TIDMPGR
RNS Number : 2031M
Phoenix Global Resources PLC
13 September 2019
13 September 2019
Phoenix Global Resources plc
('Phoenix' or 'the company')
UNAUDITED INTERIM RESULTS FOR THE SIX-MONTH PERIOD TO 30 JUNE
2019
Phoenix Global Resources (AIM: PGR; BCBA: PGR), the upstream oil
and gas company offering its investors direct exposure to
Argentina's Vaca Muerta shale formation and other unconventional
resources, is pleased to announce its unaudited interim results for
the six-month period ended 30 June 2019.
Operational highlights
-- First two unconventional horizontal wells at Mata Mora online
with production rates of up to 1,000 bopd per well in initial
testing
Extended well tests continuing with production choked back on
both wells to allow for enhanced downhole analysis
-- Total of 77,508 barrels of light crude produced from the Mata
Mora wells during July (34,356 barrels) and August (43,152
barrels)
-- Initial unconventional vertical Agrio well drilled at the
Puesto Rojas area as part of the current development campaign,
three further wells drilled post-period
-- Average daily production of 9,630 boepd (H2 2018: 10,080 boepd and H1 2018: 10,776 boepd)
2019 interim results highlights
-- Revenues of US$68.6 million (H1 2018: US$92.9 million)
-- Realised oil price of US$52.23/ bbl (H1 2017: US$60.34/ bbl
(before hedging)) reflecting lower Brent prices and the effect of
Peso devaluation on local benchmark pricing
-- Operating loss of US$32.9 million (H1 2018: loss of US$ 19.9 million)
-- Reported EBITDAX(1) loss of US$5.2 million (H1 2018: US$18.5 million gain)
-- H1 2019 adjusted EBITDAX of US$13.0 million (H1 2018: US$
18.5 million), excluding loss on termination of licences
Outlook
-- Intention to apply for unconventional development concession
at Mata Mora on conclusion of extended well testing
-- Post-period realised oil prices temporarily reduced in Dollar
terms following government decree to manage impact of recent
currency devaluation on end consumer
Javier Vallesi, COO, said:
"We are encouraged by the initial results from the company's
first two horizontal unconventional wells at Mata Mora. The wells
represent an important milestone in Phoenix's development as an
unconventional oil and gas production company focused on the Vaca
Muerta and other unconventional resources in Argentina.
In addition to the progress made at Mata Mora, our work at
Puesto Rojas continues following the award of the first ever
unconventional development concession in Mendoza province. We have
successfully drilled four unconventional vertical wells of an
eight-well programme targeting the folded Agrio formation, with
each well being drilled to plan and on time. I look forward to
providing further updates as the completions campaign for the wells
commences later in the year."
Notes:
(1) EBITDAX represents earnings before interest, taxes,
depreciation, amortisation and exploration expenses. EBITDAX is
reconciled on the income statement. Adjusted EBITDAX is stated
before/ after adjustment for specific identified items.
For further information, please contact:
Phoenix Global Resources Kevin Dennehy, CFO T: +54 11 5258 7500
plc
Shore Capital Antonio Bossi T: +44 20 7408 4090
Joint broker and nominated David Coaten
advisor
Panmure Gordon Charles Lesser T: +44 20 7886 2500
Joint broker
Camarco Billy Clegg T: +44 20 3757 4980
Financial PR Owen Roberts
James Crothers
Qualified Person Review
In accordance with AIM guidance for mining, oil and gas
companies, Mr. Javier Vallesi and Mr. Greg Easley have reviewed the
information contained in this announcement. Mr. Vallesi, Chief
Operating Officer of the group, is a petroleum engineer with over
22 years of experience in the oil and gas industry and is a member
of the Argentinian Institute of Oil and Gas. Mr. Easley, Senior
Manager - Reservoir and Engineering, is a petroleum engineer with
over 10 years of experience in the oil and gas industry, is a
licenced Professional Engineer in the State of Texas and is a
member of the Society of Petroleum Engineers.
About Phoenix
Phoenix Global Resources is an independent oil and gas
exploration and production company focused on Argentina and listed
on both the London Stock Exchange (AIM: PGR) and the Buenos Aires
Stock Exchange (BCBA: PGR). The Company has over 1.8 million
licenced working interest acres in Argentina (of which over 0.7
million are operated), 57.1 million boe of working interest 2P
reserves and average working interest production of 10,249 boepd in
2018. Phoenix has signi cant exposure to the unconventional
opportunity in Argentina through its approximately 700,000 working
interest acres with Vaca Muerta and other unconventional
potential.
Operations Review
Licences and business development
In February 2019, the company signed a joint venture contract
with GyP, the Neuquén province owned oil and gas company, for the
exploration, development and production of the Corralera Noroeste
area. In July 2019, the contract received final approval from the
province of Neuquén. The concession is adjacent to the company's
existing Corralera Sur and Corralera Noreste concessions and
together the three areas cover approximately 82,000 acres with Vaca
Muerta exposure. The confirmation of the Corralera Noroeste licence
by the province unifies all the areas that comprise Corralera under
Phoenix operatorship with GyP as a 10% partner.
The Corralera block neighbours the Filo Morado concession where
the operator, YPF, has recently commenced horizontal unconventional
completions as part of the appraisal programme.
Drilling and completions activity
Mata Mora
In late June, flowback operations began from both the MMx-1001
and MMx-1002 wells at Mata Mora. Drilling of both Mata Mora wells
concluded earlier in the year and the wells were unconventionally
completed in the La Cocina horizon of the Vaca Muerta formation in
June 2019.
The wells were drilled from a single pad with each well having a
lateral section of more than 2,000 metres. The wells were
successfully geo-steered with more than 90% of each lateral
maintained within a seven metre window in the Vaca Muerta
formation. The wells were simultaneously completed using the latest
high-intensity zipper-fracturing design that was specifically
selected based on learnings from Vaca Muerta lateral wells drilled
by other operators in nearby offset locations.
In testing to date, each Mata Mora well has seen production
rates of approximately 1,000 boepd with reservoir pressure in
excess of 9,900 psi. Oil is continuing to displace water during the
ongoing flowback process though the wells have been choked back
while downhole testing has continued, resulting in lower average
production rates from the wells. The company is in the process of
evaluating the results of the wells as flowback continues as part
of an extended well test.
These two wells satisfy the company's initial commitment for the
licence.
At the conclusion of the extended testing phase for the wells,
the company will be entitled to apply for an unconventional
exploitation concession for the Mata Mora block. That application
will include a commitment for a pilot development programme for
Mata Mora.
During the month of August 2019, a total of 43,152 barrels of
light crude were produced with API gravity of 36.5 degrees from the
two Mata Mora lateral wells. In total, the two wells have produced
77,508 barrels (gross) in July and August 2019.
Puesto Rojas Area
The previously drilled CDM-3004 vertical well was completed in
April and, after a short flowback phase, was placed on production.
This was the final well of those drilled in the Puesto Rojas
appraisal campaign to be completed. CDM-3004 was designed to test
the upper Agrio in the fold position where the unconventional
completions of previous wells targeted the lower Agrio in the fold
position. All the wells drilled at Puesto Rojas as part of the
recent unconventional vertical appraisal campaign were producing at
a combined average daily rate at 30 June of 552 bopd.
The first vertical well of the 2019 unconventional Agrio
development campaign, CDM-3011, was spud in June and subsequently
reached its planned terminal depth at 1,449 metres. The well is the
first of eight unconventional vertical wells that are planned in
the current campaign. Following conclusion of drilling at CDM-3011
in July, the CDM-3025 well was drilled from the same pad. The rig
was then moved to drill the CDM-3014 in August. Water facilities to
serve the wells are now under construction with all three wells
planned for unconventional completion in the Agrio formation
beginning in September.
On completion of the initial three wells at Cerro del Medio, the
rig was moved to the Mallin Largo field that lies to the west of
the Cerro del Medio field in the central portion of the Puesto
Rojas concession. The MLx.1001 well was spud in late August and is
the first test of the folded Agrio formation on the western side of
the structure. The well reached terminal depth in early
September.
Partner operated activity
YPF - Chachahuen
Drilling activity in the Chachahuen area continues with 16 wells
drilled in total during H1 2019. A total of five conventional
production wells were spud at Chachahuen Sur and a previously
drilled production well was converted for use as a water injector.
The conversion of selected production wells to injection wells is
part of the ongoing waterflood project aimed at stabilising
production and, together with the lower levels of new production
drilling, reflects the maturity of the concession.
Work has continued at the prospective Cerro Morado Este
concession with a total of eight wells spud in the first half of
2019. The objective of these wells is the delineation of the block
to identify the areas with highest potential for development.
Drilling work also continues on the exploration portions of the
Chachahuen concession itself where three wells in total were spud
in 2019. One of these wells has been abandoned as unsuccessful,
with a second well due to be abandoned. The final well was awaiting
completion at the period end.
Other partner operated activity
Malargüe
In May the Province of Mendoza ratified its decision to deny the
second exploration permit for the Malargüe area, in which the
company participates in on a non-operated basis. During the first
exploration period one well was drilled on the block and was deemed
a dry hole. The block, whilst large in terms of acreage, was judged
to have prospects for unconventional resources in a relatively
small area of the overall licence.
No reserves had been assessed for the block and it contributed
no production to the company in the period.
Q2 2019 production
Total Phoenix production (net WI)
Average total daily production volumes in Q2 2019 compared to
full year 2018 and the previous two quarters were as follows:
Production (boepd)
FY 2018 Q2 2019 Q1 2019 Q4 2018
-------- -------- --------
10,256 9,621 9,636 9,885
-------- -------- --------
Analysed by area, the production was as follows:
Neuquina basin
Production (boepd)
FY 2018 Q2 2019 Q1 2019 Q4 2018
-------- -------- --------
4,471 3,865 3,985 4,112
-------- -------- --------
Neuquina basin production was down for the quarter mainly due to
natural decline at Puesto Rojas not yet offset by new production
from the folded Agrio development programme. At Chachahuen Sur the
focus remains on enhanced recovery through waterflood to arrest or
slow natural decline while delineation drilling continues at Cerro
Morado Este.
Puesto Rojas Area
Production (boepd)
FY 2018 Q2 2019 Q1 2019 Q4 2018
-------- -------- --------
1,822 1,542 1,583 1,668
-------- -------- --------
Operator: PGR
In Q2, a workover was performed on the CDM-3007 well bringing
the total number of workovers at Puesto Rojas in the period to
six.
The workover on CDM-3007 involved swab tests performed to
determine the production contributions of each of the Vaca Muerta
layers penetrated by the well in preparation for possible
horizontal unconventional drilling in the future. The tests also
allowed the better optimisation of the production equipment on the
well with production increasing from 42 bopd to a peak rate of 106
bopd following the workover. All production from CDM-3007 is
derived from the Vaca Muerta formation.
A further workover was performed on CDM-3023 in July where the
Vaca Muerta layers were isolated and each layer tested for flow
rates. A downhole pump was then installed to produce the Vaca
Muerta, Cahchao, and Agrio formations similar to CDM-3007.
The CDM-3004 well was unconventionally completed in the period
and reached peak production of 182 bopd. Adjustments were made to
the downhole pump with the objective of increasing production to be
more in line with other folded Agrio wells that are currently
producing an average 220 bopd each.
Chachahuen Sur and Cerro Morado Este
Production (boepd)
FY 2018 Q2 2019 Q1 2019 Q4 2018
-------- -------- --------
2,348 2,154 2,249 2,276
-------- -------- --------
Operator YPF
Production at Chachahuen Sur was slightly down in Q2 2019
reflecting natural decline not offset by enhanced recovery from
waterflood. Minimal new wells were drilled at Chachahuen Sur with
drilling activity in the period focused on exploration wells as
part of the ongoing work commitment in the exploration portions of
the concession.
In total, YPF drilled eight new wells in Q2 2019 comprising two
delineation wells at Cerro Morado Este, three exploration wells as
part of ongoing licence commitments and three new wells at
Chachahuen Sur to complete the work commitments associated with the
development concession.
One capital workover related to enhanced production was
performed in the period as part of the long-term water injection
pattern conformance program aimed at maintaining production and
slowing decline on the existing production wells.
Other Areas
At La Brea, the LBr-4 well was worked over as part of a return
to production of this concession following remediation work on
certain portions of the in-field gathering network. Following the
necessary clearances for the recommencement of production
operations, the Agrio interval at LBr-4 was reperforated and
stimulated in preparation for a likely future unconventional
completion test. After completion, the well returned to production
at 72 bopd.
Austral basin
Production (boepd)
FY 2018 Q2 2019 Q1 2019 Q4 2018
-------- -------- --------
3,960 3,963 3,787 4,033
-------- -------- --------
Production was up in the Austral basin with increases driven by
the company's increase in working interest at the Tierra del Fuego
concessions.
Santa Cruz Sur
Production (boepd)
FY 2018 Q2 2019 Q1 2019 Q4 2018
-------- -------- --------
3,024 2,618 2,648 2,896
-------- -------- --------
Operator: ROCH S.A.
The production decrease at Santa Cruz Sur was driven largely by
natural declines at Campo Bremen and Oceano, slightly offset by
restorations in production at Chorillos. In the quarter, 11 minor
pulling jobs for well repairs were performed along with two
workovers.
Tierra del Fuego
Production (boepd)
FY 2018 Q2 2019 Q1 2019 Q4 2018
-------- -------- --------
936 1,345 1,138 1,137
-------- -------- --------
Operator: ROCH S.A.
The production increase at Tierra del Fuego was largely driven
by the company's increase in working interest in the area. One
minor pulling job and five workovers have been performed in this
area in the year to date.
The continued development plans for both Santa Cruz Sur and
Tierra del Fuego remain under discussion between Phoenix and the
asset operator, ROCH S.A.
Cuyana basin
Production (boepd)
FY 2018 Q2 2019 Q1 2019 Q4 2018
-------- -------- --------
1,818 1,789 1,864 1,794
-------- -------- --------
There was limited activity in Cuyana basin in the period. The
focus of activity at the mature Atamisqui and Tupungato fields was
on maintaining production or slowing decline through workover and
other routine well intervention.
In May 2019, Chañares Energia S.A., the operator of Chañares
Herrados, was notified by the Province of Mendoza of its decision
to rescind the exploitation concession based on unfulfilled work
commitments. The company had the right, but not the obligation, to
participate in new wells proposed by the operator. Chañares Energia
S.A. will continue to operate the block and the company will
participate in the wells that it has a working interest in until
such time as the area is awarded to a new concessionaire.
Financial review
H1 2019 H1 2018 FY 2018
US$M US$M US$M
----------------------------------------- -------- -------- --------
Revenue 68.6 92.9 177.0
Gross profit 1.6 10.1 21.3
Operating loss (32.9) (19.9) (34.9)
EBITDAX (5.2) 18.5 39.2
Loss for the period (34.9) (41.9) (78.3)
Net assets 301.1 347.0 336.2
Net cash flow from operating activities (19.6) 3.9 20.2
Investment in fixed assets 50.8 54.7 139.1
----------------------------------------- -------- -------- --------
Income Statement
Revenue and gross margin
Revenue for the six-month period was US$68.6 million (H1 2018:
US$92.9 million), comprising revenue from oil sales of US$59.7
million (H1 2018: US$81.5 million) and revenue from gas sales of
US$8.9 million (H1 2018: US$11.3 million).
The reduction in oil revenue between periods resulted from a
combination of a reduction in the realised price per barrel and a
lower sales volumes period-on-period.
The average realised oil sales price in the six months to 30
June 2019 was US$52.23/bbl, a 13% decline on the average price of
US$60.34/bbl observed in the six months to 30 June 2018. Realised
prices achieved by the company are indirectly linked to Brent. The
average Brent crude price fell period-on-period by 7%, from an
average of US$71/bbl observed in H1 2018 to an average of US$66/bbl
in H1 2019, contributing to overall fall in realised prices
observed.
The larger reduction (than Brent) in the realised price has
resulted from two main factors. First, an export retention tax was
implemented by the Argentinian government on 3 September 2018. This
tax resulted in a discount being applied to domestic crude prices
based on export parity, and equated to an approximate downward
impact of 10% on prices in H1 2019. The second factor is the
foreign exchange effects on local prices. The devaluation of the
Peso by around 70% across Q2 and Q3 2018 caused the discount
between Brent and local prices to widen, directly impacting
realised revenues.
Average daily oil sales in the period were 6,312 bopd compared
to 7,467 bopd in H1 2018. The majority of the reduction in oil
sales was observed at the Neuquina basin and resulted from natural
decline not offset by production from new wells. At Puesto Rojas
the company's focus in the period has been on the completion of the
2018 unconventional completions campaign, which analysed the Vaca
Muerta horizons at the block. Four new wells drilled as part of the
campaign were completed at the start of 2019, with the fifth
(CDM-3004) completed in April 2019. The five new wells were
producing at a combined average daily rate of 552 bopd at 30 June
2019. The FY19 development campaign began in Q2 2019 and is
expected to contribute additional sales volumes in H2 2019.
The reduction in oil sales at Puesto Rojas was somewhat offset
by the 137 bopd increase in sales at the Austral basin resulting
from the company's acquisition of an additional 4.4% share in the
Rio Cullen and Las Violetas area, increasing the company's working
interest in the concession to 16.9972%. This increase in ownership
also resulted in an increase in gas revenues by approximately
US$0.5million in the period.
Overall, gas revenues declined in the period by US$2.4 million,
driven by a reduction in the realised price from an average of
US$4.20/MMcf in H1 2018 to an average of US$ 3.45/ MMcf in H1 2019.
The higher price observed in the prior period resulted from a cold
spike in the weather during Q2 2018 which increased demand. In H2
2018 the gas market became oversupplied, predominately caused by
the continued development of the Vaca Muerta bringing new supply
streams onto the market. This change in economics has reduced the
seasonal variations in the gas curve, and consequently the higher
prices previously obtained during the winter months have not been
realised in H1 2019.
Operating costs were largely consistent period-on-period at
$18.37/boe in H1 2019 compared to $18.64/boe in H1 2018. Operating
costs at the Neuquina basin rose marginally in the period as
conventional wells experienced natural decline and new
unconventional wells have not yet reached peak rates. The fall in
production resulted in the fixed element of production costs being
spread over lower volumes, resulting in higher operating costs on a
per barrel basis. The increase at Neuquina was offset by a
reduction in cost at the Austral basin caused by higher production
volumes resulting from the company's increased interest in the Rio
Cullen and Las Violetas area.
Depreciation declined US$7.3 million in the period from US$34.7
million in H1 2018 to US$27.3 million in H1 2019. The decline
resulted from lower production volumes and an increase in the
reserves base from the 2018 reserves report used to calculate the
per-boe rate in 2019.
Other operating costs
A non-recurring operating loss of US$18.2 million was realised
in H1 2019 related to termination of two licences. The key driver
was the termination of the Chañares Herrados exploitation
concession. In May 2019, the Province of Mendoza issued a decree
terminating the concession, which was held by the company's JV
partner, Chañares Energía S.A., as a result of its failure to
fulfil work commitments. The company has no intention of
participating in the re-tender process for the licence and will
cease to hold any rights in the block once a new concessionaire is
appointed. The carrying value of the Chañares Herrados asset has
consequently been written off at 30 June 2019 and a corresponding
US$15.8 million non-cash loss has been recognised. It is noted that
a new concessionaire had not been identified at the reporting date.
The company therefore continues to participate in the concession
and the six-month results from Chañares Herrados are included
within gross margin for the period.
An additional US$2.3 million non-cash loss was recorded in
respect of the Vega Grande concession in the Neuquina basin. The
area is not part of the company's core operations and is currently
not producing. Management therefore made the decision not to
request the extension of the licence for the concession when it
comes due in H2 2019.
Excluding the non-recurring loss on licence termination realised
in the period, other operating costs fell from US$30.0 million in
H1 2018 to US$16.4 million in H1 2019. Other operating costs in H1
2018 included the impact of hedging losses of US$10.0 million (H1
2019: US$ nil) and exploration expenses of US$3.7 million (H1 2019:
US$0.4 million), which caused a higher expense in the prior
year.
Finance income and costs
Net finance costs were consistent period-on-period at US$10.0
million in H1 2019 compared to US$10.9 million in H1 2018. The
decline in cost was driven by a reduction in the net FX loss
realised in the period. The FX losses primarily arise on Peso
denominated balances held by the company. The significant
devaluation of the Peso in Q2 2018 caused large FX balances to be
recognised in the prior period. The stabilisation of the Peso
during H1 2019 has reduced the net FX loss realised.
Taxation
A US$8.0 million taxation credit was recognised in H1 2019,
compared to a US$11.1 million taxation charge in H1 2018. The main
driver of the taxation credit in the current period is the tax
benefit from loss before tax for the period. In the prior period
the benefit from losses was offset by charges arising as a result
of the large Peso devaluation in Q2 2018. The stabilisation of the
Peso during H1 2019 has meant these charges were not replicated in
the current period.
Balance Sheet
At 30 June 2019 the group had net assets of US$301.1 million, a
decrease of US$35.0 million compared to 31 December 2018.
During the period, property, plant and equipment declined by
US$38.5 million due to the termination of the Chañares Herrados
licence resulting in a write-off of US$15.8 million and DD&A of
US$27.3 million offset by US$21.5 million of additions. Additions
to property, plant and equipment predominately related to the
current unconventional drilling campaign ongoing at Puesto Rojas,
ongoing drilling investment at Chachahuen and the acquisition of an
additional 4.4% share in the Rio Cullen and Las Violetas
concessions.
A US$16.5 million reclassification of assets to be disclosed as
'held for sale' was also made. The reclassification relates to
certain non-core assets where board approval for sale has been
obtained and the company has engaged in an active program for sale
of the assets within the next 12 months.
Intangible assets increased by US$26.3 million in the period
predominately as a result of the conclusion of drilling and
completion of the MMx-1001 well and the drilling and completion of
the MMx-1002 well at Mata Mora.
Variances were also observed in the working capital balances in
comparison to 31 December 2018. Trade receivables increased by
US$4.5 million to US$40.0 million at 30 June 2019 due to an
increase in the VAT asset resulting from the large increase in
capital expenditure at Mata Mora, offset by a slight decline in
revenue receivables. Inventories increased by US$3.5 million to
US$20.7 million at 30 June 2019. This increase is mainly due to the
high volume of drilling supplies being held in anticipation of the
continuation of the upcoming drilling campaign at Puesto Rojas.
Trade and other payables declined by US$8.9 million to US$45.7
million at 30 June 2019. At 31 December 2018, the company was part
way through the FY18 unconventional completions campaign at Puesto
Rojas, which concluded during the period. The next phase began in
June 2019 meaning there was comparatively less activity at period
end.
Funding status and going concern
At 30 June 2019 the group had cash on hand of US$20.5 million
(31 December 2018: US$21.1 million). Total borrowings in the period
increased by US$65.1 million from US$200.3 million at 31 December
2018 to US$265.4 million at 30 June 2019. The increase resulted
from the drawdown of an additional US$58.0 million of funds from
the revolving convertible credit facility in place with Mercuria
and the capitalisation of US$7.1 million of accrued interest. Funds
advanced under the credit facilities have been used to invest in
exploration, evaluation and development work across the company's
core license areas and to satisfy an element of general corporate
costs.
The company is currently evaluating options for financing its
ongoing exploration, evaluation and development activity.
Accordingly, Mercuria Energy Group Limited, has provided the
company with a letter of support that states that it will provide
sufficient funds for the company to meet its obligations over a
period of at least 12 months from the date of this condensed
consolidated interim report or until such time as the company has
secured sufficient financing to fund its planned appraisal
activities and meet its other obligations, whichever is sooner.
Current political and economic climate
The presidential elections are due to take place in Argentina on
27 October 2019. On 11 August 2019 the primary elections took
place, the result of which saw the Peronist Frente de Todos party
securing 47.65% of the electoral vote; a 15.57% margin over the
Macri administration. This result was unanticipated by the
investing community and global markets with a dramatic fall
occurring in both the Merval index and US Dollar: Peso exchange
rate following the announcement.
In an aim to reduce pressure on consumers in the short-term, the
government passed a decree on 16 August 2019 which fixes the crude
oil and gasoline prices for 90 days. The decree sets a Brent
reference price of US$59/bbl and a US Dollar: Peso exchange rate of
45.19. On 30 August 2019, a new decree was issued which modified
the exchange rate set in the original decree to 46.69.
Although the fixed Brent price is broadly consistent with the
current floating price, the US Dollar: Peso exchange rate set of
46.69 is around 17% lower than the current floating rate of
exchange of 56.1 (at 12 September 2019). This has had a direct
impact on the company due to the fact that all domestic oil sales
contracts are linked to the Peso, meaning that realised revenues in
Q319 have reduced. This decline has however been partially offset
by lower Peso denominated costs.
Board and corporate governance update
Martin Bachmann was appointed to the board as a non-executive
director with effect from 2 September 2019. Martin, a trained
geophysicist, was a member of Wintershall's board of executive
directors for 10 years and brings over 35 years' experience in the
oil and gas sector to the company. We are delighted to welcome him
to the board.
Following a review of his external board commitments, Garrett
Soden has decided to step down from the Board with effect from 12
September 2019 in order to comply with UK corporate governance
guidelines. We would like to thank Garrett for his contribution
over the last two years since joining at the time of the reverse
takeover and wish him all the best for the future. David Jackson
will be replacing Garrett as chair of the audit committee.
Statement of Directors' Responsibilities
The Directors confirm that to the best of their knowledge:
a) The condensed consolidated financial information for the
period ended 30 June 2019 has been prepared in accordance with IAS
34 'Interim Financial Reporting';
b) The interim results report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the six months and description of principal risks and
uncertainties for the remaining six months of the year); and
c) The interim results include a fair review of the business and
of any required related party disclosures.
On behalf of the Board
Kevin Dennehy
Chief financial officer
13 September 2019
Independent review report to Phoenix Global Resources plc
Report on the consolidated interim financial statements
Our conclusion
We have reviewed Phoenix Global Resources plc's unaudited
condensed consolidated interim financial information (the "interim
financial statements") in the Interim results of Phoenix Global
Resources plc for the six-month period ended 30 June 2019. Based on
our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in
all material respects, in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the AIM Rules for Companies.
What we have reviewed
The interim financial statements comprise:
-- the unaudited consolidated statement of financial position as at 30 June 2019;
-- the unaudited consolidated income statement and consolidated
statement of comprehensive income for the period then ended;
-- the unaudited consolidated statement of cash flows for the period then ended;
-- the unaudited consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim results
for the six-month period to 30 June 2019 have been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the AIM
Rules for Companies.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The Interim results for the six-month period to 30 June 2019,
including the interim financial statements, is the responsibility
of, and has been approved by, the directors. The directors are
responsible for preparing the Interim results for the six-month
period to 30 June 2019 in accordance with the AIM Rules for
Companies which require that the financial information must be
presented and prepared in a form consistent with that which will be
adopted in the company's annual financial statements.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim results for the six-month
period to 30 June 2019 based on our review. This report, including
the conclusion, has been prepared for and only for the company for
the purpose of complying with the AIM Rules for Companies and for
no other purpose. We do not, in giving this conclusion, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
results for the six-month period to 30 June 2019 and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial
statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
13 September 2019
Unaudited consolidated income statement
For the period ended 30 June 2019
Six months to 30 June 2019 Six months to 30 June 2018 Year to 31 December 2018
Note US$'000 US$'000 US$'000
------------------------------ ---- -------------------------- -------------------------- ------------------------
Revenue 2,3 68,617 92,876 176,972
Cost of sales 4 (66,986) (82,746) (155,638)
------------------------------ ---- -------------------------- -------------------------- ------------------------
Gross profit 1,631 10,130 21,334
Exploration expenses (426) (3,678) (9,359)
Loss on termination of
licences 5,6 (18,180) - -
Selling and distribution
expenses (2,937) (2,916) (5,758)
Administrative expenses (12,086) (11,679) (24,561)
Other operating expense (909) (11,744) (16,568)
------------------------------ ---- -------------------------- -------------------------- ------------------------
Operating loss (32,907) (19,887) (34,912)
Presented as:
Adjusted EBITDAX 13,030 18,449 39,173
Non-recurring expenses (18,180) - -
------------------------------ ---- -------------------------- -------------------------- ------------------------
EBITDAX (5,150) 18,449 39,173
Depreciation, depletion and
amortisation (27,331) (34,658) (64,726)
Exploration cost written off (426) (3,678) (9,359)
------------------------------ ---- -------------------------- -------------------------- ------------------------
Operating loss (32,907) (19,887) (34,912)
------------------------------ ---- -------------------------- -------------------------- ------------------------
Finance income 675 2,923 4,098
Finance costs (10,717) (13,811) (30,702)
Loss before taxation (42,949) (30,775) (61,516)
Taxation 8 8,025 (11,112) (16,797)
------------------------------ ---- -------------------------- -------------------------- ------------------------
Loss for the period (34,924) (41,887) (78,313)
------------------------------ ---- -------------------------- -------------------------- ------------------------
Loss per ordinary share US$ US$ US$
------------------------------ ---- -------------------------- -------------------------- ------------------------
Basic and diluted loss per
share (0.01) (0.02) (0.03)
------------------------------ ---- -------------------------- -------------------------- ------------------------
The above unaudited consolidated income statement should be read
in conjunction with the accompanying notes.
Unaudited consolidated statement of comprehensive income
For the period ended 30 June 2019
Six months to 30 June 2019 Six months to 30 June 2018 Year to 31 December 2018
US$'000 US$'000 US$'000
------------------------------------ -------------------------- -------------------------- ------------------------
Loss for the year (34,924) (41,887) (78,313)
Translation differences - 408 (361)
------------------------------------ -------------------------- -------------------------- ------------------------
Total comprehensive loss for the
year (34,924) (41,479) (78,674)
------------------------------------ -------------------------- -------------------------- ------------------------
The above items will not be subsequently reclassified to profit
and loss. There are no impairment losses on revalued assets
recognised directly in equity.
The above unaudited consolidated statement of comprehensive
income should be read in conjunction with the accompanying
notes.
Unaudited consolidated statement of financial position
At 30 June 2019
30 June 30 June
2019 2018 31 December 2018
Note US$'000 US$'000 US$'000
-------------------------------- ---- --------- --------- ----------------
Non-current assets
Property, plant and equipment 5 327,704 353,190 366,191
Intangible assets and goodwill 6 287,352 225,179 261,010
Other receivables 2,895 3,371 5,085
Deferred tax assets 9 10,207 15,150 9,001
-------------------------------- ---- --------- --------- ----------------
Total non-current assets 628,158 596,890 641,287
-------------------------------- ---- --------- --------- ----------------
Current assets
Assets held for sale 17,069 - -
Inventories 20,731 17,131 17,279
Trade and other receivables 37,117 36,869 30,407
Cash and cash equivalents 20,476 10,099 21,085
-------------------------------- ---- --------- --------- ----------------
Total current assets 95,393 64,099 68,771
-------------------------------- ---- --------- --------- ----------------
Total assets 723,551 660,989 710,058
-------------------------------- ---- --------- --------- ----------------
Non-current liabilities
Trade and other payables 2,626 5,546 3,256
Borrowings 7 185,341 108,461 135,919
Deferred tax liabilities 9 91,818 96,171 99,374
Provisions 16,258 17,344 16,236
-------------------------------- ---- --------- --------- ----------------
Total non-current liabilities 296,043 227,522 254,785
-------------------------------- ---- --------- --------- ----------------
Current liabilities
Liabilities held for sale 447 - -
Trade and other payables 43,065 61,762 51,410
Income tax liability 1,528 1,262 1,595
Borrowings 7 80,009 23,417 64,365
Provisions 1,326 - 1,733
-------------------------------- ---- --------- --------- ----------------
Total current liabilities 126,375 86,441 119,103
-------------------------------- ---- --------- --------- ----------------
Total liabilities 422,418 313,963 373,888
-------------------------------- ---- --------- --------- ----------------
Net assets 301,133 347,026 336,170
-------------------------------- ---- --------- --------- ----------------
Equity
Share capital and share premium 457,198 435,908 457,198
Other reserves (112,150) (115,891) (112,150)
Retained earnings (43,915) 27,009 (8,878)
-------------------------------- ---- --------- --------- ----------------
Total equity 301,133 347,026 336,170
-------------------------------- ---- --------- --------- ----------------
The above unaudited consolidated statement of financial position
should be read in conjunction with the accompanying notes.
Unaudited consolidated statement of changes in equity
For the period ended 30 June 2019
Capital and reserves Called up Share premium Retained Other
share capital account earnings reserves Total equity
US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------------------------------- -------------- ------------- --------- --------- ------------
At 1 January 2018 329,877 - 68,896 (116,299) 282,474
Loss for the period - - (41,887) - (41,887)
Other comprehensive income - - - 408 408
Total comprehensive (loss)/ profit for the period - - (41,887) 408 (41,479)
Debt to equity conversion 27,027 72,973 - - 100,000
Issue of ordinary shares 2,114 3,917 - - 6,031
-------------------------------------------------- -------------- ------------- --------- --------- ------------
At 30 June 2018 359,018 76,890 27,009 (115,891) 347,026
-------------------------------------------------- -------------- ------------- --------- --------- ------------
At 1 January 2019 364,175 93,023 (8,878) (112,150) 336,170
Loss for the period - - (34,924) - (34,924)
Other comprehensive income - - - - -
-------------------------------------------------- -------------- ------------- --------- --------- ------------
Total comprehensive loss for the period - - (34,924) - (34,924)
Fair value of share based payments - - 613 - 613
Settlement of share based payments - - (154) - (154)
Acquisition of treasury shares - - (572) - (572)
At 30 June 2019 364,175 93,023 (43,915) (112,150) 301,133
-------------------------------------------------- -------------- ------------- --------- --------- ------------
Merger Warrant Translation Total other
reserve reserve reserve reserves
Other reserves US$'000 US$'000 US$'000 US$'000
--------------------------- --------- -------- ----------- -----------
At 1 January 2018 (116,510) 2,105 (1,894) (116,299)
Other comprehensive income - - 408 408
At 30 June 2018 (116,510) 2,105 (1,486) (115,891)
--------------------------- --------- -------- ----------- -----------
At 1 January 2019 (112,000) 2,105 (2,255) (112,150)
Other comprehensive income - - - -
--------------------------- --------- -------- ----------- -----------
At 30 June 2019 (112,000) 2,105 (2,255) (112,150)
--------------------------- --------- -------- ----------- -----------
The above statement of consolidated changes in equity should be
read in conjunction with the accompanying notes.
Unaudited consolidated statement of cash flows
For the period ended 30 June 2019
Six months Six months Year to 31 December 2018
to 30 June to 30 June US$'000
2019 2018
Note US$'000 US$'000
------------------------------------------------------------ ---- ----------- ----------- ------------------------
Cash flows from operating activities
Cash (used in)/ generated from operations 10 (19,487) 4,689 21,014
Income taxes paid (75) (829) (842)
------------------------------------------------------------ ---- ----------- ----------- ------------------------
Net cash (outflow)/ inflow from operating activities (19,562) 3,860 20,172
------------------------------------------------------------ ---- ----------- ----------- ------------------------
Cash flows from investing activities
Payments for property, plant and equipment (19,158) (37,964) (80,531)
Payments for intangible assets (19,169) (16,534) (43,188)
Proceeds from sale of non current assets - - 39
Recovery of restricted cash 266 - 377
------------------------------------------------------------ ---- ----------- ----------- ------------------------
Net cash outflow from investing activities (38,061) (54,498) (123,303)
------------------------------------------------------------ ---- ----------- ----------- ------------------------
Cash flows from financing activities
------------------------------------------------------------ ---- ----------- ----------- ------------------------
Proceeds from issue of shares and other equity instruments - 4,854 4,925
Proceeds from borrowings 58,000 40,340 116,210
Repayment of borrowings - (3,612) (7556)
Interest paid (735) (1,801) (8,852)
Lease payments (211) - -
Net cash inflow from financing activities 57,054 39,781 104,727
------------------------------------------------------------ ---- ----------- ----------- ------------------------
Net (decrease)/ increase in cash and cash equivalents (569) (10,857) 1,596
Cash and cash equivalents at the beginning of the financial
year 21,085 23,696 23,696
Effects of exchange rates on cash and cash equivalents (40) (2,740) (4,207)
------------------------------------------------------------ ---- ----------- ----------- ------------------------
Cash and cash equivalents at end of period 20,476 10,099 21,085
------------------------------------------------------------ ---- ----------- ----------- ------------------------
The above consolidated statement of cash flows should be read in
conjunction with the accompanying notes.
Notes to the unaudited consolidated financial information
1. Basis of preparation
General information
The company is a Public Limited Company (plc) incorporated in
England and Wales and is domiciled in the United Kingdom. The
Registered Office address is 6th Floor, King's House, 10 Haymarket,
London SW1Y 4BP. The company is listed on the AIM market of the
London Stock Exchange and maintains a secondary listing on the
Buenos Aires Stock Exchange.
The principal activities of the company and its subsidiaries
(together 'the group') are the exploration for and the development
and production of oil and gas in Argentina.
Basis of preparation
This unaudited condensed consolidated interim financial
information for the six-months ended 30 June 2019 has been prepared
in accordance with IAS 34, 'Interim financial reporting' as adopted
by the European Union. This condensed consolidated financial
information should be read in conjunction with the group's annual
financial statements for the year ended 31 December 2018, which
have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union.
The financial information for the period ended 30 June 2019
contained within this condensed consolidated financial information
does not constitute statutory accounts as defined in section 434 of
the Companies Act 2006. The information within was derived from the
statutory accounts for the year ended 31 December 2018, a copy of
which has been delivered to the Registrar of Companies. The
auditors' report on these accounts was unqualified, did not include
a reference to any matters to which the auditor drew attention by
way of an emphasis of matter and did not contain a statement under
sections 498 (2) or (3) of the Companies Act 2006.
The annual financial statements for the year ended 31 December
2018 are available on the company's website at
www.phoenixglobalresources.com.
The group's business activities, together with factors likely to
affect its future development, performance and position are set out
in the operational and financial review sections of this report.
The financial position of the group, its cash flows, liquidity
position and borrowing facilities are described in the financial
review section.
This condensed consolidated financial information has been
prepared on the going concern basis. To date, the funding required
to support the activities of the group has been provided by
subsidiaries of Mercuria Energy Group. The group is currently
assessing funding options to finance the next stage of its
operations. Whilst that funding assessment is ongoing, a letter of
support has been received from Mercuria Energy Group Limited that
states its intention to make funds available to the group for a
period of not less than 12 months from the date of this interim
condensed consolidated financial information or until such time as
sufficient funding to support the business plan for 2020 has been
secured.
The going concern basis of preparation of this interim condensed
consolidated financial information is based on the letter of
support that has been received as the directors have a reasonable
expectation that the group has access to adequate resources to
continue in operational existence for the foreseeable future.
Consequently, the directors continue to adopt the going concern
basis of accounting in preparing the financial statements.
Estimates and judgements
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing the condensed consolidated financial information,
the significant judgements made by management in applying the
group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the consolidated
financial statements for the year ended 31 December 2018.
Principal risks and uncertainties
In preparing the condensed consolidated financial information
management is required to consider the principal risks and
uncertainties facing the group. In management's opinion the
principal risks and uncertainties facing the group are unchanged
since the preparation of the consolidated financial statements for
the year ended 31 December 2018. Those risks and uncertainties,
together with management's response to them are described in the
Risk Review section of the Annual Report and Accounts 2018.
Accounting policies
The accounting policies applied in this condensed consolidated
financial information are consistent with those applied in
preparing the financial statements for the year ended 31 December
2018 with the exception of those set out below:
Non-current assets held for sale
Non-current assets or disposal groups classified as held for
sale are measured at the lower of their net book value and fair
value less costs to sell. Non-current assets and disposal groups
are classified as held for sale if their carrying amount will be
recovered through a sale transaction rather than through continuing
use. This condition is regarded as met only when the sale is highly
probable and the asset or disposal group is available for immediate
sale in its present condition. Management views the trigger for
recognition either as signature of a sales and purchase agreement
or board approval. Management must be committed to the sale which
should be expected to qualify for recognition as a completed sale
within one year from the date of classification. Assets classified
as held for sale and the corresponding liabilities are classified
in current assets and liabilities on a separate line in the balance
sheet.
New accounting standards adopted in the period
IFRS 16: Leases
IFRS 16 became effective for accounting periods that started on
or after 1 January 2019 and the group adopted the standard
retrospectively from this date.
The group has assessed its lease and rental arrangements, and
arrangements where regular payments of consistent amounts are paid
to a supplier of goods or services, in line with the rules of the
new standard. This assessment concluded that the group does not
lease significant assets in either quantum or value. The principal
lease agreements that the group is party to relate to office space
in London, Houston and Buenos Aires and to minor items of office
equipment such as photocopiers and map plotters. The group also
rents certain low value operational items but such items are
typically not covered by contracts and their use is committed to on
a monthly basis through purchase orders. As a result, the impact of
adopting the new standard has had an immaterial effect on the
financial statements of the group.
On adoption of IFRS 16 the group was required to recognise lease
liabilities on the balance sheet in relation to leases which had
previously been classified as 'operating leases' under the
principles of IAS 17 'Leases'. These leases all relate to office
space. The liabilities were measured at the present value of the
remaining lease payments, discounted using the group's incremental
borrowing rate as of 1 January 2019. The borrowing rate applied to
the lease liabilities was 6.33%. The impact on the balance sheet at
1 January 2019 is disclosed in the table below. As permitted under
the standard, the group has not restated the comparative figures
for the 2018 reporting period.
Unaudited US$'000
---------------------------------------------------------- -------
Operating lease commitments held at 31 December 2018: 800
Impact of discounting using the incremental borrowing
rate on transition (120)
Adjustments resulting from different treatment of certain
lease clauses 133
---------------------------------------------------------- -------
Lease liability recognised at 1 January 2019 813
---------------------------------------------------------- -------
Of which:
Current lease liabilities 368
Non-current lease liabilities 445
---------------------------------------------------------- -------
The corresponding US$0.8 million right-of-use asset has been
included within property in property, plant and equipment on the
balance sheet. The asset will be depreciated on a straight-line
basis over the life of the underlying lease contracts.
2. Segment information
The group's executive management team comprising the interim
chair of the executive committee, the chief financial officer and
the chief operating officer has been determined collectively as the
chief operating decision maker for the group. The information
reported to the group's executive management team for the purposes
of resource allocation and assessment of segment performance is
currently focused on the basins in which the group operates. The
strategy of the group is focused on the development of the Vaca
Muerta shale and other unconventional opportunities in the Neuquina
basin while optimising conventional production from that basin. In
addition, the group is present in the Austral basin in south
Argentina where its operations with its partner, Roch S.A., are
targeted at exploiting oil and gas resources in the group's licence
areas within the basin. The group also has production activities in
the Cuyana basin. Segments that are not currently material to the
operations or result of the group are aggregated within 'Corporate
- unallocated'.
The Neuquina, Austral and Cuyana basins have been determined by
the group to represent the reportable segments of the business
based on the level of activity across these basins and the
information provided to the executive management team.
The group's executive management primarily uses a measure of
earnings before interest, tax, depreciation and exploration
expenses (EBITDAX) to assess the performance of the operating
segments. However, the executive management team also receives
information about segment revenue and capital expenditure on a
monthly basis.
Neuquina Austral Cuyana Corporate/
First half 2019 basin basin basin unallocated Total
Unaudited US$'000 US$'000 US$'000 US$'000 US$'000
---------------------------------------------- --------- --------- --------- ------------- ---------
Revenue 31,833 20,416 16,368 - 68,617
---------------------------------------------- --------- --------- --------- ------------- ---------
Loss for the period (2,695) (4,527) (15,079) (12,623) (34,924)
---------------------------------------------- --------- --------- --------- ------------- ---------
Add: depreciation, depletion and amortisation 16,267 7,799 2,605 660 27,331
Add: exploration costs written off 377 49 - - 426
Less: finance income - - - (675) (675)
Add: finance costs 297 93 72 10,255 10,717
Add: taxation - - - (8,025) (8,025)
---------------------------------------------- --------- --------- --------- ------------- ---------
EBITDAX 14,246 3,414 (12,402) (10,408) (5,150)
---------------------------------------------- --------- --------- --------- ------------- ---------
Oil revenues 31,769 11,533 16,368 - 59,670
bbls sold 626,695 204,879 310,845 - 1,142,419
Realised price (US$/bbl) 50.69 56.29 52.66 - 52.23
---------------------------------------------- --------- --------- --------- ------------- ---------
Gas revenues 63 8,884 - - 8,947
MMcf sold 31 2,566 - - 2,597
Realised price (US$/MMcf) 2.03 3.46 - - 3.45
---------------------------------------------- --------- --------- --------- ------------- ---------
Capital expenditure
Property, plant and equipment 13,323 6,381 636 1,136 21,476
Intangible exploration and evaluation assets 28,967 272 51 2 29,292
Total capital expenditure 42,290 6,653 687 1,138 50,768
---------------------------------------------- --------- --------- --------- ------------- ---------
Neuquina Austral Cuyana Corporate/
First half 2018 basin basin basin unallocated Total
Unaudited US$'000 US$'000 US$'000 US$'000 US$'000
---------------------------------------------- --------- --------- --------- ------------- ---------
Revenue 47,949 22,637 22,290 - 92,876
---------------------------------------------- --------- --------- --------- ------------- ---------
Profit/(loss) for the period 4,584 7 2,074 (48,552) (41,887)
---------------------------------------------- --------- --------- --------- ------------- ---------
Add: depreciation, depletion and amortisation 23,480 5,940 4,868 370 34,658
Add: exploration costs written off 323 3,165 - 190 3,678
Less: finance income - - - (2,923) (2,923)
Add: finance costs - - - 13,811 13,811
Add: taxation - - - 11,112 11,112
---------------------------------------------- --------- --------- --------- ------------- ---------
EBITDAX 28,387 9,112 6,942 (25,992) 18,449
---------------------------------------------- --------- --------- --------- ------------- ---------
Oil revenues 47,935 11,318 22,291 - 81,544
bbls sold 805,817 179,432 366,192 - 1,351,441
Realised price (US$/bbl) 59.49 63.08 60.87 - 60.34
---------------------------------------------- --------- --------- --------- ------------- ---------
Gas revenues 14 11,318 - - 11,332
MMcf sold 3 2,696 - - 2,699
Realised price (US$/MMcf) 4.56 4.20 - - 4.20
---------------------------------------------- --------- --------- --------- ------------- ---------
Capital expenditure
Property, plant and equipment 28,272 6,165 2,527 1,217 38,181
Intangible exploration and evaluation assets 16,418 93 23 - 16,534
Total capital expenditure 44,690 6,258 2,550 1,217 54,715
---------------------------------------------- --------- --------- --------- ------------- ---------
Exploration costs incurred in the Austral basin of US$3.2
million related to the company's share of costs related to the
unsuccessful Orkeke well drilled by the company's partner, ROCH
S.A., during 2018.
Substantially all the company's gas production operations are in
the Austral basin where ROCH S.A. is the operator.
There are no intersegment revenues in either period presented.
All revenues represent sales made by the group to external
customers with the majority of sales made in Argentina.
Substantially all the group's oil production is sold to the
Argentinian state-owned oil company, YPF. More than half of gas
production is sold to Grupo Albanesi.
3. Total revenue
Six months Six months Year to
to 30 June to 30 June 31 December
2019 2018 2018
Unaudited US$'000 US$'000 US$'000
------------------ ----------- ----------- ------------
Crude oil revenue 59,670 81,544 154,475
Gas revenue 8,947 11,332 22,497
------------------ ----------- ----------- ------------
Total revenue 68,617 92,876 176,972
------------------ ----------- ----------- ------------
4. Cost of sales
Six months Six months Year to
to 30 June to 30 June 31 December
2019 2018 2018
Unaudited US$'000 US$'000 US$'000
----------------------------------- ----------- ----------- ------------
Production costs 40,180 47,733 89,892
Depreciation of oil and gas assets 27,331 34,658 64,726
Movements in crude inventory (525) 355 1,020
----------------------------------- ----------- ----------- ------------
Total cost of sales 66,986 82,746 155,638
----------------------------------- ----------- ----------- ------------
5. Property, plant and equipment
Property,
fixtures, Development
equipment and production Assets
and vehicles assets under construction Total
Non-current assets - unaudited US$'000 US$'000 US$'000 US$'000
--------------------------------- ------------- ---------------- -------------------- ---------
At 1 January 2019
Cost 9,431 694,747 6,070 710,248
Accumulated depreciation and
impairment (5,680) (338,377) - (344,057)
--------------------------------- ------------- ---------------- -------------------- ---------
Net book amount 3,751 356,370 6,070 366,191
Period ended 30 June 2019
Opening net book amount 3,751 356,370 6,070 366,191
Additions 1,208 9,025 11,243 21,476
Transfers - 12,742 (12,742) -
Transfer to assets held for
sale (327) (66,117) - (66,444)
Disposal of assets - cost - (53,334) - (53,334)
Exploration costs written
off - (333) - (333)
Depreciation charge (871) (26,460) - (27,331)
Transfer to assets held for
sale - accumulated DD&A 309 49,682 - 49,991
Disposal of assets - accumulated
DD&A - 37,488 - 37,488
Closing net book amount 4,070 319,063 4,571 327,704
At 30 June 2019
Cost 10,312 596,730 4,571 611,613
Accumulated depreciation and
impairment (6,242) (277,667) - (283,909)
--------------------------------- ------------- ---------------- -------------------- ---------
Net book amount 4,070 319,063 4,571 327,704
--------------------------------- ------------- ---------------- -------------------- ---------
In May 2019, the Province of Mendoza issued a decree terminating
the concession for the Chañares Herrados block held by the
company's JV partner, Chañares Energía S.A., as a result of their
failure to fulfil work commitments. The decree took immediate
effect and the company has no intention of participating in the
re-tender process. The carrying value of the asset has consequently
been written off at 30 June 2019, causing a US$15.8 million loss to
be realised in the Cuyana segment.
Assets held for sale relate to certain non-core assets in the
Austral basin. Board approval for the sale of these assets has been
given and the company has engaged in an active program for the sale
of the assets within 12 months of the reporting date.
An amount of US$0.8 million has been capitalised to property,
fixtures, equipment and vehicles in the period in relation to the
right-of-use asset calculated on the adoption of IFRS 16 in the
period. The asset will be depreciated on a straight-line basis over
the life of the underlying lease contracts.
Additions to property, plant and equipment in the period ended
30 June 2019 include US$ nil of interest capitalised in respect of
qualifying assets (H1 2018: US$0.2 million). The total amount of
interest capitalised within property, plant and equipment at 30
June 2019 is US$2.8 million (2018: US$2.8 million).
Property,
fixtures, Development
equipment and production Assets
and vehicles assets under construction Total
Non-current assets - unaudited US$'000 US$'000 US$'000 US$'000
------------------------------- ------------- ---------------- -------------------- ---------
At 1 January 2018
Cost 7,320 583,103 18,241 608,664
Accumulated depreciation and
impairment (4,608) (249,811) - (254,419)
------------------------------- ------------- ---------------- -------------------- ---------
Net book amount 2,712 333,292 18,241 354,245
Period ended 30 June 2018
Opening net book amount 2,712 333,292 18,241 354,245
Transfers to intangibles - (1,414) - (1,414)
Transfers 1,825 37,481 (39,306) -
Additions 896 - 37,285 38,181
Exploration costs written
off - (3,165) - (3,165)
Depreciation charge (1,774) (32,883) - (34,657)
Closing net book amount 3,659 333,311 16,220 353,190
At 30 June 2018
Cost 10,041 616,005 16,220 642,266
Accumulated depreciation and
impairment (6,382) (282,694) - (289,076)
------------------------------- ------------- ---------------- -------------------- ---------
Net book amount 3,659 333,311 16,220 353,190
------------------------------- ------------- ---------------- -------------------- ---------
Exploration costs written off in 2018 of US$3.2 million include
the company's share of costs related to the unsuccessful Orkeke
well drilled by the company's partner, ROCH S.A., in the Austral
basin.
6. Intangible assets
Exploration and evaluation assets are primarily the group's
licence interests in exploration and appraisal assets located in
Argentina. The exploration and evaluation assets consist of both
conventional and unconventional oil and gas properties.
Exploration
and evaluation
Goodwill assets Total
Non-current assets - unaudited US$'000 US$'000 US$'000
---------------------------------------- --------- --------------- ---------
At 1 January 2019
Cost 260,007 225,172 485,179
Accumulated amortisation and impairment (224,169) - (224,169)
---------------------------------------- --------- --------------- ---------
Net book amount 35,838 225,172 261,010
---------------------------------------- --------- --------------- ---------
Period ended 30 June 2019
Opening net book amount 35,838 225,172 261,010
Additions - 29,292 29,292
Transfer to assets held for sale - (616) (616)
Disposals - (2,334) (2,334)
Closing net book amount 35,838 251,514 287,352
At 30 June 2019
Cost 260,007 251,514 511,521
Accumulated amortisation and impairment (224,169) - (224,169)
---------------------------------------- --------- --------------- ---------
Net book amount 35,838 251,514 287,352
---------------------------------------- --------- --------------- ---------
Additions to intangible assets during the period predominately
relate to the conclusion of the drilling of the MMx-1001 well and
the drilling of the MMx-1002 well at Mata Mora.
A US$2.3 million loss on relinquishment has been recognised in
respect to the Vega Grande concession in the Neuquina basin. The
licence area is not part of the company's core operations and is
currently not producing. Management has therefore made the decision
not to request the extension of the concession when it comes due
for renewal in H2 2019.
Exploration
and evaluation
Goodwill assets Total
Non-current assets - unaudited US$'000 US$'000 US$'000
-------------------------------------------- --------- --------------- ---------
At 1 January 2018
Cost 260,007 171,393 431,400
Accumulated amortisation and impairment (224,169) - (224,169)
-------------------------------------------- --------- --------------- ---------
Net book amount 35,838 171,393 207,231
-------------------------------------------- --------- --------------- ---------
Period ended 30 June 2018
Opening net book amount 35,838 171,393 207,231
Additions - 16,534 16,534
Transfer from property, plant and equipment - 1,414 1,414
Closing net book amount 35,838 189,341 225,179
At 30 June 2018
Cost 260,007 189,341 449,348
Accumulated amortisation and impairment (224,169) - (224,169)
-------------------------------------------- --------- --------------- ---------
Net book amount 35,838 189,341 225,179
-------------------------------------------- --------- --------------- ---------
Additions to intangible assets in 2018 related to costs
associated with securing the group's interests in the Mata Mora and
Corralera blocks and increasing its working interest participation
from 27% to 90%.
Impairment tests for exploration and evaluation assets
Exploration and evaluation assets are subject to impairment
testing prior to reclassification as tangible fixed assets where
commercially viable reserves are confirmed. Where commercially
viable reserves are not encountered at the end of the exploration
phase for an area the accumulated exploration costs are written off
in the income statement.
Impairment tests for goodwill
Goodwill is monitored by management at the level of the
operating segments identified in note 2.
All of the goodwill was allocated to the Neuquina basin as
presented below.
Neuquina
basin
At 30 June 2019 and 31 December 2018 US$'000
------------------------------------- --------
Chachahuen 15,223
Corralera 16,780
Mata Mora 3,835
------------------------------------- --------
Total 35,838
------------------------------------- --------
No goodwill was recognised prior to 2017. All goodwill presented
relates to the allocation of technical goodwill arising as a result
of accounting for deferred tax on the business combination that
completed on 10 August 2017.
7. Borrowings
30 June 2019 30 December 2018
--------------------------- --------------------------------------- ---------------------------------------
Current Total Current Total
Unaudited US$'000 Non-current US$'000 US$'000 US$'000 Non-current US$'000 US$'000
--------------------------- -------- ------------------- -------- -------- ------------------- --------
Secured
Bank loans 17,407 - 17,407 17,523 - 17,523
--------------------------- -------- ------------------- -------- -------- ------------------- --------
Total secured borrowings 17,407 - 17,407 17,523 - 17,523
Unsecured
Bank loans 710 - 710 709 - 709
Loans from related parties 61,836 185,341 247,177 46,090 135,919 182,009
Other loans 56 - 56 43 - 43
Total unsecured borrowings 62,602 185,341 247,943 46,842 135,919 182,761
--------------------------- -------- ------------------- -------- -------- ------------------- --------
Total borrowings 80,009 185,341 265,350 64,365 135,919 200,284
--------------------------- -------- ------------------- -------- -------- ------------------- --------
Secured liabilities and assets pledged as security
Secured liabilities relate to US Dollar denominated loans
totalling US$17.4 million with interest rates ranging from
5.45%-9.25% (FY18: US$17.5 million).
Loans from related parties
The related party loan at 30 June 2019 relates to a convertible
rolling credit facility ('RCF') provided to the group by Mercuria
Energy Netherlands B.V., a subsidiary of the Mercuria Energy Group
Limited ('Mercuria').
In February 2018, US$100.0 million of the original Mercuria
facility was converted to equity in the company at a price of
GBP0.37 per share. At the same time the facility was restructured
as a new convertible rolling credit facility ('RCF') in the amount
of US$160.0 million with an additional US$100.0 million of new
funds made available to the company.
In December 2018, Mercuria advanced an additional US$25.0
million as a Facility B element to the RCF. In February 2019, a
further US$50.0 million was made available under this Facility B
element of the RCF. The original loan of US$160.0 million became
Facility A.
In May 2019, the amended convertible RCF was further extended to
add a Facility C commitment of US$40 million.
All funds drawn down under the amended convertible RCF facility
bear interest at three-month LIBOR+4% and are repayable by 31
December 2021.
Mercuria Group has the right to convert all or part of the
outstanding principal of Facility A into additional new ordinary
shares of the company at a price of GBP0.45 per share. This
conversion right can be exercised at any time from 30 June 2018
until 10 business days prior to the maturity of Facility A. A
similar conversion feature exists in relation to Facility B at a
price of GBP0.28 per share exercisable from 30 June 2019 until 10
business days prior to the maturity date and in relation to
Facility C at a price of GBP0.23 per share at any time from 30 June
2020 until 10 business days prior to the maturity date.
The amended convertible RCF provides for a grace period
(interest and principal) from 1 January 2019 to 29 February 2020
and the loan will be amortised in equal quarterly repayment
instalments from 31 March 2020 until maturity. The rights to
convert Facility B and Facility C are subject to appropriate
shareholder resolutions, in relation to the authority to allot and
disapplication of pre-emption rights in relation to such shares,
having been approved.
8. Income tax expense
Period to Period to Year to
30 June 30 June 31 December
2019 2018 2018
Income tax expense - unaudited US$'000 US$'000 US$'000
------------------------------------------ --------- --------- ------------
Current tax
Current tax (expense) / credit on profits
for the year (737) (176) 201
------------------------------------------ --------- --------- ------------
Total current tax expense (737) (176) 201
Deferred income tax
------------------------------------------ --------- --------- ------------
Increase / (decrease) in deferred tax 8,762 (10,936) (16,998)
------------------------------------------ --------- --------- ------------
Total deferred tax benefit / (expense) 8,762 (10,936) (16,998)
------------------------------------------ --------- --------- ------------
Income tax benefit / (expense) 8,025 (11,112) (16,797)
------------------------------------------ --------- --------- ------------
Reconciliation of income tax expense to notional tax charge
calculated using corporate tax rate:
Period to Period to Year to
30 June 30 June 31 December
2019 2018 2018
Unaudited US$'000 US$'000 US$'000
--------------------------------------- --------- --------- ------------
Loss from continuing operations before
income tax expense (42,949) (30,775) (61,516)
Tax at the Argentina tax rate of 30%
(2018: 30%) 12,885 9,233 18,455
Tax effect of amounts which are not
deductible (taxable) in calculating
taxable income:
Effect of currency translation on tax
values 4,070 (13,367) (26,556)
Effect of change in tax rate (1,539) 889 3,400
Expenses not deductible for taxation (159) (1,670) 343
Deferred tax assets not recognised (3,648) (6,954) (10,904)
Fiscal assessment - 919 -
Inflation adjustment (3,972) - -
Other 388 (162) (1,535)
--------------------------------------- --------- --------- ------------
Total income tax benefit/ (expense) 8,025 (11,112) (16,797)
--------------------------------------- --------- --------- ------------
The corporate income tax rate in Argentina in 2019 is 30% (2018:
30%) and applies to profits earned and losses suffered in the
period to 30 June 2019.
Under the December 2017 tax reform plan implemented by the
Argentina tax authorities (AFIP), the corporate income tax rate
will be maintained at 30% until 31 December 2019 and will be
further reduced to 25% for years ended 31 December 2020 and
forward.
The reduction in the corporate income tax rate articulated in
the tax reform plan relates only to profits reinvested in
Argentina. An additional tax is applied to dividends to revert the
aggregate tax rate in respect of the profits used to make the
dividend to 35%.
9. Deferred tax balances
Deferred tax assets
30 June 31 December
2019 30 June 2018
Unaudited US$'000 2018 US$'000 US$'000
-------------------------- -------- ------------- -----------
Tax losses 3,716 5,295 2,525
Provisions 2,934 7,635 3,055
Others 12,092 7,172 7,151
-------------------------- -------- ------------- -----------
Total deferred tax assets 18,742 20,102 12,731
-------------------------- -------- ------------- -----------
Argentina tax law does not contain the concept of tax groups and
therefore deferred tax assets and liabilities cannot be offset
between and among companies registered in Argentina and falling
under the control of the same shareholder. Outside of Argentina,
the group does not have sufficient concentration of subsidiaries in
a single tax jurisdiction to warrant seeking tax group status to
allow the offset of assets and liabilities.
The company did not recognise deferred income tax assets of
US$3.4 million (FY18: US$10.9 million) in respect of tax losses
amounting to US$11.4 million (FY18: US$36.3 million) as there is
insufficient evidence that the potential assets will be
recovered.
Assessed tax losses amounting to US$3.7 million (FY18: US$2.5
million) will expire between 2020 to 2024.
Tax losses Provisions Other Total
Movements US$'000 US$'000 US$'000 US$'000
--------------------------------------- ---------- ---------- -------- --------
At 1 January 2018 2,837 8,051 8,118 19,006
Credited/ (charged) to profit and loss 2,458 (416) (946) 1,096
At 30 June 2018 5,295 7,635 7,172 20,102
--------------------------------------- ---------- ---------- -------- --------
Tax losses Provisions Other Total
Movements US$'000 US$'000 US$'000 US$'000
--------------------------------------- ---------- ---------- -------- --------
At 1 January 2019 2,525 3,055 7,151 12,731
Credited/ (charged) to profit and loss 1,191 (121) 4,941 6,011
At 30 June 2019 3,716 2,934 12,092 18,742
--------------------------------------- ---------- ---------- -------- --------
Argentinian tax law has introduced provisions for inflationary
adjustments to be made for tax purposes in the event that annual
increases in the CPI index exceed 55% in 2018, 30% in 2019 or 15%
in 2020. Where an inflationary adjustment for tax is triggered the
law requires and adjustment to taxes in the period with one third
of the calculated value to be booked to current income taxes in the
year and the remaining two thirds included within deferred tax and
recognised through current tax in equal parts in the following two
years.
During the period an amount of US$1.5 million (FY18: US$ nil)
has been included in current taxes, with an additional US$2.5
million (FY18: US$ nil) included within other deferred tax assets
in relation to this adjustment.
The timeframe for expected recovery or settlement of deferred
tax assets is as follows:
30 June 30 June 31 December
2019 2018 2018
US$'000 US$'000 US$'000
------------------------------------------- -------- -------- -----------
No more than 12 months after the reporting
period 12,061 12,467 7,150
More than 12 months after the reporting
period 6,681 7,635 5,581
------------------------------------------- -------- -------- -----------
18,742 20,102 12,731
------------------------------------------- -------- -------- -----------
Deferred tax liabilities
The balance comprises temporary differences attributable to:
30 June 30 June 31 December
2019 2018 2018
US$'000 US$'000 US$'000
--------------------------------------------- --------- --------- -----------
Property, plant and equipment and intangible
assets (99,149) (99,612) (101,310)
Inventories (1,188) (96) (42)
Others (16) (1,415) (1,751)
--------------------------------------------- --------- --------- -----------
Total deferred tax liabilities (100,353) (101,123) (103,103)
--------------------------------------------- --------- --------- -----------
Property,
plant and
equipment
and intangible
assets Inventories Other Total
Movements US$'000 US$'000 US$'000 US$'000
------------------------------ --------------- ----------- -------- ---------
At 1 January 2018 (85,802) (1,108) (2,181) (89,091)
(Charged)/ credited to profit
and loss (13,810) 1,012 766 (12,032)
At 30 June 2018 (99,612) (96) (1,415) (101,123)
------------------------------ --------------- ----------- -------- ---------
Property,
plant and
equipment
and intangible
assets Inventories Other Total
Movements US$'000 US$'000 US$'000 US$'000
------------------------------ --------------- ----------- -------- ---------
At 1 January 2019 (101,310) (42) (1,751) (103,103)
Credited/ (charged) to profit
and loss 2,161 (1,146) 1,735 2,750
At 30 June 2019 (99,149) (1,188) (16) (100,353)
------------------------------ --------------- ----------- -------- ---------
The above presentation of deferred tax assets and liabilities is
prepared showing the aggregate of the gross asset and liability
position on a company-by-company basis.
Deferred tax assets and liabilities presented in the balance
sheet reflect the offset of deferred tax assets and liabilities
where permissible. The deferred tax assets and liabilities, after
legal offset, are shown in the table below.
30 June 30 June 31 December
2019 2018 2018
US$'000 US$'000 US$'000
---------------------------------- -------- -------- -----------
Deferred income tax assets 10,207 15,150 9,001
Deferred tax liabilities (91,818) (96,171) (99,374)
---------------------------------- -------- -------- -----------
Net deferred income tax liability (81,611) (81,021) (90,373)
---------------------------------- -------- -------- -----------
10. Cash (utilised)/ generated from operations
Period to Period to Year to
30 June 30 June 31 December
2019 2018 2018
Unaudited US$'000 US$'000 US$'000
-------------------------------------------- --------- --------- ------------
Loss for the period before taxation (42,949) (30,775) (61,516)
Adjusted for:
Finance costs 9,186 7,750 12,055
Finance income (373) (223) (321)
Accretion of discount on asset retirement
obligation 462 (425) 860
Net unrealised exchange gains 2,498 2,312 8,662
Income on short term investments (302) - (390)
Exploration cost written-off - 3,165 8,609
Loss on disposal of non current assets 18,180 - 1,125
Share based payments 608 - 5,990
Depreciation and amortisation 27,331 34,658 64,726
Change in operating assets and liabilities:
(Increase) in inventories (3,452) (2,756) (2,904)
(Increase) in trade and other receivables (8,887) (8,007) (15,418)
(Decrease)/ increase in trade and other
payables (20,817) (1,197) 9
(Decrease)/ increase in provisions (972) 187 (473)
-------------------------------------------- --------- --------- ------------
Cash (utilised) / generated from operations (19,487) 4,689 21,014
-------------------------------------------- --------- --------- ------------
11. Related party transactions
On 22 January 2018, the company entered a swap agreement with
Mercuria Energy Trading S.A. in order to fix the price received for
a fixed amount of 2018 production at a price of US$65.97/ bbl. The
effective term of the agreement commenced on 15 January and expired
on 14 December 2018. The realised hedging loss expensed in 2018 was
US$7.6 million. The company was not party to any derivative
instruments at 30 June 2019.
12. Events occurring after the reporting period
No events occurred after the reporting period requiring
disclosure.
Additional information
Production summary
WI FY 2018 Q2 2019 Q1 2019 Q4 2018
% Net BOE/D Net BOE/D Net BOE/D Net BOE/D
-------------------------- ----- ---------- ---------- ---------- ----------
AUSTRAL 3,960 3,963 3,787 4,033
Angostura (CA-14) 13% 352 708 564 529
Campo Breman 70% 538 441 484 504
Chorillos 70% 1,999 1,754 1,705 1,944
Las Violetas 13% 563 628 560 586
Moy Aike 70% 98 83 89 88
Oceano 70% 389 341 370 359
Rio Cullen 13% 22 9 14 22
-------------------------- ----- ---------- ---------- ---------- ----------
CUYANA 1,818 1,789 1,864 1,734
Atamisqui 100% 318 312 315 319
Chañares Herrados
(JV wells only) 78% 499 508 546 457
Refugio Tupungato 100% 1,002 969 1,003 959
-------------------------- ----- ---------- ---------- ---------- ----------
GOLFO SAN JORGE 6 3 4 7
Sur Rio Deseado Este 25% 6 3 4 7
-------------------------- ----- ---------- ---------- ---------- ----------
NEUQUINA 4,471 3,865 3,985 4,112
Cajon de los Caballos 38% 121 97 108 120
Cerro Mollar Norte 100% 91 86 90 95
Cerro Mollar Oeste 100% 88 81 72 86
Cerro Morado Este 20% - 57 15 -
Chachahuen Sur 20% 2,298 2,051 2,188 2,226
Chachahuen Sur (Permiso) 20% 50 46 46 50
El Manzano Oeste (Agrio) 100% 11 0 - -
El Manzano Oeste (Resto) 40% 16 41 14 15
La Brea 100% 37 31 31 33
La Paloma 100% 1 0 - -
Mina Cerro del Alquitran 100% - 0 - -
Puesto Rojas 100% 1,744 1,375 1,421 1,487
Rio Atuel 67% - 0 - -
Vega Grande 100% 12 0 - -
-------------------------- ----- ---------- ---------- ---------- ----------
GRAND TOTAL 10,256 9,621 9,636 9,885
-------------------------- ----- ---------- ---------- ---------- ----------
All production figures in the tables and the text of this
announcement are net figures for the company's interest in the
various licences. Totals may not add due to rounding.
Translation
This document is the English original in the event of any
discrepancy between the original English document and the Spanish
translation, the English original shall prevail.
- ENDS -
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.
END
IR GGUCGBUPBPPP
(END) Dow Jones Newswires
September 13, 2019 02:00 ET (06:00 GMT)
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