TIDMVLU
RNS Number : 6278H
Valeura Energy Inc.
05 August 2021
VALEURA ENERGY
SECOND QUARTER 2021 RESULTS
Calgary, August 5, 2021 : Valeura Energy Inc. (TSX:VLE, LSE:VLU)
(the "Company" or "Valeura"), an upstream oil and gas company with
assets in the Thrace Basin of Turkey, reports its unaudited
financial and operating results for the three month period ended
June 30, 2021.
Highlights
-- Shallow sale - The Company closed the sale of its
conventional gas business on May 26, 2021 and received net sale
proceeds of US$16.85 million in cash (including closing working
capital and effective date adjustments) plus deferred cash
consideration valued at US$1.0 million;
-- Financial position - Cash position of US$42.6 million at June 30, 2021;
-- Strategy - Continuing to pursue near-term inorganic growth
opportunities and seeking a suitable partner to farm-in to the
Company's 20 Tcfe unrisked mean prospective resource deep, tight
gas play.
Sean Guest, President and CEO commented:
"Our second quarter results reflect the close-out operating
results from our conventional gas production and financial impact
of having completed the sale. In addition to the immediate growth
in our cash position to US$42.6 million, with the sale completed we
are now entitled to future royalty income and are able to pursue
our growth-oriented strategy as a smaller and leaner organisation.
This structure sets us up well to evaluate new business
opportunities with minimal strain on the balance sheet.
"We continue to be active in evaluating mergers and acquisitions
opportunities. Our remit includes an expanded geographic scope,
with a focus on regions where the experience of our management team
and board gives us a competitive advantage. In all instances, we
are committed to only doing transactions which bring near term cash
flow, plus the opportunity for material value generation. At the
same time, our efforts to find a suitable partner for our deep
tight gas appraisal play are continuing, and we believe the 20 Tcfe
unrisked mean prospective resource in this play will serve to
generate value for shareholders in the longer term."
Shallow Sale Completion
Valeura's sale of the conventional gas producing business closed
on May 26, 2021 and the Company's Q2 2021 financial results still
include production revenue and costs up to that date.
The Company's sale of its conventional gas producing business
has resulted in a gain on disposal of US$6.1 million. Valeura
received net sale proceeds of US$16.85 million, being the headline
purchase consideration of US$15.5 million, as adjusted to reflect
working capital adjustments at closing, in addition to the economic
impact of production dating back to the sale's effective date of
July 1, 2020.
The Company has also recorded US$1.0 million in deferred
consideration on its balance sheet, in recognition of the present
value of the future royalty payments, to which it is entitled as
part of the sale transaction.
With the close of the sale and disposition of subsidiary
companies, Valeura is required to reclassify its non-cash
accumulated foreign exchange losses which had been recorded on its
balance sheet as Accumulated Other Comprehensive Income or Loss
("AOCI") since the original asset acquisition in 2011. Due to the
significant decline in the value of the Turkish Lira over the past
decade, the AOCI due to currency translation, amounting to a loss
of US$67.0 million, is transferred to retained earnings through the
Statement of Profit and Loss. This, combined with the gain on
disposal of US$6.1 million are the main drivers for the quarter's
Net loss of US$61.5 million.
Strategy Update
With the conclusion of the shallow sale Valeura has a strong
financial position including US$42.6 million in cash resources at
the end of Q2, no debt, and an internationally experienced
management team and board, Valeura is well positioned to grow by
way of mergers and acquisitions ("M&A"). In addition, as a
leaner organisation carrying a lower G&A burden plus the
expectation of future incoming royalty payments, the Company can
pursue its evaluation work without placing significant strain on
its financial resources. Valeura is progressing on several M&A
targets that provide near-term cashflow, plus the opportunity for
medium-term re-investment to generate material value through
growth. The Company takes an uncompromising approach to these
screening criteria and is squarely focussed on only executing
transactions that will lead to significant value growth for
shareholders.
In the longer term, Valeura intends to deliver value from its
deep, unconventional tight gas play in the Thrace Basin (the "Deep
Gas Play"). Its three exploration licences in the core of the Deep
Gas Play are valid up to June 27, 2022, and under Turkey's licence
terms the Company has the ability to maintain these assets for up
to approximately five more years through work programme
commitments, which do not require material near term cost outlays,
prior to converting the exploration licences to longer term
production leases. With the easing of COVID-related travel
restrictions, the Company is pursuing a plan to farm out a portion
of its interest in the Deep Gas Play in order to jointly pursue the
next phase of appraisal work.
Additional information and commentary on the three months ended
March 31, 2021, is included in the Company's management's
discussion and analysis, which is available on the Company's
website and on www.sedar.com .
For further information please contact:
Valeura Energy Inc. (General and Investor Enquiries) +1 403 237 7102
Sean Guest, President and CEO
Heather Campbell, CFO
Robin Martin, Investor Relations Manager
Contact@valeuraenergy.com , IR@valeuraenergy.com
Auctus Advisors LLP (Corporate Broker) +44 (0) 7711 627 449
Jonathan Wright
Valeura@auctusadvisors.co.uk
CAMARCO (Public Relations, Media Adviser) +44 (0) 20 3757 4980
Owen Roberts, Billy Clegg, Monique Perks, Hugo Liddy
Valeura@camarco.co.uk
Resources
Resource disclosure in this announcement is based on an
independent resources evaluation as at December 31, 2018 conducted
by DeGolyer and MacNaughton in its report dated March 13, 2019,
which was prepared using guidelines outlined in the Canadian Oil
and Gas Evaluation Handbook and in accordance with National
Instrument 51-101, Standards of Disclosure for Oil ang Gas
Activities, as adjusted to reflect Equinor's withdrawal in Q1 2020.
Prospective resources are those quantities of petroleum estimated,
as of a given date, to be potentially recoverable from undiscovered
accumulations by application of future development projects.
Prospective resources have both an associated chance of discovery
and a chance of development. The unrisked estimates of prospective
resources referred to in this announcement have not been risked for
either the chance of discovery or the chance of development. There
is no certainty that any portion of the prospective resources will
be discovered. If a discovery is made, there is no certainty that
it will be developed or, if it is developed, there is no certainty
as to the timing of such development or that it will be
commercially viable to produce any portion of the prospective
resources. Additional resources information is included in the
Company's annual information form for the year ended December 31,
2018.
Advisory and Caution Regarding Forward-Looking Information
Certain information included in this new release constitutes
forward-looking information under applicable securities
legislation. Such forward-looking information is for the purpose of
explaining management's current expectations and plans relating to
the future. Readers are cautioned that reliance on such information
may not be appropriate for other purposes, such as making
investment decisions. Forward- looking information typically
contains statements with words such as "anticipate", "believe",
"expect", "plan", "intend", "estimate", "propose", "project",
"target" or similar words suggesting future outcomes or statements
regarding an outlook. Forward-looking information in this new
release includes, but is not limited to: the Company's entitlement
to royalty payments over a five-year period; statements with
respect to the Company's inorganic growth strategy, including its
ability to identify M&A targets; statements with respect to the
Company's deep tight gas play strategy, including management's
belief that the play represents a material value proposition for
shareholders, and its ability to find another partner for the play.
In addition, statements related to "resources" are deemed to be
forward-looking information as they involve the implied assessment,
based on certain estimates and assumptions, that the resources can
be discovered and profitably produced in the future.
Forward-looking information is based on management's current
expectations and assumptions regarding, among other things:
approvals forthcoming from the Turkish government in a manner
consistent with past conduct; future drilling activity on the
required/expected timelines; the prospectivity of the Company's
lands, including the deep potential; future sources of funding;
future economic conditions; future currency exchange rates; the
ability to meet drilling deadlines and other requirements under
licences and leases; the ability to attract a new partner in the
deep play; the ability to identify attractive merger and
acquisition opportunities to support growth; and the Company's
continued ability to obtain and retain qualified staff and
equipment in a timely and cost efficient manner. In addition, the
Company's work programmes and budgets are in part based upon
expected agreement among joint venture partners and associated
exploration, development and marketing plans and anticipated costs
and sales prices, which are subject to change based on, among other
things, the actual results of drilling and related activity,
availability of drilling,
high-pressure hydraulic stimulation and other specialised
oilfield equipment and service providers, changes in partners'
plans and unexpected delays and changes in market conditions.
Although the Company believes the expectations and assumptions
reflected in such forward-looking information are reasonable, they
may prove to be incorrect.
Forward-looking information involves significant known and
unknown risks and uncertainties. Exploration, appraisal, and
development of oil and natural gas reserves are speculative
activities and involve a degree of risk. A number of factors could
cause actual results to differ materially from those anticipated by
the Company including, but not limited to: inability to secure a
new partner for the deep play and execute potential M&A
transactions; the risks of further disruptions from the COVID-19
pandemic; the risks of currency fluctuations; potential changes in
joint venture partner strategies and participation in work
programmes; uncertainty regarding the contemplated timelines and
costs for the deep evaluation; potential changes in laws and
regulations, the uncertainty regarding government and other
approvals; counterparty risk; and the risk associated with
international activity. The forward-looking information included in
this new release is expressly qualified in its entirety by this
cautionary statement. See the AIF for a detailed discussion of the
risk factors.
The forward-looking information contained in this new release is
made as of the date hereof and the Company undertakes no obligation
to update publicly or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
unless required by applicable securities laws. The forward-looking
information contained in this new release is expressly qualified by
this cautionary statement.
Additional information relating to Valeura is also available on
SEDAR at www.sedar.com .
This Announcement contains inside information as defined in EU
No. 596/2014, part of UK law by virtue of the European Union
(Withdrawal) Act 2018, and is in accordance with the Company's
obligations under Article 17 of that Regulation.
This announcement does not constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction,
including where such offer would be unlawful. This announcement is
not for distribution or release, directly or indirectly, in or into
the United States, Ireland, the Republic of South Africa or Japan
or any other jurisdiction in which its publication or distribution
would be unlawful.
Neither the Toronto Stock Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the Toronto
Stock Exchange) accepts responsibility for the adequacy or accuracy
of this news release.
Condensed Interim Consolidated Statements of Financial
Position
(thousands of US Dollars, December 31,
unaudited) June 30, 2021 2020
--------------------------------- ----------------------------- ----------------
Assets
Current Assets
Cash and cash equivalents $ 42,626 $ 30,143
Restricted cash (note 3) 17 232
Accounts receivable 725 199
Prepaid expenses and deposits 596 330
Assets held for sale (note
4) - 22,032
43,964 52,936
Deferred consideration (note
4) 1,041 -
Exploration and evaluation
assets (note 5) 1,571 1,643
Property, plant and equipment
(note 6) 261 278
$ 46,837 $ 54,857
--------------------------------- ----------------------------- ----------------
Liabilities and Shareholders'
Equity
Current Liabilities
Accounts payable and accrued
liabilities $ 514 $ 506
Liabilities directly associated
with the assets held for sale
(note 4) - 10,240
---------------------------------- ----------------------------- ----------------
514 10,746
Decommissioning obligations
(note 7) 1,306 2,161
1,820 12,907
Shareholders' Equity
Share capital (note 8) 179,717 179,717
Contributed surplus 22,454 22,410
Accumulated other comprehensive
loss (note 4) 10,329 (55,288)
Deficit (167,483) (104,889)
---------------------------------- ----------------------------- ----------------
45,017 41,950
--------------------------------- ----------------------------- ----------------
$ 46,837 $ 54,857
--------------------------------- ----------------------------- ----------------
See accompanying notes to the condensed interim consolidated
financial statements.
Condensed Interim Consolidated Statements of Loss and
Comprehensive Income (Loss)
For the three and six months ended June 30, 2021 and 2020
Three Months Ended Six Months Ended
-------------------------- -------------------------------------------- --------------------------------------------
(thousands of US Dollars, June 30, June 30, June 30, June 30,
unaudited) 2021 2020 2021 2020
-------------------------- --------------------- --------------------- --------------------- ---------------------
Revenue (note 10)
Petroleum and natural gas
sales $ 1,040 $ 1,918 $ 3,126 $ 4,726
Royalties (144) (258) (423) (636)
Other Income 103 101 232 369
-------------------------- --------------------- --------------------- --------------------- ---------------------
999 1,761 2,935 4,459
-------------------------- --------------------- --------------------- --------------------- ---------------------
Expenses and other items
Production 444 881 1,214 1,682
General and
administrative 989 911 2,647 2,141
Severance 60 - 206 450
Transaction costs 25 - 69 -
Accretion on
decommissioning
liabilities
(notes 4 and 7) 189 241 466 459
Foreign exchange (gain)
loss (332) 815 412 (502)
Settlement income - (332) - (332)
Share-based compensation
(note
8) 95 254 19 411
Change in estimate on
decommissioning
liabilities (note 7) 45 - (664) -
Depletion and
depreciation (notes
6) 7 944 14 2,222
1,522 3,714 4,383 6,531
Loss for the period
before other
items (523) (1,953) (1,448) (2,072)
Gain on sale (note 4) 6,134 - 6,134 -
Currency translation on
subsidiaries
disposed (note 4) (67,005) - (67,005) -
-------------------------- --------------------- --------------------- --------------------- ---------------------
(60,871) - (60,871) -
-------------------------- --------------------- --------------------- --------------------- ---------------------
Loss for the period
before income
taxes (61,394) (1,953) (62,319) (2,072)
Income taxes
Current tax expense 19 - 41 -
Deferred tax expense
(recovery) 120 (54) 234 19
Net loss (61,533) (1,899) (62,594) (2,091)
Other comprehensive
income (loss)
Currency translation on
subsidiaries
disposed (note 4) 67,005 - 67,005 -
Currency translation
adjustments (661) (236) (1,388) (6,081)
-------------------------- --------------------- --------------------- --------------------- ---------------------
Comprehensive income
(loss) $ 4,811 $ (2,135) $ 3,023 $ (8,172)
-------------------------- --------------------- --------------------- --------------------- ---------------------
Net loss per share (note
8)
Basic and diluted $ (0.71) $ (0.02) $ (0.72) $ (0.02)
Weighted average number
of shares
outstanding (thousands) 86,585 86,585 86,585 86,585
-------------------------- --------------------- --------------------- --------------------- ---------------------
See accompanying notes to the condensed interim consolidated
financial statements.
Condensed Interim Consolidated Statements of Cash Flows
For the three and six months ended June 30, 2021 and 2020
Three Months Ended Six Months Ended
(thousands of US Dollars, June 30, June 30, June 30, June 30,
unaudited) 2021 2020 2021 2020
Cash was provided by (used
in):
Operating activities:
Net loss for the period $ (61,533) $ (1,899) $ (62,594) $ (2,091)
Depletion and depreciation
(note 6) 7 944 14 2,222
Share-based compensation (note
8) 95 254 19 411
Accretion on decommissioning
liabilities (note7) 189 241 466 459
Change in estimate on decommissioning
liabilities (note7) 45 - (664) -
Disposition (note 4) 60,871 - 60,871 -
Unrealized foreign exchange
loss (gain) (313) 853 442 (629)
Deferred tax expense (recovery) 120 (54) 234 19
Decommissioning costs incurred - (1) - (17)
Change in restricted cash 217 - 215 -
Change in non-cash working
capital (note 11) (375) 854 (128) 1,629
--------------------------------------- ------------- ------------- ---------------------------
Cash (used in) provided by
operating activities (677) 1,192 (1,125) 2,003
--------------------------------------- ------------- ------------- ---------------------------
Financing activities:
Principal payments on lease
liability - (17) (28) (41)
Cash used in financing activities - (17) (28) (41)
---------------------------------------
Investing activities:
Property and equipment expenditures
(note 6) (2) (684) (2) (2,145)
Exploration and evaluation
expenditures (note 5) (86) (1,050) (154) (1,471)
Assets held for sale expenditures (91) - (163) -
Net cash received on disposition
(note 4) 14,358 - 14,358 -
Change in restricted cash - (1) - (15)
Change in non-cash working
capital (note 11) (412) (1,596) (584) (2,642)
--------------------------------------- ------------- ------------- ---------------------------
Cash used in investing activities 13,767 (3,331) 13,455 (6,273)
--------------------------------------- ------------- ------------- ---------------------------
Foreign exchange gain (loss)
on cash held in foreign currencies 152 71 181 (1,331)
--------------------------------------- ------------- ------------- ---------------------------
Net change in cash and cash
equivalents 13,242 (2,085) 12,483 (5,642)
Cash and cash equivalents,
beginning of period 29,384 32,554 30,143 36,111
--------------------------------------- ------------- ------------- ---------------------------
Cash and cash equivalents,
end of period $ 42,626 $ 30,469 $ 42,626 $ 30,469
--------------------------------------- -------------- ------------- ------------- ---------------------------
See accompanying notes to the condensed interim consolidated
financial statements.
Condensed Interim Consolidated Statements of Changes in
Shareholders' Equity
For the six months ended June 30, 2021 and 2020
(thousands of
US Dollars and Number
thousands of of Accumulated
shares, common Contributed Other Comp. Total Shareholders'
unaudited) shares Share Capital Surplus Deficit Loss Equity
--------------- --------- ----------------------------- ---------------------------- ------------------------------- ------------- ---------------------------------
Balance,
January
1, 2021 86,585 $ 179,717 $ 22,410 $ (104,889) $ (55,288) $ 41,950
Net loss for
the
period - - - (62,594) - (62,594)
Currency
translation
adjustments - - - - 65,617 65,617
Share-based
Compensation - - 44 - - 44
--------------- --------- ----------------------------- ---------------------------- ------------------------------- ------------- ---------------------------------
June 30, 2021 86,585 $ 179,717 $ 22,454 $ (167,483) $ 10,329 $ 45,017
--------------- --------- ----------------------------- ---------------------------- ------------------------------- ------------- ---------------------------------
(thousands of
US Dollars and Number
thousands of of Accumulated
shares, common Contributed Other Comp. Total Shareholders'
unaudited) shares Share Capital Surplus Deficit Loss Equity
--------------- --------- ----------------------------- ----------------------------- --------------------------------- ------------- ---------------------------------
Balance,
January
1, 2020 86,585 $ 179,717 $ 21,229 $ (85,355) $ (49,273) $ 66,318
Net loss for
the
period - - - (2,091) - (2,091)
Currency
translation
adjustments - - - - (6,081) (6,081)
Share-based
Compensation - - 497 - - 497
--------------- --------- ----------------------------- ----------------------------- --------------------------------- ------------- ---------------------------------
June 30, 2020 86,585 $ 179,717 $ 21,726 $ (87,466) $ (55,354) $ 58,643
--------------- --------- ----------------------------- ----------------------------- --------------------------------- ------------- ---------------------------------
See accompanying notes to the condensed interim consolidated
financial statements.
Notes to the Condensed Interim Consolidated Financial
Statements
Three and six months ended June 30, 2021 and 2020
(tabular amounts in thousands of US Dollars, except share or per
share amounts, unaudited)
1. Reporting Entity
Valeura Energy Inc. ("Valeura" or the "Company") and its
subsidiaries (refer to note 2c) are currently engaged in the
exploration and development of petroleum and natural gas in Turkey.
Valeura is incorporated in Alberta, Canada and has subsidiaries in
the Netherlands and Turkey. Valeura's shares are traded on the
Toronto Stock Exchange ("TSX") under the trading symbol VLE and the
Main Market of the London Stock Exchange ("LSE"), under the trading
symbol "VLU". Valeura's head office address is 1200, 202 - 6 Avenue
SW, Calgary, AB, Canada.
2. Basis of Preparation
(a) Statement of compliance
These unaudited condensed interim consolidated financial
statements have been prepared in accordance with IAS 34 - Interim
Financial Reporting of the International Financial Reporting
Standards ("IFRS"). The attached unaudited condensed interim
consolidated financial statements should be read in conjunction
with Valeura's audited consolidated financial statements and
MD&A for the year ended December 31, 2020. The unaudited
condensed interim consolidated financial statements have been
prepared in accordance with IFRS accounting policies and methods of
computation as set forth in Valeura's audited consolidated
financial statements for the year ended December 31, 2020, with the
exception as noted below of certain disclosures that are normally
required to be included in annual consolidated financial statements
which have been condensed or omitted in the interim statements.
Operating, transportation and marketing expenses in profit or
loss are presented as a combination of function and nature in
conformity with industry practices. Depletion and depreciation and
finance expenses are presented in a separate line by their nature,
while net administrative expenses are presented on a functional
basis. The use of estimates and judgements is also consistent with
the December 31, 2020 financial statements.
The unaudited condensed interim consolidated financial
statements were authorised for issue by the Board of Directors on
August 4, 2021.
(b) Basis of measurement
These unaudited condensed interim consolidated financial
statements have been prepared on the historical cost basis except
for certain financial and non-financial assets and liabilities,
which have been measured at fair value. The methods used to measure
fair value are consistent with the Company's December 31, 2020
audited consolidated financial statements.
The COVID-19 pandemic is an evolving situation that may continue
to have widespread implications for the Company's business
environment, operations, and financial conditions. Management
cannot reasonably estimate the length or severity of this pandemic
and will continue to monitor the situation closely.
The Company's unaudited condensed interim consolidated financial
statements include the accounts of Valeura and its subsidiaries and
are expressed in thousands of US Dollars, unless otherwise
stated.
(c) Functional and presentation currency
The consolidated financial statements are presented in US
Dollars which is Valeura's reporting currency. Valeura's and its
foreign subsidiaries transact in currencies other than the US
Dollar and have a functional currency of Turkish Lira and Canadian
dollars as follows:
Company Functional Currency
Valeura Energy Inc. Canadian Dollars
--------------------
Valeura Energy (Netherlands) Turkish Lira
Cooperatief UA
--------------------
Valeura Energy (Netherlands) Turkish Lira
BV
--------------------
The functional currency of a subsidiary is the currency of the
primary economic environment in which the subsidiary operates.
Transactions denominated in a currency other than the functional
currency are translated at the prevailing rates on the date of the
transaction. Any monetary items held in a currency which is not the
functional currency of the subsidiary are translated to the
functional currency at the prevailing rate as at the date of the
statement of financial position. All exchange differences arising
as a result of the translation to the functional currency of the
subsidiary are recorded in earnings.
Translation of all assets and liabilities from the respective
functional currencies to the reporting currency are performed using
the rates prevailing at the statement of financial position date.
The differences arising upon translation from the functional
currency to the reporting currency are recorded as currency
translation adjustments in other comprehensive income or loss
("OCI") and are held within accumulated other comprehensive loss
until a disposal or partial disposal of a subsidiary. A disposal or
partial disposal will then give rise to a realized foreign exchange
gain or loss which is recorded in earnings.
(d) Use of estimates
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. The ability to
make reliable estimates is further influenced by political and
economic factors. Management has based its estimates with respect
to the Company's operations in Turkey based on information
available up to the date these condensed interim consolidated
financial statements were approved by the Board of Directors.
Significant changes could occur which could materially impact the
assumptions and estimates made in these consolidated financial
statements. Changes in assumptions are recognised in the financial
statements prospectively.
3. Restricted Cash
The Company has restricted cash in the amount of $0.02 million
(2020 - $0.23 million) that is securing licence deposits with the
General Directorate of Mining and Petroleum Affairs of the Republic
of Turkey ("GDMPA"). This restricted cash is held with National
Bank of Canada ("NBC") as security, along with the Account
Performance Security Guarantee ("APSG") facility described in Note
9, for decommissioning or abandonment obligations and ongoing work
programmes on the Company's Turkish licences.
4. Disposition
On May 26, 2021, the Company closed the sale of its shallow
conventional gas assets for cash consideration (including closing
working capital and effective date adjustments) of $16.85 million,
and deferred consideration valued at $1.0 million, with an economic
effective date of July 1, 2020 ("the Transaction"). The Transaction
was structured as a sale of shares of Thrace Basin Natural Gas
(Turkiye) Corporation ("TBNG") and Corporate Resources B.V.
("CRBV"), both of which were wholly owned subsidiaries of Valeura.
The deferred consideration is in the form of a cash royalty payable
over 5 years, tied to local gas prices, with a minimum payment of
$1 million and a maximum of $2.5 million. The retention amount is
held in escrow for a period of 1 year from the closing date of the
transaction.
The disposition resulted in a gain on disposal of $6.1 million
and a currency translation loss of $67.0 million. Per note 2 (c),
accumulated other comprehensive income or loss in disposed
subsidiaries, due to currency translation losses, must be
transferred to retained earnings through the statement of profit
and loss.
Recognized amounts of identifiable assets and liabilities
disposed of were as follows:
Net assets disposed
------------------------------------------
Cash $ 2,185
Accounts receivable 2,418
Inventory 117
Prepaid expenses and deposits 273
Right of use asset 340
Exploration and evaluation assets 1,232
Property and equipment 13,914
Accounts payable and accrued liabilities (2,096)
Lease liability (279)
Deferred income taxes (589)
Asset retirement obligation (5,755)
------------------------------------------- ---------------
Total net assets disposed $ 11,760
------------------------------------------- ---------------
Consideration
------------------------------------------ ---------------
Cash proceeds 16,543
Retention 310
Royalty receivable 1,041
Total consideration $ 17,894
-------------------------------------------
Gain on disposition $ 6,134
--------------------------------------------
Currency translation loss on subsidiaries
disposed (67,005)
-------------------------------------------- ------------------------------
Total loss on disposition $ (60,871)
-------------------------------------------- ------------------------------
5. Exploration and Evaluation Assets
Cost Total
Balance, December 31, 2020 $ 1,643
Additions 154
Capitalised share-based compensation 29
Effects of movements in exchange rates (255)
Balance, June 30, 2021 $ 1,571
-----------------------------------------
6. Property, Plant and Equipment
Cost Total
----------------------------------
Balance, December 31, 2020 $ 15,108
Additions 2
Effects of movements in exchange
rates (2,235)
Balance, June 30, 2021 $ 12,875
------------------------------------
Accumulated depletion and Total
depreciation
----------------------------------
Balance, December 31, 2020 $ 14,830
Depreciation expense 14
Effects of movements in exchange
rates (2,230)
Balance, June 30, 2021 $ 12,614
------------------------------------
Net book value Total
----------------------------
Balance, December 31, 2020 $ 278
Balance, June 30, 2021 $ 261
------------------------------ ---------------
The depreciation expense recorded in 2021 relates to the
Company's corporate assets.
(a) Contingencies
Although the Company believes that it has title to its oil and
natural gas properties, it cannot control or completely protect
itself against the risk of title disputes or challenges.
The ultimate recovery of property, plant and equipment and
exploration and evaluation costs in Turkey is dependent upon the
Company obtaining government approvals, obtaining and maintaining
licences in good standing, the existence and commercial
exploitation of petroleum and natural gas reserves and undeveloped
lands, and other uncertainties.
7. Decommissioning Obligations
June 30, 2021
Decommissioning obligations, beginning of period $ 2,161
Change in estimates (664)
Accretion of decommissioning obligations 109
Effects of movements in exchange rates (300)
-------------------------------------------------- ------------------
Balance, June 30, 2021 $ 1,306
-------------------------------------------------- ------------------
The Company's decommissioning obligations result from its
ownership interest in oil and natural gas assets. The total
decommissioning obligation is estimated based on the Company's net
ownership interest in all wells, estimated costs to reclaim and
abandon these wells and facilities and the estimated timing of the
costs to be incurred in future years. The change in estimate is
mainly due to a revision in the cost estimates for abandonment and
reclamation, an increase in the risk-free interest rate in Turkey
(June 30, 2021 - 17.59%; December 31, 2020 - 12.5%) and an increase
in the inflation rate in Turkey (June 30, 2021 - 16.59%; December
31, 2020 - 14.6%). The change in estimate has been recorded on the
statement of loss and comprehensive loss as the Company has no
asset related to the decommissioning liability.
8. Share Capital
(a) Issued
Common shares Number of Shares Amount
Balance, June 30, 2021 and December 31,
2020 86,584,989 $ 179,717
----------------------------------------- ----------------- --------------------
(b) Per share amounts
Per share amounts have been calculated using the weighted
average number of common shares outstanding. The weighted average
number of common shares outstanding for the three months and the
year ended June 30, 2021 is 86,584,989 (June 30, 2020 and December
31, 2020 - 86,584,989). The average number of common shares
outstanding was not increased for outstanding stock options as the
effect would be anti-dilutive.
(c) Stock options
Valeura has an option programme that entitles officers,
directors, employees and consultants to purchase shares in the
Company. Options are granted at the market price of the shares at
the date of grant, have a seven-year term and vest in thirds over 3
years.
The number and weighted average exercise prices of share options
are as follows:
Weighted average
exercise price
Number of Options (CAD)
Balance outstanding, December 31, 2020 5,636,833 $ 0.57
Granted 2,312,500 0.52
Expired (360,000) 0.64
Forfeited (895,000) 1.07
Balance outstanding, June 30, 2021 6,694,333 0.48
Exercisable at June 30, 2021 2,705,509 $ 0.57
---------------------------------------- ------------------ ------------------------------
The following table summarises information about the stock
options outstanding and exercisable at June 30, 2021:
Weighted
average
Exercise Outstanding remaining Weighted average Exercisable Weighted average
prices at June life exercise price at June exercise price
(CAD) 30, 2021 (years) (CAD) 30, 2021 (CAD)
$0.25 -
$0.37 2,280,000 5.66 $ 0.25 773,342 $ 0.25
$0.38 -
$0.53 2,312,500 6.74 0.52 - -
$0.54 -
$0.74 1,148,500 2.33 0.62 981,834 0.63
$0.75 -
$4.62 953,333 2.64 0.76 953,333 0.76
6,694,333 5.03 $ 0.48 2,708,509 $ 0.57
The fair value, at the grant date during the period, of the
stock options issued was estimated using the Black-Scholes model
with the following weighted average inputs (weighted average fair
value per option in CAD):
June 30, 2021 December 31,
Assumptions 2020
-------------------------
Risk free interest rate
(%) 0.8 0.8
Expected life (years) 4.4 4.5
Expected volatility (%) 98.0 99.6
Forfeiture rate (%) 11.0 6.8
Weighted average fair
value per option $ 0.37 $ 0.20
--------------------------- -------------- -------------
9. Credit Facilities
The Company's APSG facility with Export Development Canada
("EDC") is effective from June 16, 2021 to May 31, 2022 with a
limit of $0.25 million and can be renewed on an annual basis. The
APSG facility, which was issued to NBC allows the Company to use
the facility as collateral for certain letters of credit issued by
NBC, with a limit of $0.25 million and can be renewed on an annual
basis. The Company has issued approximately $0.18 million in
letters of credit under the APSG facility at current exchange
rates.
10. Revenue
Revenue recorded is for the period until the closing date of the
Transaction on May 26, 2021. After the close of the Transaction,
the Company's only revenue for the period is interest and other
revenue.
For revenue earned until May 26, 2021, under the contracts, the
Company was required to deliver a variable volume of natural gas to
the contract counter party. Revenue was recognised when a unit of
production was delivered to the contract counterparty. The amount
of revenue recognised was based on the agreed transaction price,
whereby any variability in revenue related specifically to the
Company's efforts to transfer production or the customer's demand
for natural gas, and therefore the resulting revenue was allocated
to the production delivered in the period during which the
variability occurs. As a result, none of the variable revenue was
considered constrained.
The Company's contracts had a term of one year or less, whereby
delivery took place throughout the contract period. Revenues were
typically collected between the 12th and 25th day of the month
following production.
The Company produced a small amount of crude oil that was sold
on a spot basis as volumes warranted. Oil was delivered by truck to
customers and revenue was recognised in the period in which the
delivery occurred.
In addition to selling natural gas that the Company produced,
the Company sold natural gas that it purchased from other producers
in the area. This purchased natural gas was sold to the same
customers, using the same contracts, through the same distribution
network as natural gas the Company produced. The Company purchased
natural gas from other producers under contracts that were
typically one year or less in length at a discount of between 12.5%
and 15% to the BOTAS price. These contracts required the Company to
deliver the purchased natural gas to customers. The Company did not
have the right, nor the ability, to store the purchased natural
gas. Since the Company did not have the ability to influence the
decision-making process for the purchased natural gas volumes or
the discretion to set prices, did not experience any inventory
risk, did not perform any processing of the product and did not
remit royalties to the Turkish government for the product, it
considered itself an agent in these transactions. Revenue for this
purchased gas was included net of purchase cost in other
income.
Interest and other revenue is comprised mainly of interest on
cash in hand.
All of the Company's natural gas was sold in Turkey, in the
Thrace Basin, which is the same area in which it was produced.
Three Months ended Six Months Ended
-----------------------
June 30, June 30, June 30, June 30,
2021 2020 2021 2020
----------------------- ---------- --------- --------- ---------
Natural Gas $ 1,040 $ 1,851 $ 3,031 $ 4,557
Crude Oil - 67 95 169
Petroleum and natural
gas sales $ 1,040 1,918 $ 3,126 $ 4,726
-------------------------
Three Months ended Six Months Ended
--------------------------
June 30, June 30, June 30, June 30,
2021 2020 2021 2020
-------------------------- ---------- --------- --------- ---------
Royalties - natural gas $ 130 $ 231 $ 379 $ 569
Crude oil 5 8 14 20
Gross overriding royalty 9 19 30 47
Royalties $ 144 258 $ 423 $ 636
----------------------------
Three Months ended Six Months Ended
----------------------------
June 30, June 30, June 30, June 30,
2021 2020 2021 2020
---------------------------- ---------- --------- --------- ---------
Third party natural gas
sales net of costs $ 69 $ 24 $ 152 $ 125
Interest and other revenue 34 77 80 244
Other income $ 103 101 $ 232 $ 369
------------------------------
11. Supplemental Cash Flow Information
Three Months ended Six Months Ended
-----------------------------------
June 30, June 30, June 30, June 30,
2021 2020 2021 2020
----------------------------------- ---------- ---------- ---------- -----------
Change in non-cash working
capital:
Accounts receivable $ (638) $ (727) $ (526) $ 785
Prepaid expenses and deposits (33) (33) (266) 102
Inventory - 13 - 10
Accounts payable and accrued
liabilities (431) (54) 8 (1,665)
Movements in exchange
rates 315 59 72 (245)
------------------------------------- ---------- ---------- ---------- -----------
$ (787) $ (742) $ (712) $ (1,013)
----------------------------------- ---------- ---------- ---------- -----------
The change in non-cash working capital has been allocated to the following
activities:
--------------------------------------------------------------------------------------
Operating (375) 854 (128) 1,629
Investing (412) (1,596) (584) (2,642)
------------------------------------- ---------- ---------- ---------- -----------
$ (787) $ (742) $ (712) $ (1,013)
----------------------------------- ---------- ---------- ---------- -----------
12. Financial Risk Management
The Company's activities expose it to a variety of financial
risks that arise as a result of its exploration, development,
production, and financing activities such as:
-- Credit risk
-- Market risk
-- Liquidity risk
This note presents information about the Company's exposure to
each of the above risks, the Company's objectives, policies and
processes for measuring and managing risk, and the Company's
management of capital.
The Board of Directors oversees managements' establishment and
execution of the Company's risk management framework. Management
has implemented and monitors compliance with risk management
policies. The Company's risk management policies are established to
identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls, and to monitor risks and
adherence to market conditions and the Company's activities.
(a) Credit risk
Credit risk is the risk of financial loss to the Company if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the
Company's receivables from joint venture partners and oil and
natural gas marketers. The maximum exposure to credit risk is as
follows:
June 30, December
2021 31, 2020
------------------------------- ----
Joint venture receivable from
partners $ 60 $ 89
Revenue receivables from
customers - 1,688
Transaction Retention 310 -
Taxes receivable 225 1,248
Other 130 -
Accounts receivable $ 725 $ 3,025
--------------------------------------
Trade and other receivables:
The Company's receivables consist mostly of taxes receivable
from the Turkish Government (VAT receivable) and a retention amount
related to the Transaction which is a portion of the purchase price
held in escrow for one year.
Receivables from partners are related to the Company's remaining
licenses in Turkey.
(b) Market risk
Market risk is the risk that changes in market conditions, such
as commodity prices, foreign exchange rates and interest rates will
affect the Company's income or the value of financial instruments.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while
maximizing the Company's return.
Interest rate risk:
Interest rate risk is the risk that future cash flows will
fluctuate as a result of changes in market interest rates. The
Company is not currently exposed to interest rate risk as it has no
debt.
Liquidity risk:
Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with the financial
liabilities. The Company's financial liabilities consist of
accounts payable. Accounts payable consists of invoices payable to
trade suppliers for office, field operating activities and capital
expenditures. The Company processes invoices within a normal
payment period. Accounts payable have contractual maturities of
less than one year. The Company maintains and monitors a certain
level of cash which is used to finance all operating and capital
expenditures.
Capital management:
The Company's capital structure includes working capital and
shareholders' equity. Currently, total capital resources available
are working capital and the Company has a significant cash balance
of $42.6 million. The Company's objective when managing capital is
to maintain a flexible capital structure which allows it to execute
its
growth strategy through expenditures on exploration and
development activities while maintaining a strong financial
position. The Company's capital structure includes working
capital and shareholders' equity. Currently, total capital
resources available include working capital and funds flow from
operations.
The Company's capital expenditures include expenditures in oil
and gas activities which may or may not be successful. The Company
makes adjustments to the capital structure in light of changes in
economic conditions and the risk characteristics of the underlying
petroleum and natural gas assets. In order to maintain or adjust
the capital structure, the Company may, from time to time, issue
shares, adjust its capital spending or issue debt instruments. The
Company is not currently subject to any externally imposed capital
requirements as it maintains operatorship over all of its lands in
the Thrace Basin.
The successful future operations of the Company are dependent on
the ability of the Company to secure sufficient funds through
operations, bank financing, equity offerings or other sources and
there are no assurances that such funding will be available when
needed. Failure to obtain such funding on a timely basis could
cause the Company to reduce capital spending and could lead to the
loss of exploration licences due to failure to meet drilling
deadlines. Valeura has not utilised bank loans or debt capital to
finance capital expenditures to date.
Fair value of financial assets and liabilities:
The Company's fair value measurements are classified as one of
the following levels of the fair value hierarchy:
Level 1 - inputs represent unadjusted quoted prices in active
markets for identical assets and liabilities. An active market is
characterized by a high volume of transactions that provides
pricing information on an ongoing basis.
Level 2 - inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly or
indirectly. These valuations are based on inputs that can be
observed or corroborated in the marketplace, such as market
interest rates or forecasted commodity prices.
Level 3 - inputs for the asset or liability are not based on
observable market data.
The Company aims to maximize the use of observable inputs when
preparing calculations of fair value. Classification of each
measurement into the fair value hierarchy is based on the lowest
level of input that is significant to the fair value
calculation.
The fair value of cash and cash equivalents, accounts
receivable, prepaid expenses and deposits, and accounts payable and
accrued liabilities approximate their carrying amounts due to their
short terms to maturity.
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END
IR MZGGRMDMGMZZ
(END) Dow Jones Newswires
August 05, 2021 02:00 ET (06:00 GMT)
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