TIDMPTR
RNS Number : 6885D
Petroneft Resources PLC
30 October 2020
PetroNeft Resources plc
Unaudited interim condensed
consolidated financial statements
for the 6 months ended 30 June 2020
Forward Looking Statements
This report contains forward-looking statements. These
statements relate to the Group's prospects, developments, and
business strategies. Forward-looking statements are identified by
their use of terms and phrases such as 'believe', 'could',
'envisage', 'potential', 'estimate', 'expect', 'may', 'will' or the
negative of those, variations or comparable expressions, including
references to assumptions.
The forward-looking statements in this report are based on
current expectations and are subject to risks and uncertainties
that could cause actual results to differ materially from those
expressed or implied by those statements. These forward-looking
statements speak only as at the date of these financial
statements.
PetroNeft Resources plc
for the 6 months ended 30 June 2020
Group Information
Directors [1] David Golder (U.S. citizen)
(Independent Non-Executive Chairman)
David Sturt (British citizen)
(Chief Executive Officer)
Pavel Tetyakov (Russian citizen- appointed 17(th) January 2020)
(Vice President Business Development)
Thomas Hickey (Irish citizen)
(Independent Non-Executive Director)
Maxim Korobov (Russian citizen-resigned 17(th) January 2020)
(Independent Non-Executive Director)
Anthony Sacca (Australian citizen)
(Independent Non-Executive Director)
Daria Shaftelskaya (Russian citizen- appointed 17(th) January
2020) (Non-Executive Director)
[1] Irish citizens unless otherwise stated
Registered Office and Business Address 20 Holles Street
Dublin 2
Ireland
Secretary Michael Power appointed 3(rd) May 2020
Karl Johnson resigned 3(rd) May 2020
Karl Johnson appointed 5(th) February 2019
Paul Dowling resigned 5(th) February 2019
Auditor BDO
Beaux Lane House
Mercer Street Lower
Dublin 2
Ireland
Nominated Adviser, Euronext Growth Market Adviser, Davy
and Broker 49 Dawson Street
Dublin 2
Ireland
PetroNeft Resources plc
for the 6 months ended 30 June 2020
Group Information (continued)
Principal Bankers KBC Bank Ireland AIB Bank
Sandwith Street 1 Lower Baggot Street
Dublin 2 Dublin 2
Ireland Ireland
Solicitors Byrne Wallace
88 Harcourt Street
Dublin 2
Ireland
Registered Number 408101
Registrar Computershare
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18
Ireland
PetroNeft Resources plc
for the 6 months ended 30 June 2020
Chairman's Statement
Dear Shareholder,
I am pleased to report on the activities of the Group for the
six months to 30(th) June 2020 and an update on our plans. The
first six months of the year have been a busy time for the company
with progress been made across the business and notable
achievements that include:
-- Successfully raised $2.13M through an equity raise at a 58%
premium to the market closing price.
-- Completed construction of a 26 km pipeline connecting
Sibkrayevskoye field to the Central Processing Unit significantly
ahead of schedule and within budget, allowing year-round production
from Sibkrayevskoye which commenced from the end of March 2020
-- Optimisation of the water flood program at the Lineynoye
field resulting in a 20% year on year increase in production (July
to July).
-- Successfully completed extended well test of the C-4 well
producing and selling 1,200 bbls of oil at competitive rates.
-- Restarted construction of mini refinery at License 61, which is now under test production.
-- Daria Shaftelskaya and Pavel Tetyakov joined the board, while
Maxim Korobov resigned after almost 4 years as a director
Production and Sales for the period
Our team achieved a major milestone during the period with the
company producing and selling oil from Licence 67 for the first
time under an extended test regime on the C-4 well at the
Cheremshanskoye field. In total 1,200 barrels (gross) of oil were
produced and purchased at the well head at competitive market rates
of approximately $46.5/bbl without transportation tariffs by a
local refinery. We see significant potential in Licence 67 and we
will see more activity on this Licence in the coming months.
Gross production at Licence 61 in the six months to 30 June 2020
averaged 1,566 bopd, which represents a decline of 9.6% year from
the same period in 2019 (1,743 bopd ). A significant portion of the
decline was due to the company taking the decision in April to shut
off approximately 1,600 bbls of production in response to adverse
market conditions when the benchmark West Texas price went
negative. If the company had kept producing it would have incurred
a significant loss for the month. Excluding the period when
significant production was shut in, the decline would have been cut
in half to only 5.2% compared to the previous period.
We sold 285,020 (gross) barrels of oil in the six months to 30
June 2020 (H1 2019: 315,479 bbls) and achieved an average Russian
Domestic oil price of $42.50 (H1 2019: $44.39). This softer oil
price and reduced production led to reduced operating cash flows
for the Licence 61 joint venture.
Licence 61 Gross
Production H1-2020 Q2-2020 Q1-2020 H1-2019 FY-2019
Total gross production 285,020 133,496 151,523 315,479 590,569
-------- -------- -------- -------- --------
Gross bopd 1,566 1,467 1,665 1,743 1,618
-------- -------- -------- -------- --------
PetroNeft 50% share
bopd 783 733 833 871 809
-------- -------- -------- -------- --------
PetroNeft Resources plc
for the 6 months ended 30 June 2020
Chairman's Statement (continued)
Board Changes
After four years on the board, Maxim Korobov resigned from his
position as Non-Executive Director. I would like to take this
opportunity to thank him for his excellent support and service
throughout his time on the board. At the same time Daria
Shaftelskaya and Pavel Tetyakov joined the board as Executive and
Non-Executive Directors, respectively. Daria brings with her a
wealth of knowledge of the Tomsk and wider Russian business
environment particularly from a finance perspective. Pavel has been
involved with the company since 2016 as Vice President Business
Development, he brings with him a deep understanding of the Russian
Upstream oil industry.
Review of PetroNeft loss for the period
The loss for the period was US$2.720m (H1 2019: US2.006m). The
loss includes PetroNeft's share of the losses on the joint ventures
relating to Licences 61 and 67 of US$3.41m and US$0.34m
respectively (H1 2019: US$2.87m and US$0.32m). The loss relating to
the Licence 61 joint venture is discussed in more detail below.
Finance revenue of US$1.97m (H1 2019: US$2.160m) relates primarily
to interest receivable on loans to the joint ventures.
PetroNeft Key Financial Metrics Unaudited Audited
============================ -------------
6 months Year ended
6 months ended ended 30 31 December
30 June 2020 June 2019 2019
US$ US$ US$
Continuing operations
Revenue 1,021 831 1,443
Cost of sales (829) (699) (1,333)
=============== ===========
Gross profit 192 131 110
Administrative expenses (403) (405) (808)
Operating loss (210) (273) (698)
Share of joint venture's net
loss - WorldAce Investments Limited (3,411) (2,873) (7,510)
Share of joint venture's net
loss - Russian BD Holdings B.V. (343) (349) (664)
Finance revenue 1,970 2,164 4,275
Finance costs (216) (139) (370)
Loss for the period for continuing
operations before taxation (2,210) (1,470) (4,967)
Income tax expense (510) (536) (1,076)
Loss for the period (2,720) (2,006) (6,043)
=============== =========== =============
PetroNeft Resources plc
for the 6 months ended 30 June 2020
Chairman's Statement (continued)
Licence 61 joint venture - WorldAce Group
The metrics below are an extraction from the financial
statements of the WorldAce Group which demonstrate the performance
of Licence 61:
Unaudited Audited
============================== --------------
WorldAce Group WorldAce WorldAce Group
Group
6 months Year ended
6 months ended ended 30 31 December
30 June 2020 June 2019 2019
US$'000 US$'000 US$'000
Continuing operations
Revenue 8,043 13,478 24,853
Cost of sales (8,987) (13,393) (25,100)
=============== ============
Gross profit (944) 85 (247)
Administrative expenses (1,553) (1,042) (2,624)
Operating loss (2,497) (957) (2,871)
Impairment of exploration and
evaluation assets - - (1,383)
Write-off of exploration and evaluation
assets - - (1,300)
Finance revenue 24 32 58
Finance costs (4,349) (4,822) (9,524)
=============== ============
Loss for the period for continuing
operations before taxation (6,822) (5,747) (15,020)
Income tax - - -
=============== ============
Loss for the period for continuing
operations before taxation (6,822) (5,747) (15,020)
=============== ============ -----------------
PetroNeft's 50% share (3,411) (2,874) (7,510)
=============== ============ -----------------
WorldAce Group Analysis Unaudited Audited
======================== -------------
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
US$'000 US$'000 US$'000
Revenue
Oil sales 8,043 13,402 24,712
Other sales 0 76 141
Total revenue 8,043 13,478 24,853
=========== =========== -------------
PetroNeft's 50% share 4,022 6,739 12,427
=========== =========== -------------
Cost of Sales
Mineral Extraction Tax 4,366 8,247 15,078
Pipeline tariff 1,186 1,353 1,887
Staff costs 895 1,020 1,805
Depreciation and amortisation 704 805 1,752
Other cost of sales 1,836 1,968 4,578
Total cost of sales 8,987 13,393 25,100
=========== =========== -------------
PetroNeft's 50% share 4,494 6,697 12,550
=========== =========== -------------
PetroNeft Resources plc
for the 6 months ended 30 June 2020
Chairman's Statement (continued)
The detailed Income Statement and Balance Sheet of WorldAce
Investments Limited is disclosed at note 10 to these condensed
financial statements.
The onset of the Covid pandemic, coupled with the Saudi /
Russian dispute on production quotas gave rise to lower production
and oil prices in H1 2020. Accordingly, the margin in 2020 weakened
as compared to the same period last year. This led to an operating
loss in the L-61 joint venture of US$2.49M compared to an operating
loss in the same period last year of US$957k.
Finance
The company places a high degree of focus on its cash flow
position and financial commitments. In January, the company
successfully placed 107,755,037 new Ordinary Shares at 1.5p each
representing a 58% premium to the closing market price. There was a
significant commitment from directors representing 44% of the
placing.
The Company as reported in the 2019 Annual Financial Statements,
is conscious of the maturity of both the Convertible Debt Holders
and Petrogrand AB loan by the end of 2020. We are working with both
groups on arrangements to extend the redemption dates on these
facilities and negotiations are ongoing.
Outlook
The first half of 2020 presented many challenges to the company
through the dual effects of the Covid pandemic and turmoil in the
world's energy markets. We have however been seeing increased
stability through the third quarter and are optimistic that this
will continue through the end of 2020 and into 2021.
With the success of the C-4 extended well test combined with
stabilising production at Licence 61, we believe the company is
well positioned to benefit from a future improvement in the market.
We are particularly looking forward to an active winter work
program at the end of this year and in to 2021.
At Licence 67, the successful C-4 extended test enables the well
to be placed on year round production from the start of 2021. While
certain infrastructure investments will be required to ensure this
is possible, we are confident that the major part of these costs
will be covered by the loan agreement which is being finalised with
the Alexandrovskoye refinery. It is pleasing to see that our
confidence in the potential of this asset is matched by the
purchaser of the oil produced during the winter 2020 extended test.
We are currently working on options to be able to continue the well
re entry program at the Ledovoye field and hope to be able to
provide an update shortly..
On Licence 61, as our production has stabilised, we anticipate
significantly improved economics arising from our recently
completed mini refinery which has already produced over 100 tons of
good quality fuel as part of the testing programme. We are
confident that as well as meeting our own internal fuel
requirements we are confident that as well as meeting our own
needs, we will be able to sell excess stock thereby generating an
important new revenue stream. In addition we are continuing to
focus on optimising existing production from improving water floods
which has worked so well at the Lineynoye field. We are now looking
forward to continuing these field optimisation programs with the
current focus on the Arbuzovskoye field.
We believe that the continued and sustained improvement in our
operational and financial performance demonstrated during the
period will enhance our ability to generate value for our
shareholders whether it be through a full or partial sale or
continued development of the assets.
Whilst the company faces many challenges, our team has
demonstrated considerable creativity, innovation and focus during
the period, and continues to generate deeper technical and
operational insights which will enable us to undertake future
investments with confidence. We continue to work on building a
strong platform for a value growth proposition which ultimately
benefits our shareholders.
David Golder
Non-Executive Chairman
PetroNeft Resources plc
Interim Condensed Consolidated Income Statement
For the 6 months ended 30 June 2020
Unaudited Audited
========================== ------------------
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
Note US$ US$ US$
Continuing operations
Revenue 5 1,020,871 830,613 1,443,568
Cost of sales (828,556) (699,297) (1,333,339)
============ ============ ------------------
Gross profit 192,315 131,316 110,229
Administrative expenses (402,749) (404,759) (807,507)
------------------
Operating loss (210,434) (273,443) (697,278)
Share of joint venture's net
loss - WorldAce Investments
Limited 10 (3,410,682) (2,873,286) (7,510,318)
Share of joint venture's net
loss - Russian BD Holdings B.V. 11 (342,869) (349,384) (664,455)
Finance revenue 6 1,970,358 2,164,301 4,275,181
Finance costs 7 (215,672) (138,560) (369,950)
------------------
Loss for the period for continuing
operations before taxation (2,209,479) (1,470,372) (4,966,820)
Income tax expense 8 (510,991) (536,461) (1,075,634)
Loss for the period attributable
to equity holders of the Parent (2,720,470) (2,006,833) (6,042,454)
============ ============ ==================
Loss per share attributable
to ordinary equity holders of
the Parent
Basic - US dollar cent (0.33) (0.28) (0.84)
Diluted- US dollar cent (0.31) - (0.77)
Interim Condensed Consolidated Statement of Comprehensive
Income
For the 6 months ended 30 June 2020
Unaudited Audited
========================== -------------
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2019
US$ US$ US$
Loss for the period attributable
to equity holders of the Parent (2,720,470) (2,006,833) (6,042,454)
Other comprehensive income to be
reclassified to profit or loss
in subsequent periods:
Currency translation adjustments
- subsidiaries (59,032) (63,916) (77,816)
Share of joint ventures' other
comprehensive income - foreign
exchange translation differences (5,401,254) 4,226,227 4,996,109
Total comprehensive loss for the
period attributable to equity holders
of the Parent (8,180,755) 2,155,478 (1,124,161)
============ ============ =============
PetroNeft Resources plc
Interim Condensed Consolidated Income Statement
For the 6 months ended 30 June 2020
Unaudited Audited
============= -------------
30 June 31 December
2020 2019
Note US$ US$
Assets
Non-current Assets
Property, plant and equipment 9 12,993 28,843
Equity-accounted investment in joint
ventures - WorldAce Investments Limited 10 - -
Equity-accounted investment in joint
ventures - Russian BD Holdings B.V. 11 - -
Financial assets - loans and receivables 12 31,113,206 37,591,655
31,126,199 37,620,498
=============
Current Assets
Inventories 13 26,821 18,965
Trade and other receivables 14 1,405,249 1,136,940
Cash and cash equivalents 15 512,521 345,532
1,944,591 1,501,437
Total Assets 33,070,790 39,121,935
============= -------------
Equity and Liabilities
Capital and Reserves
Called up share capital 16 10,897,003 9,585,965
Share premium account 142,017,084 141,006,709
Share-based payments reserve 6,796,540 6,796,540
Retained loss (99,766,177) (97,045,707)
Currency translation reserve (37,500,367) (32,040,081)
Other reserves 379,923 379,923
Equity attributable to equity holders of
the Parent 22,824,007 28,683,349
============= -------------
Non-current Liabilities
Deferred tax liability 4,814,770 4,303,779
4,814,770 4,303,779
=============
Current Liabilities
Interest-bearing loans and borrowings 17 4,288,584 4,242,849
Trade and other payables 18 1,143,429 1,891,958
5,432,013 6,134,807
=============
Total Liabilities 10,246,783 10,438,586
Total Equity and Liabilities 33,070,790 39,121,935
============= =============
PetroNeft Resources plc
Interim Condensed Consolidated Statement of Changes in
Equity.
For the 6 months ended 30 June 2020
Share-based
Called Share payment Currency
up share premium and other translation Retained
capital account reserves reserve loss Total
US$ US$ US$ US$ US$ US$
At 1 January 2019 9,429,182 140,912,898 7,132,540 (36,958,374) (91,003,253) 29,512,993
----------- ------------ ------------ ------------- ------------- ------------
Loss for the year - - - - (6,042,454) (6,042,454)
Currency translation
adjustments -
subsidiaries - - - (77,816) - (77,816)
Share of joint
ventures' other
comprehensive
income - foreign
exchange translation
differences - - - 4,996,109 - 4,996,109
----------- ------------ ------------ ------------- ------------- ------------
Total Comprehensive
Loss for the year - - - 4,918,293 (6,042,454) (1,124,161)
Convertible debt
option - - 43,923 - - 43,923
Total comprehensive
loss for the year 156,783 93,811 - - - 250,594
At 31 December 2019 9,585,965 141,006,709 7,176,463 (32,040,081) (97,045,707) 28,683,349
=========== ============ ============ ============= ============= ============
At 1 January 2020 9,585,965 141,006,709 7,176,463 (32,040,081) (97,045,707) 28,683,349
=========== ============ ============ ============= ============= ============
Loss for the period - - - - (2,720,470) (2,720,470)
Currency translation
adjustments -
subsidiaries - - - (59,032) - (59,032)
Share of joint
ventures' other
comprehensive
income - foreign
exchange translation
differences - - - (5,401,254) - (5,401,254)
=========== ============ ============ ============= ============= ============
Total comprehensive
loss for the period - - - (5,460,286) (2,720,470) (8,180,755)
New share capital
subscribed 1,311,038 1,010,375 2,312,413
At 30 June 2020 10,897,003 142,017,084 7,176,463 (37,500,367) (99,766,177) 22,824,007
=========== ============ ============ ============= ============= ============
PetroNeft Resources plc
Interim Condensed Consolidated Cash Flow Statement
For the 6 months ended 30 June 2020
Unaudited Audited
========================== -------------
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2020 June 2019 2020
US$ US$ US$
Operating activities
Loss before taxation (2,209,479) (1,470,372) (4,966,820)
Adjustment to reconcile loss
before tax to net cash flows
Non-cash
Depreciation 14,016 11,858 23,884
Share of loss in joint ventures 3,753,731 3,222,670 8,174,773
Foreign Exchange Gains (18,338) - (28,528)
Finance revenue 6 (1,970,358) (2,164,301) (4,275,181)
Finance costs 7 215,672 138,560 369,950
Income tax expense - - (7,493)
Working capital adjustments
(Increase)/decrease in trade and
other receivables (268,309) (195,657) (875,067)
(Increase)/decrease in inventories (7,856) (6,376) (11,115)
Increase/(decrease) in trade and
other payables (748,529) 132,755 73,598
Income tax paid - (13,847) -
Net cash flows used in operating
activities (1,239,450) (344,710) (1,521,999)
------------ -------------
Investing activities
Purchase of property, plant, and
equipment - (9,720)
Loan facilities advanced to joint venture
undertakings (912,367) (765,000) (980,500)
Interest received 113 2,022 2,613
Net cash (used in)/received
from investing activities (912,254) (762,978) (987,607)
============ ------------ -------------
Financing activities
Proceeds from the issue of
Share Capital 2,321,413 - 250,594
Proceeds from the issue of Convertible
debt option - - 43,923
Proceeds from loan facilities - 500,000 1,756,074
Net cash received from financing
activities 2,321,413 500,000 2,050,591
============ ------------ -------------
Net increase/(decrease) in
cash and cash equivalents 169,709 (607,688) (459,015)
Translation adjustment (2,720) 251 2,609
Cash and cash equivalents
at the beginning of the period 345,532 801,938 801,938
Cash and cash equivalents
at the end of the period 15 512,521 194,501 345,532
============ ============ =============
PetroNeft Resources plc
Notes to the Interim Condensed Consolidated Financial Statements
(continued)
For the 6 months ended 30 June 2020
1. Corporate Information
The interim condensed consolidated financial statements of the
Group for the six months ended 30 June 2020 were authorised for
issue in accordance with a resolution of the Directors on 28
October 2020.
PetroNeft Resources plc ('PetroNeft, 'the Company', or together
with its subsidiaries and joint ventures, 'the Group') is a public
limited company incorporated in the Republic of Ireland with a
company registration number 408101. The Company is listed on the
Alternative Investment Market ('AIM') of the London Stock Exchange
and the Enterprise Securities Market ('ESM') of the Irish Stock
Exchange. The address of the registered office and the business
address in Ireland is 20 Holles Street, Dublin 2. The Company is
domiciled in the Republic of Ireland.
The principal activities of the Group are oil and gas
exploration, development, and production.
2. Going Concern
In March 2019 PetroNeft agreed an extension of an existing loan
facility and an increase by US$500,000 up to US$2.5 million with
Swedish company Petrogrand AB, a related party. The loan matures on
15 December 2020, and maybe extended for a further year if certain
milestones are met. The loan is secured by way of a floating charge
on the assets of PetroNeft. The original loan facility was used for
general corporate purposes and to finance the drilling programme in
2018. The increase is being used for general corporate purposes.
This loan facility has provided time and space for a more long-term
financing solution to be put in place. In June 2019, the Company
agreed another loan facility with a group of five investors for
US$1.3 million. This loan matures on 31 December 2020, or such
later date as may be agreed, and a portion (up to 65% of the
principal) may be repaid via conversion to Ordinary shares of the
Company at the option of the lenders at a conversion price of
US$0.015477 per share. Three of the five investors are related
parties.
In January 2020, the Company completed a successful share issue
with both Institutional and other investors. Gross proceeds of
US$2.12 million was raised at GBP0.015 per share at a premium of
approximately 58%. The money raised will primarily be used to fund
the 2020 capital investment program and demonstrated significant
commitment from directors, supporting 44% of the placing.
The Group has analysed its cash flow requirements through to 30
June 2021 in detail. The cash flows are highly dependent on the
successful re-financing of the Petrogrand loan and on future
production rates and oil prices achieved in its joint-venture
undertaking, WorldAce Investments Limited. Should the Petrogrand
loan not be re-financed the Group will need additional funding to
continue as a going concern.
The Group has put in place cost saving measures and the Board
and management have agreed to reduce and defer significant portions
of their remuneration.
In 2018 the Company, in conjunction with its joint venture
partners engaged financial advisers to evaluate the disposal of
License 61 and/or License 67. While there remains significant
uncertainty that any transaction will be completed, the Company has
seen interest from a range of well-financed industry players. The
result of the C-4 well which was drilled during 2018 has generated
additional interest. The Company has signed non-disclosure
agreements and opened data rooms in relation to the potential sale
or farmout of both Licence 61 and 67. As there are delaying
factors, including regulatory factors, which have been adversely
impacted by the effects of the Covid 9 pandemic , around
transferring licences and in a share for share type transaction,
the timeframe to close such a successful transaction could be at
least six months following binding agreement between the parties.
The Board is confident that one of these options will bring a
solution.
The above circumstances represent material uncertainties that
may cast significant doubt upon the Group and the Company's ability
to continue as a going concern. Nevertheless, after making
enquiries, and considering the uncertainties described above, the
Directors are confident that the Group and the Company will have
adequate
resources to continue in operational existence for the
foreseeable future. For these reasons, they continue to adopt the
going concern basis in preparing the annual report and
accounts.
PetroNeft Resources plc
Notes to the Interim Condensed Consolidated Financial Statements
(continued)
3. Accounting Policies
3.1 Basis of Preparation
The interim condensed consolidated financial statements for the
six months ended 30 June 2020 have been prepared in accordance with
IAS 34 Interim Financial Reporting.
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's annual financial statements as at 31 December 2019 which
are available on the Group's website - www.petroneft.com.
The interim condensed consolidated financial statements are
presented in US dollars ("US$").
3.2 Significant Accounting Policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 31 December 2019.
4. Segment information
At present the Group has an operating segment, which is oil
exploration and production through its joint venture
undertakings.
The risk and returns of the Group's operations are primarily
determined by the nature of the activities that the Group engages
in, rather than the geographical location of these operations. This
is reflected by the Group's organisational structure and the
Group's internal financial reporting systems.
Management monitors and evaluates the operating results for the
purpose of making decisions consistently with how it determines
operating profit or loss in the consolidated financial
statements.
Geographical segments
Although the joint venture undertakings WorldAce Investments
Limited and Russian BD Holdings B.V. are domiciled in Cyprus and
the Netherlands, the underlying businesses and assets are in
Russia. Substantially all the Group's sales and capital
expenditures are in Russia.
5. Revenue Unaudited Audited
============================================================= -----------------------------
Year ended
6 months ended 6 months ended 31 December
30 June 2020 30 June 2019 2019
US$ US$ US$
Revenue
Management
Services 514,873 316,001 678,161
Construction
Services 505,998 514,612 765,407
1,020,871 830,613 1,443,568
=============================== ============================ =============================
PetroNeft Resources plc
Notes to the Interim Condensed Consolidated Financial Statements
(continued)
6. Finance revenue Unaudited Audited
============================ -------------
6 months Year ended
6 months ended ended 30 31 December
30 June 2020 June 2019 2019
US$ US$ US$
Bank interest receivable 113 2,022 2,613
Interest receivable
on loans to Joint Ventures 1,970,245 2,162,279 4,272,568
1,970,358 2,164,301 4,275,181
=============== =========== =============
7. Finance costs Unaudited Audited
============================ -------------
6 months Year ended
6 months ended ended 30 31 December
30 June 2020 June 2019 2019
US$ US$ US$
Interest on loans 215,672 138,560 369,950
215,672 138,560 369,950
=============== =========== =============
8. Income tax
Unaudited Audited
================================ -------------
Year ended
6 months ended 6 months ended 31 December
30 June 2020 30 June 2019 2019
US$ US$ US$
Current income tax
Current income tax
charge - (14,043) 12,523
Total current income
tax - (14,043) 12,523
--------------- -------------
Deferred tax
Relating to origination
and reversal of temporary
differences 510,991 550,504 1,068,118
Total deferred tax 510,991 550,504 1,068,118
=============== --------------- -------------
Income tax expense
reported in the Consolidated
Income Statement 510,991 536,461 1,075,634
=============== =============== =============
9. Property, Plant and Equipment
Group Plant and machinery
US$
Cost
At 1 January 2019 839,805
Additions 9,720
Disposals (213,181)
Translation adjustment 83,857
----------------------
At 1 January 2020 720,201
Translation adjustment (73,800)
At 30 June 2020 646,401
Depreciation
At 1 January 2019 801,509
Charge for the period 23,884
Disposals (222,541)
Translation adjustment 88,506
======================
At 1 January 2020 691,358
Charge for the period 14,016
Translation adjustment (71,966)
At 30 June 2020 633,408
Net book values
At 30 June 2020 12,993
======================
At 31 December 2019 28,843
======================
10. Equity-accounted Investment in Joint Venture - WorldAce Investments Limited
PetroNeft Resources plc has a 50% interest in WorldAce
Investments Limited, a jointly controlled entity which holds 100%
of LLC Stimul-T, an entity involved in oil and gas exploration and
the registered holder of Licence 61. The interest in this joint
venture is accounted for using the equity accounting method.
WorldAce Investments Limited is incorporated in Cyprus and carries
out its activities, through LLC Stimul-T, in Russia.
Share of
net assets
US$
At 1 January 2019 -
Share of net loss of joint venture for
the year (7,510,318)
Translation adjustment 4,513,212
Credited against loans receivable from
WorldAce Investments Limited 2,997,106
============
At 1 January 2020 -
Share of net loss of joint venture for
the period (3,410,862)
Translation adjustment (4,530,187)
Credited against loans receivable from
WorldAce Investments Limited 7,941,049
At 30 June 2020 -
============
The balance sheet position of WorldAce Investments Limited shows
net liabilities of US$79,850,387 following a loss in the period of
US$6,821,723 together with a negative currency translation
adjustment of US$9,060,374. PetroNeft's 50% share is included above
and results in a negative carrying value of US$ 35,242,789 .
Therefore , the share of net assets is reduced to Nil and, in
accordance with IAS 28 Investments in Associates and Joint
Ventures, the amount of US$ 35,242,789 is deducted from other
assets associated with the joint venture on the Balance Sheet which
are the loans receivable from WorldAce Investments (see Note
12).
Additional financial information in respect of the WorldAce
Group joint venture entity is disclosed below:
WorldAce Group
Unaudited Audited
================================ -------------
Year ended
6 months ended 6 months ended 31 December
30 June 2020 30 June 2019 2019
US$ US$ US$
Continuing operations
Revenue 8,043,072 13,477,670 24,852,620
Cost of sales (8,986,646) (13,392,614) (25,100,495)
=============== =============== =============
Gross profit (943,574) 85,056 (247,875)
Administrative expenses (1,552,739) (1,041,850) (2,624,057)
=============== =============== -------------
Operating loss (2,496,313) (956,794) (2,871,932)
Impairment of exploration
and evaluation assets - - (1,382,769)
Write-off of exploration
and evaluation assets - - (1,299,887)
Finance revenue 23,633 31,614 57,906
Finance costs (4,349,043) (4,821,418) (9,523,954)
=============== =============== =============
Loss for the period
for continuing operations
before taxation (6,821,723) (5,746,598) (15,020,636)
Income tax expense - - -
=============== =============== =============
Loss for the period (6,821,723) (5,746,598) (15,020,636)
=============== =============== =============
Loss for the period (6,821,723) (5,746,598) (15,020,636)
Other comprehensive
income to be reclassified
to profit or loss
in subsequent periods:
Currency translation
adjustments (9,060,374) 7,610,436 9,026,423
=============== =============== =============
Total comprehensive
loss for the period (15,882,097) 1,863,838 (5,994,213)
=============== =============== =============
Finance costs mainly relate to interest on shareholder loans
from Oil India International B.V. and PetroNeft.
The currency translation adjustment results from the revaluation
of the Russian Rouble during the period. All Russian Rouble
carrying values in Stimul-T, the 100% subsidiary of WorldAce are
converted to US Dollars at each period end. The resulting gain or
loss is recognised through other comprehensive income and
transferred to the currency translation reserve. The Russian Rouble
weakened against the US Dollar during the period from
RUB61.905:US$1 at 31 December 2019 to RUB69.314:US$1 at 30 June
2020.
PetroNeft Resources plc
Notes to the Interim Condensed Consolidated Financial Statements
(continued)
WorldAce Group
Unaudited Audited
============== --------------
31 December
30 June 2020 2019
US$ US$
Non-current Assets
Oil and gas properties 68,730,300 78,147,884
Property, plant, and equipment 312,977 374,632
Exploration and evaluation assets - -
Assets under construction 1,548,866 1,468,233
Intangible Assets 1,954,601 2,178,884
72,546,744 82,169,633
============== --------------
Current Assets
Inventories 2,004,890 2,390,999
Trade and other receivables 849,637 996,439
Cash and cash equivalents 29,316 30,895
2,883,843 3,418,333
============== --------------
Total Assets 75,430,587 85,587,966
============== ==============
Non-current Liabilities
Provisions (1,735,020) (1,833,969)
Obligations under finance lease (108,298) (172,969)
Interest-bearing loans and borrowings (144,467,409) (140,244,130)
(146,310,727) (142,251,068)
============== --------------
Current Liabilities
Interest-bearing loans and borrowings (2,346,265) (2,346,265)
Obligations under finance lease (41,318) (41,318)
Trade and other payables (6,582,664) (4,917,604)
(8,970,247) (7,305,187)
============== --------------
Total Liabilities (155,280,974) (149,556,255)
============== ==============
Net Liabilities (79,850,387) (63,968,289)
============== ==============
PetroNeft Resources plc
Notes to the Interim Condensed Consolidated Financial Statements
(continued)
11. Equity-accounted Investment in Joint Venture - Russian BD Holdings B.V.
PetroNeft Resources plc has a 50% interest in Russian BD
Holdings B.V., a jointly controlled entity which holds 100% of LLC
Lineynoye, an entity involved in oil and gas exploration and the
registered holder of Licence 67. The interest in this joint venture
is accounted for using the equity accounting method. Russian BD
Holdings B.V. is incorporated in the Netherlands and carries out
its activities, through LLC Lineynoye, in Russia.
Share of
net assets
US$
At 1 January 2019 -
Share of net loss of joint venture for
the year (664,455)
Translation adjustment 482,987
Credited against loans receivable from
Russian BD Holdings BV 181,558
============
At 1 January 2020 -
Share of net loss of joint venture for
the period (342,869)
Translation adjustment (871,067)
Credited against loans receivable from
Russian BD Holdings BV 1,213,936
At 30 June 2020 -
============
The balance sheet position of Russian BD Holdings B.V. shows net
liabilities of US$6,056,239 following a loss in the period of
US$685,738 together with a negative currency translation adjustment
of US$842,030. PetroNeft's 50% share is included above and results
in a negative carrying value of US$ 1,742,133 . Therefore , the
share of net assets is reduced to Nil and, in accordance with IAS
28 Investments in Associates and Joint Ventures, the amount of
US$3,331,833 is deducted from other assets associated with the
joint venture on the Balance Sheet which are the loans receivable
from Russian BD Holdings B.V. (Note 12).
Additional financial information in respect of Russian BD
Holdings B.V. financial statements is disclosed below:
Russian BD Holdings B.V.
Unaudited Audited
================================ -------------
Year ended
6 months ended 6 months ended 31 December
30 June 2020 30 June 2019 2019
US$ US$ US$
Revenue - - -
Cost of sales - - -
Gross profit - - -
Administrative expenses (195,726) (202,924) (332,635)
Operating loss (195,726) (202,924) (332,635)
Finance revenue 304 580 1,280
Finance costs (490,721) (496,020) (997,548)
Loss for the period for continuing
operations before taxation (686,143) (698,364) (1,328,903)
Taxation 405 406 (7)
Loss for the period (685,738) (697,958) (1,328,910)
=============== =============== =============
Loss for the period (685,738) (697,958) (1,328,910)
Other comprehensive income
to be reclassified to profit
or loss in subsequent periods:
Currency translation adjustments (1,742,133) 842,030 965,794
Total comprehensive loss
for the period (2,427,871) 144,072 (363,116)
=============== =============== =============
Finance costs comprise of interest on shareholder loans from
Belgrave Naftogas B.V. and PetroNeft
PetroNeft Resources plc
Notes to the Interim Condensed Consolidated Financial Statements
(continued)
11. Equity-accounted Investment in Joint Venture - Russian BD Holdings B.V.(continued)
Unaudited Audited
============= -------------
31 December
30 June 2020 2019
US$ US$
Non-current assets 10,579,945 11,252,892
Current assets 275,232 118,311
Total assets 10,855,277 11,371,203
============= -------------
Non-current liabilities (16,172,676) (14,758,627)
Current liabilities (738,840) (848,369)
Total liabilities (16,911,516) (15,606,996)
============= -------------
Net Liabilities (6,056,239) (4,235,793)
============= =============
Financial assets - loans
12. and receivables
Unaudited Audited
============= -------------
31 December
30 June 2020 2019
US$ US$
Loans to WorldAce Investments
Limited 64,684,292 62,963,635
Loss allowance (3,109,501) (3,109,501)
Less: share of WorldAce Investments
Limited loss (Note 10) (35,242,789) (27,301,740)
26,332,003 32,552,394
============= -------------
Loans to Russian BD Holdings
B.V. 8,113,036 7,157,158
Less: share of Russian BD Holdings
B.V. loss (Note 11) (3,331,833) (2,117,897)
4,781,203 5,039,261
============= -------------
31,113,206 37,591,655
============= =============
The Company has granted a loan facility to its joint venture
undertaking WorldAce Investments Limited of up to US$45 million.
This loan facility is US$ denominated and unsecured. Interest
currently accrues on the loan at USD LIBOR plus 6.0% but the
Company has agreed not to seek payment of interest until 2021 at
the earliest. The loan is set to mature on 31 December 2025. As at
30 June 2020 the loan was fully drawn down. The loan from the
Company to Russian BD Holdings is repayable on demand. Interest
currently accrues on the loan at LIBOR plus 5.0% per annum.
13. Inventories Unaudited Audited
================================== ---------------------------------
31 December
30 June 2020 2019
US$ US$
Materials 26,821 18,965
26,821 18,965
================================== =================================
14. Trade and other receivables Unaudited Audited
================================= ---------------------------------
30 June 31 December
2020 2019
US$ US$
Other receivables 17,933 1,781
Receivable from jointly controlled
entity 1,322,352 1,005,991
Advances to contractors 318 1,353
Prepayments 64,646 127,815
1,405,249 1,136,940
================================= =================================
Other receivables are non-interest-bearing and are normally
settled on 60-day terms.
15. Cash and Cash Equivalents
Unaudited Audited
=============================== ---------------------------
31 December
30 June 2020 2019
US$ US$
Cash at bank and in hand 512,521 345,532
512,521 345,532
=============================== ===========================
Bank deposits earn interest at floating rates based on daily
deposit rates. Short-term deposits are made for varying periods of
between one day and one month depending on the immediate cash
requirements of the Group and earn interest at the respective
short-term deposit rates.
16. Share Capital - Group and Company
Called up
Allotted, called up and Number of Ordinary share capital
fully paid equity Shares US$
At 1 January 2019 707,245,906 9,429,182
At 1 January 2020 721,130,500 9,585,965
New share capital subscribed 118,226,241 1,311,038
At 30 June 2020 839,356,741 10,897,003
=================== ===============
In January 2020 as part of a fund-raising initiative, a total of
107,755,500 Ordinary Shares were issued. Details were provided to
shareholders in a regulatory news announcement on 8 January
2020.
In May 2020, the Company issued 10,571,204 Ordinary Shares in
settlement of liabilities to Dennis Francis. Details were provided
to shareholders in a regulatory news announcement on 16 May
2020.
PetroNeft Resources plc
Notes to the Interim Condensed Consolidated Financial Statements
(continued)
17. Loans and Borrowings
Group and Company Effective Contractual Unaudited Audited
interest maturity 30 June 31 December
rate date 2020 2019
% US$ US$
Interest-bearing
Current liabilities
Petrogrand AB 10.59% 15-Dec-20 2,907,535 2,897,958
Natlata Partner Limited 10.14% 31-Dec-20 591,913 577,347
ADM Consulting 10.16% 31-Dec-20 429,819 417,051
Daria Shaftelskaya 10.13% 31-Dec-20 252,029 246,341
Michael Murphy 10.14% 31-Dec-20 53,644 52,076
David Sturt 10.14% 31-Dec-20 53,644 52,076
===================== -------------
Total current liabilities 4,288,584 4,242,849
=====================
Total loans and borrowings 4,288,584 4,242,849
===================== =============
Contractual undiscounted
liability 4,288,584 4,242,849
Changes in financial liabilities arising Unaudited Audited
from financing activities 30 June 31 December
2020 2019
US$ US$
At 1 January 4,242,849 2,116,825
Cash flows - 1,799,997
Accrued interest (Note 9) 45,735 369,950
Convertible debt option reserve (43,923)
At 31 December 4,288,584 4,242,849
===================== =============
Loan facilities.
During 2019, PetroNeft has entered a convertible loan facility
of US$1.3 million with a group of five lenders. The convertible
loan, which remains unsecured, matures on 31(st) December 2020 or
on the sale of either Licence 61 or Licence 67. The loan facility
will be used for general corporate and ongoing operational purposes
and carries an interest rate of USD LIBOR plus 8%. Lenders can
elect at any time to convert up to 65% of the outstanding loan to
shares at a conversion price of US$0.01547 (1.547 cent).
In 2018 the Company obtained a US$2m secured loan facility from
Petrogrand AB. The security attaches to any of the assets of
PetroNeft Resources plc. An asset being defined as any present or
future assets, revenues, and rights of every description. The
security is for any obligation for the repayment of monies owed to
Petrogrand AB, be it present, or future, actual or contingent. This
loan facility was fully drawn down in 2018 and carries an interest
rate of US$ LIBOR plus 9%. In March 2019, the parties agreed a
further increase in the facility by US$500,000 and it was agreed
that the maturity date would be extended for one year until 15(th)
December 2020, which can be further extended if PetroNeft on or
before 15(th) December 2020, makes a payment of 20% of the loan
balance outstanding at that time.
18. Trade and other payables
Unaudited Audited
================================== -----------------------------
31 December
30 June 2020 2019
US$ US$
Trade payables 228,695 403,835
Trade payables to jointly
controlled entity 76,000 113,532
Corporation tax 55,232 55,232
Other taxes and social welfare
costs (22,274) 28,457
Accruals and other payables 805,776 1,290,902
1,143,429 1,891,958
================================== =============================
The Directors consider that the carrying amount of trade and
other payables approximates their fair value.
Trade and other payables are non-interest-bearing and are
normally settled on 60-day terms.
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs.
19. Important Events after the Balance Sheet Date
In early 2020, the emergence of the Covid-19 pandemic required
the company to make several adjustments to operating procedures,
investment decisions and staff HSE protocols to protect its
employees, joint venture partners and contractors. Production
continued with a reduced level of essential field staff, home
working was instituted where practicable, staff voluntarily took
pay cuts and the Group actively worked with its suppliers and
service providers in rescheduling payments to retain maximum
financial flexibility. When the restrictions were partially lifted,
the Group resumed full scale production in May, and in the months
of June through August saw encouraging production volume increases.
Year on year increases from August to July was 7.8% and July 2020
production versus the same period in 2019 increased by 17%.
On September 21(st) last it was announced following a successful
completion of the C4 extended well test at the Cheremshanskoye
field on Licence 67 earlier this year, a non-binding Heads of Terms
Agreement has been executed between the owner and operator of
Licence 67, LLC Lineynoye (50% owned by PetroNeft Resources) and
AOR for a financing arrangement ("Facility") to finance the cost of
constructing an all-season road to connect the C4 well with the
local year-round road network up to a maximum of $1 million. The
financing will be repaid in tranches with produced oil at market
rates. The Heads of Terms agreement commits parties to negotiate
and enter into a binding Agreement within a 30-day period. The
facility will cover the entire anticipated cost of road
construction.
AOR is a company located at Alexandrovskoye town in the
north-western part of the Tomsk region located 230km from the
Cheremshanskoye oil field. In 2020 AOR purchased all the oil
produced from the C4 well during the recent extended well test at
well head at competitive market rates.
20. Board approval
This announcement was approved by the Board of Directors of
PetroNeft Resources plc on 28 October 2020.
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END
IR KKLFLBBLZFBX
(END) Dow Jones Newswires
October 30, 2020 03:00 ET (07:00 GMT)
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