CHAR Chariot Limited

 27 September 2024

Chariot Limited

("Chariot", the "Company")

H1 2024 Results

Chariot (AIM: CHAR), the Africa focused transitional energy company, today announces its unaudited interim results for the six-month period ended 30 June 2024.

Adonis Pouroulis, CEO of Chariot commented: "We are providing an update on our Interim results today, but the main news recently has been around the drilling campaign offshore Morocco. As reported, the preliminary results of the Anchois-3 well did not deliver as expected. Post-well analysis is now underway and we will collaborate with our joint venture partners to determine the forward plan for the project. We still see a lot of potential within the Anchois field and the wider licence area, across Lixus and Rissana, and these drilling results need to be further analysed and incorporated into our understanding of the area.

Alongside this work, we continue to unlock the value of the other projects in our portfolio. We are making good progress on the financing of the Transitional Power business in South Africa, we have the onshore Loukos licence in Morocco, Project Nour and the electrolyser project in our Green Hydrogen pillar as well as the new venture opportunity.

The unexpected Anchois-3 well results have clearly had a significant impact on our share price therefore we have decided to take stock and consider our next steps with the project. We will provide further updates on forward plans across the business as soon as we are able to."

Highlights during and post period

Transitional Gas

Offshore Morocco:

·      Partnership agreements completed with Energean plc ("Energean") on the Lixus and Rissana licences offshore Morocco with Energean taking Operatorship and carrying the drilling campaign up to a gross cost of US$85m

·      Drilling campaign commenced at the Anchois-3 well in August and completed in September, having drilled safely and efficiently to target depths

o  Multiple gas bearing reservoirs were discovered in the B sand appraisal interval in the main hole, although with thinner associated gas pays than anticipated, and other target reservoirs were found to be water wet. Post-well evaluation underway

Onshore Morocco:

·      Two well drilling campaign successfully conducted in May 2024 safely and efficiently

o  The RZK-1 well drilled on the Gaufrette prospect confirmed good quality reservoir and multiple gas shows, though was sub economic

o  Gas discovery confirmed from drilling the OBA-1 well at the Dartois prospect - gross interval approximately 70m of primary interest identified

o  OBA-1 well cased and cemented with a Christmas tree installed for rigless flow testing and potential use as a future producer

·      Heads of Terms agreement signed with Vivo Energy to progress future commercialisation of onshore gas to industry business

Transitional Power:

·      Strategic Review initiated to look to secure funding at the subsidiary level and enable ongoing growth and development of the portfolio

·      Multiple expressions of interest received from South African focused investors to finance both the Etana platform and generation assets

o  Financing negotiations are progressing well

o  Potential financing terms will provide a read through valuation for the business

Electricity Trading:

·      Increased holding to 49% stake in South African electricity trading joint venture Etana Energy (Pty) Limited (Etana)

o  Provides end to end electricity solutions by generating and trading energy through South Africa's national grid

o  Many generators to many offtakers business model - electricity offtake agreements signed with a range of large consumers including Growthpoint Properties, Autocast, Petra Diamonds and Tharisa

o  Enables Chariot's participation in large renewable generation projects - 400MW of gross wind generation capacity identified

Power to Mining Projects:

·           Operational Essakane 15MW solar project at IAMGOLD's gold mine in Burkina Faso

·           Developments ongoing at three key projects in Africa:

o  Tharisa - 40MW solar project in South Africa

o  Karo - 30MW solar project in Zimbabwe

o  First Quantum Minerals - 430MW solar and wind projects in Zambia

Water:

·      Water desalination project in Djibouti running well

·      Other projects under evaluation in areas of water scarcity across the continent

·      Also pursuing funding for this business at the subsidiary level

Green Hydrogen:

·    Feasibility studies in Mauritania completed with partner TEH2 (80% owned by TotalEnergies and 20% owned by the EREN Group) and its in-house 'OneTech' engineering unit

o  Confirmed scale and scope of project and outlined phased development approach 

o  Progressing offtake discussions

·    Ongoing development of green hydrogen pilot project in Morocco in partnership with Oort Energy and University Mohammed VI Polytechnic ("UM6P") 

·    Pursuing financing options at the subsidiary level

Corporate and Financial

·      Cash position as at 30 June 2024 of US$3.6 million supplemented by a fundraise completed in July 2024 which raised circa US$9 million (gross)

Enquiries

Chariot Limited

Chief Executive's Review

Today we present our interim results outlining the workstreams and progress across our business pillars through to June and post period to date. Within each of these verticals we are looking to develop domestic energy resources that can provide accessible, sustainable solutions and help alleviate power poverty across the African continent. This is the ethos that underpins the Chariot strategy and business model and whilst recent events have had a material impact on our share price, we maintain the importance and positioning of our portfolio within the energy transition.

Transitional Gas

Lixus and Rissana Offshore licences (Energean, Operator, holding 45% in Lixus and 37.5% in Rissana, Chariot 30% and 37.5% respectively, ONHYM 25% in both licences)

As we announced on the 16 September, the Anchois East drilling campaign conducted at the Anchois gas project in the Lixus Offshore licence along with our partners Energean and ONHYM was safely and efficiently drilled to target depth in both the Pilot and Main Holes. This evaluated all of the pre-drill reservoir targets however the results did not deliver as anticipated or in line with the excellent results of the previously drilled Anchois-2 well.

As stated in our press release, multiple good quality gas bearing reservoirs were found in the B sand appraisal interval in the Main Hole, but the associated gas pays were interpreted to be lower than the pre-drill geological model and other target reservoirs beneath the B sands were also encountered but were water wet. The appraisal target reservoirs of the C and M sand were drilled deeper than the gas bearing sands in the Anchois-2 well and into the water-leg at this down-dip location. The Anchois North Flank exploration prospect was found to have well-developed O sand reservoirs, with associated gas shows, but also water wet. Both holes were plugged and abandoned, without flow testing the Main Hole, and the drill ship was demobilised.

The primary exploration objectives were unsuccessful however, we did demonstrate the extension of gas bearing reservoirs in the B sand interval and the data acquired from the other reservoirs will be useful for our understanding of the field as well as establishing the impact on pre-drill estimates.

Our team have worked very hard over the past few years on this asset, from drilling the Anchois-2 discovery, completing the FEED, securing Energean as a partner and taking it through this drilling campaign. Whilst there is always risk in drilling, the successful farm-out process provided validation of the pre-drill prospectivity and potential of the targets and we were looking to deliver an expanded development following this campaign. Clearly the results were below expectations but Chariot still believes the Anchois field and the surrounding licence areas have a lot of potential. Post well analysis is underway and we will work with our joint venture partners to determine the next steps for the project.

Loukos Onshore Licence (Chariot, Operator, 75%, ONYHM, 25%)

We successfully drilled two wells in the onshore Loukos licence in May with a discovery at the OBA-1 well which reported an approximate 70m gross interval of primary interest, with elevated resistivities coincident with elevated mud gas readings and interpreted gas pays. The team have also been interpreting reprocessed seismic across the acreage and have identified a number of additional exploration targets not evident on previous data. The uplift in quality of this dataset has helped define new amplitude-supported target structures as well as potential commercial opportunities within and around the historic discoveries situated on block.

Our partnership agreement with Vivo Energy announced in June has the potential to play a key part in commercialising future onshore production as it will enable the build out and distribution of gas via a virtual compressed natural gas ("CNG") pipeline. CNG is a low cost, flexible development solution and gas would initially be delivered into the high demand local Kenitra industrial market which is just 40km from Loukos. The partnership would also be able to trade third party gas which could drive further expansion and growth into regional hubs and generate an additional future value stream for both parties.

In light of the results from the Anchois-3 drilling campaign, we are reviewing our work programme for the Loukos licence as we look to preserve capital and utilise funds in the most optimal way. We will provide an update on this and the forward plans in due course.

New Venture

As flagged when we undertook our fundraise in July, we are in the process of progressing a multi-billion barrel new venture opportunity in a basin where we have extensive operational and technical expertise. We applied for this as a priority new venture target as it could catalyse further scale and growth of our portfolio and ties in with our focus on developing domestic resources on the African continent. Should we secure this asset we will look to partner and fund this at the asset level to fast track an exploration and drilling programme.

Transitional Power

Since we increased our interest in Etana Energy to 49%, along with partners H1 Holdings who hold 51%, this renewable energy trading platform has grown faster than we expected. With one of only five electricity trading licences granted by the National Energy Regulator in South Africa, Etana has access to a sector that is rapidly de-regulating and can tap into the huge supply and demand need from both generation and consumer markets. Etana can trade both output from renewable energy generators across the country as well as power generated by Eskom and it provides an end to end solution by buying electricity and selling it to business customers through wheeling it across the national grid. As well as generating and delivering cost effective, lower carbon energy this business model helps companies reduce their carbon footprint and facilitates the build of large-scale generation infrastructure which will be important for ongoing future output.

In recent months, Etana has announced multiple power purchase agreements with some of South Africa's largest energy users, including Growthpoint, Autocast, Petra Diamonds and Tharisa, with many more in negotiation. The wide interest we have received to fund this business is indicative of the solid fundamentals and value that can be created here. We are looking to retain a material stake and we look forward to finalising the financing as it will both provide us with a read-through valuation and enable Etana to ramp up trading and generation activity.

Our renewable power to mining projects also continue to progress with operations ongoing in Burkina Faso at IamGold's Essakane solar plant and progress being made at the Buffelspoort project in South Africa with Tharisa (which is connected to the Etana platform through its power purchase agreement as well as our stake in the solar generation asset), the solar plant in Zimbabwe with Karo Mining, and the wind and solar projects in development in Zambia with First Quantum.

We are very proud of our water desalination project in Djibouti, which is providing clean, potable desalinated water to local communities, powered by solar energy. This will provide access to water for the next 20 years and we are looking to replicate this business model in other regions whilst also looking to finance this at the subsidiary level.

Green Hydrogen

At our flagship green hydrogen project, Project Nour in Mauritania, we completed our Feasibility Study alongside our partners TE H2 (80% owned by TotalEnergies and 20% owned by the EREN Group) in March which confirmed the world class scale of the project and outlined a phased approach for domestic and export development. We continue to work closely with Total Energies' One Tech engineering team and the Government of Mauritania who recently published its Hydrogen Code. With this Code now ratified, we can progress the signature of our Investment Convention and thereafter conduct concept studies which will further inform our development plans going forward. We also continue to progress with our pilot project with Mauritania's national iron ore mining company, SNIM, and TE H2 where we are scoping options to decarbonise local iron ore train transportation.

In Morocco, we look forward to the installation of the 1MW PEM electrolyser which we will be testing in an industrial setting at the Jorf Lafsar facilities in partnership with Oort Energy and UM6P. Whilst this is also pilot scale, the objective of this test is to produce green hydrogen and would be the first of its kind within Morocco. These pilot projects are important to us but are also key building blocks of the ongoing research and development across the wider hydrogen sector. As with our Power division, we are looking to fund this at the subsidiary level and we continue to progress financing avenues for this business.

Financial Review

The Group remains debt free and had a cash balance of US$3.6 million at 30 June 2024 (US$6.0 million at 31 December 2023) which was further increased in the post-period following the equity fundraising completed in August 2024 which raised gross proceeds of circa US$9 million.

Hydrogen and other business development costs of $1.0 million (30 June 2023: $0.9 million) comprise non-administrative expenses incurred in the Group's business development activities within the Green Hydrogen pillar, the majority of which relate to Project Nour feasibility studies and the proof of concept electrolyser project with Oort Energy and UM6P.

Other administrative expenses of US$5.1 million (30 June 2023: US$3.3 million) are higher than the prior period reflecting the scaling up of the team to progress the Loukos onshore licence and work on new venture opportunities, together with continued progress on the Transitional Power project portfolio.

Finance income of US$0.1 million (30 June 2023: US$0.2 million) is lower than the prior period due reduced foreign exchange gains on non-US$ cash.

Finance expenses of US$0.2 million (30 June 2023: US$0.02 million) are higher than the prior period reflecting the increased unwinding of the discount on the lease liability under IFRS 16, and the unwinding of the discount on the contingent consideration payable for the increased holding in Etana Energy (Pty) Limited.

Share-based payments charges of US$2.0 million (30 June 2023: US$3.9 million) are lower than the prior period due to diminishing charges on share options issued in previous periods.

We were very pleased with the support we received during our successful fundraise in August from new and existing investors as well an oversubscribed open offer. We thank our shareholders for their ongoing support.

Outlook

I would like to take this opportunity to say thank you as always to our employees, the Board and all our stakeholders across all of the different projects in our portfolio. We will now take the time to evaluate and process the post well analysis from Anchois and will carefully consider our forward plans. A more detailed update on the wider business will be provided in due course.  

Adonis Pouroulis

Chief Executive Officer

26 September 2024

Chariot Limited

Consolidated statement of comprehensive income for the six months ended 30 June 2024