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Molecular Energies PLC

President Energy PLC - FY Results for year ended 31 Dec 2017 & Q1 Update

RNS Number : 4189Q
President Energy PLC
06 June 2018
 

6 June 2018

 

 

PRESIDENT ENERGY PLC

("President", "the Company", or "the Group")

 

Audited Results for the year ended 31 December 2017

and unaudited first quarter 2018 update

 

President (AIM: PPC), the upstream oil and gas company with a diverse portfolio of production and exploration assets focused primarily in Argentina, is pleased to announce its full year audited results for the year ended 31 December 2017 and a first quarter 2018 update. President Energy will be hosting an analyst and investor conference call at 14:00 (BST). Please find dial-in details at the bottom of the release.

 

Corporate & Financial Highlights

·  A transformational acquisition in late 2017 of Puesto Flores/Estancia Vieja Concessions in the Neuquén Basin from Chevron Argentina SRL producing immediate impact, generating profits,  positive cash and real returns to the Group

·  Acquisition cost of those concessions estimated to be paid back in less than two years with  production there growing and currently at its highest level since purchase by President

·   Group turnover in 2018 on course to triple year on year (2017: US$17.95 million), following an 81% increase in 2017 from the previous year (2016: US$9.9 million)

·   Exit 2017 Group production over four times the exit 2016 level

·  In 2017 the Group recognised a gross loss of US$3.4 million (2016: US$2.7 million) prior to the  transformation that will flow from the recent investment decisions

·  Strong positive cash generation from core operations in Q1 2018 of US$5 million and remaining  robust

·   Group net production:

Full year 2017 increased by 110% to 1,121boepd (2016: 533 boepd) on a like-for-like  basis

Q1 2018 increased by a further 80% to 2,018 boepd over full year 2017 with production  building up through the period

Currently approximately 2,400 boepd, even with certain wells off-line at the new  concessions due to the on-going workover programme

·   Significant improvement in core operating margin:

o  2017 well operating costs per boe excluding workovers reduced by 26% in Argentina  and 27% in the US over 2016; and

In Q1 2018 costs decreased by a further 14% and 49% respectively

·   Group-wide administrative costs reduced by:

44% over previous year to US$ 12.90 per boe (2016: US$23.20 per boe); and

A further 25% to US$9.70 per boe in Q1 2018 and set to further reduce as the year  progresses

·  Cash at year end 2017 of US$4.0 million (2016: US$17.6 million) after two acquisitions and extensive capex referred to below

·  Net debt of US$17.1 million after taking into account US$17.8 million paid for acquisitions and US$12.4 million capex incurred in year (2016:net cash US$8.5 million)

·  Group 2P (proven and probable) hydrocarbon reserves as at y/e 2017 increased by 33% to 27.1 mmboe (2016 20.3 mmboe)

 

Argentina

·   All Concessions now operationally profitable and contributing to Group

·  At period end and the start of 2018 the Company successfully worked over four wells at Puesto Flores/Estancia Vieja enabling oil to be produced from previously undrilled intervals

·   Major seven well work-over programme at Puesto Flores/Estancia Vieja now in progress with a three well drilling campaign in planning and targeted to commence in September

·   Puesto Flores  gross production as at 31 May 2018 was approximately  1,800 boepd (President 90%, Ediphsa 10%) and continuing to increase even with certain wells off-line for the ongoing work-over programme

·   Current Puesto Flores operating field net back of US$36 per barrel

·   Newly re-activated Estancia Vieja field to start selling gas in June

·   Workover programme at Puesto Guardian in H1 2017 delivered mixed results with field production having at one point during the workover programme reached approximately 900 boepd now stable at 500 boepd

·   Puesto Guardian is currently generating field net back contributing to G&A of US$15 per barrel with new development wells projected to be drilled in 2019

·   Farmout commenced of exploration assets with early interest encouraging

·  On its current businesses, no corporate tax on profits payable until estimated 2021 due to carried forward tax losses

 

Paraguay

·   During the year, additional third-party studies were carried out that further validated President's  optimistic view as to the prospectivity of its in-country assets

·     The farm-out process continues - encouraging recent interest

 

Louisiana

·  The acquisition of an additional 50% WI (37.5% NRI) in April 2017 and the assumption of  operatorship in the Triche Well, East Lake Verret, Louisiana has delivered results substantially  beyond initial expectations 

·   Louisiana contributes profitably to the Group with:

production revenue increasing in the year 2017 by 33% to US$3.6 million (2016:  US$2.7 million) on higher volumes; and

well operating costs per boe down 27% over previous year and further decreased by  49% in Q1 of 2018 

·    Louisiana is currently generating strong positive cash generation from core operations of US$245k per month. No corporate tax currently payable as carried forward losses being utilised

Outlook

·   With an increasingly capable and strengthened management team, an extensive capex programme targeting proved and probable reserves, the prospects for the present businesses to expand  are both real and positive

·   The Company will continue to seek the right acquisition to complement its existing portfolio for which patience is required

·   President views the rest of 2018 with well-founded optimism from an increasingly strong trading and financial position

Peter Levine, Chairman, commented:

''2017 was a year of transition and the transformation of the Company has been both swift and dramatic. The two acquisitions of producing assets we made, one in the Neuquén Basin, Argentina and the other, smaller, in Louisiana, are delivering results and cash flow above expectations which were fortuitously timed in the light of improving oil prices.

"With strong cash generation from our core operations in Q1 2018 of US$5 million, set to increase as the year progresses, we have now developed into a Group delivering real positive returns for its shareholders with the management and financial resources and commitment to expand further both by acquisition and organically.

"Our roadmap is clear, concentrating on cash flow, profits and margins and we look forward to 2018 with well-founded optimism as the Group goes from strength to strength."

 

Glossary

Boe barrels of oil equivalent

Bopd barrels of oil per day

Boepd barrels of oil equivalent per day

2P proven and probable hydrocarbon reserves

 

Conference call dial-in details:

United Kingdom: 08003589473

PIN: 47547253#

 

Contact:

President Energy PLC

Peter Levine, Chairman

Rob Shepherd, Group FD

 

 

+44 (0) 207 016 7950

+44 (0) 207 016 7950

 

finnCap (Nominated Advisor & Joint Broker)

Christopher Raggett, Scott Mathieson, Andrew Burdis

 

 

+44 (0) 207 220 0573

BMO Capital Markets (Joint Broker)

Jeremy Low, Neil Haycock and Tom Rider

 

 +44 (0) 207 236 1010

 

Camarco Financial PR

Billy Clegg, Owen Roberts, Violet Wilson

+44 (0) 203 757 4980

 

Chairman's Statement

 

Summary

2017 was a year of transition and transformation. President entered the year working to optimise the production from its only asset in Argentina at the Puesto Guardian Concession with mixed results.  The Group ended the year transformed. By the end of 2017 President  was producing four times more than at the same time the previous year end with increased margins primarily as a result of lower unit operating costs.  In 2018, President continues to go from strength to strength.  With strong positive cash generation from core operations of US$5 million for Q1 2018 there are realistic expectations that such level will increase as the year progresses and as benefit from the year-long capital expenditure programme crystallises.

The results for 2017 portrayed in the light of our unaudited management figures for Q1 2018 show the following:

·  A transformational acquisition in late 2017 of Puesto Flores/Estancia Vieja Concessions in the Neuquén Basin from Chevron Argentina SRL producing immediate impact, generating profits, positive cash and real returns to the Group

·  Acquisition cost of those concessions estimated to be paid back in less than two years with production there growing and currently at its highest level since purchase by President

·   Group turnover in 2018 on course to triple year on year (2017: US$17.95 million), following an 81% increase in 2017 from the previous year (2016: US$9.9 million)

·   Exit 2017 Group production over four times the exit 2016 level

·  In 2017 the Group recognised a gross loss of US$3.4 million (2016: US$2.7 million) prior to the transformation that will flow from the recent investment decisions

·  Strong positive cash generation from core operations in Q1 2018 of US$5 million and remaining robust

·   Group net production:

Full year 2017 increased by 110% to 1,121boepd (2016: 533 boepd) on a like-for-like  basis

Q1 2018 increased by a further 80% to 2,018 boepd over full year 2017 with production  building up through the period

Currently approximately 2,400 boepd , even with certain wells off-line at the new concessions  due to the on-going workover programme

·   Significant improvement in core operating margin:

2017 well operating costs per boe excluding workovers reduced by 26% in Argentina and 27% in the US over 2016; and

In Q1 2018 costs decreased by a further 14% and 49% respectively

·   Group-wide administrative costs reduced by:

44% over previous year to US$ 12.90 per boe (2016: US$23.20 per boe); and

A further 25% to US$9.70 per boe in Q1 2018 and set to further reduce as the year progresses

·  Cash at year end 2017 of US$4.0 million (2016: US$17.6 million) after two acquisitions and extensive  capex referred to below;

·  Net debt of US$17.1 million after taking into account US$17.8 million paid for acquisitions and US$12.4 million capex incurred in year (2016:net cash US$8.5 million)

·  Group 2P (proven and probable) hydrocarbon reserves as at y/e 2017 increased by 33% to 27.1 mmboe (2016 20.3 mmboe)

 

Argentina

Puesto Flores/Estancia Vieja

The fourth quarter of 2017 was a milestone in the Company's future with the acquisition and integration of the Puesto Flores/Estancia Vieja Concession, Rio Negro Province, in the famous Neuquén Basin where the Company is pleased to partner with EDHIPSA, the Rio Negro Provincial energy company which holds a 10% interest in the Concession.  

The purchase transformed the financial position and prospects of President and from day one generated positive cash flow with material operating profits. The full benefit of the acquisition and licence extension will be felt in the results for the full year 2018 with payback of the acquisition cost of the asset estimated to be less than two years.

The Concession has added significant value, added reserves to our portfolio and provides substantial running room for growth in both the fields. An early workover programme demonstrated that there were untapped oil bearing intervals in Puesto Flores and shut-in gas in Estancia Vieja. The accelerated programme announced on 16 April 2018 will capitalise on this through workovers, new drilling and gas production. Thus, President is focusing its capital in this area where the return is greatest against other areas of its portfolio. Such cash returns on its current businesses benefit from no corporate tax being paid by President until it is estimated 2021 due to carried forward tax losses.

 

Puesto Guardian

The first part of the year was spent conducting workovers of certain wells in our Puesto Guardian Concession with mixed results.  The reasons for such results were due to both surface and sub-surface issues. With regards to the former, new surface pumps that had been ordered were late being delivered and subsequently proved to be defective. The latter sub-surface issues have led us to conclude that the optimal cost effective way to materially increase production in the Concession is to drill new wells targeting the many proven undeveloped accumulations. This is being planned for 2019 and President remains optimistic as to the opportunities in Puesto Guardian particularly as there is still another 32 years left of the Concession term.

We can therefore afford to be patient but nevertheless, in the meantime, with greater efficiencies and an improved oil price, Puesto Guardian is now operationally profitable at the field level, and is making a solid contribution to the Group.

President has now begun a farmout process of the deeper exploration prospects at the Concession and in the Company's neighbouring two licences of Matorras and Ocultar. At this early stage, interest is encouraging.

 

Paraguay

·   During the year, additional third party studies were carried out that further validated President's optimistic view as to the prospectivity of its in-country assets

·   The farm-out process continued with the assistance of third party advisers, albeit initially more  slowly than anticipated, but with encouraging interest continuing to be generated from a number of  parties

·     Irrespective of this current process, the Company is committed to retaining its interests and licences in the Country and in such light is advancing plans towards drilling a well during 2019

 

Louisiana

The acquisition of an additional 50% WI (37.5% NRI) in April 2017 and the assumption of operatorship in the Triche Well, East Lake Verret, Louisiana has delivered results substantially beyond initial expectations 

Louisiana contributed profitably to the Group with:

production revenue increasing in the year 2017 by 33% to US$3.6 million (2016: US$2.7 million) on higher volumes

well operating costs per boe down 27% over previous year and further decreased by 49% in Q1 of 2018 

Louisiana is currently generating strong positive cash generation from core operations of US$245k per month. No corporate tax is currently payable due to carried forward losses being utilised.

 

Corporate

In April 2017, the Group acquired for US$2.25 million cash plus a US$400k capped earn out, an operated 50% working interest in the Triche well, Louisiana, taking President's working interest in the well to 62%. With the well performing significantly ahead of expectations and reflecting the higher than expected revenues under President's operatorship the earn out is expected to be completely satisfied in Q3 2018, some two years ahead of schedule, at which time the additional 5% revenue interest will revert to President.

In January 2018, the Group disposed of its entire non-operated, non-core beneficial interest in the East White Lake Field, Louisiana USA as further described in the Directors Report below.

In September 2017 President acquired operatorship and a 100% stake in the Puesto Flores/Estancia Vieja fields, Rio Negro Province, Argentina from Chevron Argentina for US$618k including apportionments.   In December, the relevant Concession was extended by the Rio Negro Province for 10 years resulting in a payment to the Province of US$15 million, an obligation to pay a further US$7 million in 2018 in three instalments and the granting of a 10% interest in the Concession to Edhipsa, the Provincial energy company. Of such further monies, US$3.3 million has already been paid in 2018 with the balance payable in Q3 and Q4 2018.

In November/December 2017 a placing supported by major shareholders together with a subsequent open offer to shareholders raised US$15.3 million gross of new money which was utilised to part pay the approximately US$16 million cash due as a result of the acquisition of Puesto Flores/Estancia Vieja from Chevron Argentina and the subsequent grant of a further ten year licence period for the relevant concession. 

Also in 2017, the Group entered into its first formal bank lending arrangement, with an US$8 million loan in Argentina. The loan has a 3.5 year term and is repayable in quarterly installments. Repayment commenced in 2018 and by the year end 2018, the capital balance outstanding of such loan is expected to be approximately US$6 million. The long term revolving facility of up to US$15 million granted by a Peter Levine group company, IYA, remains in place; the year-end balance was around US$13.1 million and currently some US$1.5 million remains undrawn as at 30 April 2018.

In April 2018 Rob Shepherd stepped up as from his Non-Executive role to be Group Finance Director with Alex Moody-Stuart formerly of Schlumberger being welcomed as a Non-Executive Director. Taking into account the increase in executive directors, to ensure a balanced Board, Miles Biggins will step down at the forthcoming AGM but will remain the Group's Technical Director.

 

Financial review of 2017

In 2017, the Group recognised a gross loss of US$3.4 million (2016: loss US$2.7 million) prior to the transformation that will flow from recent investment decisions. Throughout 2017, the Group continued to build for the future growth in Argentina with a major acquisition, higher workover activity and the build-up of the in country capability all of which need to be seen in the context of a full year when the transition will be fully apparent in the returns. After administrative expenses of US$5.3 million (2016: US$4.5 million) are taken in to account, this led to an operating loss before impairment and non-operating gains of US$8.8 million (2016: loss US$7.2 million).  The loss for the year from continuing operations of US$8.8 million (2016: loss US$14.0 million loss) was after impairment charges of US$1.3 million (2016: US$ 11.0 million) relating primarily to the impairment of the East White Lake field in the USA in 2017.

Revenue increased by 81% to US$17.9 million (2016: US$9.9 million), reflecting higher sales driven by production offsetting slightly lower average product prices for the year of US$50.62/boe (2016: US$53.51/boe). Overall Group production increased by 110% to 1,121 boepd (2016: 533 boepd) on a like for like basis, which was driven by acquisitions in Argentina and the USA and higher production from the Puesto Guardian field in Argentina.

The Group's primary investment focus during 2017 was on growth through acquisitions in core areas, increasing production in Argentina whist continuing to evaluate farm out opportunities in Paraguay and Argentina. Investment in Property, Plant and Equipment and related Goodwill in the year included US$25.0 million on the acquisition and licence extension in Argentina, US$2.4 million on acquisition of low cost operations in the USA and US$10.3 million (2016: US$ 15.6 million) on capitalised workovers, tangible equipment purchases in Argentina offset by a decrease in the asset abandonment recognition. Intangible Fixed Asset additions amounted to US$0.7 million (2016: US$0.6 million) relating to Paraguay and Argentina.

 

Conclusion and Prospects

2017 was a year of transition and the transformation of the Company has been both swift and dramatic. The two acquisitions of producing assets we made, one in the Neuquén Basin, Argentina and the other, smaller, in Louisiana, are delivering results and cash flow above expectations which were fortuitously timed in the light of improving oil prices.

With strong cash generation from our core operations in Q1 2018 of US$5 million, set to increase as the year progresses, we have now developed into a Group delivering real positive returns for its shareholders with the management and financial resources and commitment to expand further both by acquisition and organically.

Our roadmap is clear, concentrating on cash flow, profits and margins and we look forward to 2018 with well-founded optimism as the Group goes from strength to strength.

 

Detailed financial review

In 2017, the Group recognised a gross loss of US$3.4 million (2016: loss US$2.7 million) that is yet to fully reflect the transformation that will flow from recent investment decisions. Throughout 2017, the Group continued to build for the future growth in Argentina with a major acquisition, higher workover activity and the build-up of the in country capability all of which need to be seen in the context of a full year when the transition will be fully apparent in the returns. After administrative expenses of US$5.3 million (2016: US$4.5 million) are taken in to account, this led to an operating loss before impairment and non-operating gains of US$8.8 million (2016: loss US$7.2 million).  The loss for the year from continuing operations of US$8.8 million (2016: loss US$14.0 million loss) was after impairment charges of US$1.3 million (2016: US$ 11.0 million) relating primarily to the impairment of the East White Lake field in the USA in 2017  and  full impairment of the DP-1002 S/T well in Argentina in 2016.

Revenue increased by 81% to US$17.9 million (2016: US$9.9 million), reflecting higher sales driven by production offsetting slightly lower average product prices for the year of US$50.62/boe (2016: US$53.51/boe). Overall Group production increased by 110% to 1,121 boepd (2016: 533 boepd) on a like for like basis, which was driven by acquisitions in Argentina and the USA and higher production from the Puesto Guardian field in Argentina. Cost of sales of US$21.4 million (2016: US$12.6 million) increased in line with the stepped changes following the acquisitions but fell on a per boe basis reflecting the higher production volumes achieved.

In September 2017, the Group completed the acquisition of the Puesto Flores and Estancia Vieja assets in the Rio Negro Province, Argentina. This together with the higher production from successful workovers on both the Puesto Guardian and Puesto Flores fields increased production in Argentina by 42% to 302,849 boe (2016: 125,135 boe) or 830 boepd (2016: 342 boepd). As well as increasing production, the workovers also informed independently assessed additions to 2P reserves of over 2.0 mmboe representing a reserves replacement ratio of nearly over 7 times production volumes in 2017.

Oil sales in Argentina averaged US$53.41 per bbl (2016: US$57.83 per bbl) as the transition to a fully de-regulated market was only completed in in October. Oil prices are now set to move in line with the prevailing Brent oil price adjusted for locational variations. Well operating costs before workover expenses were managed down during the year to US$41.43/boe (2016: US$55.69/boe) whilst depreciation also fell during the year to US$12.30/boe (2016: US$13.68/boe) as a result of the acquisition and reserves upgrades. With a full year of production from Puesto Flores combined with successful workovers we anticipate this should lead to a further reduction of unit well operating costs in 2018.

In April 2017, The Group completed the acquisition of an incremental interest and operatorship of the Triche well in Louisiana, USA.  Consequently, production from the Group's working interest in US operations rose by 52% to 291 boepd (2016: 191 boepd, as adjusted) offsetting the natural decline at East Lake Verret and East White Lake

Realised prices in the US edged down 5% on the prior year to US$42.11/boe (2016: US$44.51/boe).  Cost of Sales increased by 14% to US$2.6 million (2016: US$2.2 million) reflecting the acquisition. However, on a per boe basis, cost of sales from the Group's working interest in US operations decreased to US$24.14/boe (2016: US$32.07/boe as adjusted) primarily due to the additional volumes from the lower unit cost Triche operation.

Despite the price environment, the EBITDA contribution from the US operations rose to US$1.2 million (2016: US$0.8 million) reflecting the acquisition and steps undertaken in 2017 to manage down operational and administrative costs in the Group's US operations.

In line with the investment strategy in Argentina, the growth in Argentine operating and administrative expense reflects the building up of in country capability and pursuit of investment opportunities. While Group-wide administrative expenses outside of Argentina remained flat the increase in overall Group administrative expense to US$5.3 million (2016: US$4.5 million) was driven by this approach. 

Total impairment charges during the year of US$1.3 million (2016: US$11.0 million) relate to the impairment of the East White Lake field in the USA. In light of continued poor production performance the non-operated interest in the field was disposed of in 2018. Consequently, the carrying value was impaired in the year in line with the fair value of the disposal proceeds. In 2016, the DP-1002 S/T well drilled in September in Puesto Guardian, Argentina, was fully impaired, US$10.9 million, as the well was rendered incapable of completion for production due to due to service quality issues encountered in drilling operations with the balance of the impairment on the carrying value of the East White Lake field.

With an improving oil price environment carrying through to 2018 there are growing signs that the global E&P sector is emerging from its recent slumber and looking for new opportunities. The Group's timely acquisition of Puesto Flores is evident that we are well placed to build on our positions in Paraguay and Argentina from our portfolio of investment opportunities but also well placed and well-funded should new opportunities arise.  To that end the Company announced in February 2018 that it has commenced the relevant processes to obtain a secondary listing of the Company's shares on The Bolsa de Comercio de Buenos Aires (BCBA) - the Argentine Stock Exchange. The secondary listing is expected to take place later in  2018. The primary listing of the Company will remain the AIM market of the London Stock Exchange.

With support from existing and new shareholders, the Company raised US$13.1 million of equity (before expenses) in Q4 2017 to support the ongoing work programme at the recently acquired Puesto Flores and Estancia Vieja fields in Argentina, contributing towards the overall funding package to be paid to the Rio Negro Province in relation to the extension of the Concession for Puesto Flores. Following the completion of the acquisition, the Group announced their first commercial bank loan through the established Argentinian Banks, BACS Banco de Credito y Securitizacion S.A and Banco Hipotecario. The US$8.0 million facility was used to part fund the extension of the concession

Concurrent with the equity fundraising, the Group's loan facility with IYA Limited was restructured such that US$2.2 million of the outstanding principal was capitalised into equity and the remaining facility was extended to US$15.0 million at a 10.5% interest rate with maturity date remaining as the 31 December 2021. Certain clauses in the new loan agreement were amended resulting in the reclassification of the loan to non-current. At the year-end, total borrowings under this facility amounted to US$9.1 million (2016: US$9.1 million).  Together, the new equity raise and loan capitalisation represent the US$14.8 million net placing proceeds set out in the Consolidated Statement of Changes in Equity.

The Group's primary investment focus during 2017 was on growth through acquisitions in core areas, increasing production in Argentina whist continuing to evaluate farm out opportunities in Paraguay and Argentina.

Investment in Property, Plant and Equipment and related Goodwill in the year included US$25.0 million on the acquisition and licence extension in Argentina, US$2.4 million on acquisition of low cost operations in the USA and US$10.3 million (2016: US$ 15.6 million) on  capitalised workovers and tangible equipment purchases in Argentina, offset by a decrease in the asset abandonment recognition.  As in the prior year, the Argentine Peso fell again in value relative to the US dollar, resulting in a reduction in the carrying value of the assets as presented in the Group financial statements.

Intangible Fixed Asset additions amounted to US$0.7 million (2016: US$0.6 million) relating to Paraguay and Argentina. In Paraguay, following encouraging interest in the farm out process the Company is committed to retaining its interests and licences in the Country and in such light is advancing plans towards drilling a well during 2019 The technical evaluation of the Matorras/Occultar block in Argentina was completed following the extension granted in 2017 and a formal farm out process has been launched.

Trade and other payables increased to US$18.1 million (2016: US$10.8 million) largely due to the US$7.0 million licence extension deferred payments due to be settled in 2018.  The Group retains a prudent provision for all accrued costs in relation to the DP-1002 well.  Notwithstanding this, President having taken expert legal advice considers that its claims against service providers relating to that well on a full liability basis extinguish and exceed the amounts so provided.  No benefit from President's potential claims has been taken into account given that legal action is in process.

Year-end cash balances were US$4.0 million (2016: US$17.6 million).

 

Key Performance Indicators

Key Performance Indicators are used to measure the extent to which Directors and management are reaching key objectives. The principal methods by which the Directors monitor the Group's performance are volumes of net production, well operating costs and the extent of exploration success. The Directors also carry out a regular review of cash available for exploration and development and review actual capital expenditure and operating expenses against forecasts and budgets.

Production in Argentina increased by 42% to 302,849 boe (2016: 125,135 boe) or 830 boepd (2016: 342 boepd) following the acquisition of the Puesto Flores and Estancia Vieja assets in the Rio Negro Province, Argentina and the higher production from successful workovers on both the Puesto Guardian and Puesto Flores fields.

In Argentina, well operating costs before workover expenses were managed down during the year to US$41.43/boe (2016: US$55.69/boe) whilst depreciation also fell during the year to US$12.30/boe (2016: US$13.68/boe) as a result of the acquisition and reserves upgrades.

 

2017

 

2016 Restated

 

Increase/ (Decrease)

 

 

 

 

 

 

Production

 

 

 

 

 

Net oil and natural gas liquid production mbbls

371.4

 

178.6

 

107.9%

Net gas production mmcf

226.8

 

99.4

 

128.2%

 

 

 

 

 

 

Production mboe

 

 

 

 

 

USA

106.3

 

70.0

 

51.8%

Argentina

302.8

 

125.1

 

142.0%

Total net hydrocarbons

409.1

 

195.1

 

109.7%

 

 

 

 

 

 

 

 

 

 

 

 

Well operating costs US$000

 

 

 

 

 

USA

1,796

 

1,619

 

10.9%

Argentina

15,111

 

8,637

 

75.0%

Total operating costs

16,907

 

10,256

 

64.8%

 

 

 

 

 

 

Well operating costs per boe US$

 

 

 

 

 

USA

16.9

 

23.1

 

-26.9%

Argentina

49.9

 

69.0

 

-27.7%

Total well operating costs per boe US$

41.3

 

52.6

 

-21.4%

 

 

 

 

 

 

Cash balances US$000

4,026

 

17,586

 

-77.1%

 

 

 

*Production and reserves for USA reported assets have been changed from an entitlement basis to a working interest basis to better reflect the production managed and controlled from operations on the licence interests.

 

Production from US operations rose by 52% to 291 boepd (2016: 191 boepd, as adjusted) following the acquisition of an incremental interest and operatorship of the Triche well in Louisiana offsetting the natural decline at East Lake Verret and East White Lake

In USA, well operating costs rose by 11% to US$1.8 million (2016: US$ 1.6 million) following the Triche acquisition.  On a per boe basis, well operating costs fell to US$16.90/boe (2016: US$23.13/boe) on a like for like basis primarily due to the additional volumes from the lower unit cost Triche operation.

 

Consolidated Statement of Comprehensive Income

Year ended 31 December 2017

 

 

Note

 

2017
US$000

 

2016
US$000

Continuing Operations

 

 

 

 

 

 

Revenue

 

 

 

17,945

 

9,900

Cost of sales

 

2

 

(21,402)

 

(12,593)

Gross profit/(loss)

 

 

 

(3,457)

 

(2,693)

Administrative expenses

 

3

 

(5,295)

 

(4,524)

Operating loss before impairment and non-operating gains/(losses)

 

(8,752)

 

(7,217)

Non-operating gains

 

4

 

1

 

583

Impairment charge

 

 

 

(1,337)

 

(11,039)

Profit / (loss) after impairment and non-operating gains/(losses)

 

 

(10,088)

 

(17,673)

 

 

 

 

 

 

 

Interest income

 

 

 

251

 

1

Realised gains/(losses) on translation of foreign currencies

 

 

 

(1,079)

 

(388)

Finance costs

 

 

 

(2,326)

 

(2,431)

Profit / (loss) before tax

 

 

 

(13,242)

 

(20,491)

Income tax credit

 

 

 

4,444

 

6,470

Profit / (loss) for the year from continuing operations

 

 

 

(8,798)

 

(14,021)

 

 

 

 

 

 

 

Other comprehensive income, net of tax

 

 

 

 

 

 

Items that may be reclassified  subsequently to profit or loss

 

 

 

 

 

 

    Exchange differences on translation of foreign operations

 

 

 

(8,495)

 

(7,534)

Total comprehensive profit /(loss) for the year attributable

 

 

 

 

 

 

    to the equity holders of the parent

 

 

 

(17,293)

 

(21,555)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings / loss per share

 

5

 

US cents

 

US cents

 

 

 

 

 

 

 

Basic profit/(loss) per share from continuing operations

 

 

 

(0.9)

 

(2.5)

Diluted profit(loss) per share from continuing operations

 

 

 

(0.9)

 

(2.5)

 

 

 

Consolidated Statement of Financial Position

31 December 2017

ASSETS

 

 

 

2017
US$000

 

2016
US$000

Non-current assets

 

 

 

 

 

 

Intangible exploration & evaluation assets

 

 

 

103,299

 

103,372

Goodwill

 

 

 

705

 

  - 

Property, plant and equipment

 

 

 

72,016

 

51,492

Deferred tax

 

 

 

1,190

 

848

Other non-current assets

 

 

 

352

 

318

 

 

 

 

177,562

 

156,030

Current assets

 

 

 

 

 

 

Trade and other receivables

 

 

 

8,310

 

4,510

Asset held for resale

 

 

 

1,313

 

  - 

Stock

 

 

 

77

 

84

Cash and cash equivalents

 

 

 

4,026

 

17,586

 

 

 

 

13,726

 

22,180

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

 

191,288

 

178,210

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 

 

 

18,043

 

10,793

Asset held for resale

 

 

 

788

 

  - 

Borrowings

 

 

 

1,846

 

9,076

 

 

 

 

20,677

 

19,869

Non-current liabilities

 

 

 

 

 

 

Long-term provisions

 

 

 

5,015

 

4,717

Borrowings

 

 

 

19,313

 

  - 

Deferred tax

 

 

 

306

 

5,663

 

 

 

 

24,634

 

10,380

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

 

45,311

 

30,249

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Share capital

 

 

 

23,642

 

22,086

Share premium

 

 

 

240,822

 

227,325

Translation reserve

 

 

 

(50,240)

 

(41,745)

Profit and loss account

 

 

 

(75,189)

 

(66,391)

Other reserves

 

 

 

6,942

 

6,686

TOTAL EQUITY

 

 

 

145,977

 

147,961

TOTAL EQUITY AND LIABILITIES

 

 

 

191,288

 

178,210

 

 

 

Consolidated Statement of Changes in Equity

Year ended 31 December 2017

 

 

 

 

 

 

 

Profit

 

 

 

 

 

Share

 

Share

 

Translation

 

and loss

 

Other

 

 

 

capital

 

premium

 

reserve

 

account

 

reserves

 

Total

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2016

16,754

 

201,646

 

(34,211)

 

(52,462)

 

6,594

 

138,321

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments

  - 

 

  - 

 

  - 

 

  - 

 

242

 

242

Placing of ordinary shares

5,332

 

26,660

 

  - 

 

  - 

 

  - 

 

31,992

Costs of issue

  - 

 

(981)

 

  - 

 

  - 

 

  - 

 

(981)

Transfer to P&L account

  - 

 

  - 

 

  - 

 

92

 

(92)

 

  - 

Convertible loan equity

  - 

 

  - 

 

  - 

 

  - 

 

(58)

 

(58)

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with the owners

5,332

 

25,679

 

  - 

 

92

 

92

 

31,195

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the year

  - 

 

  - 

 

  - 

 

(14,021)

 

  - 

 

(14,021)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

    Exchange differences on

 

 

 

 

 

 

 

 

 

 

 

    translation

  - 

 

  - 

 

(7,534)

 

  - 

 

  - 

 

(7,534)

Total comprehensive income for

 

 

 

 

 

 

 

 

 

 

 

the year

  - 

 

  - 

 

(7,534)

 

(14,021)

 

  - 

 

(21,555)

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2017

22,086

 

227,325

 

(41,745)

 

(66,391)

 

6,686

 

147,961

 

 

 

 

 

 

 

 

 

 

 

 

Share-based payments

  - 

 

  - 

 

  - 

 

  - 

 

256

 

256

Issue of ordinary shares

1,534

 

13,809

 

  - 

 

  - 

 

  - 

 

15,343

Costs of issue

 

 

(507)

 

  - 

 

  - 

 

  - 

 

(507)

Issue to service provider

22

 

195

 

  - 

 

  - 

 

  - 

 

217

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with the owners

1,556

 

13,497

 

  - 

 

  - 

 

256

 

15,309

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the year

  - 

 

  - 

 

  - 

 

(8,798)

 

  - 

 

(8,798)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

    Exchange differences on

 

 

 

 

 

 

 

 

 

 

 

    translation

  - 

 

  - 

 

(8,495)

 

  - 

 

  - 

 

(8,495)

Total comprehensive income for

 

 

 

 

 

 

 

 

 

 

 

the year

  - 

 

  - 

 

(8,495)

 

(8,798)

 

  - 

 

(17,293)

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2017

23,642

 

240,822

 

(50,240)

 

(75,189)

 

6,942

 

145,977

 

 

 

Consolidated Statement of Cash Flows

Year ended 31 December 2017

 

2017
US$000

 

2016
US$000

Cash flows from operating activities

 

 

 

Cash generated by operating activities (note 6)

(7,438)

 

2,196

Interest received

251

 

1

Taxes paid

(82)

 

(2)

 

(7,269)

 

2,195

Cash flows from investing activities

 

 

 

Expenditure on exploration and evaluation assets

(655)

 

(578)

Expenditure on development and production assets

(11,746)

 

(13,979)

Proceeds from asset sales

475

 

209

Acquisition & licence extension in Argentina

(15,618)

 

  - 

Proceeds from insurance

  - 

 

585

USA acquisition

(2,218)

 

  - 

Deposits with state authorities

(184)

 

  - 

Expenditure on abandonment

  - 

 

(16)

 

(29,946)

 

(13,779)

 

 

 

 

Cash flows from financing activities

 

 

 

Loan drawn

15,495

 

14,661

Proceeds from issue of shares (net of expenses)

14,836

 

31,011

Loan converted to equity

(2,205)

 

(12,000)

Shares issued to service provider

217

 

  - 

Repayment of borrowings

(1,207)

 

(2,000)

Payment of interest and loan fees

(1,971)

 

(2,330)

 

25,165

 

29,342

 

 

 

 

Net decrease in cash and cash equivalents

(12,050)

 

17,758

Opening cash and cash equivalents at beginning of year

17,586

 

217

Exchange gains on cash and cash equivalents

(1,510)

 

(389)

Closing cash and cash equivalents

4,026

 

17,586

 

 

 

 

Notes

1.   Accounting policies and preparation

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2017 or 2016 but is derived from the 2017 accounts.

A copy of the statutory accounts for the year to 31 December 2016 has been delivered to the Registrar of Companies, and is also available on the Company's web site. Statutory accounts for 2017 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2016 nor 2017.

Whilst the financial statements from which this preliminary announcement is derived have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the EU, this announcement does not itself contain sufficient information to comply with IFRS. The Annual Report, containing full financial statements that comply with IFRS, will be sent out to shareholders later in June 2018.

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, in the preparation of the 2017 financial statements they continue to adopt the going concern basis.

 

 

 

2017

 

2016

2.

Cost of sales

 

US$000

 

US$000

 

 

 

 

 

 

 

Depreciation

 

4,495

 

2,337

 

Well operating costs

 

16,907

 

10,256

 

 

 

21,402

 

12,593

 

Well operating costs include US$2,566,000 (2016: US$1,670,465) in Argentine non-recurring workover costs expensed in the period.

 

 

 

2017

 

2016

3.

Administrative expenses

 

US$000

 

US$000

 

 

 

 

 

 

 

Directors and staff costs (including non-executive Directors)

 

4,048

 

2,775

 

Share-based payments

 

256

 

242

 

Depreciation

 

(4)

 

27

 

Other

 

995

 

1,480

 

 

 

5,295

 

4,524

 

To allow for meaningful comparison, staff costs, share based payments and depreciation expenses are reflected gross before the effect of allocations to operating costs or balance sheet assets. Other expenses are shown net of the effect of allocations US$1.79 million (2016: US$0.75 million).

 

 

4.

Other non-operating gains/(losses)

 

2017

 

2016

 

 

 

US$000

 

US$000

 

 

 

 

 

 

 

Insurance claim proceeds

 

  - 

 

585

 

Other gains/(losses) arising on asset disposals

 

1

 

(2)

 

 

 

1

 

583

 

Insurance proceeds amounting to US$0.585 million were received in 2016 from claims arising in connection with the DP1002 well in Argentina.

 

 

5. Earnings / (Loss) per share

2017

 

2016

 

US$000

 

US$000

Net profit / (loss) for the period attributable to

 

 

 

the equity holders of the Parent Company

(8,798)

 

(14,021)

 

 

 

 

 

Number

 

Number

 

'000

 

'000

 

 

 

 

Weighted average number of shares in issue

971,173

 

554,655

 

 

 

 

 

US cents

 

US cents

Earnings /(loss) per share

 

 

 

Basic earnings / (loss) per share from continuing operations

(0.9)

 

(2.5)

Diluted earnings / (loss) per share from continuing operations

(0.9)

 

(2.5)

 

 

At 31 December 2017, 115,176,490 (2016: 105,507,307) weighted potential ordinary shares in the Company which underlie the Company's share option and share warrant awards and may dilute earnings per share in the future, have been included in the calculation of diluted earnings per share. No dilution per share was calculated for 2016 or 2017 as with the reported loss they are anti-dilutive.

 

 

 

6. Notes to the consolidated statement cash flows

2017

 

2016

 

US$000

 

US$000

 

 

 

 

Profit / (loss) from operations before taxation

(13,242)

 

(20,491)

Interest on bank deposits

(251)

 

(1)

Interest payable and loan fees

2,326

 

2,431

Depreciation of property, plant and equipment

4,491

 

2,364

Impairment

1,337

 

11,039

(Gain) / loss on non-operating transaction

(1)

 

(583)

Share-based payments

256

 

242

Foreign exchange difference

1,079

 

388

Operating cash flows before movements in working capital

(4,005)

 

(4,611)

Decrease / (increase) in receivables

(3,677)

 

(833)

Increase / (decrease) in payables

244

 

7,640

Net cash generated by operating activities

(7,438)

 

2,196

 

 

7. Segment reporting

 

 

Argentina

 

Paraguay

 

USA

 

Australia

 

UK

 

Total

 

2017

 

2017

 

2017

 

2017

 

2017

 

2017

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

14,391

 

  - 

 

3,554

 

  - 

 

  - 

 

17,945

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

Depreciation

3,725

 

  - 

 

770

 

  - 

 

  - 

 

4,495

Well operating costs

15,111

 

  - 

 

1,796

 

  - 

 

  - 

 

16,907

Administrative expenses

1,703

 

91

 

494

 

  - 

 

3,007

 

5,295

Segment costs

20,539

 

91

 

3,060

 

  - 

 

3,007

 

26,697

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating profit/(loss)

(6,148)

 

(91)

 

494

 

  - 

 

(3,007)

 

(8,752)

 

 

 

 

 

 

 

 

 

 

 

 

 

Argentina

 

Paraguay

 

USA

 

Australia

 

UK

 

Total

 

2016

 

2016

 

2016

 

2016

 

2016

 

2016

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

7,234

 

  - 

 

2,666

 

  - 

 

  - 

 

9,900

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

Depreciation

1,711

 

  - 

 

626

 

  - 

 

  - 

 

2,337

Well operating costs

8,637

 

  - 

 

1,619

 

  - 

 

  - 

 

10,256

Administrative expenses

913

 

132

 

233

 

9

 

3,237

 

4,524

Segment costs

11,261

 

132

 

2,478

 

9

 

3,237

 

17,117

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating profit/(loss)

(4,027)

 

(132)

 

188

 

(9)

 

(3,237)

 

(7,217)

 

 

Segment assets

Argentina

 

Paraguay

 

USA

 

Australia

 

UK

 

Total

 

2017

 

2017

 

2017

 

2017

 

2017

 

2017

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

 

 

 

 

Intangible assets

1,578

 

101,721

 

  - 

 

  - 

 

  - 

 

103,299

Goodwill

705

 

  - 

 

  - 

 

  - 

 

  - 

 

705

Property, plant and equipment

69,754

 

103

 

2,159

 

  - 

 

  - 

 

72,016

 

72,037

 

101,824

 

2,159

 

  - 

 

  - 

 

176,020

Asset held for resale

  - 

 

  - 

 

1,313

 

  - 

 

  - 

 

1,313

Other assets

7,852

 

17

 

1,767

 

  - 

 

293

 

9,929

 

79,889

 

101,841

 

5,239

 

  - 

 

293

 

187,262

 

 

 

 

 

 

 

 

 

 

 

 

 

Argentina

 

Paraguay

 

USA

 

Australia

 

UK

 

Total

 

2016

 

2016

 

2016

 

2016

 

2016

 

2016

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

 

 

 

 

Intangible assets

1,655

 

101,717

 

  - 

 

  - 

 

  - 

 

103,372

Property, plant and equipment

48,298

 

101

 

3,093

 

  - 

 

  - 

 

51,492

 

49,953

 

101,818

 

3,093

 

  - 

 

  - 

 

154,864

Other assets

3,696

 

168

 

1,673

 

36

 

187

 

5,760

 

53,649

 

101,986

 

4,766

 

36

 

187

 

160,624

 

Segment assets can be reconciled to the Group as follows:

 

 

 

 

 

2017

 

2016

 

 

 

 

 

US$000

 

US$000

 

 

 

 

 

 

 

 

Segment assets

 

 

 

 

187,262

 

160,624

Group cash

 

 

 

 

4,026

 

17,586

Group assets

 

 

 

 

191,288

 

178,210

 

Segment liabilities

Argentina

 

Paraguay

 

USA

 

Australia

 

UK

 

Total

 

2017

 

2017

 

2017

 

2017

 

2017

 

2017

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

27,438

 

274

 

2,451

 

  - 

 

15,148

 

45,311

 

 

 

 

 

 

 

 

 

 

 

 

 

Argentina

 

Paraguay

 

USA

 

Australia

 

UK

 

Total

 

2016

 

2016

 

2016

 

2016

 

2016

 

2016

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

17,205

 

294

 

1,901

 

  - 

 

10,849

 

30,249

 


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 rns@lseg.com or visit www.rns.com.
 
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