TIDMMATD
RNS Number : 2803D
Petro Matad Limited
20 June 2023
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY
PETRO MATAD LIMITED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED
UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION (EU) NO.
596/2014 AS IT FORMS PART OF UNITED KINGDOM DOMESTIC LAW BY VIRTUE
OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR"). ON THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION
SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN
THE PUBLIC DOMAIN.
20 June 2023
Petro Matad Limited
("Petro Matad" or the "Company")
Final results for year ended 31 December 2022
Petro Matad Limited ("Petro Matad" or "the Company"), the AIM
quoted Mongolian oil company, announces its audited final results
for the year ended 31 December 2022. All monetary values are
expressed in United States dollars unless otherwise stated.
2022 Operational Highlights
-- The Company continued to push the Mongolian government and
authorities to register Block XX Exploitation Area as special
purpose land.
-- Negotiations with DQE Drilling entered their final stages for
a multi-well development drilling contract with the Company
securing cost reductions that can make a real difference to project
cash flows and asset value.
-- Block V project readiness continued with a cost-effective
drilling solution found for Velociraptor.
-- MRPAM announced an Exploration Licensing round covering 14
blocks in the prospective fairways of the southern half of the
country.
-- Petro Matad continued to explore opportunities in the
Mongolian renewables sector following Board approval to do so.
Current situation
-- On Block XX, the Company continues to push government on
certification of the Exploitation Area as special purpose land and
finally conclude the process. The Ministry of Construction and
Urban Development has completed its internal work and has submitted
the documentation to all other government ministries for comment
prior to submission to Cabinet.
-- The Velociraptor-1 exploration well in the Taats Basin of
Block V located in central Mongolia spudded on 13 June, targeting
an inversion anticline prospect estimated to have 200 million
barrels (MMbo) of Mean Prospective Recoverable Resource potential.
Encouraging results in the Velociraptor prospect would
significantly de-risk two adjacent prospects on the Raptor Trend
which together have Mean Prospective Recoverable Resource potential
of an additional 375 MMbo.
-- The Company raised US$6.6 million through a capital raise
that will allow the Company to test the low-cost, high impact
Velociraptor exploration prospect, evaluate new areas offered for
licencing by the Mongolian government in the 2022/23 tender round
and explore renewable energy projects.
-- The Company formed a joint venture (JV) with a very active
and successful Mongolian renewable energy project developer called
SunSteppe Energy ("SunSteppe"). This JV will give the Company an
opportunity to compete in Mongolia's growing renewables sector.
2022 Financial Highlights
-- As of 31 December 2022, the Group's cash position was $5.1
million (Financial Assets) (31 December 2021: $8.2 million)
-- The Group's net loss after tax for the twelve months ended 31
December 2022 was $2.95 million (31 December 2021: loss $2.1
million)
Mike Buck, CEO of Petro Matad, said:
" 2022 saw an easing of Covid-19 related delays that had
impacted service providers and cross-border activity. We were
pleased that we were able to progress our preparations for Heron
development, our negotiations with DQE Drilling and to continue our
investigations on the Block V Exploration PSC.
This year we hit the ground running and set to work on a capital
raise to allow Petro Matad to move ahead with testing the low-cost,
high impact Velociraptor exploration prospect and evaluate new
areas offered for licencing by the Mongolian government. We have
also ventured into the renewable energy sector in Mongolia through
the SunSteppe Renewable Energy joint venture which we hope will
generate near term opportunities for us and our partner.
We continue to push forward with our 2023 work programme which
of course includes urging the government to certify Petro Matad's
Block XX Exploitation Area as special purpose land. Meanwhile we
are delighted to have spudded Velociraptor-1 which we have wanted
to drill for some time. Encouraging results here would
significantly de-risk two adjacent prospects on the Raptor Trend
which together have a resource potential of an additional 375
MMbo.
I would like to thank our loyal shareholders for their continued
support and hope that the recent spudding of the Velociraptor well
demonstrates our firm commitment to our work programme. I very much
look forward to updating you in the coming months with our progress
on multiple workstreams that are now in play."
All Reserves and Resources definitions and estimates shown in
this report are based on the 2018 SPE/AAPG/WPC/SPEE Petroleum
Resource Management System ("PRMS").
Prospective Recoverable Resources are defined under PRMS as :
Those quantities of petroleum estimated, as of a given date, to be
potentially recoverable from undiscovered accumulations by
application of future development projects.
About Petro Matad
Petro Matad is the parent company of a group focused on oil
exploration, as well as future development and production in
Mongolia. Currently, Petro Matad holds 100% working interest and
the operatorship of two Production Sharing Contracts with the
government of Mongolia. Block XX has an area of 218 square
kilometres in the far eastern part of the country, and Block V has
an area of 7,937 square kilometres in the central part of the
country.
Petro Matad Limited is incorporated in the Isle of Man under
company number 1483V. Its registered office is at Victory House,
Prospect Hill, Douglas, Isle of Man, IM1 1EQ.
For more information, please contact:
Petro Matad Limited
+976 7014 1099 / +976 7575
Mike Buck, CEO 1099
Shore Capital (Nominated Adviser and Joint Broker)
Toby Gibbs
John More
Rachel Goldstein +44 (0) 20 7408 4090
Zeus Capital Limited (Joint Broker)
Simon Johnson
Louisa Waddell +44 (0) 20 7614 5900
FTI Consulting (Communications
Advisory Firm)
Ben Brewerton
Christopher Laing +44 (0) 20 3727 1000
Annual Report and Accounts
The Company's statutory annual report and accounts will be
dispatched electronically to shareholders shortly and will be
posted to shareholders who have elected to receive hard copies of
the Annual Report. Additional copies of the Annual Report may be
requested directly from the Company and an electronic copy will be
available on the Company's website www.petromatadgroup.com .
Annual General Meeting ("AGM")
A notice of the Company's AGM will be distributed in due course
and made available on the Company's website www.petromatadgroup.com
.
Directors' Statement 2022
Summary
The easing of Covid-19 travel and border restrictions during
2022 permitted both equipment and services to more freely flow into
Mongolia and this allowed the Company to progress the procurement
of key equipment for the development of the Heron discovery in the
Block XX Exploitation Area. Planning and preparations for first oil
were also significantly progressed with more certainty given that
the mainly Chinese service companies were also able to commit to
offering services again and to engage in substantive contract
negotiations. Whilst the Company pursued its procurement and
contracting strategy it was however hindered by the continued land
access issue such that onsite installation and fabrication
activities could not be started while this issue remained
outstanding. The land access issue on Block XX remained an obstacle
to progress throughout 2022 despite constant pressure applied to
central and local government agencies to overcome the conflicts in
the land law that have generated this delay. The Company focussed
its efforts on being as prepared as it can be so that once the land
issue is resolved development activities can be immediately
pursued. To that end, the Company and the industry regulator, the
Mineral Resources and Petroleum Authority of Mongolia ("MRPAM")
discussed with PetroChina Daqing Tamsag, the operator of the
adjacent producing fields, various options to process, export and
sell Heron crude during the initial phase of development and
negotiations on the operational and contractual details are
ongoing.
On the Company's central Mongolian exploration acreage, the
moratorium on Block V which had been in place through the pandemic
was lifted and agreement secured with MRPAM and the Ministry of
Mining and Heavy Industry ("MMHI") to extend the Exploration Period
under the Production Sharing Contract ("PSC") to July 2024. The
Company matured the technical evaluation of the Velociraptor
Prospect to drillable status and contracted with Major Drilling to
drill an exploration well on this prospect in the 2023 operational
window with the full support of the local government, who have
granted land access and all other necessary permits. In the event
of success or encouragement in the Velociraptor-1 well in 2023,
there will be enough time left in the Block V exploration term to
gather sufficient data to complete the required technical work in
order to secure an exploitation licence. T he rig contract with
Major Drilling allows for appraisal well drilling in the event that
such follow up is required .
The Company continued in its efforts to partner with local and
foreign companies on development and exploration activities in
Mongolia and supported MRPAM in their marketing efforts for their
Exploration licensing round launched at the end of November 2022.
The Company has high graded a number of blocks included in the
tender round with the expectation of applying for the best areas in
order to restock the Company's portfolio. Mongolia offers lengthy
exploration periods and the potential to keep financial commitments
relatively low, allowing for exploration drilling activity to be
discretionary rather than committed upfront.
Plans for entering the renewable energy sector in Mongolia
matured with discussions with a well-established local project
developer with a proven track record and with excellent
relationships within the sector and with the Mongolian Ministry of
Energy. The Sunsteppe Renewable Energy joint venture was
established with initial funding supplied by Petro Matad and it is
working towards developing a number of value additive opportunities
to either follow through to production or to secure partners on a
promoted basis.
Covid-19
Covid-19 related travel restrictions eased considerably during
the early part of 2022 but major border crossings into China
remained closed on the Chinese side until the end of the second
quarter due to China's continuation of its zero Covid policies. In
the middle of the year, China allowed the northerly of the two oil
export border crossings at Bayankhoshuu to re-open and oil export
from the PetroChina operated fields in Mongolia resumed. The
southerly oil export crossing at Bichigt remained closed until the
third quarter restricting passage of oil field consumables and
equipment although some goods and service crews could be flown in.
By year-end 2022 all borders had re-opened and were back to near
pre-pandemic activity levels and this situation has normalised
through 2023 to date.
Block XX Exploitation Area - Land access
The Company was not able to access the Heron development
location during 2022 due to the ongoing land access dispute between
central and local governments. This situation has come about due to
conflicts in the Mongolian Land Law and local disquiet in Dornod
Province in which Block XX is located. This province is home to 95%
of Mongolia's current oil production and the local communities in
the area feel that they have suffered all the impacts of oil
exploitation activities since start up in the late 1990s with
little or no benefit. As a result, the local government has been
refusing to issue land access permits which the Company requires
since central government has not yet declared the Block XX
Exploitation Area as Special Purpose land under the Land Law.
The Company has worked tirelessly with MRPAM and MMHI to resolve
this issue and the prescribed legal pathway is being pursued by
which the registration of the Block XX exploitation licence as
Special Purpose land will be requested from the Mongolian Cabinet.
This is a lengthy process with overly cumbersome bureaucracy but is
now at an advanced stage and we expect the submission to Cabinet to
be made shortly. We look forward to resolving this issue and
progressing Heron development activities.
2022 Review
HSSE
The Company's Health, Safety, Security and Environmental
Management System (HSSE MS) is structured to follow International
Association of Oil and Gas Producers (IOGP) best practices.
As per Mongolian national and international best practice, any
reported HSSE incidents are fully investigated, recorded, and
classified according to IOGP guidelines , and learnings are openly
shared through the management review process. The Company is
pleased to report that Petro Matad , along with its sub-contractors
, followed all Mongolian laws and national standards in all aspects
of the 2022 operations and there were no environmental incidents
and no lost time incidents nor recordable incidents during the
year.
As per Mongolian environmental law, technical restoration of the
drilling mud sumps at both the Heron-1 and Gazelle-1 well sites
were conducted by a specialist restoration contractor and with the
approval of the local authorities. The provincial Handover
Committee formally inspected both sites and signed off that the
work had been completed in compliance with the relevant
regulations.
The Company is fully committed to environmental protection and
ensures all practical measures are implemented to fully comply with
national and international best practices with reference to ISO
14001 as the benchmark.
Social impact 2022
In 2022 on Block V, within the framework of the billion trees
project initiated by the Mongolian President, programmes to supply
tree seedlings and irrigation wells were completed in the
Baruunbayan-Ulaan (BBU) and Guchin-Us (GU) districts where the
Company's 2023 activities will be implemented. In addition, the
Company supported a livestock restocking project in BBU to help
herders affected by drought conditions and carried out remediation
works at the district land fill site. Eco-toilets were installed at
district schools and reconstruction of a public service building
was also completed.
On Block XX, early in 2022 the Company donated patient control
monitors to the Dornod province hospital and medical beds to the
Matad district hospital to assist in preventing the spread of
Covid-19. In addition, the Company financed the remediation of the
Matad land fill site.
Operations
Block XX: The Company continues to target having everything in
place to get the Heron-1 well onstream as soon as the land issue is
resolved by the government. Pumping, downhole completion and power
generation equipment and power control systems are now all in
country and ready to be mobilised and installed at Heron-1.
Production tanks have been sourced from PetroChina. These
second-hand tanks offer a cost-effective solution to achieve rapid
production start-up and have passed non-destructive testing to
confirm integrity and suitability. They will be relocated to the
production site where installation fabrication and electrical work
is planned once access to the production site is obtained. The
Company and MRPAM discussed with PetroChina Daqing Tamsag, the
operator of the Block XIX exploitation area and facilities located
immediately north of Block XX, options to process, export and sell
Heron crude during the initial phase of the Heron development.
Negotiations with DQE Drilling (DQE), the main provider of
drilling services in Mongolia, have continued and a contract for a
multi-well development drilling and completion programme is in the
final stages of discussion. The contract envisages a reduction in
drilling, testing, fracking and completion costs compared to the
previous drilling campaign and includes some deferral of costs to
allow a portion of the drilling expenditure to be settled from
future production revenue. The contract once finalised will require
MRPAM approval and discussions have now begun. The cost reductions
and payment phasing could significantly improve project cash flows
and overall asset value since the largest portion of the Heron
development costs are drilling related.
Block V: On the Block V Exploration PSC area, local government
approvals for land access have been secured. This area does not
have the same history with the oil industry that Dornod Province
has and as such, just as in previous years, thanks to its continued
focus on positively engaging with local communities, Petro Matad
has been able to secure all necessary permits to work on the land
covering the highly prospective Raptor Trend and the Velociraptor
prospect.
A cost-effective drilling solution for Velociraptor has been
found using Major Drilling, a contractor that has been in country
for many years, has tried and trusted equipment and a mainly
Mongolian crew. MMHI's approval of the Company's application to
secure a moratorium for 2022 on Block V was critical as it extended
the exploration period until July 2024 and so ensures that there
will be sufficient time after Velociraptor-1 is drilled to gather
enough data and submit the necessary documentation to secure a
Block V Exploitation Licence in the event of success. T he Major
Drilling contract allows for immediate appraisal well drilling in
the event the Company chooses to do so .
New Areas: The Company is actively working on detailed technical
studies of new exploration acreage where petroleum systems have
been proven but also in some frontier areas where little
exploration activity has occurred to date. The aim is to re-stock
the Company's acreage portfolio to create a balance of production,
development, appraisal, near field and high impact frontier
exploration.
2022/23 Exploration Licencing Round
MRPAM announced an Exploration Licencing round at the end of
November 2022 at an industry event in Singapore covering 14 blocks
located in proven hydrocarbon fairways in eastern Mongolia and also
in southern and western Mongolia where little or no exploration
activity has occurred. The Company supported MRPAM with its
marketing efforts and advised on MRPAM's potential attendance at
industry conferences in 2023 to further promote the licencing
round.
The initial release of 5 of the 14 blocks in the licencing round
were located in southeastern Mongolia and share the same
stratigraphy and geological history as proven prolific oil basins
both in Mongolia and northern China. With its extensive data base,
technical expertise and operational experience, Petro Matad has a
significant competitive advantage as the country's leading explorer
and is participating in the licencing round with a view to
acquiring some new PSCs. Contemporaneous with the licencing round
the government is reviewing the Petroleum Law, last updated in
2014, and has solicited views from industry operators. The Company
has provided detailed feedback highlighting areas that would make
Mongolia more attractive to foreign investment.
Renewable Energy Opportunities in Mongolia
Petro Matad continued to explore opportunities in the renewable
energy sector in Mongolia through 2022 following Board approval to
do so in 2021. Work was done to investigate the technical and
commercial drivers of solar, wind and battery storage opportunities
and to evaluate local partners. As a result, a solid relationship
was established with Sunsteppe Energy, an experienced and well
connected local developer with a track record of bringing projects
to construction ready status and finding investors for the
construction phase. A joint venture has been established between
Sunsteppe and Petro Matad and work is now moving forward at pace to
generate a number of renewable energy opportunities that have the
potential to add value and generate revenue in the near term.
Community Relations
The Company takes its responsibilities in community engagement
and community relations very seriously. In advance of any work
programme activity being undertaken, the Company ensures that it
obtains the necessary approvals from MRPAM and all other relevant
authorities. Company staff participate in joint meetings with the
regulator and the local communities to present and discuss planned
activities. In addition to meeting local government officials, the
socialisation programmes will typically include town hall meetings
where questions from local residents are answered. Company
representatives will also meet with nomadic herders who may be in
proximity to planned operations to ensure all parties are listened
to. Representatives from the Community Relations team are stationed
at site during all operational activities.
A focussed programme of community projects is undertaken in
areas where operations are conducted, and this is done in
cooperation with local government. The Company views engagement
with local communities as key to conducting safe and successful
operations that will in turn benefit the local area.
Conclusions
During 2022 , the Company continued to make progress in
establishing itself as the first independent Mongolian oil
exploration and production company but remained frustrated in its
efforts by the ongoing land access dispute. However, having made
good progress with central government, the Company is confident
that the land issue will be resolved during 2023. Plans to drill
the Velociraptor-1 well on a prospect with mean recoverable
resource potential of 200 MMbo were advanced, and the well was
scheduled to be drilled in mid-2023. The evaluation of acreage
offered in MRPAM's Exploration Licencing round is at an advanced
stage with a view to re-stocking the portfolio with prospective
acreage and the Company's entry into Mongolia's renewable energy
sector shows early signs of promise.
Acknowledgements
The Company is very appreciative of the support and
collaboration shown by MRPAM and MMHI and is confident that the
long running land issue in Block XX will also soon be solved.
The Directors would like to reiterate their appreciation to the
staff of Petro Matad who have continued to work with enthusiasm,
diligence, and dedication. Shareholders continued support is also
highly appreciated. The Board looks forward to an exciting
operational period in 2023.
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
For the year ended 31 December 2022
Consolidated
31 Dec 31 Dec
2022 2021
Note $'000 $'000
-------- --------
Continuing operations
Revenue
Interest income 4(a) 201 33
Other income 4(a) - 13
-------- --------
201 46
Expenditure
Consultancy fees (129) (98)
Depreciation and amortisation (149) (181)
Employee benefits expense 4(b) (1,687) (1,010)
4( c
Exploration and evaluation expenditure ) (137) (114)
4( d
Other expenses ) (1,048) (759)
(Loss)/Profit from continuing
operations before income tax (2,949) (2,116)
Income tax expense 5 - -
-------- --------
(Loss)/Profit from continuing
operations after income tax (2,949) (2,116)
Net (loss)/profit for the year (2,949) (2,116)
-------- --------
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translating
foreign operations, net of income
tax of $Nil (2021: $Nil) (149) -
Other comprehensive (loss)/income
for the year, net of income tax (149) -
Total comprehensive (loss)/income
for the year (3,098) (2,116)
======== ========
(Loss)/Profit attributable to
owners of the parent (2,949) (2,116)
======== ========
Total comprehensive (loss)/income
attributable to owners of the
parent (3,098) (2,116)
======== ========
(Loss)/Earnings per share (cents
per share)
Basic (loss)/earnings per share 6 (0.3) (0.3)
Diluted (loss)/earnings per share 6 (0.3) (0.3)
The above Consolidated Statement of Profit or Loss and Other
Comprehensive Income should be read in conjunction with the
accompanying notes.
Consolidated Statement of Financial Position
As at 31 December 2022
Consolidated
31 Dec 31 Dec
2022 2021
Note $'000 $'000
---------- ----------
ASSETS
Current Assets
Cash and cash equivalents 7 1,476 1,162
Trade and other receivables 8 2,607 21
Prepayments 9 138 176
Financial assets 10 1,017 7,045
Inventory 11 215 221
---------- ----------
Total Current Assets 5,453 8,625
Non-Current Assets
Exploration and evaluation
assets 12 15,275 15,275
Property, plant and equipment 13 261 99
Right-of-Use asset 13 92 93
Total Non-Current Assets 15,628 15,467
---------- ----------
TOTAL ASSETS 21,081 24,092
---------- ----------
LIABILITIES
Current Liabilities
Trade and other payables 14 456 371
Lease liability 14 - 6
Total Current Liabilities 456 377
TOTAL LIABILITIES 456 377
---------- ----------
NET ASSETS 20,625 23,715
========== ==========
EQUITY
Equity attributable to owners
of the parent
Issued capital 15 154,057 154,057
Reserves 16 8 182
Accumulated losses (133,440) (130,524)
---------- ----------
TOTAL EQUITY 20,625 23,715
========== ==========
The above Consolidated Statement of Financial Position should be
read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
Consolidated
31 Dec 31 Dec
2022 2021
Note $'000 $'000
-------- --------
Cash flows from operating activities
Payments to suppliers and employees (2,860) (2,424)
Interest received 130 33
Other income - 13
Net cash flows (used in)/provided
by operating activities 7 (2,730) (2,378)
Cash flows from investing activities
Purchase of property, plant and
equipment (212) (16)
Proceeds from sale of financial
assets 3,527 (7,034)
Proceeds from the sale of property,
plant and equipment - -
Net cash flows used in investing
activities 3,315 (7,050)
Cash flows from financing activities
Proceeds from issue of shares - 10,491
Capital raising cost - (664)
Payments of lease liability principal (122) (176)
Net cash flows from financing
activities (122) 9,651
Net increase in cash and cash
equivalents 463 223
Cash and cash equivalents at beginning
of the year 1,162 939
Net foreign exchange differences (149) -
-------- --------
Cash and cash equivalents at
the end of the year 7 1,476 1,162
======== ========
The above Consolidated Statement of Cash Flows should be read in
conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Consolidated
Attributable to equity holders
of the parent
Issued Accumulated Other
Capital Losses Reserves Total
Note 16
Note $'000 $'000 $'000 $'000
--------- ------------ ---------- --------
As at 1 January 2021 144,011 (128,930) 1,392 16,473
Net loss for the year - (2,116) - (2,116)
Other comprehensive income - - - -
--------- ------------ ---------- --------
Total comprehensive gain/(loss)
for the year - (2,116) - (2,116)
Issue of share capital 15 10,491 - - 10,491
Cost of capital raising 15 (664) - - (664)
Share-based payments 15 & 16 - - (469) (469)
Exercise of Conditional 15, 16
Share Awards & 17 219 - (219) -
Expiry of Options 16 & 17 - 522 (522) -
As at 31 December 2021 154,057 (130,524) 182 23,715
========= ============ ========== ========
Net loss for the year - (2,949) - (2,949)
Other comprehensive income - - (149) (149)
--------- ------------ ---------- --------
Total comprehensive gain/(loss)
for the year - (2,949) (149) (3,098)
Issue of share capital 15 - - - -
Cost of capital raising 15 - - - -
Share-based payments 15 & 16 - - 8 8
Exercise of Conditional 15, 16
Share Awards & 17 - - - -
Expiry of Options 16 & 17 - 33 (33) -
As at 31 December 2022 154,057 (133,440) 8 20,625
========= ============ ========== ========
The above Consolidated Statement of Changes in Equity should be
read in conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
1 Corporate information
The financial report of Petro Matad Limited (Company) for the
year ended 31 December 2022 was authorised for issue in accordance
with a resolution of the Directors dated 15 June 2023 which was
approved on 19 June 2023.
This financial report presents the consolidated results and
financial position of Petro Matad Limited and its subsidiaries.
Petro Matad Limited (Company) incorporated in the Isle of Man on
30 August 2007 has five wholly owned subsidiaries, including
Capcorp Mongolia LLC and Petro Matad LLC (both incorporated in
Mongolia), Central Asian Petroleum Corporation Limited (Capcorp)
and Petromatad Invest Limited (both incorporated in the Cayman
Islands) and Petro Matad Singapore Pte Ltd. The Company and its
subsidiaries are collectively referred to as the "Group". The
Group's principal activity in the course of the financial year
consisted of oil exploration and development in Mongolia.
Petrovis Matad Inc. (Petrovis) is a major shareholder of the
Company, holding approximately 21.08% of the shareholding at the
year end of 2022.
2 Summary of significant accounting policies
(a) Basis of p reparation
This financial report complies with International Financial
Reporting Standards (IFRS) as adopted by the European Union.
This financial report has been prepared on a historical cost
basis, except where otherwise stated. Historical cost is generally
based on the fair values of the consideration given in exchange for
goods and services. Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date,
regardless of whether that price is directly observable or
estimated using another valuation technique.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
-- Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
-- Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
-- Level 3 inputs are unobservable inputs for the asset or liability.
For the purpose of preparing the consolidated financial
statements, the Company is a for-profit entity.
(b) Statement of c ompliance
This general-purpose financial report has been prepared in
accordance with the requirements of all applicable IFRS as adopted
by the European Union and related Interpretations and other
authoritative pronouncements .
(c) Going concern
The financial statements have been prepared on a going concern
basis, which contemplates the continuity of normal business
activity and the realisation of assets and the settlement of
liabilities in the ordinary course of business.
The Group generated a loss of $2.95 million for year 2022 (2021
Loss: $2.12 million) and experienced net cash outflows from
operating activities of $2.73 million (2021 Outflow: $2.38
million). In addition, as outlined in Note 18(b) the Group is
required to meet minimum exploration commitments on its Block XX
Production Sharing Contract (PSC) of approximately $6.0 million.
The Company has reached an agreement with the Mineral Resources and
Petroleum Authority of Mongolia (MRPAM) that this underspent
minimum exploration commitment can be transferred to and spent on
exploration and appraisal activities during the exploitation
period. The Company's application for a 25-year Exploitation
Licence (EL) for Block XX was approved in July 2021. The Company
raised an additional $6.6 million funds in February 2023, which
provides sufficient working capital to operate beyond mid 2024 as a
going concern, as well as commencing appraisal and production
operations at Heron oilfield in Block XX, and drilling a
high-graded exploration prospect in Block V.
The Company believes that the current cash balance is sufficient
to continue operations until at least July 2024.
Cumulative expenditures to end 2022 in Block V exceed financial
commitments by $3.0 million. The Company applied for moratoria on
Block V for both 2020 and 2021 which were approved by MRPAM. The
Block V PSC exploration term is now due to expire in July 2024.
The Directors have prepared a cash flow forecast which indicates
that the Group will have sufficient cash to meet their working
capital requirements for the twelve-month period from the date of
signing the financial report.
(d) Application of new and revised Accounting Standards
Accounting Standards that are mandatorily effective for the
current reporting year
The Group has adopted all of the new and revised Standards and
Interpretations issued by the Australian Accounting Standards Board
(AASB) that are relevant to its operations and effective for an
accounting period that begins on or after 1 January 2020.
The Directors have determined that there is no material impact
of the new and revised Standards and Interpretations on the Group
and, therefore, no material change is necessary to Group accounting
policies.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the
Group has not applied the new and revised Australian Accounting
Standards, Interpretations and amendments that have been issued but
are not yet effective. Based on a preliminary review of the
standards, interpretations and amendments, the Directors do not
anticipate a material change to the Group's accounting policies,
however further analysis will be performed when the relevant
standards are effective.
(e) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
and its subsidiaries. Control is achieved when the Company:
-- has power over the investee;
-- is exposed, or has rights, to variable returns from its involvement with the investee; and
-- has the ability to use its power to affect its returns.
The Company reassesses whether it controls an investee if facts
and circumstances indicate that there are changes to one or more of
the three elements of control listed above.
The financial statements of the subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases.
The financial statements of subsidiaries are prepared for the
same reporting period as the parent company, using consistent
accounting policies. Adjustments are made to bring into line any
dissimilar accounting policies that may exist.
A change in the ownership interest of a subsidiary that does not
result in a loss of control is accounted for as an equity
transaction.
All intercompany balances and transactions, including unrealised
profits arising from intra-group transactions, have been eliminated
in full. Unrealised losses are eliminated unless costs cannot be
recovered.
(f) Foreign currency translation
Functional and presentation currency
Both the functional and presentation currency of Petro Matad
Limited is United States Dollars (USD). The Cayman Islands and
Singaporean subsidiaries' functional currency is USD. The Mongolian
subsidiaries' functional currency is Mongolian Tugrugs (MNT) which
is then translated to the presentation currency, USD.
Transactions and balances
Transactions in foreign currencies are initially recorded in the
functional currency by applying the exchange rates ruling at the
date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of
exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rate as at
the date of the initial transaction. Non-monetary items measured at
fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
Exchange differences are recognised in profit or loss in the
period in which they arise except for:
-- Exchange differences on transactions entered into to hedge
certain foreign currency risks; and
-- Exchange differences on monetary items receivable from or
payable to a foreign operation for which settlement is neither
planned nor likely to occur (therefore forming part of the net
investment in the foreign operation), which are recognised
initially in other comprehensive income and reclassified from
equity to profit or loss on disposal or partial disposal on the net
investment.
Translation of s ubsidiaries ' functional currency to
presentation currency
The results of the Mongolian subsidiaries are translated into
USD (presentation currency) as at the date of each transaction.
Assets and liabilities are translated at exchange rates prevailing
at the reporting date.
Exchange differences resulting from the translation are
recognised in other comprehensive income and accumulated in the
foreign currency translation reserve in equity.
On consolidation, exchange differences arising from the
translation of the net investment in Mongolian subsidiaries are
recognised in other comprehensive income and accumulated in the
foreign currency translation reserve. If a Mongolian subsidiary was
sold, the proportionate share of exchange difference would be
transferred out of equity and recognised in profit and loss.
(g) Cash and cash equivalents
Cash and short-term deposits in the statement of financial
position comprise cash at bank and in hand and short-term deposits
with an original maturity of three months or less.
For the purposes of the statement of cash flows, cash and cash
equivalents consist of cash and cash equivalents as defined above,
net of outstanding bank overdrafts.
(h) Trade and other receivables
Trade receivables, which generally have 30-60 day terms, are
recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less an
allowance for impairment.
Collectability of trade receivables is reviewed on an ongoing
basis. An impairment provision is recognised when there is
objective evidence that the Group will not be able to collect the
receivable. Objective evidence of impairment includes financial
difficulties of the debtor, default payments or debts more than 60
days overdue. The amount of the impairment loss is the amount by
which the receivable carrying value exceeds the present value of
the estimated future cash flows, discounted at the original
effective interest rate.
(i) Plant and equipment
Plant and equipment is stated at historical cost less
accumulated depreciation and any impairment in value.
Depreciation is calculated on a straight-line basis over the
estimated useful life of the asset and is currently estimated to be
an average of 6 years.
The assets' residual values, useful lives and amortisation
methods are reviewed, and adjusted if appropriate, at each
financial year end.
Derecognition
An item of property, plant and equipment is derecognised upon
disposal or when no further future economic benefits are expected
from its use or disposal.
(j) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when
the entity becomes a party to the contractual provisions to the
instruments. For financial assets, this is equivalent to the date
that the Company commits itself to either purchase or sell of the
asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus
transaction costs, except where the instruments is classified at
'Fair value through profit or loss' in which case transaction costs
are expensed to profit or loss immediately. Financial instruments
are classified and measured as set out below.
Classification and subsequent measurement
Financial instruments are subsequently measured at either fair
value, amortised cost using the effective interest rate method or
cost. Fair value represents the price that would be received to
sell an asset or paid to transfer a liability in orderly
transaction between market participants at the measurement date.
Where available, quoted prices in an active market are used to
determine fair value. In other circumstances, valuation techniques
are adopted.
Amortised cost is calculated as (i) the amount at which the
financial asset or financial liability is measured at initial
recognition; (ii) less principal repayments; (iii) plus or minus
the cumulative amortization of the difference, if any, between the
amount initially recognised and the maturity amount calculated
using the effective interest method; and (iv) less any reduction
for impairment.
The effective interest method is used to allocate interest
income or interest expense over the relevant period and is
equivalent to the rate that exactly discounts estimated future cash
payments or receipts (including fees, transaction costs and other
premiums or discounts) through the expected life (or when this
cannot be reliably predicted, the contractual term) of the
financial instrument to the net carry amount of the financial asset
or financial liability. Revisions to expected future net cash flows
will necessitate an adjustment to the carrying value with a
consequential recognition of an income or expense in profit or
loss. The Group does not designate any interest in subsidiaries,
associates or joint venture entities as being subject to the
requirements of accounting standards specifically applicable to
financial statements.
(i) Financial assets at fair value through profit and loss or
through other comprehensive Income
Financial assets are classified at 'Fair value through profit or
loss' or 'Fair value through other comprehensive Income' when they
are either held for trading for purposes of short term profit
taking, derivatives not held for hedging purposes, or when they are
designated as such to avoid an accounting mismatch or to enable
performance evaluation where a group of financial assets is managed
by key management personnel on a fair value basis in accordance
with a documented risk management or investment strategy. Such
assets are subsequently measured at fair value with changes in
carrying value being included in profit or loss if electing to
choose 'fair value through profit or loss' or other comprehensive
income if electing 'Fair value through other comprehensive
income'.
(ii) Financial Liabilities
The Group's financial liabilities include trade and other
payables, loan and borrowings, provisions for cash bonus and other
liabilities which include deferred cash consideration and deferred
equity consideration for acquisition of subsidiaries &
associates.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings, and payables, net of
directly attributable transaction costs.
Fair value
Fair value is determined based on current bid prices for all
quoted investments. Valuation techniques are applied to determine
the fair value for all unlisted securities, including recent arm's
length transactions, reference to similar instruments and option
pricing models.
Derecognition
Financial assets are derecognised where the contractual rights
to receipts of cash flows expire or the asset is transferred to
another party whereby the entity no longer has any significant
continuing involvement in the risk and benefits associated with the
asset. Financial liabilities are recognised where the related
obligations are either discharged, cancelled or expire. The
difference between the carrying value of the financial liability
extinguished or transferred to another party and the fair value of
consideration paid, including the transfer of non-cash assets or
liabilities assumed, is recognised in profit or loss.
(k) Inventory
Inventories are stated at the lower of cost and net realisable
value. Costs of inventories are determined on a first-in-first-out
basis. Net realisable value represents the estimated selling price
for inventories less all estimated costs of completion and costs
necessary to make the sale.
(l) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred by the Group is
expensed separately for each area of interest. The Group's policy
is to expense all exploration and evaluation costs funded out of
its own resources.
(m) Exploration and evaluation assets
Exploration and evaluation assets arising out of business
combinations are capitalised as part of deferred exploration and
evaluation assets. Subsequent to acquisition, exploration
expenditure is expensed in accordance with the Group's accounting
policy.
(n) Impairment of tangible and intangible assets other than
goodwill
At each reporting date, the Group assesses whether there is any
indication that tangible and intangible asset may be impaired.
Where an indicator of impairment exists, the Group makes a formal
estimate of recoverable amount for each asset or cash generating
unit to determine the extent of the impairment loss (if any). Where
the carrying amount of an asset (or cash-generating unit) exceeds
its recoverable amount the asset is considered impaired and is
written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to
sell and value in use. It is determined for an individual asset,
unless the asset's value in use cannot be estimated to be close to
its fair value less costs to sell and it does not generate cash
inflows that are largely independent of those from other assets or
groups of assets, in which case, the recoverable amount is
determined for the cash-generating unit to which the asset
belongs.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the assets (or cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which
case the reversal of impairment loss is treated as a revaluation
increase.
Impairment review for deferred exploration and evaluation assets
are carried out on a project-by-project basis, where each project
representing a single cash generating unit. An impairment review is
undertaken when indicators of impairment arise, typically when one
of the following circumstances apply:
-- Unexpected geological occurrences that render the resource uneconomic;
-- Title to asset is compromised;
-- Variations in prices that render the project uneconomic; or
-- Variations in the currency of operation.
(o) Trade and other payables
Trade and other payables are initially recognised at fair value.
After initial recognition, trade and other payables are carried at
amortised cost and due to their short-term nature are not
discounted. They represent liabilities for goods and services
provided to the Group prior to the end of the financial year that
are unpaid and arise when the Group becomes obliged to make future
payments in respect of the purchase of these goods and services.
The amounts are unsecured and are usually paid within 30 days of
recognition.
(p) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. If the effect of the
time-value of money is material, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to
the passage of time is recognised as a finance cost.
(q) Leases
The Group as lessee
At inception of a contract, the Group assesses if the contract
contains or is a lease. If there is a lease present, a right-of-use
asset and a corresponding lease liability are recognised by the
Group where the Group is a lessee. However, all contracts that are
classified as short-term leases (ie a lease with a remaining lease
term of 12 months or less) and leases of low-value assets are
recognised as an operating expense on a straight-line basis over
the term of the lease.
Initially the lease liability is measured at the present value
of the lease payments still to be paid at the commencement date.
The lease payments are discounted at the interest rate implicit in
the lease. If this rate cannot be readily determined, the Group
uses the incremental borrowing rate.
Lease payments included in the measurement of the lease
liability are as follows:
-- fixed lease payments less any lease incentives;
-- variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date;
-- the amount expected to be payable by the lessee under residual value guarantees;
-- the exercise price of purchase options, if the lessee is
reasonably certain to exercise the options;
-- lease payments under extension options, if the lessee is
reasonably certain to exercise the options; and
-- payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, any lease payments made at or before
the commencement date and any initial direct costs. The subsequent
measurement of the right-of-use assets is at cost less accumulated
depreciation and impairment losses.
Right-of-use assets are depreciated over the lease term or
useful life of the underlying asset, whichever is the shortest.
Where a lease transfers ownership of the underlying asset or the
cost of the right-of-use asset reflects that the Group anticipates
to exercise a purchase option, the specific asset is depreciated
over the useful life of the underlying asset.
The Group as lessor
Upon entering into each contract as a lessor, the Group assesses
if the lease is a finance or operating lease.
A contract is classified as a finance lease when the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases not within this
definition are classified as operating leases.
Rental income received from operating leases is recognised on a
straight-line basis over the term of the specific lease.
Initial direct costs incurred in entering into an operating
lease (for example, legal cost, costs to set up equipment) are
included in the carrying amount of the leased asset and recognised
as an expense on a straight-line basis over the lease term.
Rental income due under finance leases are recognised as
receivables at the amount of the Group's net investment in the
leases. When a contract is determined to include lease and
non-lease components, the Group applies IFRS 15 to allocate the
consideration under the contract to each component.
(r) Contributed equity
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds.
(s) Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured. The following specific criteria must also be met
before revenue is recognised:
Interest revenue
Revenue is recognised on an accrual basis using the effective
interest method.
(t) Share-based payment transactions
The Group provides to certain key management personnel
share-based payments, whereby they render services in exchange for
rights over shares (equity-settled transactions).
The cost of these equity-settled transactions is measured by
reference to the fair value at the date at which they are granted.
The fair value is determined by use of the Black Scholes model.
In determining the fair value of the equity-settled
transactions, vesting conditions that are not market conditions are
not taken into account.
The cost of equity-settled transactions is recognised as an
expense on a straight-line basis, together with a corresponding
increase in equity, over the period in which they vest.
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date
reflects:
-- the extent to which the vesting period has expired; and
-- the number of awards that, in the opinion of the Directors of
the Group, will ultimately vest.
This opinion is formed based on the best available information
at the reporting date. The impact of the revision of original
estimates, if any, is recognised in profit or loss such that the
cumulative expense reflects the revised estimate, with a
corresponding adjustment to equity reserves.
Where the terms of an equity-settled award are modified, as a
minimum, an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any increase in
the value of the transaction as a result of the modification, as
measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if
it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award and designated as
a replacement award on the date that it is granted, the cancelled
and new award are treated as if they were a modification of the
original award, as described in the previous paragraph.
(u) Income tax
Current tax
Current tax is calculated by reference to the amount of income
taxes payable or recoverable in respect of the taxable profit or
tax loss for the year. It is calculated using tax rates and tax
laws that have been enacted or substantively enacted by the
reporting date. Current tax for current and prior years is
recognised as a liability (or asset) to the extent that it is
unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive balance
sheet liability method in respect of temporary differences arising
from differences between the carrying amount of assets and
liabilities and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all
taxable temporary differences. Deferred tax assets are recognised
to the extent that it is probable that sufficient taxable amounts
will be available against which deductible temporary differences or
unused tax losses and tax offsets can be utilised. However,
deferred tax assets and liabilities are not recognised if the
temporary differences giving rise to them arise from the initial
recognition of assets and liabilities (other than as a result of a
business combination) that affects neither taxable income nor
accounting profit. Furthermore, a deferred tax liability is not
recognised in relation to taxable temporary differences arising
from goodwill.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the year(s) when the asset and
liability giving rise to them are realised or settled, based on tax
rates (and tax laws) that have been enacted or substantively
enacted by reporting date. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would
follow from the manner in which the consolidated Group expects, at
the reporting date, to recover or settle the carrying amount of its
assets and liabilities.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities on
a net basis.
Current and deferred tax for the year
Current and deferred tax is recognised as an expense or income
in the profit or loss, except when it relates to items credited or
debited directly to equity/other comprehensive income, in which
case the deferred tax is also recognised directly in equity/other
comprehensive income, or where it arises from the initial
accounting for a business combination, in which case it is taken
into account in the determination of goodwill.
(v) Earnings per share
Basic earnings per share is calculated as net profit
attributable to owners of the parent, adjusted to exclude any costs
of servicing equity (other than dividends), divided by the weighted
average number of ordinary shares, adjusted for any bonus
element.
Diluted earnings per share is calculated as net profit
attributable to owners of the parent, adjusted for:
-- Costs of servicing equity (other than dividends);
-- The after-tax effect of dividends and interest associated
with dilutive potential ordinary shares that have been recognised
as expenses; and
-- Other non-discretionary changes in revenues or expenses
during the year that would result from the conversion of dilutive
potential ordinary shares, divided by the weighted average number
of ordinary shares and dilutive potential ordinary shares, adjusted
for any bonus element.
(w) Significant accounting judgments, estimates and
assumptions
In applying the Group's accounting policies, management
continually evaluates judgments, estimates and assumptions based on
experience and other factors, including expectations of future
events that may have an impact on the Group. All judgments,
estimates and assumptions made are believed to be reasonable based
on the most current set of circumstances available to management.
Actual results may differ from the judgments, estimates and
assumptions.
Any revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both the current and future
periods.
The following are the most critical estimates and judgments made
by management in applying the accounting policies and have the most
significant effect on the amounts recognised in the financial
statements.
Share-based payments
The Group measures the cost of equity-settled transactions with
Directors and employees at the fair value of the equity instruments
at the date at which they are granted. The fair value is determined
using a Black Scholes model. One of the inputs into the valuation
model is volatility of the underlying share price which is
estimated on the historical share price.
Recovery of the exploration and evaluation assets
The ultimate recoupment of the exploration and evaluation assets
is dependent upon successful development and commercial
exploitation or alternatively the sale of the respective areas of
interest at an amount at least equal to book value. At the point
that it is determined that any capitalised exploration and
evaluation expenditure is not recoverable, it is written off.
Going Concern
The Group assesses the going concern of the Group on a regular
basis, reviewing its cash flow requirements, commitments and status
of PSC requirements and funding arrangements. Refer to Note 2(c)
for further details.
3 Operating segments
Operating segments have been identified on the basis of internal
reports of the Group that are regularly reviewed by the chief
operating decision maker in order to allocate resources to the
segments and to assess their performance.
The chief operating decision maker has been identified as the
Board of Directors. On a regular basis, the Board receives
financial information on a consolidated basis similar to the
financial statements presented in the financial report, to manage
and allocate their resources. Based on the information provided to
the Board of Directors, the Group has one operating segment and
geographical segment, being Mongolia; as such no separate
disclosure has been provided.
31 Dec 31 Dec
2022 2021
$'000 $'000
--------- ---------
4 Revenues and expenses
(a) Revenue
Interest income 201 33
Other income:
Other income - 13
201 46
==== ===
(b) Employee benefits expense
Included in employee benefits expense are the following:
Wages and s alaries 1,488 1,253
Bonuses - 75
Non-Executive Directors' fees (including
Directors of affiliates) 161 96
Consultancy fees 30 30
Share-based payments 8 (469)
------ ------
1,687 1,010
====== ======
(c) Exploration and e valuation e xpenditure
Exploration and e valuation e xpenditure relates to the
following PSCs:
Block XX 128 114
Block V 9 -
137 114
==== ====
(d) Other e xpenses
Included in other expenses are the following:
Administration costs 511 371
PSC administration costs 285 316
Audit fees 71 64
Travel expenses 181 8
1,048 759
====== ====
31 Dec 31 Dec
2022 2021
Note $'000 $'000
------- -------
5 Income tax
Income tax recognised in the statement of profit or loss:
Tax expense/(benefit) comprises:
Current tax expense/(benefit) - -
Deferred tax expense/(benefit)
relating to the
origination and reversal of temporary
differences - -
Total tax expense/(benefit) reported
in the statement of profit or
loss - -
====
The prima facie income tax benefit on pre-tax accounting loss
from continuing operations reconciles to the income tax
expense/(benefit) in the financial statements as follows:
Net (loss)/profit for the year (2,949) (2,116)
Income tax benefit calculated
at 10% (i) 295 212
Effect of different tax rates
on entities in different jurisdictions (ii) (92) (16)
Change in unrecognised deferred
tax assets (203) (196)
-------- --------
- -
======== ========
(i) The tax rate used in the above reconciliation is the
corporate tax rate of 10% payable by Mongolian corporate entities
on taxable profits up to 6 billion MNT under Mongolian tax law.
(ii) Petromatad Invest Limited and Capcorp are exempt of
Mongolian corporate tax on profits derived from the sale of oil
under their PSCs once production commences and are subject to
Cayman Islands income tax at a rate of 0%. As a consequence, no
provision for Mongolian corporate tax or Cayman Islands current tax
or deferred tax has been made in the Company's accounts in relation
to them.
Petro Matad Limited is subject to Isle of Man income tax at a
rate of 0%. As a consequence, no provision for Isle of Man current
tax or deferred tax has been made in the Company's accounts.
6 (Loss)/Earnings per share
The following reflects the loss and share data used in the total
operations basic and diluted (loss)/earnings per share
computations:
31 Dec 2022 31 Dec 2021
cents per
share cents per share
---------------- ----------------
Basic (loss)/earnings per share (0.3) (0.3)
================ ================
Diluted (loss)/earnings per share (0.3) (0.3)
================ ================
$'000's $'000's
---------------- ----------------
The loss and weighted average number of ordinary
shares used in the calculation of basic and
diluted (loss)/earnings per share are as follows:
Net (loss)/profit attributable to owners of
the parent (2,949) (2,116)
---------------- ----------------
Weighted average number of ordinary shares
for the purposes of diluted (loss)/earnings
per share (in thousands) 898,812 776,419
Weighted average number of ordinary shares
for the purposes of basic (loss)/earnings per
share (in thousands) 898,762 776,419
---------------- ----------------
31 Dec 31 Dec
2022 2021
$'000 $'000
--------- ---------
7 Cash and cash equivalents
Cash at bank and in hand 1,476 1,162
1,476 1,162
========= =========
Cash at bank and in hand earns interest at fixed and floating
rates based on prevailing bank rates, and the fair value of the
above cash and cash equivalents is $1,476,000 (2021: $1,162,000)
due to the short-term nature of the instruments.
Reconciliation from the net gain/(loss) after tax to the net
cash flows from operations:
Net (loss)/gain after tax (2,949) (2,116)
Adjustments for:
Depreciation and amortisation 149 181
Expired bond recorded as an account
receivable 2,501 -
Share based payments 8 (469)
Unrealised foreign exchange (gains)/
losses 24 -
Changes in assets and liabilities
Decrease/(increase) in trade
and other receivables (2,586) (11)
Decrease/(increase) in prepayments 38 46
Decrease/(increase) in inventory 6 3
Increase/(decrease) in trade
and other payables 79 (12)
Net cash flows used in operating
activities (2,730) (2,378)
=========== ===========
Non-cash investing and financing activities
There were no non-cash investing or financing activities
undertaken in the 2022 financial year or prior year, other than the
exercise of Conditional Share Awards (2021: $0.003).
8 Trade and other receivables
Current
Other debtors 2,607 21
2,607 21
========= ======
All amounts are recoverable and are not considered past due or
impaired.
Account receivables include the receivable from TDB Capital for
expired bond for which the money was received on 4 January
2023.
9 Prepayments
Prepayments 138 176
138 176
==== ====
10 Financial assets
Long Term Deposits 1,017 7,045
1,017 7,045
====== ======
The Group holds term deposits with an average weighted interest
rate of 2.92%. The deposits have maturity dates greater than 3
months. None of these assets had been past due or impaired at the
end of the reporting period.
31 Dec 31 Dec
2022 2021
$'000 $'000
------- -------
11 Inventory
Raw materials 215 221
215 221
==== ====
Inventory are mainly consumables, including casing, mud and
drilling materials purchased for Block XX.
12 Exploration and evaluation assets
Exploration and evaluation assets 15,275 15,275
------- -------
15,275 15,275
======= =======
The exploration and evaluation asset arose following the initial
acquisition in February 2007 of 50% of Petromatad Invest Limited,
together with acquisition on 12 November 2007 of the remaining 50%
not already held by the Group, for a consideration of 23,340,000
ordinary shares credited as fully paid up and with an estimated
fair value of $0.50 per share, taking into account assets and
liabilities acquired on acquisition. This relates to the
exploration and evaluation of PSC Block XX.
The ultimate recoupment of exploration and evaluation
expenditure is dependent upon successful development and commercial
exploitation or alternatively the sale of the respective areas of
interest at an amount at least equal to book value.
Management have reviewed for impairment indicators on Block XX
and no impairment has been noted.
During 2020, the Company was focused on providing all necessary
documentation to the Mongolian regulator in an effort to obtain
approval for its Exploitation Licence application, which would then
enable development of its 2019 Heron discovery in the northern area
of Block XX. The Exploitation Licence was approved on 5 July 2021,
which allows the Company to be able to appraise, develop and
produce oil from the area for a 25-year term, extendable by up to
10-years (two times 5-years)
13 Property, plant and equipment and Right-of-Use asset
Plant and equipment at cost 925 816
Accumulated depreciation and impairment (664) (717)
------ ------
261 99
------ ------
Right-of-Use asset 122 176
Accumulated depreciation - Right-of-Use
asset (30) (83)
------ ------
92 93
------ ------
Reconciliation of carrying amounts at the beginning and end of
the year:
Plant Right-of-Use
and equipment asset Total
Total Total Total
$'000 $'000 $'000
---------------- ------------- -------
As at 1 January 2021 (net of accumulated
depreciation) 145 36 181
Additions 16 176 192
Depreciation charge for the year (62) (119) (181)
As at 31 December 2021 (net of accumulated
depreciation) 99 93 192
================ ============= =======
Additions 212 122 334
Foreign exchange (16) (8) (24)
Depreciation charge for the year (34) (115) (149)
As at 31 December 2022 (net of accumulated
depreciation) 261 92 353
================ ============= =======
The following useful lives are used in the calculation of
depreciation: Plant and equipment - 2 to 10 years
31 Dec 31 Dec
2022 2021
$'000 $'000
--------- ---------
14 Trade and other payables ( c urrent)
Trade payables 456 371
Lease liability - 6
456 377
==== ====
Trade payables are non-interest bearing and are normally settled
within 60 day terms.
15 Issued capital
Ordinary Shares
898,761,649 shares issued and fully
paid
(2021: 898,761,649 ) 154,057 154,057
-------- --------
154,057 154,057
======== ========
Movements in ordinary shares on issue:
Issue
Number Price
of Shares $ $'000
------------ ------- --------
As at 1 January 2021 681,422,306 144,011
Placement shares through Shore Capital on 22 July
2021 (note (a)) 89,988,470 $0.048 4,332
Placement shares through Arden on 22 July 2021 (note
(b)) 65,252,142 $0.048 3,163
Placement shares through Primary Bid on 22 July 2021
(note (c)) 14,285,714 $0.048 689
Direct subscription shares on 6 August 2021 (note
(d)) 45,384,218 $0.048 2,200
Open Offer shares on 6 August 2021 (note (e)) 2,169,649 $0.048 104
Exercise of Conditional Share Awards on 20 December
2021 (note (f)) 259,150 $0.010 3
Capital raising cost (664)
Exercise of Awards 219
------------ --------
As at 31 December 2021 898,761,649 154,057
============ ========
No transactions during 2022 -
------------ --------
As at 31 December 2022 898,761,649 154,057
============ ========
(a) On 22 July 2021, the Company concluded a placing by issuing
89,988,470 shares at a price of GBP0.035 per share arranged through
its nominated adviser, broker and joint book runner for the
purposes of the Placing, Shore Capital Stockbrokers.
(b) On 22 July 2021, the Company concluded a placing by issuing
65,252,142 shares at a price of GBP0.035 per share arranged through
its joint book runner for the purposes of the Placing, Arden.
(c) On 22 July 2021, the Company concluded a placing by issuing
14,285,714 shares at a price of GBP0.035 per share through a retail
offering via Primary Bid.
(d) On 6 August 2021, the Company issued 45,384,218 shares
through direct subscriptions at a price of GBP0.035 per share.
(e) On 6 August 2021, the Company issued 2,169,649 shares
through Open Offer to shareholders at a price of GBP0.035 per
share.
(f) On 20 December 2021, 259,150 shares were allotted to a
Director and employees upon exercise of Conditional Share Awards
under the Group's Plan, with an exercise price per share of
USD0.01.
16 Reserves
A detailed breakdown of the reserves of the Group is as
follows:
Equity Foreign
Merger benefits currency
reserve reserve translation Total
$'000 $'000 $'000 $'000
---------- ---------- ------------- ------
As at 1 January 2021 831 1,780 (1,219) 1,392
Currency translation differences - - - -
Expiry of Options - (522) - (522)
Exercise of Awards - (219) - (219)
Share based payments - (469) - (469)
---------- ---------- ------------- ------
As at 31 December 2021 831 570 (1,219) 182
Currency translation differences - - (149) (149)
Expiry of Options - (33) - (33)
Share based payments - 8 - 8
As at 31 December 2022 831 545 (1,368) 8
========== ========== ============= ======
Nature and purpose of reserves
Merger reserve
The merger reserve arose from the Company's acquisition of
Capcorp on 12 November 2007. This transaction is outside the scope
of IFRS 3 'Business Combinations' and as such Directors have
elected to use UK Accounting Standards FRS 6 'Acquisitions and
Mergers'. The difference, if any, between the nominal value of the
shares issued plus the fair value of any other consideration, and
the nominal value of the shares received in exchange are recorded
as a movement on other reserves in the consolidated financial
statements.
Equity benefits reserve
The equity benefits reserve is used to record the value of
Options and Conditional Share Awards provided to employees and
Directors as part of their remuneration, pursuant to the Group's
Long-Term Equity Incentive Plan (Plan or Group's Plan). Refer to
Note 17 for further details of these plans.
Foreign currency translation reserve
The foreign currency translation reserve is used to record
exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
17 Share based payments
(a) Long Term Equity Incentive Plan (Plan or Group's Plan)
The Group provides long term incentives to employees (including
Executive Directors) , Non-Executive Directors and consultants
through the Group's Plan based on the achievement of certain
performance criteria. The Plan provides for share awards in the
form of Options and Conditional S hare A wards. The incentives are
awarded at the discretion of the Board, or in the case of Executive
Directors, the Remuneration Committee of the Board, who determine
the level of award and appropriate vesting, service and performance
conditions taking into account market practice and the need to
recruit and retain the best people.
Options may be exercised, subject only to continuing service,
during such period as the Board may determine. Options have a term
of 10 years.
Conditional S hare A wards shall vest subject to continuing
service and appropriate and challenging service and performance
conditions determined by the Remuneration Committee relating to the
overall performance of the Group.
Conditional S hare A wards based on performance conditions will
vest on achievement of the following performance conditions:
-- 25% vest on the first discovery of oil on a commercial scale,
determined by management as being 5 July 2021 upon the award of the
Exploitation License;
-- 25% vest on the first production of oil on a commercial
scale, estimated by management as to be achieved prior to 31
December 2024; and
-- 50% vest on the Company achieving the sale of 1 million
barrels of oil , estimated by management as being by 31 December
2025.
Other Conditional Share Awards have service conditions tied to
employment continuity and are available for vesting in three equal
annual instalments on various dates.
(b) Option pricing model
The fair value of Options granted is estimated as at the date of
grant using the Black Scholes model, taking into account the terms
and conditions upon which the Options were granted.
No Options have been issued during 2021 and 2022.
(c) Movement in Share Options
The weighted average fair value for all Options in existence as
at 31 December 2022 is 0.05 (2021: 0.19).
Opening Closing
balance balance Exercisable
at 1 Granted Forfeited Exercised as at as at
January during during during 31 December 31 December
2021 the year the year the year 2021 2021
Grant of Options on
6 April
2011 75,000 - (75,000) - - -
Grant of Options on
5 July
2011 150,000 - (150,000) - - -
Grant of Options on
22 Nov
2011 120,000 - (120,000) - - -
Grant of Options on
5 Dec
2011 23,600 - (23,600) - - -
Grant of Options on
25 Apr
2012 100,000 - - - 100,000 100,000
Grant of Options on
16 Jul
2012 24,000 - - - 24,000 24,000
Grant of Options on
4 Dec
2012 6,000 - - - 6,000 6,000
Grant of options on
9 July
2013 50,000 - - - 50,000 50,000
548,600 - (368,600) - 180,000 180,000
============ ========== ========== ============ ============= =============
Weighted Average
Exercise
Price (cents per
option) 108.67 - 149.92 - 24.2 24.2
============ ========== ========== ============ ============= =============
Opening Closing
balance balance Exercisable
at 1 Granted Lapsed Exercised as at as at
January during during during 31 December 31 December
2022 the year the year the year 2022 2022
Grant of Options on
25 Apr
2012 100,000 - (100,000) - - -
Grant of Options on
16 Jul
2012 24,000 - (24,000) - - -
Grant of Options on
4 Dec
2012 6,000 - (6,000) - - -
Grant of options on
9 July
2013 50,000 - - - 50,000 50,000
180,000 - (130,000) - 50,000 50,000
============ ========== ========== ============ ============= =============
Weighted Average
Exercise
Price (cents per
option) 24.2 - 31.07 - 6.33 6.33
============ ========== ========== ============ ============= =============
(d) Share Options Contractual Life
The weighted average remaining contractual life of outstanding
share Options is 0.5 year (2021: 0.7 years).
(e) Conditional Share Awards pricing model
The fair value of Conditional Share Awards granted is estimated
as at the date of grant using the Black Scholes model, taking into
account the terms and conditions upon which the Awards were
granted.
No awards were granted in 2021 and 2022.
(f) Movement in Conditional Share Awards
The weighted average fair value for all Awards in existence as
at 31 December 2022 is 0.84 (2021: 0.84)
Opening Closing
balance balance Exercisable
at 1 Granted Exercised Forfeited as at as at
January during during during 31 December 31 December
Consolidated 2021 the year the year the year 2021 2021
---------- ---------- ---------- ---------- ------------- -------------
Grant of Conditional Share
Awards
on 3 Jun 2008 265,000 - (41,250) (100,000) 123,750 -
Grant of Conditional Share
Awards
on 8 Apr 2009 80,000 - (20,000) - 60,000 -
Grant of Conditional Share
Awards
on 9 Jul 2010 422,000 - (71,500) (136,000) 214,500 -
Grant of Conditional Share
Awards
on 6 Apr 2011 144,000 - (6,000) (120,000) 18,000 -
Grant of Conditional Share
Awards
on 5 Jul 2011 180,000 - (45,000) - 135,000 -
Grant of Conditional Share
Awards
on 22 Nov 2011 50,000 - (12,500) - 37,500 -
Grant of Conditional Share
Awards
on 5 Dec 2011 39,600 - (7,150) (11,000) 21,450 -
Grant of Conditional Share
Awards
on 25 Apr 2012 400,000 - (25,000) (300,000) 75,000 -
Grant of Conditional Share
Awards
on 5 Oct 2012 150,000 - - (150,000) - -
Grant of Conditional Share
Awards
on 4 Dec 2012 3,000 - (750) - 2,250 -
Grant of Conditional Share
Awards
on 9 Jul 2013 120,000 - (30,000) - 90,000 -
1,853,600 - (259,150) (817,000) 777,450 -
========== ========== ========== ========== ============= =============
Weighted Average Exercise
Price
(cents per award) 1.00 - 1.00 1.00 1.00 -
========== ========== ========== ========== ============= =============
Opening Closing
balance balance Exercisable
at 1 Granted Exercised Lapsed as at as at
January during during during 31 December 31 December
Consolidated 2022 the year the year the year 2022 2022
---------- ---------- ---------- ---------- ------------- -------------
Grant of Conditional Share Awards
on 3 Jun 2008 123,750 - - - 123,750 -
Grant of Conditional Share Awards
on 8 Apr 2009 60,000 - - - 60,000 -
Grant of Conditional Share Awards
on 9 Jul 2010 214,500 - - - 214,500 -
Grant of Conditional Share Awards
on 6 Apr 2011 18,000 - - - 18,000 -
Grant of Conditional Share Awards
on 5 Jul 2011 135,000 - - - 135,000 -
Grant of Conditional Share Awards
on 22 Nov 2011 37,500 - - - 37,500 -
Grant of Conditional Share Awards
on 5 Dec 2011 21,450 - - - 21,450 -
Grant of Conditional Share Awards
on 25 Apr 2012 75,000 - - - 75,000 -
Grant of Conditional Share Awards
on 4 Dec 2012 2,250 - - - 2,250 -
Grant of Conditional Share Awards
on 9 Jul 2013 90,000 - - - 90,000 -
777,450 - - - 777,450 -
========== ========== ========== ========== ============= =============
Weighted Average Exercise Price
(cents per award) 1.00 - - - 1.00 -
========== ========== ========== ========== ============= =============
(g) Conditional Share Awards Contractual Life
The weighted average remaining contractual life of outstanding
Conditional Share Awards is 5.5 years (2021: 6.5 years).
(h) Summary of Share Based Payments
A reconciliation of all share-based payments made during the
year is as follows:
31 Dec 31 Dec
2022 2021
Note $'000 $'000
------- -------
Vesting of Options and Awards 17 8 (469)
------- -------
8 (469)
======= =======
31 Dec 31 Dec
2022 2021
Note $'000 $'000
------- -------
Lapsed Options 17 (33) (522)
(33) (522)
======= =======
18 Commitments and contingencies
(a) Operating lease commitments
Operating leases relate to premises used by the Group in its
operations, generally with terms between 2 and 5 years. Some of the
operating leases contain options to extend for further periods and
an adjustment to bring the lease payments into line with market
rates prevailing at that time. The leases do not contain an option
to purchase the leased property.
31 Dec 31 Dec
2022 2021
$'000 $'000
--------- -------
Operating Leases:
Within one year - 6
After one year but not more than
five years - -
Greater than five years - -
--------- -------
- 6
========= =======
(b) Exploration expenditure commitments
Petromatad Invest Limited and Capcorp have minimum spending
obligations, under the terms of their PSCs on Blocks V and XX with
MRPAM.
The amounts set out below do not include general and
administrative expenses.
31 Dec 31 Dec
2022 2021
$'000 $'000
------- -------
Production Sharing Contract Fees:
Within one year 286 286
After one year but not more than
five years 548 548
Greater than five years 1,518 1,606
------- -------
2,352 2,439
======= =======
Minimum Exploration Work Obligations:
Within one year
Greater than one year but no more
than five years - -
Greater than five years 6,480 6,499
------ ------
6,480 6,499
====== ======
(c) Contingencies
On 5 August 2016, Shell through its Affiliate company announced
it would be withdrawing from Blocks IV and V in West/Central
Mongolia. As part of the negotiations leading to formal Mongolian
Government approval of the reassignment of interest from Shell's
Affiliate to the Company's Affiliate, Shell agreed to a payment of
$5 million to be remitted to the Company's Affiliate upon such
government approval being received. A condition to the payment by
Shell is that the proceeds are required to be repaid to Shell by
the Company in the event a farmout is concluded in future prior to
the development of either Block IV or V. Block IV has since been
relinquished by the Company in its entirety. There is no certainty
that such farmout will be concluded in future in which case funds
would not be repaid. The $5 million payment was received on 1
February 2017.
19 Related party disclosures
The immediate parent and ultimate controlling party of the Group
is Petro Matad Limited.
The consolidated financial statements include the financial
statements of Petro Matad Limited and the subsidiaries listed in
the following table:
Equity Interest
Country of 2022 2021
Incorporation % %
---------------- -------- --------
Central Asian Petroleum Corporation
Limited Cayman Islands 100 100
Capcorp Mongolia LLC Mongolia 100 100
Petromatad Invest Limited Cayman Islands 100 100
Petro Matad LLC Mongolia 100 100
Petro Matad Singapore Pte Ltd Singapore 100 100
Subsidiary Details
Central Asian Petroleum Corporation Limited (Capcorp) was
acquired on 12 November 2007. Petro Matad Limited holds 43,340,000
ordinary shares of $0.01 each.
Capcorp Mongolia LLC is 100% owned by Capcorp. Capcorp holds 1
,0 00,000 ordinary shares of MNT150 each.
Petromatad Invest Limited was acquired on 12 November 2007.
25,000 shares of $1 each held by Capcorp was transferred to Petro
Matad Limited on 25 November 2019 resulting in Petro Matad Limited
holding 50,000 shares of $1 each.
Petro Matad LLC is 100% owned by Petromatad Invest Limited.
Petromatad Invest Limited holds 15,000 ordinary
shares of MNT10,000 each.
Petro Matad Singapore Pte. Ltd is 100% owned by Petro Matad
Limited. Petro Matad Limited holds 50,000 ordinary shares of
SG$1.
Balances and transactions between the Company and its
subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note.
Petrovis Matad Inc. (Petrovis) is a major shareholder of the C
ompany, holding approximately 21.08% of the shareholding at year
end of 2022.
20 Key management personnel
(a) Details of Directors
The names of the Company's Directors, having authority and
responsibility for planning, directing and controlling the
activities of the Group, in office during 2021 and 2022, are as
below:
The Directors were in office until the date of this report and
for this entire period unless otherwise stated .
D irectors
Enkhmaa Davaanyam Non-Executive Chairperson
Timothy Paul Bushell Non-Executive Director
Michael James Buck Chief Executive Officer
Shinezaya Batbold Non-Executive Director
(b) Compensation of Directors
Consolidated
31 Dec 31 Dec
2022 2021
$'000 $'000
------------- -------
Short-term employee benefits 685 478
Post-employment benefits - -
Share based payment expense 3 23
688 501
============= =======
(c) Other key management personnel transactions
There were no other key management personnel transactions during
the year (2021: Nil).
21 Financial risk management objectives and policies
The Group's principal financial instruments comprise cash and
short-term deposits classified as loans and receivables financial
assets.
The main purpose of these financial instruments is to raise
capital for the Group's operations.
The Group also has various other financial instruments such as
trade debtors and trade creditors, which arise directly from its
operations. It is, and has been throughout the year under review,
the Group's policy that no trading in financial instruments shall
be undertaken.
The main risks arising from the Group's financial instruments
are interest rate risk, foreign currency risk, credit risk and
liquidity risk.
The Board is responsible for identification and control of
financial risks. The Board reviews and agrees policies for managing
each of these risks as summarised below.
Risk Exposures and Responses
Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument or cash flow associated with the instrument will
fluctuate due to changes in market interest rate. Interest rate
risk arises from fluctuations in interest bearing financial assets
and liabilities that the Group uses. Interest bearing assets
comprise cash and cash equivalents which are considered to be
short-term liquid assets. It is the Group's policy to settle trade
payables within the credit terms allowed and the Group does
therefore not incur interest on overdue balances.
The following table sets out the carrying amount of the
financial instruments that are exposed to interest rate risk:
31 Dec
2022 31 Dec 2021
Weighted
Average
Int. rate $'000 $'000
------- ------------
Financial Assets
Cash and cash equivalents 0.00% 1,476 1,162
*Other financial assets 2.92% 1,017 7,045
------- ------------
2,493 8,207
Trade and other receivables 0% 2,607 21
5,100 8,228
Financial Liabilities
Trade and other payables 0% 456 371
------- ------------
456 371
Net exposure 4,644 7,857
======= ============
*Other financial assets are comprised of cash deposits placed in
the banks for terms exceeding 90 days.
Sensitivity Analysis
If the interest rate on cash balances at 31 December 2021 and
2022 weakened/strengthened by 1%, there would be no material impact
on profit or loss. There would be no effect on the equity reserves
other than those directly related to other comprehensive income
movements.
Foreign currency risk
As a result of operations overseas, the Group's statement of
financial position can be affected by movements in various exchange
rates.
The functional currency of Petro Matad Limited and
presentational currency of the Group is deemed to be USD because
the future revenue from the sale of oil will be denominated in USD
and the costs of the Group are likewise predominately in USD. Some
transactions are however dominated in currencies other than USD.
These transactions comprise operating costs and capital expenditure
in the local currencies of the countries w here the Group operates.
These currencies have a close relationship to the USD and
management believes that changes in the exchange rates will not
have a significant effect on the Group's financial statements.
The Group does not use forward currency contracts to eliminate
the currency exposures on any individual transactions.
The following significant exchange rates applied during the
year:
Average rate Spot rate at the balance
date
USD 2022 2021 2022 2021
--------- --------- ------------- ------------
Mongolian Tugrug (MNT) 1 3,139.80 2,849.26 3,444.60 2,848.80
Australian Dollar (AUD) 1 1.450052 1.332058 1.472423 1.378034
Great British Pound (GBP) 1 0.811255 0.727108 0.829194 0.741266
Sensitivity Analysis
A 5% strengthening/weakening of the MNT against USD at 31
December 2021 and 2022 would not have a material effect on profit
and loss or on equity.
Price risk
The Group's exposure to price risk is minimal as the Group is
currently not revenue producing other than from interest income
.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group is exposed to credit risk on
its cash and cash equivalents and other receivables as set out in
Notes 7 and 8 which also represent the maximum exposure to credit
risk. The G roup only deposits surplus cash with well-established
financial institutions of high quality credit standing.
In addition, receivable balances are monitored on an ongoing
basis with the result that the Group's exposure to bad debts is not
significant.
There are no significant concentrations of credit risk within
the Group.
Maximum exposure to credit risk at reporting date:
31 Dec 31 Dec
2022 2021
Note $'000 $'000
------- -------
Financial Assets
Trade and other receivables 8 2,607 21
------- -------
Net exposure 2,607 21
======= =======
Impairment Losses:
None of the Group's receivables are past due at 31 December 2022
(2021: Nil)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due.
The Group's approach to managing liquidity is to ensure, as far
as possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage
to the Group's reputation.
The Group's objective is to ensure that sufficient funds are
available to allow it to continue its exploration and development
activities.
The following table details the Group's expected maturity for
its non-derivative financial assets. The table has been drawn up
based on the undiscounted maturities of the financial assets
including interest that will be earned on those assets.
Weighted
average
interest 6 months 1-5 over 5
rate or less 6-12 months years years Total
$'000 $'000 $'000 $'000 $'000
----------- ------------ ------- ------- ------
Cash and cash equivalents 0.00% 1,476 - - - 1,476
Trade and other receivables - 2,607 - - - 2,607
Financial Assets 2.92% 1,017 - - - 1,017
----------- ------------ ------- ------- ------
As at 31 December 2022 5,100 - - - 5,100
Cash and cash equivalents 0.17% 1,162 - - - 1,162
Trade and other receivables - 21 - - - 21
Financial Assets 2.90% 7,045 - - - 7,045
As at 31 December 2021 8,225 - - - 8,225
=========== ============ ======= ======= ======
The remaining contractual maturities of the Group's and parent
entity's financial liabilities are:
31 Dec 31 Dec
2022 2021
$'000 $'000
------- -------
6 months or less 456 371
6-12 months - -
1-5 years - -
over 5 years - -
------- -------
456 371
======= =======
All of the Group's amounts payable and receivable are
current.
Further, the Group has exploration expenditure commitments on
its PSCs as disclosed in Note 18(b).
Fair Value of Financial Assets and Liabilities
The fair value of cash and cash equivalents and non-interest
bearing financial assets and financial liabilities of the Group
approximate their carrying value due to their short term
duration.
Fair Value Hierarchy as at 31 December
2022
Level Level
1 Level 2 3 Total
---------- ------------ --------- ---------
Financial Assets
Trade and other receivables - 2,607 - 2,607
--------- ------------ --------- ---------
Total - 2,607 - 2,607
========= ============ ========= =========
Financial Liabilities
Trade and other payables - 456 - 456
Total - 456 - 456
========= ============ ========= =========
Fair Value Hierarchy as at 31 December
2021
Level Level
1 Level 2 3 Total
---------- ------------ --------- ---------
Financial Assets
Trade and other receivables - 21 - 21
--------- ------------ --------- ---------
Total - 21 - 21
========= ============ ========= =========
Financial Liabilities
Trade and other payables - 371 - 371
Total - 371 - 371
========= ============ ========= =========
The fair values of the financial assets and financial
liabilities included in the level 2 category above have been
determined in accordance with generally accepted pricing models
based on a discounted cash flow analysis, with the most significant
inputs being the discount rate that reflects the credit risk of
counterparties.
22 Capital management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. The management of the Group and the Group's
capital is regularly reviewed by the Board. The capital structure
of the Group consists of cash and bank balances (Note 7) and equity
of the Group (comprising issued capital, reserves and retained
earnings as detailed in Notes 15 and 16). This is reviewed by the
Board of Directors as part of their regular Board meetings.
The Group monitors its capital requirements based on the funding
required for its exploration and development activities in Mongolia
and operations of the Company.
The Group is not subject to externally imposed capital
requirements.
23 Events after the reporting date
On 10 February 2023, the Company concluded a placing by issuing
94,787,994 shares at a price of GBP0.025 per share arranged through
its nominated adviser, broker and joint book runner for the
purposes of the Placing, Shore Capital.
On 10 February 2023, the Company concluded a placing by issuing
67,000,626 shares at a price of GBP0.025 per share arranged through
its broker and joint book runner for the purposes of the Placing,
Zeus Capital.
On 10 February 2023, the Company issued 33,333,332 shares
through direct subscriptions at a price of GBP0.025 per share.
On 10 February 2023, the Company issued 20,000,000 shares to
shareholders at a price of GBP0.025 per share through a retail
offering on the Bookbuild platform.
On 13 April 2023, the Company entered into a joint venture with
SunSteppe Energy (a renewable energy company focused on generation
of clean energy in Mongolia), to form Sun Steppe Power LLC,
incorporated in Mongolia and which is a 50% owned subsidiary of
Petro Matad LLC.
On 15 May 2023, Petro Matad Energy Limited a wholly owned
subsidiary of the Company was incorporated in Isle of Man.
On 29 May 2023, pursuant to the Group's Long Term Equity
Incentive Plan ("Plan"), 12,147,000 Options over shares were
granted to employees and consultants with an exercise price per
share of GBP0.048, exercisable in three parts as follows:
-- 33% after 29 May 2024;
-- 33% after 29 May 2025;
-- 34% after 29 May 2026.
24 Auditors' remuneration
The auditor of Petro Matad Limited is Hall Chadwick (WA) Pty
Ltd.
31 Dec 31 Dec
2022 2021
$'000 $'000
------- -------
Amounts received or due and receivable
by Hall Chadwick (WA) Pty Ltd:
- an audit or review of the financial
report of the entity and any other
entity in the Group 33 44
- other services in relation to
the entity and any other entity
in the Group - -
------- -------
33 44
Amounts received or due and receivable
by Deloitte Onch Audit LLC for:
- an audit or review of the financial
report of subsidiary entities 23 20
- other services in relation to
the subsidiary entities - -
------- -------
23 20
Amounts received or due and receivable
by Deloitte Infinity Assurance
LLP for:
- an audit or review of the financial
report of subsidiary entities 15 -
- other services in relation to
the subsidiary entities - -
------- -------
15 -
------- -------
71 64
======= =======
25 Other Information
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END
FR FMMATMTTTMLJ
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June 20, 2023 02:00 ET (06:00 GMT)
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