REG - Westmount Energy Ld - Interim Results

Westmount EnergyAnnouncement

31/03/2020 07:00

RNS Number : 1306I
  
Westmount Energy Limited
  
31 March 2020
  
 

31 March 2020
 
Westmount Energy Limited
("Westmount" or the "Company")
 
Interim Results
 
The Company is pleased to announce its Interim Results for the six months ended 31 December 2019.
 
Copies of the Company's interim results and are available on the Company's website, www.westmountenergy.com, and will be posted to shareholders shortly.
 
2019 Highlights
 
·      Continued focus on emerging Guyana-Suriname Basin, where 19 discoveries and in excess of 8 Bn Boe discovered resources have been reported since 2015
 
·      £5.57m raised in aggregate via Subscription at 13 pence per share
 
·      Convertible Loan Note interest and partial principal conversion at 14.93 pence per share 

 
·      Two Tertiary heavy oil discoveries (Jethro-1 and Joe-1) reported from 2019 drilling portfolio
 
·      Positioned for exposure to imminent ExxonMobil operated drilling of Upper Cretaceous, light oil, prospects on Canje and Kaieteur Blocks 
 
·      Material new investment made in Cataleya Energy Corporation
 
·      Strong cash balances of £2.6M at period end.  
 
Chairman's Review
 
The second half of 2019 reaffirmed the exciting potential of the emerging Guyana-Suriname basin while establishing important milestones. Aggressive exploration drilling, by a number of operators, has yielded new discoveries, new plays and stacked petroleum systems while extending the geographic and stratigraphic boundaries of this prolific province. In addition, Guyana became South America's newest oil producing nation with first oil from the Liza Phase I development being delivered, in December 2019, less than 5 years after discovery.  Production from this, ExxonMobil operated, development is currently ramping up and will produce up to 120,000 barrels of oil per day in the coming months, utilizing the Liza Destiny floating production storage and offloading vessel (FPSO). Anticipated sequential follow-on developments, including Liza Phase II, Payara and Hammerhead, are at various stages of design, engineering, government approval and project sanction and have the potential for Guyana to be producing circa 750,000 BOD by the mid-2020s. 
 
ExxonMobil and Stabroek Block partners added 3 new light oil discoveries in this period (Tripletail-1, Mako-1 and Uaru-1) and reported, in January 2020, cumulative discovered resources on the Stabroek Block of in excess of 8 Bn Boe (not including Uaru-1). This brings the total number of discoveries, to date, on the Stabroek Block to 16 from the 18 exploration wells drilled since 2015 (a prodigious success rate of 89%).


Tullow and Orinduik Block partners reported two heavy oil discoveries (Jethro-1 and Joe-1) in separate Tertiary age reservoirs during August/September 2019. Repsol and partners followed up in January 2020 with the reporting of a light oil discovery (Carapa-1), in Upper Cretaceous reservoirs, on the Kanuku Block. While the commercial potential of these discoveries remains to be fully evaluated they have established a south-westwards and updip extension of the Upper Cretaceous and Tertiary play fairways, albeit with a more complicated hydrocarbon sourcing and charging history. 
 
In January 2020 Apache and Total reported a substantial, stacked pay, hydrocarbon discovery (Maka Central-1) which extended the Upper Cretaceous play fairways to the southeast into Block 58, Suriname. This well encountered 50m of net, light oil and gas-condensate, pay (40o-60oAPI) in Campanian reservoirs overlying 73m of net light oil pay (35o-45oAPI) in Santonian reservoirs. This deeper Santonian pool represents a new play opening discovery and confirms the potential for deeper light oil discoveries throughout the deepwater Guyana-Suriname Basin. 
 
These discoveries have confirmed that the petroleum system extends beyond the Stabroek Block. The drilling results continue to support the presence of quality reservoirs, multiple source rocks and multiple phases of hydrocarbon expulsion.  Furthermore, a total of 5 plays have now been proven in the basin though the Upper Cretaceous Liza play dominates in terms of number of discoveries and discovered volumes to date.
 
In late 2019 ExxonMobil submitted drilling permit applications for 3 wells on Canje Block and 3 wells on Kaieteur Block. They also announced the contracting of a 5th drillship (Noble Sam Croft) for duty offshore Guyana from late Q2 2020. Guidance from Canje and Kaieteur partners indicates that three wells have been selected as potential drilling targets in the Canje Block (Bulletwood-1, Jabillo-1 and Sapote-1), with one well (Tanager-1) as the main drilling target in the Kaieteur Block. Subject to any operational delays introduced by the COVID-19 pandemic, it is anticipated that drilling will commence in Q2 2020 with Westmount shareholders having exposure to a minimum of 3 ExxonMobil operated Upper Cretaceous wells within the next 12 months via your Company's strategic investments in JHI Associates Inc ("JHI"), Cataleya Energy Corporation ("CEC") and Ratio Petroleum Energy Limited Partnership ("Ratio Petroleum").  
 
Access to opportunities in offshore Guyana remains one of the key challenges for both the industry and investors as your company continues to endeavour to deploy capital in this space. However, no new offshore deepwater licences have been awarded since January 2016 and Total remains the only major player to gain access (post Liza-1 Discovery) to direct licence interests via its 2018 multi-block farm-in to the Orinduik, Kanuku and Canje Licences. On 27th August 2019 Total announced that Qatar Petroleum had acquired a 40% interest in its subsidiary holding company with respect to the Orinduik and Kanuku Blocks. Current guidance from the various deepwater operators offshore Guyana indicates that Westmount will be the only London listed junior player offering exposure to drilling offshore Guyana in 2020.
 
Share Subscription, Convertible Loan Note and Investments
On 23rd and 28th August 2019 the Board announced the raising of £5.573m in total at 13p per share, by way of a share subscription. This financing inter alia enabled the completion of our second CEC investment, announced on the 30th August 2019, with the acquisition of an additional 313,500 common shares in CEC at a price of US$10 per share, for a total consideration of US$3,135,000 (equivalent to £2,582,372) including transaction costs. As a result of this share purchase, Westmount holds a total of 567,185 common shares in CEC, representing approximately 5.4% of the fully diluted share capital of CEC.
 
This investment increases your company's exposure to the ExxonMobil operated Kaieteur Block and to the Tanager Prospect one of the portfolio of drilling targets anticipated for drilling over the next 12 months. A Ratio Petroleum published CPR by NSAI describes the Tanager Prospect as a stacked reservoir prospect (Maastrichtian to Turonian reservoir intervals) and assigns a 'Best Estimate' Unrisked Gross (100%) Prospective Oil Resource of 256.2 MMBBLs to the prospect (Low to High Estimates 135.6 MMBBLs to 451.6 MMBBLs), with an aggregate Probability of Geologic Success (POSg) of 72%.
 
On 1st November 2019 the Board announced in conjunction with making the 1st Interest Payment of £67,446.56, in relation to the residual £660,000 principal of 10% p.a. convertible unsecured loan notes 2021 ("Convertible Loan Notes"), the early repayment of £260,000 principal of the £660,000 residual principal of Convertible Loan Notes through the issue, in aggregate, of 2,193,210 New Ordinary Shares at 14.93p per share. Following this subscription the residual principal of Convertible Loan Notes has been reduced to £400,000. 
 
Summary/Outlook 
Post the end of this reporting period, March 2020 has heralded the arrival of a series of unprecedented events on the back of the COVID-19 pandemic. Flight cancellations, industrial shutdowns, quarantines and travel bans have resulted in a sharp downturn in economic activity and collapsing capital markets which has had a devastating impact on the oil and gas industry globally. Dramatic declines in demand has seen Brent oil prices crash to sub $30/bbl and this price crash has been accentuated by the ending of the 'Opec-plus' supply cut arrangement from 1st April 2020 and the signalling of substantial oil supply increases to the market by Saudi Arabia, Russia and others. 
 
As a result, the near term outlook is likely to be dominated by extreme volatility, in the first instance, as public health authorities globally grapple with containment and mitigation measures with respect to the virus. The duration of the pandemic is unclear at this stage, though there is some evidence from China in recent days which suggest that the measures taken there have been successful and that the peak of the epidemic there has now passed (after 3 months). In addition, synchronized economic stimuli are being put in place by governments across the main global economies to cushion the immediate impacts and promote economic rebound.     
 
In spite of this immediate outlook, proven plays, large discovered volumes and prodigious exploration success rates, continue to highlight the Guyana-Suriname Basin as a global exploration hotspot.  In addition, low break-even costs (~$25/bbl Liza Phase II) continue to sustain offshore Guyana as a major investment growth area for the large incumbent players, in spite of the near term sector headwinds in the form of collapsing oil prices and poor economic growth prospects due to the Coronavirus (COVID-19) pandemic. While the major incumbent players in the Guyanese offshore sector have been guiding reduced capital investment for 2020, in response to the sudden oil price collapse, the picture so far suggests that near term discretionary exploration drilling, offshore Guyana,  may be less affected by these immediate budgetary adjustments than drilling in other regions. The main impact of COVID-19 is likely to be its potential to delay some operational activities as travel restrictions upset the international flow of offshore workers.  
 
At this stage, Westmount Energy is not experiencing any major disruption to its business model from COVID-19. While the near term oil price collapse/volatility effects market sentiment and immediate valuations, the long term valuation and return on Westmount investments will be determined by (a) drilling outcomes, (b) longer term oil pricing and (c) the exit price achievable by the investee companies (in drilling success case). The Company is very well capitalised with £2.6M cash at 31st Dec. 2019 and with a low fixed cost base. In this context, your Board remains focused on investment opportunities and deployment of capital that gives additional exposure to drilling in this prolific emerging basin.
 
Westmount's current investment portfolio offers shareholders exposure to potentially a minimum of 3 ExxonMobil operated Upper Cretaceous wells, across the Canje and Kaieteur Blocks, over the next 12 months. With independent geological risks these prospects provide some risk diversification and a portfolio effect in addition to drilling program results over a condensed timeframe. Furthermore, current guidance from the various deepwater operators indicates that Westmount is likely to be the only London quoted junior player offering exposure to drilling offshore Guyana in 2020. Success in some of these wells could result in transformational value changes for the medium term and positive times ahead for shareholders.
 
GERARD WALSH
Chairman
30 March 2020 
Enquiries: -
 
David King / Anita Weaver
Westmount Energy Limited                             Tel: 01534 823059
 
Nicholas Wells / Harry Hargreaves
Nomad and Broker
Cenkos Securities plc                                      Tel: 020 7397 8900
 
 
 
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 DECEMBER 2019
 




 


Six months ended 
31 Dec 2019
(unaudited)
£


 


Six months ended 
31 Dec 2018
(unaudited)
£


 


Year ended
30 Jun 2019
(audited)
£




Net (loss) / gain on financial assets held at fair value through profit or loss 


(756,794)


 


424,084


 


2,654,137




Net gain / (loss) on financial liabilities held at fair value through profit or loss


93,169


 


49,564


 


(183,753)




Impairment of intangible assets


-


 


-


 


(66,667)




Administration expenses


(200,458)


 


(107,431)


 


(203,648)




(Loss) / gain on foreign exchange


(53,038)


 


1,228


 


(25,814)




Share options expensed


(1,500)


 


(3,000)


 


(80,853)




 


 


 


 


 


 




Operating (loss) / profit


(918,621)


 


364,445


 


2,093,402




 


 


 


 


 


 




Finance charges


 


 


 


 


 




Loan interest expense


(37,189)


 


(105,024)


 


(79,987)




 


 


 


 


 


 




(Loss) / profit before tax


(955,810)


 


259,421


 


2,013,415




 


 


 


 


 


 




Tax


-


 


-


 


-




 


 


 


 


 


 




Comprehensive (loss) / income for the period / year


(955,810)


 


259,421


 


2,013,415




 


 


 


 


 


 




 


 


 


 


 


 




Basic (loss) / profit per share (pence)


(1.01)


 


0.55


 


3.83




Diluted (loss) / profit per share (pence)


(0.94)


 


0.55


 


3.51




 
 
All results are derived from continuing operations.
The Company had no items of other comprehensive income during the period / year.
 
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
 




 


31 Dec 2019
(unaudited)
£


 


31 Dec 2018
(unaudited)
£


 


30 Jun 2019
(audited)
£




 


 


 


 


 


 




ASSETS


 


 


 


 


 




Non-current assets


 


 


 


 


 




Intangible assets


33,333


 


100,000


 


33,333




Financial assets at fair value through profit or loss


8,644,384


 


2,718,357


 


6,745,797




 


8,677,717


 


2,818,357


 


6,779,130




 


 


 


 


 


 




Current assets


 


 


 


 


 




Other receivables


1,109


 


3,063


 


7,001




Cash and cash equivalents


2,618,986


 


1,343,190


 


63,374




 


2,620,095


 


1,346,253


 


70,375




 


 


 


 


 


 




Total assets


11,297,812


 


4,164,610


 


6,849,505




 


 


 


 


 


 




 


 


 


 


 


 




LIABILITIES AND EQUITY


 


 


 


 


 




Non-current liabilities


 


 


 


 


 




Derivative financial instruments


113,684


 


49,500


 


221,411




Borrowings


362,651


 


598,375


 


598,375




 


476,335


 


647,875


 


819,786




Current liabilities


 


 


 


 


 




Trade and other payables


54,595


 


46,360


 


45,422




Derivative financial instruments


1,900


 


936


 


3,592




Borrowings


12,683


 


957,254


 


50,967




 


69,178


 


1,004,550


 


99,981




 


 


 


 


 


 




Total liabilities


545,513


 


1,652,425


 


919,767




 


 


 


 


 


 




EQUITY


 


 


 


 


 




Share capital


11,606,743


 


4,244,166


 


5,829,872




Share option account


446,346


 


366,993


 


444,846




Retained earnings


(1,300,790)


 


(2,098,974)


 


(344,980)




Total equity


10,752,299


 


2,512,185


 


5,929,738




 


 


 


 


 


 




Total liabilities and equity


11,297,812


 


4,164,610


 


6,849,505




 


 


 


 


 


 




 
 
 
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 DECEMBER 2019




 


 


Share capital account
£


Share option account
£


Deficit 
£


Total equity
£




As at 1 July 2018


 


4,244,166


363,993


(2,358,395)


2,249,764




 
Comprehensive Income
Profit for the year ended 30 June 2019


-


-


2,013,415


2,013,415




Share issue


1,585,706


-


-


1,585,706




Transactions with owners 


 


 


 


 




Share options expensed


 


-


80,853


-


80,853




 


 


 


 


 


 




As at 30 June 2019


 


5,829,872


444,846


(344,980)


5,929,738




 


 


 


 


 


 




Comprehensive Income


 


 


 


 


 




Loss for the period ended 31 December 2019


-


-


(955,810)


(955,810)




Share issue


5,449,424


-


-


5,449,424




Transactions with owners


 


 


 


 




Loan notes converted


 


327,447


 


 


327,447




Share options expensed


 


-


1,500


-


1,500




 


 


 


 


 


 




As at 31 December 2019


 


11,606,743


446,346


(1,300,790)


10,752,299




 




 


 


Share capital account
£


Share option account
£


Deficit
£


Total equity
£




As at 1 July 2017


 


3,772,244


352,906


(2,919,475)


1,205,675




 


 


 


 


 




Comprehensive Income


 


 


 


 




Profit for the year ended 30 June 2018


-


-


561,080


561,080




Transactions with owners 
Warrants converted


471,922


-


-


471,922




Share options expensed


 


-


11,087


-


11,087




 


 


 


 


 


 




As at 30 June 2018


 


4,244,166


363,993


(2,358,395)


2,249,764




  
 
 
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2019
 




 


Six months ended 
31 Dec 2019
(unaudited)
£


 


Six months ended 
31 Dec 2018
(unaudited)
£


 


Year ended
30 Jun 2019
(audited)
£




Cash flows from operating activities


 


 


 


 


 




Total comprehensive (loss) / income for the period / year


(955,810)


 


259,421


 


 
        2,013,415


 




Adjustments for:


 


 


 


 


 


 




Net loss / (gain) on financial assets at fair value through profit or loss


756,794


 


(424,084)


 


(2,654,137)


 




Net (gain) / loss on financial liabilities at fair value through profit or loss


(93,169)


 


(49,564)


 


183,753


 




Impairment of intangible assets


-


 


-


 


66,667


 




Interest on borrowings


37,189


 


105,024


 


79,987


 




Share options expensed


1,500


 


3,000


 


 
80,853


 




Decrease in other receivables 


5,892


 


5,150


 


 
1,212


 




Increase in trade and other payables


9,173


 


3,190


 


 
2,252


 




Purchase of investments


(2,655,381)


 


(808,999)


 


 
(3,317,515)


 




Proceeds from sale of investments


-


 


142,265


 


1,499,100


 




Net cash out flow from operating activities


(2,893,812)


 


(764,597)


 


(2,044,413)


 




 


 


 


 


 


 


 




Cash flows from financing activities


 


 


 


 


 


 




Proceeds from borrowings


-


 


1,600,000


 


 
1,600,000


 




Interest and charges on borrowings 


-


 


(49,395)


 


(49,395)


 




Proceeds from issue of ordinary shares


5,449,424


 


-


 


-


 




Net cash generated from financing activities


5,449,424


 


1,550,605


 


1,550,605


 




 


 


 


 


 


 


 




Net increase / (decrease) in cash and cash equivalents


2,555,612


 


786,008


 


(493,808)


 




Cash and cash equivalents at the beginning of the period / year


63,374


 


557,182


 


557,182


 




Cash and cash equivalents at the end of the period / year


2,618,986


 


1,343,190


 


63,374


 



 
 
 
 
 
 
 
 
 



   
 
 
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2019
 
1. Accounting Policies
Basis of accounting
The interim financial statements have been prepared in accordance with the International Accounting Standard ("IAS") 34, Interim Financial Reporting.
 
The interim financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements for the year ended 30 June 2019. The annual financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS").
 
The same accounting policies and methods of computation are followed in the interim financial statements as in the Company’s annual financial statements for the year ended 30 June 2019.
 
2. Investments 




 


Six months ended 
31 December 2019


 


Six months ended 
31 December 2018


 


Year 
ended
30 June 
2019




 


(unaudited)


 


(unaudited)


 


(audited)




 


£


 


£


 


£




Argos Resources Limited, at market value


28,300


 


26,000


 


26,300




Cost, 1,000,000 shares


310,775


 


310,775


 


310,775




(31 December 2018: 1,000,000 shares, 30 June 2019: 1,000,000 shares)


 


 


 


 


 




 


 


 


 


 


 




Cataleya Energy Corporation, at market value


4,281,697


 


-


 


1,993,317




Cost, 567,185 shares


4,518,215


 


-


 


1,943,894




(31 December 2018: nil, 30 June 2019: 253,685 shares)


 


 


 


 


 




 


 


 


 


 


 




Eco Atlantic Oil & Gas Oil Limited, at market value


799,500


 


1,193,750


 


1,050,000




Cost,  1,500,000 shares


240,000


 


500,000


 


240,000




(31 December 2018: 3,125,000 shares, 30 June 2019: 1,500,000 shares)


 


 


 


 


 




 


 


 


 


 


 




JHI Associates Inc, at market value


2,577,471


 


1,121,100


 


2,662,304




Cost, 2,213,770 shares 


2,009,210


 


809,840


 


2,009,210




31 December 2018: 1,110,000 shares, 30 June 2019: 2,213,770 shares)


 


 


 


 


 




 


 


 


 


 


 




Ratio Petroleum Energy Limited Partnership shares, at market value


872,306


 


377,507


 


1,013,876




Cost, 1,200,000 shares 


252,144


 


245,048


 


252,144




(31 December 2018: 1,200,000 shares, 30 June 2019: 1,200,000 shares)


 


 


 


 


 




 


 


 


 


 


 




Ratio Petroleum Energy Limited Partnership warrants, at market value


85,110


 


-


 


-




Cost, 166,063 warrants


81,060


 


-


 


-




(31 December 2018: nil, 30 June 2019: nil)


 


 


 


 


 




 


 


 


 


 


 




Total market value


8,644,384


 


2,718,357


 


6,745,797




Total cost


7,411,404


 


1,865,663


 


4,756,023




 


 


 


 


 


 




Total fair value adjustment


1,232,980


 


852,694


 


1,989,774




Reverse prior year fair value adjustment


(1,989,774)


 


621,452


 


621,452




Current period fair value movement


(756,794)


 


1,474,146


 


2,611,226




 


 


 


 


 


 




Realised loss


-


 


(1,050,062)


 


42,911




Unrealised gain


(756,794)


 


1,474,146


 


2,611,226




Current period income statement impact


(756,794)


 


424,084


 


2,654,137




 


 


 


 


 


 




  
 


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