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Caspian Sunrise plc - Interim Results

RNS Number : 3647Z
Caspian Sunrise plc
18 September 2020
 

Caspian Sunrise PLC

 

("Caspian Sunrise" or the "Company")

 

Interim Results for the period ended 30 June 2020

 

 

Highlights in period under review and subsequently

 

Operational

 

·    Production

 

Six months ended 30 June

Units

2020

2019

 

 

 

 

Total production

bbls

272,707

259,475

Production for export sales

bbls

115,233

-

Production for domestic sales

bbls

157,474

259,475

Average daily production in the period

bopd

1,494

1,421

Daily production at the period end

bopd

1,643

1,268

 

·    New Wells 150 & 153 operational in the period under review

·    New Well 151 spudded in the period under review and now testing

·    Acid treatments conducted at Deep Wells A6 & A8

·    Work resumed at deep Well A5

·    Acquisition of the Caspian Explorer now subject only to UAE re-registration

·    New drilling paused

 

Financial

 

Six months ended 30 June

 

2020

2019

 

 

$'m

$'m

 

 

 

 

Revenue

 

5.0

4.4

Gross Profit

 

2.4

0.0

Operating loss

 

(0.9)

(1.4)

Loss before tax

 

(1.4)

(1.5)

 

 

 

 

Total assets

 

121.9

127.5

Cash & cash equivalents

 

0.2

4.0

Other current assets

 

4.5

5.7

Current liabilities

 

28.4

28.4

 

 

 

 

Net cash used by / provided from operating activities

 

(4.7)

4.6

 

Contacts:

Caspian Sunrise PLC

Clive Carver

Chairman                                                                +7 727 375 0202

 

WH Ireland, Nominated Adviser & Broker

James Joyce / James Sinclair-Ford

 

Qualified person

Mr. Assylbek Umbetov, an employee in the Company's technical department, has reviewed and approved the technical disclosures in this announcement.

 

This announcement has been posted to:

www.caspiansunrise.com/investors

 

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.

 

 

 

Introduction

The period under review was one of the most difficult since our 2007 IPO.

 

The Impact of Covid-19

Between 1 January 2020 and 21 April 2020, Brent Crude, on which the price for our export sales are based, fell from $63.65 per barrel to less than $10 per barrel. Domestic prices also fell from approximately $18.75 per barrel to approximately $6.2 per barrel.  While international prices have partially recovered and for most of the past 3 months have exceeded $40 per barrel it is disappointing to report domestic prices remain at historic lows.

 

The extensive lockdowns in Kazakhstan led to serious disruption to our production and exploration activities. Crew changeovers were limited, vital supplies unable to reach the oilfield and there were long delays getting the required acid and engineers to the field for the long planned acid treatments to our existing deep wells.

 

The shutdown also impacted the renewal of licences and our appeal against what we are firmly advised are excessive state assessed historic costs at BNG. It also delayed the completion of the acquisition of the Caspian Explorer.

 

Our response

In March 2020, we paused operational activities to assess the likely impact of the measures taken to restrict the spread of Covid-19. Staff numbers were cut and operational programmes postponed with extensions to work programmes secured at BNG and at 3A Best.

 

Then the prime constraint was crew changeovers with stranded crews in the field and at home. To get the most from the crews then in place our focus shifted to work that, if successful, would result in quick wins.

 

As the strict lockdowns eased and crew changeovers became possible the principal constraint became sourcing supplies and expertise from outside Kazakhstan. The speciality acid required for the planned treatments at deep wells A6, A8 & 801 was not allowed through the Russian / Kazakh border. After many weeks waiting we sourced replacement acid from China, however the delays in crossing the Chinese / Kazakh border, which can be in excess of a month, again added several weeks to the process.

 

Financial

The impact of the measures taken to limit the spread of Covid-19 came at a difficult time for the Group.  We were already tight on working capital following in H2 2019 the award of export status at the MJF structure, under which we receive higher revenues but wait longer for payment.

 

Before Covid-19 our plan was to deal with this by working with long standing suppliers to bring our working capital position back into line over several quarters, thereby avoiding diluting shareholders. However, the sharp fall in income following the Covid-19 related price falls and the impact of committing to sell 100% of May 2020's production on the domestic market before the domestic price was dramatically reduced meant this was no longer a viable option.

 

In August 2020, we therefore conducted a placing to raise £1 million, from which the creditor issues at the holding company have been normalised. This was the first placing for cash since 2014.

 

At board level cash compensation was cut to approximately 25% of contracted levels with directors taking accrued and deferred amounts due up to 30 June 2020 in the form of shares.  Since the end of June 2020, directors cash payments have remained at these reduced levels with entitlements to deferments suspended.

 

Operations

Shallow structures

 

MJF structure

With the exception of Well 141 (see below) all 6 wells operational at the start of the period under review continued to produce. In March 2020, New Well 150 entered production followed in April 2020, by New Well 153.

 

For the six months ended 30 June 2020, 259,800 barrels were produced (2019; 226,737 barrels) accounting for approximately 95% of the total production.

 

A consequence of the Covid-19 lock down has been long delays in sourcing drilling consumables previously readily available in Kazakhstan. In particular at Well 141 where we lost many weeks waiting for drill bits to be delivered from Russia.

 

Well 141 has been the subject of an extensive workover and so contributed little to the production in the period under review. Cementing works to isolate the zones producing water were successful. However, we are still waiting on replacement drill bits to complete this work and return the well to production.

 

Well 144 is the next shallow well scheduled for a workover, which will include re-perforation.

 

New Well 151 reached its total depth of 2,432 meters without incident.  The well sits at the top of the MJF structure and such is expected to be a stronger performer.  However, the concentration of gas at the top of the structure is resulting in it taking longer than anticipated to bring this well into commercial production.

 

We first perforated a thin zone of 0.7 meters at a depth of between 2,314.5 and 2,342.2 meters to test an interval not observed in previous wells. Oil flowed but not at rates we believe would be achievable from the interval others targeted with our other MJF wells. We have therefore perforated further intervals with a view to maximise short term income. Testing of these intervals continues.

 

South Yelemes

Throughout the period under review all four wells on the South Yelemes structure, which in aggregate would be expected to produce 300 barrels per day, were shut in as required while the application to move to export status is considered by the Kazakh regulatory authorities.  While we fully expect the structure to be moved to export status the Covid-19 shut downs mean we cannot with certainty say when.

 

Deep structures

There was only limited progress in the period under review with the four deep wells already drilled.

 

Deep Well A5

Following a long delay during the period under review work has resumed to attempt to stimulate the well to flow at rates nearer the 3,800 barrel per day experienced for a brief period in November 2017. A conventional acid treatment has resulted in oil flowing to the surface but not yet at the rates previously encountered.

 

Deep Wells A6, A8 & 801

Following the period under review the long planned acid treatments at Deep Wells A6 & A8 have resulted in oil flowing to the surface. Work continues to stimulate the wells to flow at commercial rates.

 

Depending on the outcome of these acid treatments the next deep well to receive similar acid treatment would be Deep Well 801 on the Yelemes Deep structure.

 

3A Best

Our focus during the period under review at the 3A Best Contract Area was to renew the previous licence, which required a well to be drilled in 2020 at an expected cost of $2 million.

 

We have been notified informally that our submission to defer the work programme commitments under this new licence has been accepted and we expect soon to receive formal confirmation.

 

Future development of 3A Best is dependent on the Group's financial position.

 

Caspian Explorer

In January 2020, we announced the proposed acquisition of the Caspian Explorer, a shallow water drilling vessel capable of drilling to depths of 6,000 meters in water as shallow as 2.5 meters.

 

The $25 million headline consideration is to be satisfied by the issue of 160,256,410 new Caspian Sunrise shares at a price of 12p per share, a 28% premium to the prevailing share price. The acquisition was approved by independent shareholders in February 2020.

 

In  July 2020, we announced all the Kazakh regulatory approvals had been received and completion is now only dependent on the re-registrations required in the UAE, the location of the Caspian Explorer's holding company. We are now working in the UAE to re-register ownership.

 

Given the sharp decline in the Company's share price the Caspian Explorer purchase price for accounting purposes based on current prices would be $4.5 million.

 

To date there are no confirmed bookings for the Caspian Explorer. We believe however, that as exploration activities resume in the shallow northern Caspian Sea we shall over time see interest in using the drilling vessel. While potential hirers of the Caspian Explorer have conducted initial technical due diligence with a view to commissioning the vessel there can be no guarantee this will result in such a commission.

 

Monthly costs while not in use are estimated to be $60,000.

 

Going Concern

The Group's Financial Statements for the year ended 31 December 2019, which were published on 25 June 2020, contained reference to the existence of a material financial uncertainty, which only some three months on continues to exist. This may cast significant doubt about the Group's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.

 

The financial information in these interim results has been prepared on a going concern basis using current income levels but a reduced work programme with no new wells being drilled. On this basis the Directors believe that the Group will have sufficient resources for its operational needs over the relevant period, being until September 2021. Accordingly, the Directors continue to adopt the going concern basis.

 

However, the Group's liquidity is dependent on a number of key factors: -

·    The Group continues to forward sell its domestic production and receive advances from oil traders with $3.8m currently advanced and the continued availability of such arrangements is important to working capital. Whilst the Board anticipate such facilities remaining available given its trader relationships, should they be withdrawn or reduced more quickly than forecast cash flows allow then additional funding would be required.

·    The forecasts assume that the remaining obligation at BNG's Yelemes Deep structure to drill new Deep Well 802 before the year end will not be fulfilled and that the regulatory authorities will not enforce the sanctions under the licence conditions. Should the regulatory authorities enforce penalty sanctions additional funding would be required.

·    The Group has $5.5m of loans due on demand or within the forecast period to its largest shareholder and his connected companies. Whilst the Board has received assurances that the facilities will not be called for payment unless sufficient liquidity exists, there are no binding agreements currently in place to this effect and if repayment was required additional funding would be needed. -

·    The forecasts remain sensitive to oil prices, which have shown significant volatility. Independent of the factors above, if international oil prices fall below c$30/bbl additional actions would be required including further cost reductions, additional payment deferrals and raising funds.

 

 

 

 

 

 

 

 

 

 

Funding

The Group's principal source of funding is from oil sales from the MJF structure. Since Q3 2019 we have been able to sell the majority of the MJF production by reference to international rather than domestic prices.  In recent months this has typically been between 50 and 60% of our total production.

 

The remainder of our production is sold as required under Kazakh regulations to the domestic market.  However, with prices of only $6.2 per barrel after processing and transportation costs and associated taxes the net return from production sold on the domestic market is very low.

 

Any deep well production will also be required to be sold at domestic prices following a deep well success. However, if deep production commenced at domestic prices we would expect to be able to sell a higher proportion of production from the MJF and South Yelemes structures at export prices.

 

During the period under review and subsequently, we received additional funding of approximately $1.5 million from the Oraziman family, increasing the total to approximately $5.5 million.

 

Financial performance

Basis of accounting

These are the first set of interim results in which we report export sales. The method of accounting for production sold under an exploration phase of an appraisal licence differs from the sale of oil under a full production licence in which commercial production is considered to have been reached.

 

Under an appraisal licence revenues are treated as a contribution to the costs associated with the main objective, which is to ascertain the productive capabilities of the producing wells concerned. Therefore, whilst revenue is recorded as an amount equivalent to the margin amounts derived from the sale of oil the same amounts are charged to cost of sale and recorded as a reduction in the appraisal assets resulting in a zero gross profit. Under a production licence only the actual costs of production are recorded as costs of sales so that any excess of receipts over direct costs is shown as gross profit.

 

Revenue & gross profit

Reported revenue in the period under review at $5.0 million was 15% higher than for the corresponding period. This was the result of the combination of:

·    A 5% increase in production volumes

·    lower prices for the production sold on the domestic market

·    for the first time higher prices for the production sold on the export market.

 

For the first time we report a gross profit of $2.4 million.

 

Total administrative expenses

At $1.7 million these were some 18% greater than in the corresponding period (2018: $1.4 million), reflecting increased corporate activity.

 

Finance costs

At $466,000 finance costs have risen by $431,000 of which $351,000 related to the historic costs assessed against the BNG's MJF structure.

 

Loss before tax

At $1.4 million is comparable to that recorded in the corresponding period (2019: $1.5 million).

 

Balance sheet values

The $2.3 million reduction in the carrying value of unproven oil and gas assets was largely the result of exchange rate movements with the Kazakh Tenge depreciating by approximately 7% against the US$, the Group's functional currency, in the period under review and approximately a further 5% subsequently.

 

While the depreciation of the Kazakh Tenge against the US$ reduces the carrying value of the group's oil & gas assets it also reduces the US$ denominated amounted for all operational costs paid for in Kazakh Tenge.

 

Cash and other receivables, fell by approximately $3.8 million as past advances to oil traders were delivered against.

 

Short term debt increased by approximately $1.8 million, of which $1.5 million relates to an increase in loans provided by the Oraziman family.

 

Cash generation

Cash generated from operating actives fell from a positive $4.6 million in the corresponding period to a negative $4.7 million in the period under review as advances to oil traders were partially unwound.

 

Connecting with shareholders

A welcome benefit of Covid-19 was the innovation of posting responses to shareholder questions submitted via the Company's website.  This allowed all shareholders equal access to the response to questions raised rather than providing such information on a selective basis.  We propose to continue the practice following each quarterly operational update and will on Monday 21 September 2020 reopen the link on the Group's website www.capsiansunrise.com. We plan to publish response to questions on or before 6 October 2020.

 

Aibek Oraziman

In August 2020, we were pleased to announce the appointment of Aibek Oraziman to the board, further evidencing the continued commitment of the Oraziman family to the future success of the Company.

 

Strategy

For more than a decade our strategy with the BNG Contract Area has been to seek to develop both the shallow and deep prospects. Our principal success in that period has been the discovery of the shallow MJF structure, which currently accounts for approximately 95 per cent of total production.

 

We have to date been less successful with the development of our deep wells.  Four deep wells have been drilled and while with each we have encountered oil shows we have yet to get any of them to flow consistently at commercial volumes.

 

Deep well exploration is technically difficult and expensive. Following a strategic review of the best way to maximise the values locked up in the deep structures and in recognition of the Group's financial position the Board has decided to seek to defer drilling commitments for a period of 12 months to improve the Group's financial position to fund further drilling while at the same time also seeking a larger partner to continue the development of this potentially extremely valuable asset.

 

Various discussions have taken place which could lead to the involvement of a larger partner although at this stage there can be no certainty of such an outcome. The Group's focus is now on making the most of the wells already drilled.

 

An impact of Covid-19 has also been to place previously planned acquisitions on hold.

 

Outlook

The impact of the measures taken to deal with the Covid-19 virus continue to have a material impact on the Group's operational and financial position. The Board is focused on preserving the Group's asset base during this period to allow the continued development of our potentially extremely valuable assets over the medium / longer term.

 

Clive Carver

Chairman

18 September 2020

 

 

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT

 

 

 

Six month
ended
30 June 2020
Unaudited

Six month
ended
30 June 2019
Unaudited

 

 

US$000s

US$000s

Revenue

 

5,030

4,368

Cost of sales

 

(2,613)

(4,368)

Gross Profit

 

2,417

-

Selling expense

 

(1,669)

-

Share-based payments

 

(22)

(6)

Other administrative expenses

 

(1,687)

(1,443)

Total administrative expenses

 

(1,709)

(1,449)

Operating Loss

 

(961)

(1,449)

Finance cost

4

(466)

(35)

 

 

 

 

Loss before taxation

 

(1,427)

(1,484)

Taxation

 

(744)

(785)

 

 

 

 

Loss after taxation

 

(2,171)

(2,269)

 

 

 

 

Loss attributable to owners of the parent

 

(2,169)

(2,164)

Loss attributable to non-controlling interest

 

(2)

(105)

Loss for the year

 

(2,171)

(2,269)

 

 

 

 

Earnings per share

3

 

 

 

 

Basic loss per ordinary share (US cents)

 

(0.12)

(0.13)

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

Six months
ended
30 June 2020
Unaudited

Six months
ended
30 June 2019
Unaudited

 

 

  US$000s

  US$000s

Loss after taxation

 

(2,171)

(2,269)

Other comprehensive loss:

 

 

 

Items to be reclassified to profit or loss in subsequent periods

 

 

 

Exchange differences on translating foreign operations

 

(3,106)

419

Total comprehensive loss for the period

 

(5,277)

(1,850)

 

 

 

 

Total comprehensive loss attributable to: Owners of the parent

 

(5,275)

(1,745)

Non-controlling interest

 

(2)

(105)

 

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

For the six months ended 30 June 2020

 

 

 

Unaudited

Share capital

Share premium

Deferred shares

Cumulative translation reserve

Capital contribution reserve

Retained deficit

Total

Non-controlling interests

Total equity

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

At 1 January 2020

28,120  

246,299

64,702

(55,643)

(2,362)

 (220,477)

60,639

(5,729)

54,910

Loss after taxation

-

-

-

-

-

(2,169)

(2,169)

(2)

(2,171)

Exchange differences on translating foreign operations

-

-                       

-

 (3,106)

-

-

(3,106)

-

(3,106)

Total comprehensive

income for the period

 

-

 

-

-

 

 (3,106)

 

       -

 

(2,169)

 

(5,275)

 

(2)

 

(5,277)

Arising on employee share options

-

-

-

 

                     

 

     -

22

22

 

-

22

At 30 June 2020

28,120

246,299

64,702

(58,749)

(2,362)

(222,624)

55,386

(5,731)

49,655

 

 

 

 

 

 

 

 

 

 

 

                                 

 

 

For the six months ended 30 June 2019

 

 

 

Unaudited

Share capital

Share premium

Deferred shares

Cumulative translation reserve

Shares

to be issued

Capital contribution reserve

Retained deficit

Total

Non-controlling interests

Total equity

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

At 1 January 2019

25,416  

229,020

64,702

(55,911)

-

(2,362)

 (219,230)

41,635

(5,605)

36,030

Loss after taxation

-

-

-

-

-

-

(2,164)

(2,164)

(105)

(2,269)

Exchange differences on translating foreign operations

-

-                       

-

 419

-

-

-

419

-

419

Total comprehensive

income for the period

 

-

 

-

-

 

 419

 

     -

 

       -

 

(2,164)

 

(1,745)

 

(105)

 

(1,850)

Purchase of subsidiary

-

-

-

-

11,795

-

-

11,795

-

11,795

Stock options exercised

56

164

-

-

 

 

      -

-

220

-

220

Arising on employee share options

-

-

-

 

                     

-

 

     -

6

6

-

6

At 30 June 2019

25,472

229,184

64,702

(55,492)

11,795

(2,362)

(221,388)

51,911

(5,710)

46,201

 

 

 

 

 

 

 

 

 

Reserve

Description and purpose

Share capital

The nominal value of shares issued

Share premium

Amount subscribed for share capital in excess of nominal value

Deferred shares

The nominal value of deferred shares issued

Cumulative translation reserve

Losses arising on retranslating the net assets of overseas operations into US Dollars

Shares to be issued

Amount received in respect of shares which are yet to be issued

Other reserves

Fair value of warrants issued and gain/losses from the purchase of NCI

Retained deficit

Cumulative losses recognised in the profit or loss

Non-controlling interest

The interest of non-controlling parties in the net assets of the subsidiaries

 

 

 

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

 

As at

30 June

As at

31 December

 

Note

2020

US$000s

2019

US$000s

Assets

Non-current assets

Unproven oil and gas assets

 

 

5

Unaudited

 

57,776

Audited

 

60,040

Property, plant and equipment

                    6

50,069

51,326

 

Inventories

 

1,336

384

 

Other receivables

7

7,763

5,745

 

Restricted use cash

 

242

241

 

Total non-current assets

 

117,186

117,736

 

Current assets

Other receivables

 

 

 

4,507

5,663

Cash and cash equivalents

 

214

4,060

Total current assets

 

4,721

9,723

Total assets

 

121,907

127,459

Equity and liabilities

Equity

Share capital

 

 

8

 

 

28,120

28,120

Share premium

 

246,299

246,299

Deferred shares

8

64,702

64,702

Other reserves

 

(2,362)

(2,362)

Retained earnings

 

(222,624)

(220,477)

Cumulative translation reserve

 

(58,749)

(55,643)

Shareholders' equity

 

55,386

60,639

Non-controlling interests

 

(5,731)

(5,729)

Total equity

 

49,655

54,910

Current liabilities

Trade and other payables

 

         

 

13,653

14,836

Short-term borrowings

9

5,517

4,050

Provision for BNG license payment

 

3,178

3,178

Other current provisions

 

6,091

6,304

Total current liabilities

 

28,439

28,368

 

 

 

 

Non-current liabilities

 

 

 

 

 

Deferred tax liabilities

 

7,772

7,244

 Provision for BNG license payment

 

23,247

24,216

 Other non-current provisions

 

406

428

Other payables

 

12,388

12,293

Total non-current liabilities

 

43,813

44,181

Total liabilities

 

72,252

72,549

Total equity and liabilities

 

121,907

127,459

 

 

 

 

 

This financial information was approved and authorised for issue by the Board of Directors on 17 September 2020 and was signed on its behalf by:

Clive Carver

Chairman

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

Six months ended

30 June 2020

Six months ended

30 June 2019

 

Unaudited

US$000s

Unaudited

US$000s

Cash flow provided by operating activities

Cash received from customers

 

 

2,286

 

 

5,959

Payments made to suppliers

and employees

 

(6,984)

 

(1,316)

Net cash used by

operating activities

 

(4,698)

 

4,643

 

Cash flow used in investing activities

Additions to unproven oil and gas assets

 

 

 

(410)

 

 

 

(4,364)

Cash flow used in investing

 

 

activities

(410)

 (4,364)

 

Cash flow used by financing activities

Loans provided

 

 

1,262

 

 

               700

Repayment of borrowings

-

 -

Net cash used by financing

activities

 

1,262

 

700

 

 

 

Net decrease in cash and

cash equivalents

 

(3,846)

 

979

Cash and cash equivalents at

the start of the period

 

4,060

 

557

Cash and cash equivalents

at the end of the period

 

214

 

1,536

         

 

            NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION

 

1.  STATUTORY ACCOUNTS

 

The interim financial results for the period ended 30 June 2020 are unaudited. The financial information contained within this report does not constitute statutory accounts as defined by Section 434(3) of the Companies Act 2006.

 

2.  BASIS OF PREPARATION

 

Caspian Sunrise plc is registered and domiciled in England and Wales.

 

This interim financial information of the Company and its subsidiaries ("the Group") for the six months ended 30 June 2020 has been prepared on a basis consistent with the accounting policies set out in the Group's consolidated annual financial statements for the year ended 31 December 2019. It has not been audited or reviewed, does not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's consolidated annual financial statements for the year ended 31 December 2019. The 2019 annual report and accounts, which received an unqualified opinion from the auditors, included a material uncertainty in respect of going concern but did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006, have been filed with the Registrar of Companies. As permitted, the Group has chosen not to adopt IAS 34 'Interim Financial Reporting'.

 

The financial information is presented in US Dollars and has been prepared under the historical cost convention.

 

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2019 except for the effect of new standards effective from 1 January 2020 as explained below. These are expected to be consistent with the financial statements of the Group as at 31 December 2020 that are/will be prepared in accordance with IFRS and their interpretations issued by the International Accounting Standards Board ("IASB") as adopted by the European Union ("EU").

 

Several other amendments and interpretations apply for the first time in 2020, but do not have an impact on the interim consolidated financial statements of the Group as well.

 

Going Concern

 

The Group's Financial Statements for the year ended 31 December 2019, which were published on 25 June 2020, contained reference to the existence of a material financial uncertainty, which only some three months on continues to exist. This may cast significant doubt about the Group's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.

 

The financial information in these interim results has been prepared on a going concern basis using current income levels but a reduced work programme. On this basis the Directors believe that the Group will have sufficient resources for its operational needs over the relevant period, being until September 2021. Accordingly, the Directors continue to adopt the going concern basis.

 

However, the Group's liquidity is dependent on a number of key factors:

·    The Group continues to forward sell its domestic production and receive advances from oil traders with $3.8m currently advanced and the continued availability of such arrangements is important to working capital. Whilst the Board anticipate such facilities remaining available given its trader relationships and recent increases, should they be withdrawn or reduced more quickly than forecast cash flows allow then additional funding would be required.

·    The forecasts assume that certain material licence commitments and obligations respect of 3A Best and BNG will be deferred by the authorities based on applications submitted to the regulatory authorities.

·    The Group has $5.5m of loans due on demand or within the forecast period to its largest shareholder and his connected companies. Whilst the Board has received assurances that the facilities will not be called for payment unless sufficient liquidity exists, there are no binding agreements currently in place to this effect and if repayment was required additional funding would be needed.

·    The forecasts remain sensitive to oil prices, which have shown significant volatility. Independent of the factors above, if international oil prices fell below c$30/bbl additional actions would be required including further cost reductions, additional payment deferrals and raising funds.

 

 

 

3.         LOSS PER SHARE

 

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year including shares to be issued.

 

There is no difference between the basic and diluted loss per share as the Group made a loss for the current and prior year. Dilutive potential ordinary shares include share options granted to employees and directors where the exercise price (adjusted according to IAS33) is less than the average market price of the Company's ordinary shares during the period. 

 

 

The calculation of loss per share is based on:

 

 

Six months

ended        30 June 2020 Unaudited

Six months

ended        30 June 2019 Unaudited

The basic weighted average number of ordinary

shares in issue during the period*

 

1,882,660,885

 

1,692,987,515

The loss for the year attributable to owners of the

parent (US$'000)

 

(5,966)

 

(2,158)

 

* There were 3,000,000 potentially dilutive instruments in the period (2019: 3,000,000).

 

4.         FINANCIAL EXPENSE

 

The Group incurred US$466,000 financial expenses during the 6 months to 30 June 2020, of which US$115,000 was the interest expense on loans provided by Kuat Oraziman and the companies controlled by him (2019: US$35,000). US$351,000 is the provision for historical costs obligation (2019: US$0).

 

5.         UNPROVEN OIL AND GAS ASSETS

During the six months period ended June 30 2020 the Company's oil and gas assets decreased on US$ 2.2 million mainly due to foreign exchange differences and additions of US$ 410,000 (2019: US$1.5 million).

 

6.           PROPERTY, PLANT & EQUIPMENT

 

 

Group

 

Proved oil
and gas assets

Motor Vehicles

Other

Total

 

 

US$'000

US$'000

US$'000

US$'000

 

 

 

 

 

 

Cost at 1 January 2019

 

-

56

266

322

Additions

 

564

-

8,071

8,635

Transferred from exploration and evaluation assets

12,000

-

-

12,000

Additions to Proved O&G assets related to Historical obligation

28,335

-

-

28,335

Reversal of impairment

 

2,414

-

-

2,414

Disposals

 

-

-

(3)

(3)

Foreign exchange difference

 

5

-

-

5

Cost at 31 December 2019

 

43,318

56

8,334

51,708

Additions

 

-

-

-

-

Foreign exchange difference

 

(726)

(2)

(32)

(760)

Cost at 30 June 2020

 

42,592

54

8,302

50,948

Depreciation at 1 January 2019

 

-

31

203

234

Charge for the year

 

130

8

10

148

Disposals

 

 

 

(3)

(3)

Foreign exchange difference

 

 

 

3

3

Depreciation at 31 December 2019

 

130

39

213

382

Disposals

 

 

 

-

-

Charge for the year

 

473

4

20

497

Foreign exchange difference

 

-

-

-

-

Depreciation at 30 June 2020

 

603

43

233

859

Net book value at:

 

 

 

 

 

01 January 2019

 

-

25

63

88

31 December 2019

 

43,188

17

8,121

51,326

30 June 2020

 

41,989

11

8,069

50,069

 

* During the six months of 2020 The Group made the capital contribution into its subsidiary Caspian Technical Services LLP using the drilling rigs and other equipment on the balance of Eragon Petroleum FZE. The contribution has been made in Kazakh tenge after the formal assets valuation by the local company. The difference in values has been charged to the consolidated profit and loss account.  

 

 

7.         OTHER NON-CURRENT RECEIVABLES

During the six months period ended June 30 2020 the Company has provided advances related to its drilling operations in the amount of US$1.95 million (2019: US$2.7 million). Total prepayments made for drilling services as at 30.06.2020 was US$ 4,397,000 (2019: US$ 2,450,000). VAT recoverable at the Group level as at 30.06.2020: US$3,363,000 (2019: US$3,286,000).

 

 

8.         CALLED UP SHARE CAPITAL

 

 

Number of ordinary shares

$'000

 

Number of deferred shares

$'000

Balance at 31 December 2019 and 30 June 2020

 

1,882,660,885

 

28,120

 

373,317,105

 

64,702

 

 

 

 

 

 

 

 

 

 

 

 

 

9.      Borrowings

 

 

Six months
ended 30 June 2020 Unaudited
US$'000

Year ended 31
December 2019 Unaudited
US$'000

Amounts payable within one year

 

 

Mr Oraziman (a)

3,389

2,288

Fosco BV (b)

667

661

Other borrowings (c)

1,461

1,101

 

5,517

4,050

 

 

As at the date of the report Eragon Petroleum FZE, a wholly owned subsidiary, had an outstanding loan of US$ 1,010,000 from Kuat Oraziman. Caspian Sunrise had an outstanding loan of US$ 752,000 from Kuat Oraziman including the accrued to date interest. Additionally, during 2019 a loan due from Roxi Kazakhstan LLP to KC Caspian Explorer, an entity controlled by Aibek Oraziman, was assigned to Kuat Oraziman. The balance of the loan at 30 June 2020 was US$ 553,000. During 2020 Kuat Oraziman has provided additional short term financing to the companies of the Group on the amount of US$ 1,062,000. Total US$ 1,627,000 of the provided to Kazakh LLPs directly is interest free and repayable during 2020. US$ 1,762,000 of the payable to him is interest bearing of 7% and repayable at 2020 year end with the possibility of further extension. The total balance of the loans as at 30 June 2020, including the accrued interest, was US$ 3,389,000.

b) During July 2016 Fosco BV, a company controlled by Mr Oraziman, therefore a related party of the Group, provided an on demand loan to BNG LLP in the amount of US$ 0.63 million. The loan is interest bearing with the rate of Libor+ 1%.

 

c) The total amount borrowed by the Group at 30 June 2020 US$1,461,000 (2019: US$1,1001,000) was payable to Kuat Oraziman and legal entities controlled by Mr Oraziman and his family. Cash additions during the period were represented by US$ 200,000 provided by Prosperity Petroleum Limited to BNG LLP. The loans are interest bearing with the rate of 7% and repayable during 2020 with the possibility of further extension.

10.            SUBSEQUENT EVENTS

 

 

Shares subscription by the Company's Directors

On 8 July 2020, the Company announced that its directors had agreed to subscribe for a total of 8,938,570 ordinary shares in the Company at a price of 3.2p per share in lieu of a combination of accumulated pay, deferred pay and expenses.

 

Shares issue On 6 August 2020, the Company announced that it has raised approximately £1 million through the placing of 36,363,629 new ordinary shares in the capital of the Company to new and existing investors at an issue price of 2.75 pence per share.

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IR FFFLIARIDLII

Quick facts: Caspian Sunrise Plc

Price: 1.8

Market: AIM
Market Cap: £37.59 m
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