TIDMPXEN

RNS Number : 1389N

Prospex Energy PLC

28 September 2021

Prospex Energy Plc / Index: AIM / Epic: PXEN / Sector: Energy

Prospex Energy Plc ('Prospex' or the 'Company')

Half Year Report

Prospex Energy Plc, the AIM quoted investment company, is pleased to announce its Interim unaudited Results for the six months ended 30 June 2021.

Overview:

Financial

   --    GBP129,356 net profit after taxation from continuing operations (H1 2020 loss: GBP1,027,875). 

-- 13.48% increase in the net book value of investments to GBP4,109,225 (Full Year 2020: GBP3,620,890).

   --    GBP488,335 gain on revaluation of investments and loans (H1 2020 loss: GBP664,949). 
   --    GBP417,126 administrative expenses (H1 2020: GBP416,885). 

-- GBP750,000 raised via placing completed in March 2021 to fund the Company's acquisition of a 49.9% indirect stake in the El Romeral asset, an integrated gas production and power station operation located in Southern Spain

Operational

-- In March 2021, the Company announced the acquisition of the El Romeral project in southern Spain from a subsidiary of Naturgy. This acquisition has resulted in the Company earning increasing income throughout the year from electricity generation. Subsequent to the end of the period, there have been significant increases in electricity revenues with record prices being realised from the sale of electricity.

-- In May 2021, an application was submitted to convert the Tesorillo Project exploration permit into an exploitation concession before Spain's Climate Change Act came into force.

-- Subsequent to the end of the period, the Company signed a Sale & Purchase Agreement for the conditional acquisition of 20% of Podere Gallina licence in Italy. The acquisition is conditional on the transaction being financed, which the Company is progressing. Prospex's holding in the licence would increase from 17% to 37%. The transaction would add a further 2.7 billion cubic feet ("Bcf") of 2P gas reserves to Prospex's portfolio, increasing its share in Selva's 2P gas reserves to 5 Bcf. At Selva the Podere Maiar well was successfully drilled in 2018 and this well is expected to come into production by Q2 2022.

-- Subsequent to the end of the period, the Company approved the budget for Tarba Energia to proceed with a well workover and data acquisition programme on the El Romeral gas wells.

Mark Routh, CEO of Prospex, said, "Prospex has made significant strides during the period to expand and develop its position as an energy production and electricity generation company focussed on Europe. This strategy is being driven by the team's deep understanding of the upstream gas and resources industry, experience in the jurisdictions in which we are working and also by the positive working relationships that we have built with our partners and the relevant authorities.

"As shareholders will be aware, the landscape for European-focussed energy production companies has never been so positive in terms of pricing, and whilst we appreciate that the current pricing environment is unsustainable, we do recognise that there remains a critical need for indigenous energy resources to be unlocked in order to deliver accessible, reliable and affordable energy across Europe. The team at Prospex is working judiciously with our partners and the relevant authorities in Spain and Italy to set a benchmark for sustainable energy production and to help bridge this crucial energy gap alongside the proliferation of renewable sources.

"Since taking up the position of CEO at Prospex I laid out a clear plan for the future of the company in a detailed letter to all shareholders at the end of August 2021 which builds on solid foundations laid by the Company's founders.

"The Company's forward-plan and strategy is to focus on upstream gas developments and production and electricity generation in North-West Europe. We are an energy company, not an oil company, with the ambition to expand our portfolio with further gas-to-power projects and in time, blue hydrogen and other initiatives. The Company will target appraisal and development assets not exploration. We will be evaluating assets already in production for acquisition at fair market value.

"Despite the recent corporate disruptions, stemming from a group of shareholders requisitioning a General Meeting to remove the Board, we have continued to make solid progress as evidenced from the recent El Romeral well workover update provided to shareholders. We expect this forward momentum to continue once the General Meeting is resolved and I look forward to providing further updates on both our operational and debt financing developments in the coming weeks."

CHAIRMAN'S STATEMENT

Operational Report

The first six months of 2021 has seen key progress in both of the Company's key investments in Italy and Spain.

In Italy, March saw the full environmental approval from Italy's Ecological Transition Ministry for production development at the Selva field with the final Environmental Impact Assessment ('EIA') decree. This paves the way for the grant of a full production licence from Italy's Economic Development Ministry. The operator, Po Valley Energy Limited, continues to work the various strands that support its application for a full production licence for Selva which is currently expected in the fourth quarter of 2021. This includes applying for an INTESA (intergovernmental agreement) between the regional and national governments, which is a standard development procedure for onshore gas fields in Italy.

1 March 2021 was a significant day for Tarba Energia ('Tarba'), the Company through which Prospex holds its Spanish investments, with the completion of the El Romeral transaction. The El Romeral asset is a producing gas to power station selling electricity into the Spanish grid. Therefore, Tarba has successfully transferred from an exploration company into a production and generation company with net income. The plant and its employees have seamlessly transferred over to Tarba, following much preparation, which significantly bolstered the team and broadened its capabilities. Plant operations have been without incident and production hours are up on the prior year under the previous owners. Tarba, with collaboration from its shareholders has continued to review operations, both above and below ground at El Romeral, with the intention of increasing utilisation of the generating capacity at the power station. There have been several operational upgrades to the plant operation and there is ongoing work to optimise the generation capacity. Two of the three generators are operational, and work is planned to recommission the third generator in preparation for increased gas production expected from well interventions and workovers and the future infill well drilling campaign. The first well workover on one of the suspended wells (Rio Corbones) is planned for October. The permitting process for the infill wells is underway.

During the period, on 22 May 2021 Spain passed its Climate Change and Energy Transition Act 7/2021 (the "Climate Change Act"). Tarba sought advice from specialist legal advisors in the country. Based on this advice, an application was submitted to convert the vast majority of the existing Tesorillo Project to an exploitation concession. This application was submitted to MITECO on 12 May 2021 together with a field development plan for approval and all of the necessary supporting documents. The application was submitted before the Climate Change Act came into force. The outcome of this application will not be known for some time. Whilst the new legalisation states that no new hydrocarbon permits or licences will be granted in Spain, it specifically excluded existing permits. This confirmed that applications from existing permits prior to the Climate Change Act coming into force maintain their validity under the new law. Tarba's application is being considered by the regulators at a time of significantly rising prices for gas and LNG imports in Spain, which the Board believes should work in the Company's favour. The El Romeral exploitation concessions at which Tarba operates its gas to power plant are in force and are unaffected by the Climate Change Act.

The Tarba team has continued to liaise with various government agencies to progress drilling and environmental approvals for both El Romeral and Tesorillo. Tarba is targeting conventional sandstone gas reservoirs. There are no financial or drilling commitments attached to the Tesorillo Project Exploitation Concession application.

Financial Review

For the six months ended 30 June 2021, the Company is reporting a net profit after taxation from continuing operations of GBP129,356 (H1 2020: loss - GBP1,027,875). Unrealised gains arising on revaluation of financial assets at fair value totalled GBP488,335 (H1 2020: loss - GBP664,949). These unrealised gains are dominated by a revaluation of the Company's share in its subsidiary PXOG Marshall (in which the assets in the Podere Gallina licence in Italy are held), where the underlying licence valuation has been updated to reflect positive changes in the forward curve of European gas prices.

Administrative expenses of GBP417,126 for the year-to-date, compares with GBP416,885 for the six- month period ended 30 June 2020.

In March 2021, the Company raised GBP750,000 gross via an oversubscribed placing primarily to fund the planned programmes at El Romeral and the Podere Gallina licence.

In June the 2021 Company refinanced 83% of its outstanding 2018 Loan Notes. GBP321,681 of the then GBP386,017 outstanding loan notes were rolled over into the 2021 Loan note instrument, whilst increasing the interest rate to 12% the repayment dates have been extended by 18 months.

At 30 June 2021, the Company held cash and cash equivalents of GBP458,591 (30 June 2020: GBP170,866)

Outlook

The outlook for Prospex is one of consolidation and growth. With a shortage of gas across Europe, markets are experiencing record high gas and electricity prices. These prices are unlikely to be sustainable longer term. The drive to convert energy supply towards renewable energy sources must continue but cannot be achieved quickly. Local indigenous onshore gas is the optimum energy source to fulfil the energy gap whilst the transition to renewables gains pace. Prospex is well positioned to grow its business into this undeniable market opportunity, while using the strength of our team and our assets to invest in appropriate alternative energy sources

Following the Annual General Meeting of shareholders, the team leading your company has changed with Mark Routh becoming CEO and a director and Alasdair Buchanan joining as an additional non-executive director. These two individuals bring a significant depth of experience to the Board and management and have a thorough understanding of the existing assets and joint venture partners as well as bringing skills and experience to implementing new opportunities. Ed Dawson, former Managing Director and a founder of the company was instrumental in building the asset base of the Company to what it is today - a strong platform to build upon in Italy and Spain. James Smith, a former director, contributed technical strength and governance experience to the Board. I would like to extend my thanks to these individuals for the considerable work they put in to establishing the strong platform for growth that we now have.

Bill Smith

Non-Executive Chairman

For further information visit www.prospex.energy or contact the following:

 
Mark Routh          Prospex Energy PLC          Tel: +44 (0) 20 7236 
                                                                1177 
Rory Murphy         Strand Hanson Limited       Tel: +44 (0) 20 7409 
 Ritchie Balmer                                                 3494 
Colin Rowbury       Novum Securities Limited    Tel: +44 (0) 20 7399 
 Jon Belliss                                                    9427 
Duncan Vasey        Peterhouse Capital Limited  Tel: +44 (0) 20 7220 
                                                                9797 
Susie Geliher       St Brides Partners Ltd      Tel: +44 (0) 20 7236 
 Catherine Leftley                                              1177 
 

Prospex Energy Plc

Interim results

For the six months ended 30 June 2021

Statement of profit or loss and other comprehensive income

 
                                                    Six months               Six months 
                                                         ended                    ended                 Year ended 
                                                       30 June                  30 June                31 December 
                                ------------------------------  -----------------------  ------------------------- 
                                                          2021                     2020                       2020 
                                                   (unaudited)              (unaudited)                  (audited) 
                                              GBP                         GBP                       GBP 
 
 CONTINUING OPERATIONS 
 Other income                                           61,335                  136,292                    247,143 
 Administrative expenses                             (417,126)                (416,885)                  (870,018) 
 Share-based payment charge                                  -                (102,175)                  (102,175) 
                                ------------------------------  -----------------------  ------------------------- 
 
 OPERATING LOSS                                      (355,791)                (382,768)                  (725,050) 
 
 Gain/(loss) on revaluation 
  of investments and loans                             488,335                (664,949)                (1,121,815) 
                                ------------------------------  -----------------------  ------------------------- 
 
                                                       132,544              (1,047,717)                (1,846,865) 
 
 Finance income                                         50,093                   47,334                     91,362 
 
 Finance costs                                        (53,281)                 (27,492)                   (50,989) 
                                    --------------------------  -----------------------  ------------------------- 
 
 PROFT/(LOSS) BEFORE INCOME 
  TAX                                                  129,356              (1,027,875)                (1,806,492) 
 
 Income tax                                                  -                        -                          - 
                                    --------------------------  -----------------------  ------------------------- 
 
 PROFIT/(LOSS) AND TOTAL 
  COMPREHENSIVE 
  LOSS FOR THE PERIOD                                  129,356              (1,027,875)                (1,806,492) 
                                    ==========================  =======================  ========================= 
 
 Earnings/(loss) per share 
 - Basic and diluted                                     0.11p                  (1.24)p                    (2.10)p 
                                    ==========================  =======================  ========================= 
 
 

Statement of financial position

As at 30 June 2021

 
                                                   30 June                   30 June                 31 December 
                                --------------------------  ------------------------  -------------------------- 
                                                      2021                      2020                        2020 
                                               (unaudited)               (unaudited)                   (audited) 
                                            GBP                        GBP                        GBP 
 ASSETS 
 NON-CURRENT ASSETS 
 Property, plant and 
 equipment                                               -                         -                           - 
 Investment                                      4,109,225                 3,983,439                   3,620,890 
 Loans and other financial 
  assets                                                 -                   359,717                           - 
 Trade and other receivables                     1,058,766                   921,643                     989,645 
                                                 5,167,991                 5,264,799                   4,610,535 
                                --------------------------  ------------------------  -------------------------- 
 
 CURRENT ASSETS 
 Trade and other receivables                       921,364                   766,662                     917,058 
 Cash and cash equivalents                         458,591                   170,866                     220,618 
                                --------------------------  ------------------------  -------------------------- 
                                                 1,379,955                   937,528                   1,137,676 
                                --------------------------  ------------------------  -------------------------- 
 
 TOTAL ASSETS                                    6,547,946                 6,202,327                   5,748,211 
                                ==========================  ========================  ========================== 
 
 
 EQUITY 
 SHAREHOLDERS' EQUITY 
 Called up share capital                         7,085,589                 7,035,589                   7,035,589 
 Share premium account                          10,855,416                10,185,819                  10,185,819 
 Capital redemption reserve                         43,333                    43,333                      43,333 
 Merger reserve                                  2,416,667                 2,416,667                   2,416,667 
 Retained earnings                            (14,835,674)              (14,186,413)                (14,965,030) 
                                --------------------------  ------------------------  -------------------------- 
 
 TOTAL EQUITY                                    5,565,331                 5,494,995                   4,716,378 
                                --------------------------  ------------------------  -------------------------- 
 
 LIABILITIES 
 NON-CURRENT LIABILITIES 
 Financial liabilities - 
 borrowings 
  Bank loans                                        40,195                    49,632                           - 
  Interest bearing loans and 
   borrowings                                      321,680                   265,848                     579,998 
                                --------------------------  ------------------------  -------------------------- 
                                                   361,875                   315,480                     579,998 
                                --------------------------  ------------------------  -------------------------- 
 
 CURRENT LIABILITIES 
 Trade and other payables                          152,574                   143,011                     164,262 
 Financial liabilities - 
 borrowings 
  Bank loans                                         9,437                         -                           - 
  Interest bearing loans and 
   borrowings                                      458,729                   248,841                     287,573 
                                --------------------------  ------------------------  -------------------------- 
 
                                                   620,740                   391,852                     451,835 
                                --------------------------  ------------------------  -------------------------- 
 
 TOTAL LIABILITIES                                 982,615                   707,332                   1,031,833 
                                --------------------------  ------------------------  -------------------------- 
 
 TOTAL EQUITY AND LIABILITIES                    6,547,946                 6,202,327                   5,748,211 
                                ==========================  ========================  ========================== 
 

Statement of changes in equity

For the six months ended 30 June 2021

 
                                                                                                                    Capital 
                                       Share                     Share                    Retained               redemption               Merger 
                                     capital                   premium                    earnings                  reserve              reserve          Total 
                              GBP                        GBP                        GBP                       GBP                    GBP               GBP 
 Unaudited 
 At 1 January 
  2021                             7,035,589                10,185,819                (14,965,030)                   43,333            2,416,667      4,716,378 
 Total 
  comprehensive 
  income 
  for the period                           -                         -                     129,356                        -                    -        129,356 
 Issue of shares                      50,000                   700,000                           -                        -                    -        750,000 
 Costs in 
  respect of 
  shares 
  issued                                   -                  (54,900)                           -                        -                    -       (54,900) 
 Equity settled 
  share-based 
  payment                                  -                    24,497                           -                        -                    -         24,497 
 At 30 June 2021                   7,085,589                10,855,416                (14,835,674)                   43,333            2,416,667      5,565,331 
                  ==========================  ========================  ==========================  =======================  ===================  ============= 
 
 Unaudited 
 At 1 January 
  2020                             6,435,587                10,095,358                (13,260,713)                   43,333            2,416,667      5,730,232 
 Total 
  comprehensive 
  income 
  for the period                           -                         -                 (1,027,875)                        -                    -    (1,027,875) 
 Issue of shares                     600,002                   119,998                           -                        -                    -        720,000 
 Costs in 
  respect of 
  shares 
  issued                                   -                  (29,537)                           -                        -                    -       (29,537) 
 Equity settled 
  share-based 
  payment                                  -                         -                     102,175                        -                    -        102,175 
 At 30 June 2020                   7,035,589                10,185,819                (14,186,413)                   43,333            2,416,667      5,494,995 
                  ==========================  ========================  ==========================  =======================  ===================  ============= 
 
 Audited 
 At 1 January 
  2020                             6,435,587                10,095,358                (13,260,713)                   43,333            2,416,667      5,730,232 
 Total 
  comprehensive 
  income 
  for the year                             -                         -                 (1,806,492)                        -                    -    (1,806,492) 
 Issue of shares                     600,002                   119,998                           -                        -                    -        720,000 
 Costs in 
  respect of 
  shares 
  issued                                   -                  (29,537)                           -                        -                    -       (29,537) 
 Equity settled 
  share-based 
  payments                                 -                         -                     102,175                        -                    -        102,175 
 At 31 December 
  2020                             7,035,589                10,185,819                (14,965,030)                   43,333            2,416,667      4,716,378 
                  ==========================  ========================  ==========================  =======================  ===================  ============= 
 

Statement of Cash Flows

For the six months ended 30 June 2021

 
                                                 Six months                   Six months 
                                                      ended                        ended              Year ended 
                                                    30 June                      30 June             31 December 
                                ---------------------------  ---------------------------  ---------------------- 
                                                       2021                         2020                    2020 
                                                (unaudited)                  (unaudited)               (audited) 
                                            GBP                          GBP                        GBP 
 Operating activities 
 Profit/(loss )before income 
  tax                                               129,356                  (1,027,875)             (1,806,492) 
 (Gain)/loss on revaluation 
  of investments and loans                        (488,335)                      664,949                 377,498 
 Provision against loan to 
  subsidiary undertaking                                  -                            -                 744,317 
 Finance income                                    (50,093)                     (47,334)                (91,362) 
 Finance costs                                       53,281                       27,492                  50,989 
                                ---------------------------  ---------------------------  ---------------------- 
 Operating loss                                   (355,791)                    (382,768)               (725,050) 
 Increase in trade and other 
  receivables                                      (23,334)                    (415,834)               (590,204) 
 (Decrease)/increase in trade 
  and other payables                               (11,688)                       41,824                  67,968 
 Share-based payment charge                          24,497                      102,175                 102,175 
 Issue of loan notes to settle 
  liabilities                                             -                            -                  38,250 
                                ---------------------------  ---------------------------  ---------------------- 
 
 Net cash used in operating 
  activities                                      (366,316)                    (654,603)             (1,106,861) 
                                ---------------------------  ---------------------------  ---------------------- 
 
 Investing activities 
 Interest paid                                     (53,281)                     (23,274)                (51,664) 
                                ---------------------------  --------------------------- 
 
 Net cash used in from 
  investing 
  activities                                       (53,281)                     (23,274)                (51,664) 
                                ---------------------------  ---------------------------  ---------------------- 
 
 Financing activities 
 New loan notes in period                                 -                            -                 265,000 
 New bank loans in period                                 -                       49,632                  49,632 
 Loan (payments)/repayments 
  in period                                        (37,530)                       39,261                 304,661 
 Issue of share capital                             750,000                      720,000                 720,000 
 Costs in respect of share 
  issue                                            (54,900)                     (29,537)                (29,537) 
 
 Net cash generated from 
  financing 
  activities                                        657,570                      779,356               1,309,756 
                                ---------------------------  ---------------------------  ---------------------- 
 
 Net increase in cash and cash 
  equivalents                                       237,973                      101,479                 151,231 
 
 Cash and cash equivalents 
  at start of period                                220,618                       69,387                  69,387 
                                ---------------------------  ---------------------------  ---------------------- 
 
 Cash and cash equivalents 
  at end of period                                  458,591                      170,866                 220,618 
                                ===========================  ===========================  ====================== 
 

Notes to the interim financial statements

   1          General information 

Prospex Energy Plc is a company incorporated in the United Kingdom, which is listed on the Alternative Investment Market of the London Stock Exchange Plc. The address of its registered office is Stonebridge House, Chelmsford Road, Hatfield Heath, Essex CM22 7BD. The Group is primarily involved in the exploration for, and the production of, natural gas.

   2          Financial information 

The interim financial information for the six months ended 30 June 2021 and 2020 have not been audited or reviewed and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The comparative financial information for the year ended 31 December 2020 has been derived from the audited financial statements for that period. A copy of those statutory financial statements for the year ended 31 December 2020 has been delivered to the Registrar of Companies. The report of the independent auditors on those financial statements was unqualified, drew attention to a material uncertainty relating to going concern and did not contain a statement under Sections 498 (2) or (3) of the Companies Act 2006.

The interim financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 as they apply to the financial statements of the Company for the six months ended 30 June 2021 and as applied in accordance with the provisions of the Companies Act 2006 and under the historical cost convention or fair value where appropriate. They have also been prepared on a basis consistent with the accounting policies expected to be applied for the year ending 31 December 2021 and which are also consistent with those set out in the statutory accounts of the Company for the year ended 31 December 2020.

The interim financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the company operates.

   3          Taxation 

On the basis of these accounts there is no tax charge for the period.

   4          Earnings/loss per share 

The profit/loss and number of shares used in the calculation of earnings per share are as follows:

 
                                       Six months     Six months 
                                            ended          ended       Year ended 
                                          30 June        30 June      31 December 
                                    -------------  -------------  --------------- 
                                             2021           2020             2020 
                                      (unaudited)    (unaudited)        (audited) 
 Basic and diluted 
 Profit/(loss) for the financial 
  period                                  129,356    (1,027,875)      (1,806,492) 
 Weighted average number of 
  shares                              116,168,109     83,137,132       85,855,239 
 Loss per share                             0.11p        (1.24)p          (2.10)p 
                                    =============  =============  =============== 
 

The profit/loss and the weighted average number of shares used for calculating the diluted loss per share are identical to those for the basic loss per share. The exercise prices of the outstanding share options and share warrants are above the average market price of the shares and would therefore not be dilutive under IAS 33 'Earnings per Share.'.

   5          Non-current investment 
 
                                Shares in 
                                    Group                  Unlisted 
                             undertakings               investments            Totals 
                                      GBP                       GBP               GBP 
 Unaudited 
 At 1 January 2021              3,570,890                    50,000         3,620,890 
 Revaluations                     488,335                         -           488,335 
 At 30 June 2021                4,059,225                    50,000         4,109,225 
                        =================  ========================  ================ 
 
 Unaudited 
 At 1 January 2020              3,948,388                    50,000         3,998,388 
 Revaluations                    (14,949)                         -          (14,949) 
 At 30 June 2020                3,933,439                    50,000         3,983,439 
                        =================  ========================  ================ 
 
 Audited 
 At 1 January 2020              3,948,388                    50,000         3,998,388 
 Revaluations                   (377,498)                         -         (377,498) 
 At 31 December 2020            3,570,890                    50,000         3,620,890 
                        =================  ========================  ================ 
 

The investments in subsidiary undertakings are accounted for at fair value through the profit and loss, as the Company is deemed to be an Investment Entity.

   6          Dividends 

The directors do not propose to declare a dividend for the period.

   7          Copies of interim results 

Copies of the interim results can be obtained from the website www.prospex.energy . From this site you may access our financial reports and presentations, recent press releases and details about the company and its operations.

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