Company Announcements

United Oil & Gas PLC / Index: AIM / Epic: UOG / Sector: Oil & Gas

27 September 2022

United Oil & Gas Plc

("United" "the Group" or the "Company")

 

Half-year 2022 results

 

United Oil & Gas PLC (AIM: "UOG"), the growing oil and gas company with a portfolio of production, development, exploration and appraisal assets is pleased to announce its unaudited financial and operating results for the half year ended 30 June 2022.  A shareholder call will take place this morning, details are below.

 

Brian Larkin, CEO commented:

 

"The Company's balance sheet is the strongest it has ever been and in the first half of the year we have continued an active work programme across our portfolio of assets.

 

"We look forward to drilling both the ASH-4 development well and ASF-1X exploration well on the Abu Sennan licence by the end of the year. Successful outcomes on these wells have the potential to significantly increase production levels, add reserves, and boost the longer-term value of the Abu Sennan licence.

 

"United's portfolio consists of complementary assets that have the potential to provide  short, medium and long term upside to all our stakeholders and provides a platform for growth. Abu Sennan in Egypt continues to deliver production and strong  cashflows, Maria in the UK contains a discovery with a potential development  adjacent to some of the largest oil fields in the Central North Sea, and Jamaica, where the Walton Morant licence offers access to high impact exploration potential with a quality drill-ready prospect."

 

 

1H 2022 Operational summary

·      1H 2022 Group working interest production averaged 1,552 boepd

·      In Egypt

-       Active drilling programme continues with three out of five wells in the 2022 programme now drilled

-       Successful ASD-2 development well brought onstream in March, just six days after well completion.

-       ASV-1X exploration well did not yield commercial volumes, but encountered evidence for the migration of hydrocarbons de-risking this element of the petroleum system in this area of the licence

-       AJ-14 development well encountered seven metres of net pay. The operations programme continues with well stimulation expected to deliver production rates in line with pre-drill estimates of c. 300 bopd gross (post period)

-       The ASH-4 development well has commenced drilling, targeting over 2 mmbbls gross in the prolific Alam El Bueib reservoir (post period)

-       Significant increase in the interpreted in-place volumes on the ASH field following improvement to the subsurface imaging from seismic reprocessing

-       Zero - Lost Time Incident Frequency rate and Fatal Accident Frequency rate. No environmental spills, Restricted Work Incidents or Medical Treatment Incidents

·      In Jamaica, a two-year licence extension was granted and the Initial Exploration Period will now run to 31 January 2024

·      In the UK, low cost technical studies have been completed ahead of commissioning of an independent contingent resources report on the Maria discovery

1H 2022 Financial summary 

·      Group revenue for the first half of 2022 was $9.8m⁽¹⁾ (1H 2021:$10.2m)

·      Realised oil price of $105.5/bbl (1H 2021:$63.1/bbl)

·      Gross Profit (excluding Egypt tax gross up) $5.6m (1H 2021: $5.7m)

·      Cash Operating Expenses of $8.40/boe (1H 2021: $4.61/boe)

·      Profit After Tax of $2.4m (1H 2021: $2.0m)

·      Cash collections in the six-month period of  $8.7m (1H 2021: $8.2m)

·      Repayments on BP Pre-payment facility of $1.6m (H1 2021: $2.4m)

·      Group cash balances at period end were $3.8m (1H 2021: $2.0m)

·      Group Cash balance as at 23/9/2022 of $4.7m

⁽¹⁾       22% working interest net of Government Take

 

 

1H 2022 Corporate summary

·      Appointment of Peter Dunne as Chief Financial Officer, with effect from 5 May 2022

·      United terminated the sale and purchase agreement with Quattro Energy Limited to sell its UK Central North Sea Licences; P2480 (Zeta) and P2519 (Maria)

·      Agreement signed with Anasuria Hibiscus UK Ltd for $2.5m in relation to the Crown milestone payment, with $1.5m received in 1H 2022 and the remainder due prior to year-end

·      Completion and receipt of proceeds in relation to the sale of UOG Italia Srl to Prospex Energy for €2.2m plus €0.1m working capital adjustment

·      Tom Hickey, non-executive director stepped down from the Board on 23 September 2022

 

Outlook

·      The full year 2022 average group working interest production guidance range has narrowed to 1,450 - 1,500 boepd (vs 1,500-1,650 boepd previously guided). This is primarily due to rescheduling of the 2022 drilling programme in order to incorporate the results of seismic reprocessing prior to drilling the high impact ASH-4 development well which has now commenced drilling

·      In Egypt, drilling results from ASD-2 and the seismic reprocessing over the ASH field are expected to have a positive impact on year-end reserves

·      The drilling programme in Abu Sennan is continuing, and we look forward to completing the ASH-4 development well, targeting 2.2 mmbbls gross recoverable resources from the prolific AEB reservoir and the ASF-1X exploration well with a pre-drill target of c. 8 mmbbls gross recoverable resources

·      In the UK, we are expecting to complete an independent contingent resources report during Q4 2022 on the Maria discovery ahead of assessing commercialisation options

·      In Jamaica, a number of companies are currently conducting detailed technical evaluations

·      United continues to evaluate M&A opportunities with a strengthened balance sheet to support the growth strategy

 

 

CEO Statement

United's current portfolio now consists of three complementary assets that have the potential to provide short, medium and long term upside to our stakeholders and a solid platform for continued growth. Abu Sennan in Egypt continues to deliver strong cashflows and is central to our ability to fund activity across our other assets.  Maria in the UK contains a discovery with a potential development that neighbours some of the largest oil fields in the Central North Sea, and on our Jamaica licence, we have identified a drill target which offers high impact exploration potential. The business is well placed to benefit from rising commodity prices and to play a responsible part towards energy security during the global energy transition.

The Company's balance sheet is the strongest it has ever been, with period end cash balances of $3.8m. We have good cashflows from the Egypt production which is leveraged to  the current high commodity prices. We remain disciplined in our approach to capital allocation to where it delivers the best returns to our stakeholders and we continue to focus on G&A and operating costs. In order to deliver longer term value from our Egyptian portfolio we continue to invest free cash flow through participation in the drilling programme. The work programme  has delivered good operational results which we believe will optimise the continuing returns from the field for all stakeholders.  

Safety will always be of the highest priority within the business and we are pleased to report that during the period the operator has achieved an excellent record of safety in Egypt and has reported zero Lost Time Incidents, Medical Treatment Injury, Restricted Work Injury, spills, fires or environmental incidents.

 

We are pleased with the progress of the 2022 five-well Egyptian drilling programme  with drilling at the  ASH-4 development well currently underway.  This well is targeting 2.2 mmbbls gross recoverable resources from the prolific AEB reservoir which has produced over 4 mmbbls to date on Abu Sennan. The final well in the programme is the exploration well ASF-1X, which has a pre-drill target of c. 8 mmbbls gross recoverable resources. Successful outcomes on these wells have the potential to significantly increase production levels, add reserves, and materially enhance the longer-term value from the Abu Sennan licence.

 

The Maria licence in the UK contains a discovered resource near existing producing fields and infrastructure, which in a success case has the potential to be brought into production through a low-cost development utilising existing infrastructure. We have completed the low-cost work programme and will be initiating an independent contingent resources report during Q4 2022 ahead of assessing commercialisation options.

 

In Jamaica, we have completed a number of work programme items that have further enhanced our understanding of the acreage and we are encouraged by the number and quality of companies that are currently conducting detailed technical evaluations of the opportunity.

 

During the period we were delighted to welcome Peter Dunne to the team as CFO bringing over 20 years' experience of working in senior finance leadership roles including over 14 years in the upstream oil and gas sector. Peter's strategic, financial, capital markets and treasury expertise will be invaluable to the Company, adding to its strength and depth as we continue to grow the business. Peter took over from David Quirke, who stepped down from his role as Executive Director and Chief Financial Officer in May 2022. David was instrumental in our asset acquisitions, divestments and capital markets transactions and I thank him for his insight, guidance and commitment and wish him the very best.  Tom Hickey, independent non-executive director  stepped down from the Board on 23 September 2022 ahead of taking up an executive position at Kenmare Resources. Tom's commitment and wealth of experience has been invaluable during United's transition into a producing company.  

 

Finally, we remain focused on our strategy: to create value by actively managing our existing assets whilst growing our business through additional high-margin opportunities. Our growth strategy is supported by four pillars;

-       the strength of our assets;

-       commitment to managing a responsible business;

-       financial and risk management; and

-       an experienced team

 

Brian Larkin, Chief Executive Officer, 26 September 2022

 

Operations Update

 

Egypt, Abu Sennan licence (22% working interest)

First half (1H) 2022 Group working interest production averaged 1,552 boepd net (1,290 bopd oil and 262 boepd gas).  Group working interest production to 31 August averaged 1,478 boepd net.

The full year 2022 average group working interest production guidance range has narrowed to 1,450 - 1,500 boepd (vs 1,500-1,650 boepd previously guided).

This updated guidance is the result of changes to the 2022 drilling schedule, primarily the moving of the high-impact ASH-4 development well, from Q2 to Q3, to incorporate the results of seismic reprocessing and ensure an optimised well location.

The first well in the 2022 Egyptian drilling campaign, the ASD-2 development well, continues to deliver strong production performance. As a result, the proportion of high value oil production from Abu Sennan is now expected to comprise 86% of the full-year production mix, compared to 82% forecast at the start of the year.

The results from both the drilling at ASD-2 and the seismic reprocessing at the ASH field, are expected to have a positive impact on Abu Sennan reserves when these are updated at the end of 2022.

 

2022 Egypt work programme

The 2022 approved work programme consists of five firm wells (three development and two exploration wells) and eight workovers.

 

The drilling programme commenced in late January 2022 with the ASD-2 development well. The well encountered over 25.5 metres of net pay and was brought onstream less than six days after completion and  has continued to produce at levels above initial expectations.

 

The second well, the ASV-1X exploration well, spud on the 14 April. The well was put on test, and although no hydrocarbons flowed, evidence for the migration of hydrocarbons observed in the ASV-1X structure has helped de-risk this element of the petroleum system in this area of the licence and will assist in optimising future well targets.

 

The third well, the AJ-14 development well, spud on 21 June and safely reached Total Depth in early August, ahead of schedule and under budget. The AJ-14 well successfully encountered seven metres of net pay in the primary Abu Roash-C ("ARC") target in line with the higher end of the pre-drill estimates.

 

Following the installation of a down-hole pump, oil has been recovered to the surface from the well, however consistent flow rates have yet to be established, due to near-borehole formation damage. Well stimulation has previously delivered successful results on a number of Abu Sennan wells with a stimulation programme expected to commence on AJ-14 shortly, subject to final partner approval. As the AJ-14 well encountered good quality reservoir facies in the ARC in the heart of the Al Jahraa field, once the borehole issues have been addressed, commercial flow-rates in line with the pre-drill expectations of c. 300bopd are expected to be established.

 

The ASH-4 development well, the penultimate well in the 2022 drilling programme, has commenced drilling.

 

The completion of seismic reprocessing earlier in the year has significantly improved the quality of the subsurface imaging over the ASH field resulting in an optimised location for ASH-4, as well as increasing in-place volumes by almost 30% on the ASH field (from 17 to 22 mmboe gross according to operator estimates). In addition, it has helped identify a further six additional potential development well locations, which will be considered for future drilling programmes.

 

The ASF-1X exploration well is planned to be the fifth and final well in the 2022 drilling campaign. This well will target un-risked mean recoverable resources estimated by United at approx. 8 mmbbls gross in multiple reservoirs to the south-west of the ASH field. This is a key well, not just for the significant volumes that it is targeting directly, but also for the potential to de-risk a number of other similar structures in this portion of the licence.

 

We look forward to continuing the active Abu Sennan drilling programme into 2023. With the exploration area of the licence expiring in September 2023, we expect a balance of exploration drilling, aiming to grow reserves and ensure all the prospective areas of the licence are captured, and development drilling, aiming to maintain and boost production. We anticipate finalising the 2023 drilling programme with the Abu Sennan JV partners in the coming months.

 

Jamaica, Walton Morant licence (100% working interest)

The farm-out campaign continues to progress with a number of parties currently conducting detailed technical evaluations. The campaign has been supported by the two-year extension to the Initial Exploration Period which was granted in January 2022, the continuing technical work programme, and by the higher oil price environment and improved industry sentiment that has been observed since the start of 2022.

 

UK Central North Sea, P2519 (Maria) licence (100% working interests)

Licence P2519 includes Blocks 15/18e and 15/19c and covers an area of circa 225 km².  The licence contains the existing Forties-aged Maria discovery, as well as additional Forties and deeper prospectivity. United estimated as part of its licence application that Maria holds circa 6 mmboe mid-case recoverable resources. The low-cost technical studies commitments have been completed, and an independent contingent resources report is scheduled for completion in Q4 2022 before commercialisation options are assessed.

 

Licence P2480, containing the Zeta prospect, was relinquished in July. As an exploration target, Zeta did not offer the same near-term potential as the Maria discovery and the decision was taken not to progress into the next phase of the licence.

 

 

Financial Update

 

Highlights

 

	1H 2022	1H 2021
Net average production volumes (boepd)	1,552 boepd	2,730 boepd
Oil price realised ($/bbl)	$105.5	$63.10
Revenue(1)	$9.8m	$10.2m
Gross profit (2)	$5.6m	$5.7m
Profit after tax	$2.4m	$2.0m
Cash from operating activities	$4.8m	$6.3m
Capital expenditure	$3.4m	$4.3m
Debt repayments	$1.6m	$2.4m
Cash operating cost per boe	$8.40	$4.61

 

⁽¹⁾ 22% working interest stated net of government take

⁽²⁾ Gross profits excluding Egypt tax gross up

 

The Company continues to maintain a detailed and consistent approach to capital discipline, with our financial and business strategy based upon investment and safeguarding of capital to optimally manager our assets and enhance shareholder value. In H1 2022, with the Company benefiting from the high commodity price environment and have delivered a Gross profit of $5.6m, excluding other income relating to tax entitlement volumes.

 

Group Production and Commodity Prices

Total group working interest production for H1 2022 was 1,552 boepd. The average realised oil price was $105.50/bbl and the average realised gas price was $2.61/mmbtu.

 

Revenues

Group Revenues for the six month period ending 30 June 2022 was $9.8m (1H 2021 $10.2m), with increased commodity prices offsetting reduced average production. The entire revenue for the Group is generated from our 22% interest in the Abu Sennan concession in Egypt and is stated after accounting for government entitlements under each of the production sharing contracts. The 1H 2022 average realised oil price per barrel achieved was $105.5/bbl (representing a discount to Brent of circa $2.37/bbl).

 

 

Group Operating costs, Depreciation, Depletion & Amortisation ("DD&A"), and expenses

Cash Operating costs amounted to $8.40/boe (H1 2021: $4.61/boe). Whilst the current higher commodity price environment has had a subsequent inflationary impact on operating costs, the increase in the per barrel cost is being primarily driven  by the predominantly fixed nature of the cost base, and the reduction in average daily production in the period. DD&A charges on production and development assets amounted to $1.8m for the six months to 30 June 2022.

 

Derivative Financial Instrument

In January 2022 the Group extended the final maturity date on the BP facility from 30 September 2022 to 31 December 2023. This amendment to the final maturity of the facility requires the Group to recognise a fair value loss on the derivative of $1.5m in the period, rather than recognising the charge over the remaining maturity of the facility. No additional charge to the income statement in relation to the fair value of the derivative will arise over the remaining period of the facility if the prevailing oil price remains above $70 per barrel.  In the event oil drops below $70 per barrel, a derivative gain will be recognised in the income statement.

 

Exploration Costs

There were no exploration costs written off in the period.

Impairment

There were no impairment triggers in the period.

 

Taxation and other income

In Egypt under the terms of the Production Sharing Agreement all corporate taxes are paid by EGPC who receive production entitlements from the licence. The Egypt concession is subject to corporate income tax at the standard rate of 40.55%. However, responsibility for payment of corporate income taxes falls upon EGPC on behalf of UOG Egypt Pty Ltd. The Group records a tax charge with a corresponding increase in other income for the tax paid by EGPC on its behalf. Due to accumulated tax- deductible balances there was no tax due in the prior period.

 

Cash

 

						US$'000
Opening Cash at 1 January 2022						397
Net cash inflow from operations						6,411
Movements in working capital						(1,484)
Proceeds from Divestments						3,887
Exploration Expenditure						(1,318)
Development Expenditure						(2,138)
Repayment of Debt facility						(1,633)
Exchange movements and other						(316)
Closing  Cash at 30 June 2022						$3,806

 

The impact of recent global macroeconomic volatility has resulted in both a devaluation of the Egyptian Pound and restrictions on outgoing US Dollar transfers by the Central Bank of Egypt, which have made it challenging to consistently schedule the repatriation of cash from Egyptian operations.

We have continued to receive remittances from EGPC throughout the period in both Egyptian pounds and USD, the former of  which is primarily  used to fund our active drilling and operations programme in country. The Group continues to actively manage its cash and working capital position to support our business operations.

 

Capital Expenditure

The Group engages in an active work programme across our portfolio of assets with forecast cash capital expenditure for the full year 2022 of $7.7m of which $3.4m was incurred in 1H 2022, including $2.9m on the drilling programme in Egypt and workover activity in addition to $0.5m on Jamaica and UK assets.

 

 

 

 

Events today

Management is hosting a shareholder call at 1100 BST today.   Investors that wish to participate in the event, please click on this link to register https://bit.ly/3Sg95Di

 

Confirmation email with the details of the dialling in process will be sent to your email address.

 

A presentation will be available today on www.uogplc.com.

 

ENDS

 

This announcement contains inside information for the purposes of Article 7 of Regulation 2014/596/EU which is part of domestic UK law pursuant to the Market Abuse (Amendment) (EU Exit) regulations (SI 2019/310).

 

Glossary:

bopd - barrels of oil per day |  boepd - barrels of oil equivalent per day

mmbbls - million barrels of oil | m- million

 

 

Enquiries
United Oil & Gas Plc (Company)
Brian Larkin, CEO		brian.larkin@uogplc.com
Sharan Dhami, Head of IR & ESG		sharan.dhami@uogplc.com
Beaumont Cornish Limited (Nominated Adviser)
Roland Cornish | Felicity Geidt		+44 (0) 20 7628 3396
Tennyson Securities (Joint Broker)
Peter Krens		+44 (0) 020 7186 9030
Optiva Securities Limited (Joint Broker)
Christian Dennis		+44 (0) 20 3137 1902
Camarco (Financial PR)
Georgia Edmonds  |   Emily Hall | Sam Morris		+44 (0) 20 3757 4983  uog@camarco.co.uk

 

Notes to Editors

United Oil & Gas is a high growth oil and gas company with a portfolio of low-risk, cash generative production, development, appraisal and exploration assets across Egypt, UK and a high impact exploration licence in Jamaica.

The business is led by an experienced management team with a strong track record of growing full cycle businesses, partnered with established industry players and is well positioned to deliver future growth through portfolio optimisation and targeted acquisitions.

United Oil & Gas is listed on the AIM market of the London Stock Exchange. For further information on United Oil and Gas please visit www.uogplc.com 

CONSOLIDATED INCOME STATEMENT

Period ended 30 June 2022

                                                                                                                               

		Note	Period ended 30 June 2022		Period ended 30 June 2021		Year ended 31 December 2021
			Unaudited		Unaudited		Audited
			$		$		$
Revenue			9,782,239		10,213,771		19,228,698
Other income			3,360,093				1,940,574
Cost of sales		4	(4,172,012)		(4,538,696)		(8,911,815)
Gross profit			8,970,320		5,675,075		12,257,457
Administrative expenses:
Other administrative expenses			(1,188,964)		(960,888)		(1,763,362)
Impairment of intangible assets			(290,609)		-		(624,546)
Impairment of divestment receivable			-		-		(394,686)
Exploration and New Venture write offs			(122,793)		(236,832)		(377,934)
Foreign exchange (losses) / gains			(158,346)		(127,135)		(356,850)
Gain on disposal of non-current assets held for sale			-		-		118,651
Operating profit			7,209,578		4,350,220		8,858,730
Fair value loss on derivative financial instruments			(1,457,545)		(1,540,451)		(1,527,250)
Interest expense			(10,435)		(787,987)		(1,395,504)
Profit before taxation			5,741,598		2,021,782		5,935,976
Taxation			(3,360,093)		-		(1,861,882)
Profit for the financial period attributable to the Company's equity shareholders			2,381,505		2,021,782		4,074,094
Earnings per share from continuing operations expressed in cents per share:
Basic		3	0.37		0.32		0.64
Diluted		3	0.35		0.30		0.62

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

				Period ended 30 June 2022		Period ended 30 June 2021		Year ended 31 December 2021
				Unaudited		Unaudited		Audited
				$		$		$
Profit for the financial period				2,381,505		2,021,782		4,074,094
Foreign exchange difference				(241,389)		32,513		(209,164)
Profit for the financial period attributable to the Company's equity shareholders				2,140,116		2,054,295		3,864,930

 

CONSOLIDATED BALANCE SHEET

At 30 JUNE 2022

	Note		30 June 2022		30 June 2021		31 December 2021
			Unaudited		Unaudited		Audited
			$		$		$
NON-CURRENT ASSETS
Intangible assets	5		6,104,920		7,424,024		4,970,091
Property, plant and equipment	6		18,261,905		16,065,215		17,990,809
			24,366,825		23,489,239		22,960,900
Non-current assets / assets in disposal groups held for sale			-		-		2,561,250
			24,366,825		23,489,239		25,522,150
CURRENT ASSETS
Inventory			272,341		111,093		145,570
Trade and other receivables	7		6,334,151		7,484,842		7,702,022
Cash and cash equivalents			3,806,121		2,036,635		397,308
			10,712,613		9,632,570		8,244,900
TOTAL ASSETS			34,779,438		33,121,809		33,767,050
CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
Share capital	8		8,416,182		8,416,182		8,416,182
Share premium	8		16,215,361		16,215,361		16,215,361
Share-based payment reserve			2,376,659		2,101,982		2,247,465
Merger reserve			(2,697,357)		(2,697,357)		(2,697,357)
Translation reserve			(799,493)		(316,427)		(558,104)
Retained earnings			3,052,862		(1,380,955)		671,357
TOTAL EQUITY			26,564,214		22,338,786		24,294,904
CURRENT LIABILITIES
Trade and other payables			3,923,213		4,512,347		5,422,734
Derivative financial instruments			1,229,802		1,942,972		1,346,044
Borrowings	9		1,413,983		3,075,515		2,422,212
Current tax payable			-		138,084		57,246
Lease liabilities			28,517		21,358		83,368
			6,595,515		9,690,276		9,331,604
NON-CURRENT LIABILITIES
Borrowings	9		709,753		661,741		-
Decommissioning Provisions			274,262		-		-
Derivative financial instruments			611,199		336,605		-
Lease liabilities			24,495		94,401		24,494
			1,619,709		1,092,747		24,494
Liabilities associated with assets in disposal groups held for sale			-		-		116,048
TOTAL LIABILITIES			8,215,224		10,783,023		9,472,146
TOTAL EQUITY AND LIABILITIES			34,779,438		33,121,809		33,767,050

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Period ended 30 June 2022

 

	Share capital	Share premium	Share- based payment reserve	Retained earnings	Translation reserve	Merger reserve	Total equity
	$	$	$	$	$	$	$
For the period ended 30 June 2022
Balance at 1 January 2022	8,416,182	16,215,361	2,247,465	671,357	(558,104)	(2,697,357)	24,294,904
Profit for the period	-	-	-	2,381,505	-	-	2,381,505
Foreign exchange difference	-	-	-	-	(241,389)	-	(241,389)
Total comprehensive income for the period	-	-	-	2,381,505	(241,389)	-	2,140,116
Contributions by and distributions to owners:
Share based payments	-	-	129,194	-	-	-	129,194
Total contributions by and distributions to owners	-	-	129,194	-	-	-	129,194
Balance at 30 June 2022 (Unaudited)	8,416,182	16,215,361	2,376,659	3,052,862	(799,493)	(2,697,357)	26,564,214
For the period ended 30 June 2021
Balance at 1 January 2021	8,138,619	16,047,975	1,922,090	(3,402,737)	(348,940)	(2,697,357)	19,659,650
Profit for the period	-	-	-	2,021,782	-	-	2,021,782
Foreign exchange difference	-	-	-	-	32,513	-	32,513
Total comprehensive income for the period	-	-	-	2,021,782	32,513	-	2,054,295
Contributions by and distributions to owners:
Share based payments	-	-	179,892	-	-	-	179,893
Shares issued	277,563	167,385	-	-	-	-	444,949
Total contributions by and distributions to owners	277,563	167,385	179,892	-	-	-	624,841
Balance at 30 June 2021 (Unaudited)	8,416,182	16,215,361	2,101,982	(1,380,955)	(316,427)	(2,697,357)	22,338,786
For the period ended 31 December 2021
Balance at 1 January 2021	8,138,619	16,047,975	1,922,090	(3,402,737)	(348,940)	(2,697,357)	19,659,650
Profit for the period	-	-	-	4,074,094	-	-	4,074,094
Foreign exchange difference	-	-	-	-	(209,164)	-	(209,164)
Total comprehensive income for the year
Contributions by and distributions to owners:
Shares issued	277,563	167,386	-	-	-	-	444,949
Share-based payments	-	-	325,375	-	-	-	325,375
Balance at 31 December 2021 (Audited)	8,416,182	16,215,361	2,247,465	671,357	(558,104)	(2,697,357)	24,294,904

 

 

 

CONSOLIDATED STATEMENT OF CASHFLOWS

Period ended 30 June 2022

		Period ended 30 June 2021		Period ended 30 June 2021		Year ended 31 December 2021
		Unaudited		Unaudited		Audited
		$		$		$
Cash flows from operating activities
Profit before taxation		5,741,598		2,021,782		5,935,976
Adjustments for:
Share-based payments		129,194		179,893		325,375
Amortisation		1,858,201		2,308,395		4,107,685
Depreciation		1,839		2,029		3,985
Fair value loss on derivatives		1,457,545		1,540,451		1,527,250
Impairment, decommissioning and NV costs		413,403		-		624,546
Gain on non-current assets / disposal groups held for sale		57,926		-		(118,651)
Gain on disposal of property, plant and equipment		-		(25,683)		(25,683)
Interest expense		10,435		787,987		1,395,504
Foreign exchange movements		158,344		127,135		356,850
Tax paid		(3,417,339)		-		(1,940,574)
		6,411,146		6,941,989		12,192,263
(Increase) / decrease in inventories		(126,771)		(75,364)		(109,841)
Decrease / (increase) in trade and other receivables		(132,129)		(2,030,535)		(2,276,303)
(Decrease) / increase in trade and other payables		(1,224,657)		1,516,232		(697,544)
Net cash from operating activities		4,927,589		6,352,322		9,108,575
Cash flows from investing activities
Cash from disposal of business		3,887,275		-		160,404
Purchase of property, plant & equipment		(2,138,247)		(3,093,236)		(3,607,826)
Payments for intangible exploration assets		(1,318,314)		(1,257,093)		(2,121,050)
Net cash used in investing activities		430,714		(4,350,329)		(5,568,472)
Cash flows from financing activities
Issue of ordinary shares (net of expenses)		-		444,949		444,949
Repayments on swap financing arrangement		(710,824)		(2,292,540)		(3,518,359)
Payments on oil price derivatives		(922,286)		(132,632)		(1,805,086)
Capital payments on lease		(46,195)		(22,159)		(68,914)
Interest paid on lease		(3,888)		(7,984)		(14,421)
Net cash used in financing activities		(1,683,193)		(2,010,366)		(4,961,831)
Increase / (decrease) in cash and cash equivalents		3,675,110		(8,373)		(1,421,728)
Cash and cash equivalents at beginning of period / year		397,308		2,188,902		2,188,902
Effects of exchange rate changes		(266,297)		(143,894)		(369,866)
Cash and cash equivalents at end of period / year		3,806,121		2,036,635		397,308

 

 

 

Notes to the financial information

Period ended 30 June 2022

 

1.     GENERAL

 

The interim financial information for the period to 30 June 2022 is unaudited.

2.     ACCOUNTING POLICIES

 

The interim financial information in this report has been prepared on the basis of the accounting policies set out in the audited financial statements for the period ended 31 December 2021, which complied with International Financial Reporting Standards as adopted for use in the European Union ("IFRS").

 

IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and there is an on-going process of review and endorsement by the European Commission.

 

The financial information has been prepared on the basis of IFRS that the Directors expect to be applicable as at 31 December 2022.

 

The Directors have adopted the going concern basis in preparing the financial information.  In assessing whether the going concern assumption is appropriate, the Directors have taken into account all relevant available information about the foreseeable future. 

 

The condensed financial information for the year ended 31 December 2021 set out in this interim report does not comprise the Group's statutory accounts as defined in section 434 of the Companies Act 2006.

 

The statutory accounts for the year ended 31 December 2021, which were prepared under IFRS, have been delivered to the Registrar of Companies. The auditors reported on these accounts; their report was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006

 

Foreign currency

The Group's presentation currency is USD.

 

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the CEO's Statement.

 

The Group closely monitors and carefully manages its liquidity risk. Cash flow forecasts are regularly updated, and sensitivities run for different scenarios, including, but not limited to, changes in commodity price and different forecasts for the Group's producing assets. Careful portfolio management and divestment of non-core assets in Italy and the UK Central North Sea been monetised in the first half of 2022 and aligned with positive cash receipts from EGPC significantly strengthen the cash position at mid-year and cashflow projections remain strong for the second half of 2022.

 

The directors remain confident that the Group has adequate resources to continue in operational existence for the 12 months from the date of approval of its Interim Financial Statements on 26 September 2022 therefore the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

 

Revenue

Revenue comprises invoiced sales of hydrocarbons to customers, excluding value added and similar taxes. Also disclosed within revenue is tariff income recognised, excluding value added and similar taxes, for gas transportation facilities provided to third parties.

 

Revenue from hydrocarbon sales represents the Group's share of sales from its producing interest in Egypt, at the point in time when ownership of the oil has passed to the buyer. This includes adjustments to invoiced quantities for entitlement share adjustments calculated on a licence by licence basis that arise in the periodThe Group does not have performance obligations subsequent to delivery.

 

Other Income - Tax Entitlement Volumes

Under the concession agreements in Egypt, income tax due on taxable profit is paid on the Group's behalf by EGPC. To achieve this through the agreements, the Group notionally receive a greater share of hydrocarbon production in excess of the Group's entitlement interest share of production equal to the amount required to cover the tax payable. The oil is produced and sold on the Group's behalf and proceeds remitted to the tax authorities. This income does not fall within the definition of revenue and is therefore shown as other income with an equal and opposite tax charge recorded through current taxation.

 

Exploration and evaluation assets

The group accounts for oil and gas expenditure under the full cost method of accounting.

 

Costs (other than payments to acquire the legal right to explore) incurred prior to acquiring the rights to explore are charged directly to the profit and loss account. All costs incurred after the rights to explore an area have been obtained, such as geological, geophysical, data costs and other direct costs of exploration and appraisal are accumulated and capitalised as intangible exploration and evaluation ("E&E") assets.

 

E&E costs are not amortised prior to the conclusion of appraisal activities. At the completion of appraisal activities if technical feasibility is demonstrated and commercial reserves are discovered, then following development sanction, the carrying value of the relevant E&E asset will be reclassified as a development and production asset within tangible fixed assets.

 

If after completion of appraisal activities in an area, it is not possible to determine technical feasibility or commercial viability, then the costs of such unsuccessful exploration and evaluation are impaired to the Income Statement. The costs associated with any wells which are abandoned are fully amortised when the abandonment decision is taken.

 

Development and production assets are accumulated generally on a field by-field basis and represent the costs of developing the commercial reserves discovered and bringing them into production, together with the E&E expenditures incurred in finding commercial reserves which have been transferred from intangible E&E assets.

 

The net book values of development and production assets are depreciated generally on a field-by-field basis using the unit of production method based on the commercial proven and probable reserves. Assets are not depreciated until production commences.

 

Depreciation of production assets

Production assets are accumulated into cash generating units (CGUs) and the net book values are depreciated on a prospective basis using the unit-of production method by reference to the ratio of production in the year and the related economic commercial reserves, taking into account future development expenditures necessary to bring those reserves into production.

 

The gain or loss arising on disposal or scrapping of an asset is determined as the difference between the sales proceeds, net of selling costs, and the carrying amount of the asset and is recognised in the income statement.

 

Each asset's estimated useful life has been assessed with regard to both its own physical life limitations and the present assessment of economically recoverable reserves of the oil and gas asset at which the item is located, and to possible future variations in those assessments. Estimates of remaining useful lives are made on a regular basis for all oil and gas assets, machinery and equipment, with annual reassessments for major items. Changes in estimates which affect unit production calculations are accounted for prospectively.

 

Classification and measurement of financial liabilities

The Group's financial liabilities include borrowings, trade and other payables and embedded derivative financial instruments.

 

Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss.

 

Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss.

 

All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or fair value gains/(losses) on derivative financial instruments.

 

Embedded derivative financial instruments

A borrowing arrangement structured as a prepaid commodity swap with monthly repayments over 30 months has embedded in it a derivative that is indexed to the price of the commodity. This is considered to be a separable embedded derivative of a loan instrument.

 

At the date of issue, the fair value of the embedded derivative is estimated by considering the derivative as a series of forward contracts with modelling of the fixed and floating legs to determine a repayment schedule and derive a net present value for the forward contract embedded derivative.

 

This amount is recognised separately as a financial liability or financial asset and measured at fair value through the income statement. The residual amount of the loan is then recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date.

 

 

3.     EARNINGS PER SHARE

 

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

 

Basic and diluted loss per share                                    

	Period ended 30 June 2022		Period ended 30 June 2021		Year ended 31 December 2021
Profit for the period ($)	2,381,505		2,021,782		4,074,094
Weighted average number of ordinary shares for the purposes of basic earnings per share(number)	644,803,969		630,039,328		637,482,325
Dilutive shares	37,200,000		38,575,000		24,871,644
Weighted average number of ordinary shares for the purposes of diluted earnings per share(number)	682,003,969		668,814,328		662,353,969
Basic earnings per share from continuing operations (cents per share)	0.37		0.32		0.64
Diluted earnings per share from continuing operations (cents per share)	0.35		0.30		0.62

 

4.     COST OF SALES

	30-Jun-22	30-Jun-21	31-Dec-21
	$	$	$
Production Operating costs	2,360,166	2,280,289	4,906,713
Depreciation, depletion and amortisation	1,811,846	2,258,407	4,005,102
	4,172,012	4,538,696	8,911,815

 

5.     INTANGIBLE ASSETS

 

Intangible assets comprise the Group's exploration and evaluation projects which are pending determination.

 

Management review the intangible exploration assets for indications of impairment at each balance sheet date based on IFRS 6 criteria. Commercial reserves have not yet been established and the evaluation and exploration work is ongoing. The Directors do not consider that any indications of impairment have arisen and accordingly the assets continue to be carried at cost.

 

 

6.     PROPERTY, PLANT AND EQUIPMENT

 

Property, Plant and Equipment assets primarily consist of the group's producing assets in the Abu Sennan concession in Egypt, plus some office assets and right of use leased office space.

 

Management reviews the property, plant and equipment for indications of impairment at each balance sheet date in accordance with IAS 36. No indications of impairment have been identified at either 30 June 2022 or 31 December 2021.

 

7.     TRADE AND OTHER RECEIVABLES

	30 June 2022		30 June 2021		31 December 2021
	$		$		$
Trade receivables	1,545,991		234,629		2,257,609
Prepayments and deposit	6,739		7,735		7,361
Accrued income	3,732,373		4,257,664		2,865,287
Other tax receivables	49,048		134,814		71,765
Crown disposal proceeds due	1,000,000		2,850,000		2,500,000
	6,334,151		7,484,842		7,702,022

 

 

 

8.     SHARE CAPITAL & SHARE PREMIUM

 

Allotted, issued, and fully paid:

			30 June 2022
			Share capital	Share premium
		No	$	$
Ordinary shares of £0.01 each
Opening balance		644,803,969	8,416,182	16,215,361
At 30 June		644,803,969	8,416,182	16,215,361
			30 June 2021
			Share capital	Share premium
		No	$	$
Ordinary shares of £0.01 each
Opening balance		625,153,969	8,138,619	16,047,975
Allotments:
Share issued for cash (exercise of warrants)		19,650,000	277,563	167,385
At 30 June		644,803,969	8,416,182	16,215,361

 

			31 December 2021
			Share capital	Share premium
		No	$	$
Ordinary shares of £0.01 each
Opening balance		625,153,969	8,138,619	16,047,975
Allotments:
Share issued for cash (exercise of warrants)		19,650,000	277,563	167,385
At 31 December		644,803,969	8,416,182	16,215,361

 

9.     BORROWINGS AND DERIVATIVES

 

Summary of borrowing arrangements:

In February 2020, the Group entered into a prepaid commodity swap arrangement for $8 m to part-finance the acquisition of Rockhopper Egypt Pty Ltd. The funds were to be repaid through 30 monthly repayments which are structured as a fixed notional amount with variations based on movements in oil prices. Due to the price structure, the arrangement includes an embedded derivative (a forward contract). For financial reporting purposes, this must be separately accounted for at fair value at each balance sheet date. The balance of proceeds that did not relate to the derivative were treated as the opening carrying amount of the loan which will then be measured at amortised cost over its life, with finance charges recognised to give an even return over the loan life and repayments of capital allocated appropriately.

In January 2022, the Group refinanced the swap arrangement, with the remaining balance to be repaid through a further 24 monthly repayments which are structured as a fixed notional amount with variations based on movements in oil prices. The refinanced swap arrangement is a substantial modification and has therefore been accounted for as a termination of the old debt and commencement of a new arrangement. This has again been accounted for as a loan at amortised cost with an embedded derivative which is separately accounted for at fair value.

As at 30 June 2022, a fair value loss on derivative financial instruments has been recognised as a result of the refinancing arrangement.

 

 

10.   EVENTS AFTER THE BALANCE SHEET DATE

 

There have been no events since the Balance Sheet date that have any material impact on the half year results announced.

 

Glossary

Non-IFRS measures

The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted accounting principles.

Cash-operating costs per barrel

Cash operating costs are defined as cost of sales less depreciation, depletion and amortisation, and movements in inventories. The cash operating costs are then divided by barrels of oil equivalent produced to demonstrate the cash cost of producing oil and gas from the Group's producing assets.

 

				Period ended 30 June 2022	Period ended 30 June 2021	Year ended 31 December 2021
				Unaudited	Unaudited	Audited
				$	$	$
Cost of Sales				4,172,012	4,538,696	8,911,815
Less:
Depreciation, depletion and amortisation				(1,811,846)	(2,258,407)	(4,005,102)
Inventories				-	-	109,841
Cash Operating costs *				2,360,166	2,280,289	5,016,554
Production (BOEPD) *				1,552	2,730	2,327
Cash Operating cost per BOE ($)				8.40	4.61	5.90

 

 

EBITDAX

EBITDAX is a non-IFRS measure that represents earnings (exclusive of Egypt income relating to tax entitlement volumes) before Interest, tax, depreciation, amortisation, exploration expense and impairment.

Exploration expense excluded as write off is one-off in nature and not normal annual activity.

Presented to help users understand the cash profitability of the Group.

				Period ended 30 June 2022	Period ended 30 June 2021	Year ended 31 December 2021
				Unaudited	Unaudited	Audited
				$	$	$
Operating Income				3,849,486	4,350,221	6,918,155
Depreciation, Depletion & Amortisation				1,858,201	2,308,395	4,107,685
Exploration/NV, Impairment & Decommissioning Expense				413,403	236,832	1,002,480
EBITDAX				6,121,090	6,895,448	12,028,320