities and
general corporate expenditures. Inter-segment transfers of products, which
are accounted for at market value, are eliminated on consolidation.
Net income/(loss) for the year-ended 31 December 2022
Tanzania Operations Corporate Consolidated
$000 $000 $000
Total revenue 37,709 - 37,709
Production costs (4,273) - (4,273)
Depletion (7,962) - (7,962)
Total cost of sales (12,235) - (12,235)
Gross profit 25,474 - 25,474
Recurring administrative costs (2,852) (4,869) (7,721)
Proposed acquisition costs - (1,256) (1,256)
New venture and pre - licence costs - (335) (335)
Value Added Tax write-off - (607) (607)
Impairment of E&E and PPE (25,000) - (25,000)
Share-based payment charges (194) (914) (1,108)
Depreciation and depletion (97) (1) (98)
Total costs (28,143) (7,982) (36,125)
Loss from operations (2,669) (7,982) (10,651)
Finance income 131 494 625
Finance costs (125) (112) (237)
Loss before tax (2,663) (7,600) (10,263)
Current tax expense (8,574) - (8,574)
Deferred tax 5,857 - 5,857
(2,717) - (2,717)
Net loss and comprehensive loss from continued operation
(5,380) (7,600) (12,980)
Net income/(loss) for the year-ended 31 December 2021
Tanzania Operations Corporate Consolidated
$000
$000 $000
Total revenue 23,818 - 23,818
Production costs (3,800) - (3,800)
Depletion (6,267) - (6,267)
Total cost of sales (10,067) - (10,067)
Gross profit 13,751 - 13,751
Recurring administrative costs (1,988) (4,436) (6,424)
New venture and pre - licence costs - (502) (502)
Share-based payment charges (115) (422) (537)
Depreciation and depletion (50) - (50)
Total costs (2,153) (5,360) (7,513)
Profit/(loss) from operations 11,598 (5,360) 6,238
Finance income 137 2 139
Finance costs 998 (1,367) (369)
Profit/(loss) before tax 12,733 (6,725) 6,008
Current tax expense (1,321) - (1,321)
Deferred tax 1,380 - 1,380
59 - 59
Net profit/(loss) and comprehensive profit/(loss) from continued operation
12,792 (6,725) 6,067
Selected balances at 31 December 2022
Tanzania Operations (1) Mozambique (Discontinued) Corporate Consolidated
$000 $000
$000 $000
Current assets 23,546 205 18,266 42,017
Property, plant and equipment 41,814 - - 41,814
Deferred tax asset 14,097 - - 14,097
Total assets 79,457 205 18,266 97,928
Current liabilities 3,955 11 1,657 5,623
Non-current liabilities 1,818 - - 1,818
Total Liabilities 5,773 11 1,657 7,441
Capital additions for the year-ended 31 December 2022
Additions to property, plant and equipment 530 - - 530
Disposals (211) - - (211)
Change in decommissioning liability (250) - - (250)
Total additions 69 - - 69
( )
(1) Discontinued operations represent Wentworth Moçambique Petroleos,
Limitada which is in the process of liquidation after relinquishment of the
Tembo Block Appraisal Licence in April 2019.
Selected balances at 31 December 2021
Tanzania Operations (1) Mozambique (Discontinued) Corporate Consolidated
$000 $000
$000 $000
Current assets 19,764 101 8,505 28,370
Exploration and evaluation assets 8,129 - - 8,129
Property, plant and equipment 66,464 - 1 66,465
Deferred tax asset 8,239 - - 8,239
Total assets 102,596 101 8,506 111,203
Current liabilities 1,704 - 799 2,503
Non-current liabilities 1,929 - - 1,929
Lease liability 36 - - 36
Total Liabilities 3,669 - 799 4,468
Capital additions for the year-ended 31 December 2021
Additions to property, plant 186 - - 186
and equipment
Disposals (17) (17)
Change in decommissioning liability 289 - - 289
Total additions 458 - - 458
(1) Discontinued operations represent Wentworth Moçambique Petroleos,
Limitada which is in the process of liquidation after relinquishment of the
Tembo Block Appraisal Licence.
5. Revenue
2022 2021
$000 $000
Revenue from gas sales 30,792 23,622
Revenue from condensate sales 9 33
Other revenue 6,908 163
37,709 23,818
Other revenue includes $3.0 million (2021: 163k) of corporate income tax
("CIT") recovery within WGL. It also includes $1.8 million and $2.1 million of
CIT recovery within CMBL for the financial years of 2022 and 2021 respectively
(see note: 23). CIT is recovered through adjustments to TPDC gas sales
entitlements.
6. Administrative costs
2022 2021
$000 $000
Employee salaries and benefits (note 7) 2,213 1,915
Executive director costs (note 8) 742 927
Contractors and consultants 1,199 1,100
Travel and accommodation 423 182
Professional, legal and advisory 967 311
Auditor's remuneration 496 326
Office and administration 521 408
Corporate and public company costs 1,160 1,255
7,721 6,424
Auditor's remuneration comprises:
Audit of these financial statements 243 159
Audit of financial statements of subsidiaries of the Company 180 124
Other tax advisory services 73 43
496 326
During the year the Company incurred regulatory, legal and consultancy costs
with respect to proposed acquisition transaction expenditures amounting to
$1,256k (2021: nil).
2022 2021
$000 $000
Regulatory costs 794 -
Legal costs 258 -
Consultancy costs 204 -
1,256 -
During the year the Company incurred legal and consultancy costs with respect
to new venture and pre-licence appraisal expenditures amounting to $335k
(2021: $502k).
2022 2021
$000 $000
Legal costs 277 301
Consultancy costs 58 201
335 502
During the year the Company write-off Value Added Tax recoverable amounting to
$607k (2021: nil) which was disallowed for refund by the HM Revenue &
Customs.
2022 2021
$000 $000
Value Added Tax write-off 607 -
607 -
7. Staff numbers and costs
The average number of persons employed during the year, analysed by category,
was as follows:
2022 2021
Number of employees
Senior Managers 2 2
Managers and supervisors 7 7
Support staff 7 7
16 16
The aggregate payroll costs were as follows:
2022 2021
$000 $000
Salaries 1,219 856
Social security costs 216 103
Bonuses 338 206
Other staff costs 440 750
Employee salaries and benefits (note 6) 2,213 1,915
LTIP charges 312 134
2,525 2,049
8. Directors' costs
2022 2021
$000 $000
Executive director costs:
Remuneration 404 427
Bonuses 303 357
Contractual termination payments - 100
Pensions 35 43
Executive director costs 742 927
Non-executive directors' remuneration 271 430
LTIP charges 795 403
1,808 1,760
The aggregate remuneration of the highest paid Director was $404k (2021:
$427k). During 2021, contractual termination payments, relate to amounts paid
to Bob McBean who retired as Company Chairman.
For additional segregation by Director, refer to Total Remuneration of
Executive Director Table and Total Remuneration of Non-Executive Directors
Table contained within the Remuneration Committee Report.
9. Finance income and finance costs
2022 2021
$000 $000
Finance income
Foreign exchange gain 431 -
Interest income 178 128
Gain on disposal of PP&E 16
Reversal of expected credit losses on TANESCO receivable (note 10)
- 11
625 139
Finance costs
Accretion - decommissioning provision (note 16) (139) (126)
Intercompany loan withholding tax costs (60) (58)
Bank charges (33) (21)
Lease interest expenses (note 17) (5) (8)
Foreign exchange loss - (137)
Renewal fee on overdraft facility - (19)
(237)
(369)
10. Trade and other receivables
2022 2021
$000 $000
Trade receivable from TPDC 2,479 1,917
Other receivable from Operator - M&P 2,747 1,087
Trade receivable from TANESCO 1,035 351
Other receivable from TPDC 3,563 378
Other receivables 1,277 1,817
11,101 5,550
At 31 December 2022, $2.5 million is receivable from TPDC (2021: $1.9 million)
representing one month of gas sales (2021: one month).
At 31 December 2022, $2.7 million is receivable from Operator - M&P (2021:
$1.1 million) representing one month of gas sales of $2.5 million which was
paid by TPDC to M&P in December 2022 but payment to Wentworth was made in
January 2023. The receivable from Operator - M&P also include $265k (2021:
62k) representing two months gas sales paid by TANESCO to M&P in November
2022 but payment to Wentworth was made in January 2023.
At 31 December 2022, $1 million is receivable from TANESCO (2021: $351k)
representing seven months of gas sales (2021: three months).
Other receivables from TPDC represent income tax of $2.9 million (2021: $378k)
paid by WGL, a wholly owned subsidiary of the Company and income tax of $675k
(2021: nil) paid by CMBL, a 39.925% owned subsidiary of the Company. The
income tax is anticipated to be recovered from TPDC's share of profit gas
within the next 12-months under the terms of the Mnazi Bay PSA, which provides
such a mechanism for the recovery of all corporate taxes.
Other receivables include VAT recoverable of $306k (2021: 886k), corporate tax
prepayments of $546k (2021: $483k), various prepaid expenses $425k (2021:
$88k). In accordance with IFRS 9 the Company notes no material expected credit
losses.
11. Tanzania Government receivables
The Group has an agreement with the Government of the United Republic of
Tanzania (TANESCO, TPDC and the Ministry of Energy and Minerals) to be
reimbursed for all the project development costs associated with Umoja T&D
expenditures at cost. An audit of the Mtwara Energy Project ("MEP")
development expenditures was completed in November 2012 and costs of
approximately $8.1 million were verified to be reimbursable. After deducting
costs associated with the Tariff Equalisation Fund and VAT input credits
associated with the MEP totalling $1.6 million, the amount agreed to be
reimbursed was $6.5 million.
During 2017, the Government initiated its first review of the costs to verify
the balance owing by it. On 8 February 2018 the Government issued the results
which differed from the previously audited and approved gross receivable of
$6.5 million, which the Group maintains was accurate and correct.
The Government is conducting a second ongoing review and due to the age and
uncertainty surrounding the receivable and its recoverability, the Group made
a provision in-full during 2018 against the carrying amount without prejudice
to the ongoing commercial discussions with the Government, the Group has
reviewed this at the year-end and continues to consider the provision is
appropriate.
12. Exploration and evaluation assets
Tanzania
$000
Cost
Balance at 31 December 2021 and 2022 8,129
Accumulated impairment
Balance at 31 December 2021 -
Impairment charge for the year (8,129)
Balance at 31 December 2022 (8,129)
Carrying amounts
31 December 2021 8,129
31 December 2022 -
At the year-end the carrying value of these assets were assessed for
impairment. The impairment test ultimately determined that the recoverable
amount was less than the carrying amount and all E&E assets were fully
impaired (see note 13).
13. Property, plant and equipment
Natural gas properties Office and other equipment Right of use Total
$000 $000 $000 $000
Cost
Balance at 31 December 2020 104,400 613 - 105,013
Additions 28 34 124 186
Disposals - (17) - (17)
Change in decommissioning liability 289 - - 289
Balance at 31 December 2021 104,717 630 124 105,471
Additions 321 198 11 530
Disposals - (211) - (211)
Change in decommissioning liability (250) - - (250)
Balance at 31 December 2022 104,788 617 135 105,540
Accumulated depreciation, depletion and impairment
Balance at 31 December 2020 (32,097) (609) - (32,706)
Depreciation and depletion (6,267) (5) (45) (6,317)
Disposals - 17 - 17
Balance at 31 December 2021 (38,364) (597) (45) (39,006)
Impairment (16,871) - - (16,871)
Depreciation and depletion (7,962) (46) (52) (8,060)
Disposals - 211 - 211
Balance at 31 December 2022 (63,197) (432) (97) (63,726)
Carrying amounts
31 December 2021 66,353 33 79 66,465
31 December 2022 41,591 185 38 41,814
During the year a full impairment test was conducted on the Mnazi Bay asset as
there was an indication of impairment with respect to the difference between
the offer made for 100% of the issued and to be issued share capital of the
Company and its net assets prior to the recognition of an impairment loss.
This implied fair value of the cash generating unit is derived from the
agreed offer price adjusted for cash and other monetary assets and
liabilities, provided a higher recoverable amount for the year ended 31
December 2022, compared to the value-in-use of the cash generating unit as at
that date. An impairment provision of $25.0 million has therefore been
recognised, reducing the carrying value of the cash generating unit to the
recoverable amount of $41.8 million from $66.8 million.
The impairment loss has been limited to the measurable fair value less costs
to disposal of the individual assets within the CGU. The fair value of the
asset is categorised as level 2 and was determine with reference to the offer
price, adjusted for additional factors considered in agreeing to the offer
price. A $8.1m impairment loss has been applied against the carrying value of
the E&E assets reducing the carrying value down to $nil. At such time as
the Group, alongside its JV partners in Mnazi Bay, undertake future
exploration activities, this provision will be reviewed and dependent upon the
outcome of these activities may be reversed in part or in full. A total of
$16.9 million has been provided against the producing asset in Mnazi bay,
reducing the carrying value down to $41.8 million from $58.7 million.
Irrespective of the above accounting treatment, the asset continues to
outperform expectations and 2022 remains the strongest performing year in its
production history.
During the year, the Group made additions to PPE totalling $519k (2021: $62k).
Right of use asset addition of $11k (2021: $124k) relate to office space
leased in Tanzania. Disposals related to office furniture and other equipment
disposed during the year. A change to the assumptions used in calculating the
decommissioning and abandonment provisions resulted in further additions of
($250k) (2021: $289k) (see note 16). Assets disposals $211k (2021: $17k)
includes disposal of vehicles.
14. Subsidiary and joint undertakings
The subsidiary and joint undertakings at 31 December 2022 are:
Name of Company Country of incorporation Class of shares held Types of ownership Percentage holding Nature of business
Wentworth Resources (UK) Limited United Kingdom Ordinary Direct 100% Investment holding company
Wentworth Holding (Jersey) Limited Jersey Ordinary Direct 100% Investment holding company
Wentworth Tanzania (Jersey) Limited Jersey Ordinary Indirect 100% Investment holding company
Wentworth Gas (Jersey) Limited Jersey Ordinary Indirect 100% Investment holding company
Wentworth Gas Limited Tanzania Ordinary Indirect 100% Exploration production company
Cyprus Mnazi Bay Limited (1) Cyprus Ordinary Indirect 39.925% Exploration production company
Wentworth Mozambique (Mauritius) Limited Mauritius Ordinary Indirect 100% Investment holding company
Wentworth Moçambique Mozambique Ordinary Indirect 100% Investment holding company
Petroleos, Limitada (2)
( )
(1) CMBL is considered a jointly controlled entity and accounted for as a
joint operation rather than a joint venture (see note 1 for further details).
( )
(2) The Wentworth Moçambique Petroleos, Limitada is in the process of
liquidation following the relinquishment of the Tembo Block Appraisal Licence
in April 2019.
15. Trade and other payables
2022 2021
$000 $000
Payable to Maurel et Prom (Operator) 1,634 1,222
Trade payables 1,070 250
Other payables and accrued expenses 2,919 1,031
5,623 2,503
Other payables and accrued expenses include income tax liability $994k (2021:
nil), bonuses of $682k (2021: $606k), audit and tax advice fees of $350k
(2021: $320k), other third-party services of $852k (2021: $59k) and current
lease liability $41k (2021: $46k).
16. Decommissioning and abandonment provision
The Company's decommissioning provision results from net ownership interests
in petroleum and natural gas assets including well sites, pipeline gathering
systems and processing facilities in Tanzania. The operator of the Mnazi Bay
Concession has revised the estimate of the Company's share of the
undiscounted, inflation-adjusted amount of cash flows required to settle
decommissioning obligations for the infrastructure within the Mnazi Bay
Concession to $3.7 million (initial estimated costs was $4.2 million).
Estimates of the gross cost of abandonment to the JV has decreased from $9.8
million to $7.7 million as per a revised abandonment cost study prepared by
TSB Offshore in 2021. The projected costs have decreased due to the
expectation that a local contractor will perform the work. Costs have been
discounted back to 2031, the current licence expiry date, however a further
10-year extension beyond this to 2041 would likely be awarded, deferring this
expenditure until that date. The obligations have been estimated using
existing technology at current prices inflated and discounted using discount
rates that reflect current market assessments of the time value of money and
the risks specific to each liability.
A reconciliation of the decommissioning obligations is provided below:
2022 2021
$000 $000
Balance at 1 January 1,929 1,514
Change in accounting estimates (250) 289
Accretion (Note 9) 139 126
Balance at 31 December 1,818 1,929
The change in the accounting estimate of ($250k) during the year comprises:
· Change in inflation rate from 3.16% in 2021 to 4.20% in 2022
(2021: from 1.36 to 3.16%).
· Revised estimated gross abandonment cost which has decreased from
$9.8 million to $7.7 million in 2022 (2021: nil).
The same discount rate of 8.3% was used for year 2022 and 2021.
17. Lease liability
2022 2021
$000 $000
Balance at 1 January 82 -
Additions 11 124
Lease interest expenses 5 8
Lease payment (57) (50)
Balance at 31 December 41 82
Current 41 46
Non-current - 36
During the year, the Company recognised a lease liability of $41k (2021:
$82k), the whole amount is current (2021: $46k) and is presented in trade and
other payables. The lease liability was initially recognised in year 2021 with
the assumption that the office in Dar Es Salaam would have been leased for the
next two years up to September 2023, however in case the lease is extended the
lease liability will be revised.
18. Repurchase of own shares
2022 2021
$000 $000
Settlement of 866,572 ordinary shares at various prices each 243 -
Settlement of 7,500,000 ordinary shares at 20.0 pence (26 cents) each - 1,982
243 1,982
During 2022, the Company repurchased 867k ordinary shares totalling $243k,
which were cancelled and removed from the share register during the first half
of 2022 (see note 20).
During 2021, the Company repurchased 7.5 million ordinary shares totalling
$2.0 million which included $1.2 million for 4.5 million ordinary shares
repurchased on 17 December 2021, cancelled and removed from the share register
on 30 December 2021. The balance of $793k for 3.0 million ordinary shares
repurchased on 17 December 2021 was held in treasury and recognised within
equity reserves at 31 December 2021 (see note 20) and used to satisfy upcoming
obligations in respect of the employee share plan.
19. Share-based payments
2022 2021
$000 $000
Share based compensation recognised in the statement of Comprehensive income 1,108 537
Movement in the total number of share options outstanding and their related
weighted average exercise prices are summarised as follows:
2022 2021
Number of Weighted average exercise price (US$)(1) Number of Weighted average exercise price (US$)
options options
Outstanding at 1 January 10,749,451 0.17 7,813,711 0.30
Granted 4,031,020 - 4,325,815 -
Forfeited (500,000) 0.26 - -
Lapsed (495,422) 0.26 (1,390,075) 0.38
Outstanding at 31 December 13,785,049 0.07 10,749,451 0.17
The following table summarises share options outstanding and exercisable at 31
December 2022:
Outstanding Exercisable
Exercise price (NOK) Exercise price (US$)(1) Number of options Weighted average remaining life (years) Number of options
- - 1,016,430 9.5 -
- - 3,014,590 9.2 -
- - 957,447 8.9 -
- - 3,368,368 8.5 -
- - 942,593 7.9 -
- - 2,485,621 7.0 -
3.85 0.39 750,000 3.0 750,000
4.08 0.41 250,000 0.3 250,000
5.18 0.52 1,000,000 1.2 1,000,000
13,785,049
( )
(1) The US Dollar to Norwegian Kroner exchange rate used for determining the
exercise price at 31 December 2022 is 0.10135.
The following table summarises share options outstanding and exercisable at 31
December 2021:
Outstanding Exercisable
Exercise price (NOK) Exercise price (US$)(1) Number of options Weighted average remaining life (years) Number of options
- - 957,447 9.9 -
- - 3,368,368 9.5 -
- - 942,593 8.9 -
- - 2,485,621 8.0 -
- - 495,422 7.4 -
3.85 0.44 750,000 4.0 750,000
4.08 0.46 250,000 1.3 250,000
5.18 0.59 1,500,000 2.2 1,500,000
10,749,451 2,500,000
( )
(1) The US Dollar to Norwegian Kroner exchange rate used for determining the
exercise price at 31 December 2021 is 0.11349.
Measurement of fair value
The fair value of share options is assessed on the grant date and the fair
value is subsequently recognized as compensation expense over the vesting
period which is three years. The fair value of options granted is measured at
the date of the grant and is determined using the Black-Scholes option pricing
model. The following table indicates weighted average grant date fair value
and the assumptions used in the determination of the fair value of options
granted during the year:
2022 2021
Grant date fair value per option (US$) 0.53 0.55
Risk free interest rate (%) 4.25 4.25
Expected volatility (%) 64 59
Expected dividends (US$) Nil Nil
20. Share capital
Authorised, called up, allotted and fully paid
Ordinary shares Par value
2022 2021 2022 2021
$000 $000
Balance at 1 January 181,049,139 186,488,465 414,919 416,426
Repurchase of own shares: Cancelled and removed from share register during the (866,572) - (243) -
first half of year 2022.
Repurchase of own shares: Cancelled and removed from share register on 3 - (939,326) - (318)
February 2021.
Repurchase of own shares: Cancelled and removed from share register on 30 - (4,500,000) - (1,189)
December 2021.
180,182,567 (2021: 181,049,139) ordinary shares 180,182,567 181,049,139 414,676 414,919
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company.
The 867k ordinary shares repurchased on various dates during the first half of
2022 were cancelled and removed from the share register during the same
period.
The 939k ordinary shares repurchased in December 2020 were cancelled and
removed from the share register on 3 February 2021. These ordinary shares have
been removed from share capital.
The 4.5 million ordinary shares repurchased on 17 December 2021 were cancelled
and removed from the share register on 30 December 2021. These ordinary shares
have been removed from share capital.
21. Earnings per share
Basic and diluted eps
2022 2021
$000 $000
Net (loss)/profit for the period (12,980) 6,067
Weighted average number of ordinary shares outstanding 181,049,139 185,549,139
Weighted average number of own ordinary shares repurchased (518,901) (287,671)
180,530,238 185,261,468
Dilutive effect of share options outstanding 11,785,049 8,249,451
Dilutive weighted average number of ordinary shares outstanding 192,315,287 193,510,919
Basic net profit per ordinary share (0.07) )0.03
Diluted net profit per ordinary share (0.07) 0.03
During the year-ended 31 December 2022 2.0 million options (2021: 2.5 million
options) were excluded from the dilutive weighted average number of shares
outstanding because they were anti-dilutive.
During the year, the Company repurchased 867k own ordinary shares from
shareholders. The Company cancelled all repurchased ordinary shares on various
dates during the first half of 2022.
On 17 December 2021, the Company repurchased 7.5 million own ordinary shares
from shareholders. On 30 December 2021, the Company cancelled 4.5 million
repurchased ordinary shares (see note 18). The balance of 3.0 million ordinary
shares were held in treasury to satisfy upcoming obligations in respect of an
employee share plan.
22. Dividends
The following dividends were declared and paid by the Company during the
year.
2022 2021
$000 $000
1.16 pence ($1.40 cents) per ordinary share (2021: 1.0 pence; ($ 0.14 cents; 2,680 2,600
NOK 0.12205)
0.70 pence ($0.78 cents) per ordinary share (2021: 0.52 pence; $ 0.71 cents; 1,453 1,320
NOK 0.06035)
Total dividend paid 4,133 3,920
On 23 July 2021 (and for VPS shareholders, 6 August 2021), the Company paid
shareholders the final year 2020 dividend of 1.0 pence ($1.4 cents; NOK
0.12205) per ordinary share. The total final dividend distribution was $2.6
million.
On 8 October 2021 (and for VPS shareholders, 22 October 2021), the Company
paid shareholders the 2021 interim dividend of 0.52 pence ($ 0.71 cents; NOK
0.06035) per ordinary share. The total interim dividend distribution was $1.3
million.
On 29 July 2022, the Company paid shareholders a final 2021 dividend of 1.16
pence ($1.40 cents) per ordinary share. The total final dividend distribution
was $2.7 million.
On 7 September 2022, the Company paid shareholders an interim dividend of 0.70
pence ($0.78 cents) per ordinary share. The total interim dividend
distribution was $1.5 million.
23. Income taxes
Income taxes
A. Amounts recognised in profit
2022 2021
$000 $000
Current tax expense
Current year 4,064 163
Prior year 3,117 (4)
Withholding tax 1,393 1,162
8,574 1,321
Deferred tax expense
Prior year 2,487 (71)
Current year (8,466) (2,645)
Previously unrecognized tax losses now recognised (1,574) -
Other temporary differences not recognised 229 80
Tax losses not recognised 1,467 1,256
(5,857) (1,380)
Income tax expense: 2,717 (59)
B. Reconciliation of tax expense
The Company's income tax expense for the year-end 31 December is as follows:
2022 2021
$000 $000
(Loss)/profit before income taxes (10,263) 6,008
Expected (loss)/income tax expense at combined Tanzanian rate of 30% (2021: (3,079) 1,802
30%)
Rate differentials 267 514
Tanzania cost gas excluded from taxable income (96) (4,661)
Tanzania dividend withholding tax 1,393 1,162
Tanzania prior year income tax(1) 3,117 (4)
Prior year deferred tax 2,487 (71)
Previously unrecognized tax losses now recognised (1,574) -
Other temporary differences not recognised 229 80
Tax losses not recognised 1,467 1,256
Movement in deferred tax assets not previously recognised and other (1,494) (137)
adjustments(2)
Income tax expense: 2,717 (59)
Current tax 8,574 1,321
Deferred tax (5,857) (1,380)
(1) Prior year income tax includes additional tax charges incurred subsequent
to assessments by the Tanzanian Revenue Authority. The amount includes prior
year CIT of $1.0 million incurred by WGL and $2.1 million incurred by CMBL
(2)Includes ($1.5 million) prior year adjustment on T&D receivable (2021:
($137k) Non-deductible expenses and non-taxable profit).
The current tax expense includes $3.0 million of CIT incurred by WGL (2021:
$163k), withholding tax $1.4 million incurred by Wentworth Gas Jersey Limited
("WGJL") (2021: $1.2 million) and $1.8 million and $2.1 million of accrued CIT
by CMBL for the years 2022 and 2021 respectively.
During the year 2021, Wentworth Resources plc fully recovered amounts it had
historically loaned to its operating subsidiaries to explore for, and
ultimately develop, gas in Mnazi Bay. The final intercompany loan repayments
were made in May 2021. After this date, the repatriation of funds from the
United Republic of Tanzania to Wentworth Resources plc was made by way of
dividends which carry a 10% withholding tax charge. These charges totalled
$1.3 million (2021: $1.2 million). The Group is in continued dialogue with the
Government of the United Republic of Tanzania on the applicability of these
charges to the PSA at Mnazi Bay, however, will continue to pay these charges
in full until such time as talks are concluded and a final settlement is
reached.
The Company operates in multiple jurisdictions with complex tax laws and
regulations which are evolving over time. The Company has taken certain tax
positions in its tax filings and these filings are subject to audit and
potential reassessment after the lapse of considerable time. Accordingly, the
actual income tax impact may differ significantly from that estimated and
recorded by management.
The Company has unrecognised deductible temporary differences that results in
unrecognised deferred income tax assets of:
2022 2021
$000 $000
Non-capital losses 5,313 5,375
Property and equipment (385) (307)
4,928 5,068
The total non-capital losses of the Company are $99.0 million (2021: $118.5
million) of which $81.0 million (2021: $104.0 million) are in Tanzania, $18.0
million (2021: $14.5 million) are in the UK.
A deferred tax asset is recognised to the extent that it is probable that
taxable profit will be available against which deductible temporary
differences and the loss carry forwards can be utilised. Recognition of the
tax asset is supported by the proven and probable reserves as determined by a
third-party external reserves engineer, RPS.
2022 2021
$000 $000
Balance at 1 January 8,239 6,859
Deferred income tax assets recognised in profit or loss:
PP&E (9,906) 1,688
Receivables 1,488 (3)
Non-capital losses (5,500) (518)
Asset retirement obligations (36) 213
Balance at 31 December 14,097 8,239
The deferred tax balance at year end comprises:
2022 2021
$000 $000
Property, plant and equipment (12,107) (22,014)
Trade and other receivables 1,488 -
Accumulated tax losses 24,172 29,673
Asset retirement obligation 544 580
Balance at 31 December 14,097 8,239
Accumulated tax loss carried forward of $80.6million (2021: $95.6 million)
relate to the Company's Tanzanian subsidiary and are expected to be offset
against future taxable income.
24. Financial instruments
The Company's activities expose it to a variety of financial risks: credit
risk, liquidity risk and market risk (currency fluctuations, interest rates
and commodity prices). The Company's overall risk management programme focuses
on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the Company's financial performance. A full description of
the key risks affecting the business is noted in the Business Risks section of
the Strategic Report.
Credit risk
Wentworth's credit risk exposure is equal to the carrying value of its cash
and cash equivalents, trade, other and long-term receivables. Credit terms are
30 days from the date of invoice.
Trade and other receivables are comprised predominantly of amounts due from
government owned entities in Tanzania and Value Added Tax ("VAT") in
Tanzania.
The Group's ongoing exposure to trade receivables from TANESCO, the state
power company, relates to the gas sales from the Mnazi Bay Concession to a
TANESCO owned 18-megawatt gas-fired power plant located in Mtwara, Tanzania.
At 31 December 2022, the Mnazi Bay Concession partners were owed seven months
of invoices for gas sales made to TANESCO, with $1.0 million owing to
Wentworth (2021: $350k representing three months). After year-end, TANESCO has
paid six invoices, $864k net to Wentworth.
At 31 December 2022, $265k receivable from the Operator representing two
months gas sales was paid by TANESCO to M&P in November 2022, but payment
to Wentworth was made in January 2023, (2021: $62k representing three months
gas sales).
During 2015, the Group commenced gas sales to TPDC under a long-term gas
sales agreement, the operator of the new transnational gas pipeline in
Tanzania. Credit risk relating to sales to TPDC is substantially mitigated
through a two-part payment guarantee structure. The first part relates to a
prepayment amount of approximately three to four months of gas deliveries at
current sales volumes which has been received and is held by the Operator of
the Mnazi Bay Concession. The second part is a one-month replenishable letter
of credit which is not yet executed. At 31 December 2022, the Mnazi Bay
Concession partners were owed one-month gas sales, with $2.5 million owing to
Wentworth (2021: $1.9 million representing one-month gas sales invoice).
Subsequent to the year-end, TPDC paid this invoice, $2.5 million net to
Wentworth.
At 31 December 2022, $2.5 million receivable from Operator - M&P
representing one month of gas sales which was paid by TPDC to M&P in
December 2022 but payment to Wentworth was made in January 2023, (2021: $1.0
million representing three months gas sales for CMBL).
At 31 December 2022, an undiscounted long-term receivable of $6.5 million
(2021: $6.5 million) related to the Group's disposal of T&D assets, and
the costs associated with the MEP incurred in prior years by a wholly owned
subsidiary of Wentworth. On February 6, 2012, the Company, TANESCO, TPDC and
MEM reached an agreement that the Group's cost of historical operations in
respect of the Mtwara Energy Project should be reimbursed (see note 11).
The Group's cash and cash equivalents of $30.9 million as at 31 December 2022
(2021: $22.8 million). are held with financial institutions which are rated
below. Wherever possible ratings are provided by Fitch Ratings, however, where
no rating was available from either Fitch Ratings or either of the other major
international credit rating agencies such as Standard & Poors or Moodys,
the bank's local credit rating was used:
2022 2021
Financial Institutions Rating Cash held Cash held
$000 $000
Standard Bank BB- 15,045 12,270
Santander A+ 11,948 7,553
Absa Bank BB- 2,691 12
FirstRand Bank BB- - 2,516
Tanzania Commercial Bank - 733 245
Citibank Group A 276 120
Exim Bank - 123 -
Mauritius Commercial Bank Limited BB- 92 92
RBC Royal Bank AA 6 10
Petty cash N/A 2 2
30,916 22,820
The exposure to credit risk as at 31 December:
2022 2021
$000 $000
Trade and other receivables (1) 6,534 4,181
Cash and cash equivalents 30,916 22,820
37,450 27,001
( )
(1) Trade and other receivable exclude recoverable VAT and prepaid corporate
income tax of $4.6 million (2021: $1.4 million).
Aged trade and other receivables
Current Overdue, but not impaired Total
1-30 days $000
$000
31-60 61-90 >90
days days days
$000 $000 $000
Balance at 31 December 2022
Trade receivables 2,787 2,644 147 683 6,261
Other receivables 2,705 - - 2,135 4,840
5,492 2,644 147 2,818 11,101
Balance at 31 December 2021
Trade receivables 2,410 506 397 42 3,355
Other receivables 288 - - 1,907 2,195
2,698 506 397 1,949 5,550
Current Overdue, but not impaired Total
1-30 days $000
$000
31-60 61-90 >90
days days days
$000 $000 $000
Balance at 31 December 2022
Trade receivables 2,787 2,644 147 683 6,261
Other receivables 2,705 - - 2,135 4,840
5,492 2,644 147 2,818 11,101
Balance at 31 December 2021
Trade receivables 2,410 506 397 42 3,355
Other receivables 288 - - 1,907 2,195
2,698 506 397 1,949 5,550
The movement in the allowances for impairment in respect of trade receivables
and contract assets during the year was as follows (see note 10):
2022 2021
$000 $000
Balance as at 1 January - 11
Impairment loss recognized - (11)
Balance as at 31 December - -
Liquidity risk
Liquidity risk is the risk that the Company will not have sufficient funds to
meet its liabilities as they become payable. Other than routine trade and
other payables, incurred in the normal course of business.
The table below summarises the maturity profile of the Company's financial
liabilities based on contractual undiscounted payments including future
interest payments on long-term loans.
Less than 1 year 1 to 2 years 2 to 5 years Total
$000 $000 $000 $000
Balance at December 31, 2022
Trade and other payables 3,873 - - 3,873
3,873 - - 3,873
Balance at December 31, 2021
Trade and other payables 2,503 - - 2,503
Lease liability - 36 - 36
2,503 36 - 2,539
Trade and other payables include the current lease liability of $41k (2021:
$46k).
The fair value of the Company's trade and other payables approximates their
carrying values due to the short-term nature of these instruments. The fair
value of the long-term loans approximates their carrying amounts as they bear
market rates of interest. The fair value of the other liability approximates
its carrying amount.
The Company has a working capital surplus at 31 December 2022 and generated
positive cash flow from operations in 2022. The Company plans to pay its
financial liabilities in the normal course of operations and fund future
operating and capital requirements through operating cash flows, bank debt,
bank overdraft credit facility and equity raises, when deemed appropriate.
Operating cash flow of the Company is dependent upon the purchasers of natural
gas, TPDC and TANESCO, continuing to meet their payment obligations. Any
delays in collecting funds from these purchasers for an extended period could
negatively impact the Company's ability to pay its financial liabilities in a
timely manner in the normal course of business (see also capital management
section).
Market risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices.
Market risk is comprised of foreign currency risk, interest rate risk and
other price risk (e.g. commodity price risk). The objective of market risk
management is to manage and control market price exposures within acceptable
limits, while maximising returns.
Commodity price risk
Commodity price risk is the risk that the Company suffers financial loss as a
result of fluctuations in oil or natural gas prices. The Company's exposure
to commodity price risk is mitigated as the sale prices for gas sold by the
Company is fixed under the existing gas sale and purchase agreements. An
increase of 1% in the gas production would result in an increase of $88k
(2021: $70k) in revenue.
Foreign exchange risk
Foreign exchange rate risk is the risk that the Company suffers financial loss
as a result of changes in the value of an asset or liability or in the value
of future cash flows due to movements in foreign currency exchange rates.
Wentworth operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the
Tanzanian Shilling and Pound Sterling against the functional currency of its
operating entities, the US dollar. The Company's objective is to minimise its
risk by borrowing funds in US dollars as revenues are denominated in US
dollars. In addition, the Company holds substantially all its cash and cash
equivalents in US dollars and converts to other currencies only when cash
requirements demand such conversion.
Current receivables and liabilities denominated in various currency:
United States
Pound Sterling Tanzanian Shilling Other Currency Dollar
$000 $000 $000 $000 Total
$000
Balance at 31 December 2022
Cash and cash equivalents 6,702 223 107 23,884 30,916
Trade and other receivables - 984 92 10,025 11,101
Trade and other payables (162) (870) (9) (4,582) (5,623)
6,540 337 190 29,327 36,394
United States
Pound Sterling Tanzanian Shilling Other Currency Dollar
000 $000 $000 $000 Total
$000
Balance at 31 December 2021
Cash and cash equivalents 91 287 111 22,331 22,820
Trade and other receivables 899 645 92 3,914 5,550
Trade and other payables (49) (193) - (2,261) (2,503)
941 739 203 23,984 25,867
A 10% increase of the Pound Sterling against US dollar would result in a
change in loss before tax of $106k (2021: $3k) and the opposite will be true
for the decrease. In addition, a 10% increase of the Tanzanian shilling
against the US dollar would result in a change in loss before tax of
approximately $12k (2020: $2k) and the opposite will be true for the decrease.
Financial instrument classification and measurement
The Company classifies the fair value of financial instruments according to
the following hierarchy based on the number of observable inputs used to value
the instrument:
· Level 1 - Quoted prices are available in active markets for
identical assets or liabilities as of the reporting date. Active markets are
those in which transactions occur in sufficient frequency and volume to
provide pricing information on an ongoing basis.
· Level 2 - Pricing inputs are other than quoted prices in active
markets included in Level 1. Prices in Level 2 are either directly or
indirectly observable as of the reporting date. Level 2 valuations are based
on inputs, including expected interest rates, share prices, and volatility
factors, which can be substantially observed or corroborated in the
marketplace.
· Level 3 - Valuation in this level are those with inputs for the asset
or liabilities that are not based on observable market data.
The following table shows the carrying amounts and fair values of financial
assets and financial liabilities, including their levels in the fair value
hierarchy. It does not include fair value information for financial assets and
financial liabilities not measured at fair value if the carrying amount is a
reasonable approximation of fair value.
Carrying amount Fair value Level 1 Level 2 Level 3 Carrying amount Fair value Level 1 Level 2 Level 3
2022 2022 2022 2022 2022 2021 2021 2021 2021 2021
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Loans and receivables
Cash and cash equivalent 30,916 - - - - 22,820 - - - -
Trade and other receivables (note 10) 7,538 - - - - 5,172 - - - -
Total financial assets 38,454 - - - - -
27,992 - - -
Financial liabilities measured at amortised cost
Trade and other payables (note 15) (3,873) (41) - (41) -
(2,503) (46) - (46) -
Lease liability (note 17) - - - - - (36) (36) - (36) -
Total financial liabilities (3,873) (41) - (41) -
(2,539) (82) - (82) -
Total financial instruments 34,581 (41) - (41) -
25,453 (82) - (82) -
Capital management
The Company's objectives when managing capital are to safeguard the Company's
ability to continue as a going concern, to develop its oil and gas properties
and maintain a flexible capital structure for its projects for the benefit of
its stakeholders. In the management of capital, the Company includes the
components of shareholders' equity as well as cash and long-term liabilities.
The Company manages the capital structure and adjusts it in light of changes
in economic conditions and the risk characteristics of the underlying assets.
As part of its capital management process, the Company prepares budgets and
forecasts, which are used by management and the Board of Directors to direct
and monitor the strategy, ongoing operations and liquidity of the Company.
Budgets and forecasts are subject to judgement and estimates such as those
relating to future gas demand and ultimate timing of collectability of trade
receivables for gas sales. These factors may not be within the control of
the Company, which may create near term risks that may impact the need to
alter the capital structure. The Company continues to effectively manage its
relationships with its gas purchasers to ensure timely collection and with
external lenders such that lending facilities are available to the Company as
and when needed. The Company may attempt to issue new shares, enter into joint
arrangements or acquire or dispose of assets to maintain or adjust the capital
structure. Management reviews the capital structure on a regular basis to
ensure that the above-noted objectives are met. The Company's overall strategy
remains unchanged from the prior year. At 31 December 2022 and 2021 there was
no net debt.
25. Related party transactions
Transactions with key management personnel
Details of Directors' remuneration, which comprise key management personnel,
are provided below:
2022 2021
$000 $000
Executive director short-term employee benefits 741 828
Non-executive directors' short-term employee benefits 272 529
LTIP charges 795 403
1,808 1,760
Further details of the Directors' remuneration can be found in the
Remuneration Report on pages 54 to 63 of the Annual Report.
26. Supplemental cash flow information
Finance income:
2022 2021
$000 $000
Finance income
Foreign exchange gain 431 -
Interest income 178 128
Gain on disposal 16 -
Reversal of expected credit losses on TANESCO receivable (note 10) - 11
625 139
Finance costs
Accretion - decommissioning provision (139) (126)
Bank charges (33) (21)
Lease interest expenses (5) (8)
Foreign exchange loss - (137)
Renewal fee on overdraft facility - (19)
(177) (311)
Finance costs, net
448 (172)
27. Commitments
Lease commitment
The Group has an office leasehold agreement in Dar es Salaam, Tanzania which
was entered into on 1 October 2022 and expires on 30 September 2023 at an
annual lease cost of $57k.
Capital commitment
At the date of this report, the Company had an outstanding contractual work
programme commitment with respect to the compression project, a gross firm
budget for which totalled $13.5 million ($11.1 million net to Wentworth) and a
contingent budget of $6.9 million ($2.2 million net to Wentworth). The work
programme is expected to be implemented within the coming year.
28. Subsequent events
On 5th December, the Company and M&P reached agreement on the terms of a
recommended acquisition of the entire issued and to be issued share capital of
the Company by M&P (the "Acquisition").
Detailed information on the Proposed Transaction is available on Wentworth's
website (https://www.wentplc.com/investors/offer-for-wentworth/
(https://www.wentplc.com/investors/offer-for-wentworth/) ).
On 23 February 2023, the Company announced that, at the Court Meeting and the
General Meeting held earlier that day, the following were the results: -
· the requisite majority of Scheme Shareholders voted to approve
the Scheme at the Court Meeting; and
· the requisite majority of the Company shareholders voted to pass
the resolution in connection with the amendment of the Company Articles and
the implementation of the Scheme at the General Meeting.
On 7 June 2023, representatives of the Company and M&P attended a
preliminary hearing before the FCC in Tanzania, at which various Tanzanian
governmental parties were present. A number of concerns were raised at the
hearing, which may impact the likelihood of the FCC to approve the acquisition
in its current form. A ruling is expected in the coming weeks.
On 12 June 2023, the Company received a letter from TPDC dated 9 June
2023 by which TPDC has notified Wentworth Gas Limited, the Company's main
operating subsidiary, of its decision purportedly to exercise its right of
first refusal in respect of Company's interest in the Mnazi Bay asset
pursuant to section 86(7) of the Tanzanian Petroleum Act, Cap 392
(the "ROFR").
The ROFR grants TPDC a right of first refusal to acquire a participating
interest that is intended to be assigned to a non-affiliate. The ROFR does
not, however, entitle TPDC to a right of first refusal (or similar right) in
connection with any indirect sale of a participating interest arising as a
result of the acquisition of shares in Company itself, which in the case of
the acquisition will in any event occur only after sanction of the Scheme by
the Royal Court of Jersey.
Discussions with TPDC and the FCC on the way forward and resolution of these
issues are ongoing as at the date of this report.
LTIP Vesting
On 3 January 2023 the performance period ended in respect of conditional
rights over 2,485,621 ordinary shares in the Company granted to Katherine Roe,
CEO. Following review by the Remuneration Committee, 98.1% of the Award,
representing 2,437,376 ordinary shares vested. The Award was satisfied by the
transfer of 1,291,809 ordinary shares held in treasury and the payment of
£459,574 ($601,973) which included the sum of £104,448 ($136,841) in respect
of dividend equivalents which the Remuneration Committee determined to pay.
Non-IFRS Measures
The Group uses certain performance measures that are not specifically defined
under IFRS, or other generally accepted accounting principles. These non-IFRS
measures include adjusted EBITDAX and operational costs of production
($/Mscf). The following note describes why the Group has selected this
non-IFRS measure.
Adjusted EBITDAX
Adjusted EBITDAX is a non-IFRS measure which does not have a standardised
meaning prescribed by IFRS. This non-IFRS measure is included because
management uses the information to analyse cash generation and financial
performance of the Group. Adjusted EBITDAX is defined as earnings before
interest, taxation, depreciation, depletion and amortisation, impairment,
share-based payments, provisions, and pre-licence expenditure The calculations
of adjusted EBITDAX are as follows:
2022 2021
($000) ($000)
Revenue
37,709 23,818
Less: production and operating costs
(4,273) (3,800)
Less: recurring administrative costs
(7,721) (6,424)
EBITDAX
25,715
13,594
Operating costs per Mscf is a non-IFRS measure used to monitor the Group's
operating cost efficiency, as it measures operating costs to extract
hydrocarbons on a unit basis. Operating costs per Mscf is defined as total
production costs excluding depletion. Adjusted aggregate production cost is
then divided by total production for the prevailing period, to determine the
unit cost per Mscf.
2022 2021
Production and operating costs ($000)
(4,273)
(3,800)
Net entitlement to gas production (MMscf)
8,588 6,904
Production and operating cost
($/Mscf)
(0.50) (0.55)
Standard
Cameron Snow, Head of Subsurface and Business Development, is a geologist with
16 years' experience across North America, South America, Africa, and Europe.
He holds a BS in Geology from North Carolina State University, an MS in
Geology from Utah State University, a PhD in Geological and Environmental
Science from Stanford University, and an MBA from Imperial College London. Mr.
Snow has read and approved the technical disclosure in this regulatory
announcement.
RESERVE DEFINITIONS
The following definitions have been used by RPS Energy Canada Ltd. (RPS) in
evaluating reserves. These definitions are based on the Petroleum Resources
Management System, published in 2007, and revised in June 2018, and sponsored
by the Society of Petroleum Engineers (SPE), World Petroleum Council (WPC),
American Association of Petroleum Geologists (AAPG), Society of Petroleum
Evaluation Engineers (SPEE), Society of Exploration Geophysicists (SEG),
Society of Petrophysicists and Well Log Analysts (SPWLA), and the European
Association of Geoscientists & Engineers (EAGE).
Reserves
Reserves are those quantities of petroleum anticipated to be commercially
recoverable by application of development projects to known accumulations from
a given date forward under defined conditions. Reserves must satisfy four
criteria: discovered, recoverable, commercial, and remaining (as of the
evaluation's effective date) based on the development project(s) applied.
Reserves are classified according to a range of uncertainty according to the
following categories:
Proved Reserves (P1)
Proved Reserves are those quantities of Petroleum that, by analysis of
geoscience and engineering data, can be estimated with reasonable certainty to
be commercially recoverable from known reservoirs and under defined technical
and commercial conditions. If deterministic methods are used, the term
"reasonable certainty" is intended to express a high degree of confidence that
the quantities will be recovered. If probabilistic methods are used, there
should be at least a 90% probability that the quantities actually recovered
will equal or exceed the estimate.
Probable Reserves (P2)
Probable Reserves are those additional Reserves which analysis of geoscience
and engineering data indicate are less likely to be recovered than Proved
Reserves but more certain to be recovered than Possible Reserves. It is
equally likely that actual remaining quantities recovered will be greater than
or less than the sum of the estimated Proved plus Probable Reserves (2P). In
this context, when probabilistic methods are used, there should be at least a
50% probability that the actual quantities recovered will equal or exceed the
2P estimate.
Glossary
Bcf/Bscf Billion standard cubic feet
BOE Barrels of oil equivalent
MMbbl Million barrels
MMboe Million barrels of oil equivalent
MMscf/d Million standard cubic feet per day
NPV Net present value (at a specified discount rate and specified discount date)
Inside Information
The information contained within this announcement is deemed by Wentworth to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) no. 596/2014 ("MAR"). On the publication of this announcement via a
Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
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. END FR PPUMWQUPWGRB
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