TIDMPET
RNS Number : 6896A
Petrel Resources PLC
27 September 2022
27 September 2022
Petrel Resources plc
("Petrel" or "the Company")
Unaudited Interim Statement for the six months ended 30 June
2022
Petrel Resources plc (AIM: PET) today announces unaudited
financial results for the six months ended 30(th) June 2022.
Petrel is a hydrocarbon explorer with interests in Iraq, and
Ghana.
Highlights
-- Petrel's Iraqi business is being re-built although as
explained below our Iraqi Director, Riadh Ani has had to resign -
but requires formation of a Government for the Company to progress
new funding.
-- An updated Merjan oil field development proposal has been
submitted to the Ministry.
-- Iraqi oil output recovered to 4.65 million barrels daily in
August 2022.
-- Ratification discussions on Tano 2A block underway with
Ghanaian authorities - though acreage adjustments likely.
-- Board considers there are new expansion opportunities
presented by oil price and demand recovery.
Prior to the recent elections, the Iraqi authorities had
suggested that Petrel initially target "exploration of blocks in
the western desert of Iraq, and present past studies done on the
Merjan-Kifl-West Kifl discoveries, and Petrel's work on the
Mesozoic and Paleozoic plays in the Western Desert". Our updated
development proposal requires an operating Iraqi Government in
order to proceed.
Following the C-19 pandemic, Petrel Resources plc restored
contacts with the Ghanaian authorities to update the acreage to be
explored, and resuscitate the ratification of our signed Petroleum
Agreement on Tano 2A Block. Slowness in ratification of signed
contracts had constrained the development of Ghana's oil and gas
industry. The current Ghanaian government has indicated its
determination to recover momentum. Ghanaian fiscal terms are
competitive, while West African infrastructure steadily
improves.
Financial markets and farm-out interest in petroleum had been
depressed since the oil price war starting in 2014, and continuing
periodically until 2022. This had constrained our options for early
seismic or wells in Ghana. But recent oil & price surges show
that major new investment is required to service global demand.
Petrel Resources hopes to participate in the coming boom.
Despite challenges, Iraq offers the best petroleum commercial
opportunity. Iraqi geology is unsurpassed. Oil demand reaches new
records - despite high prices constraining demand - especially in
gas. But barriers to rapid expansion are above-the-ground issues of
logistics and contractual weaknesses, rather than lack of
geological potential. The solution is to align interests, so that
capital, technology contracts must be updated for effective
exploration and development.
Many Iraqi decision-makers have reached similar conclusions:
they want to increase output to rival Saudi capacity of circa
13mmbod. Unfortunately, the success of patriotic candidates in the
2021 elections has not yet led to an effective Government - without
which there cannot be democratically-supported policy reforms.
But Iraqi oil output has recovered to pre C-19 pandemic levels.
The Baghdad authorities are restoring control over the regions,
vindicating Petrel's longstanding stance of respecting the
sovereignty of the elected Government. Recovering oil & gas
demand and prices have opened room to update fiscal terms and
development plans. Some western majors, ignorant of prevailing
circumstances, had bid over-optimistically on service contracts
from 2009, and then found it hard to operate effectively. Many of
these have departed during the recent oil price war and
pandemic.
TotalEnergies has withdrawn from Kurdistan, but continues
elsewhere in Iraq. Chinese NOCs continue to expand. Iraq is not for
the faint of heart, but there is considerable upside to be realised
provided the elected government implements necessary reforms.
For several years after the 2003 Iraqi invasion, there was a
perception that contractors close to western governments, and later
super-majors, would dominate Iraqi oil exploration and development.
Iraqis had other ideas, however: they want partners, rather than
bosses.
Iraq is sovereign, but so is finance. The investment dollar is
an orphan. It seeks out return, and works to minimise risk - though
resolute investors will carry risk if fairly compensated.
Any investment can be considered to be worth the discounted
Present Value of all cash flows (in and out). Calculations are
sensitive to timing and the discount rate. Foreigners always see
higher risks than locals do.
The more uncertainty (political, tax, operational) the higher
the discount rate, & the lower the Present Value.
For capitalism to work, it must reward all the key players,
whose interests should be aligned - rather than in conflict.
The biggest challenge facing Petrel in this new era is not
operating conditions, access to technology or community relations.
The biggest challenge facing agile industry players is outdated
contracts and fiscal terms. The strong resurgence in demand and
price will smoothen necessary reforms.
Our Iraqi Director, Riadh Ani has helped maintain strong
relationships with Ministry of Oil officials, even during the
darkest hours of sanctions, invasion, conflict, and Covid-19. He
has now regretfully decided to resign with immediate effect as a
Non-Executive Director in order to enter public service. Our loss
will be society's gain, and we wish him the very best success in
this next challenge. Riadh's insights and introductions will help
Petrel in Iraq for years to come.
Petrel Resources plc Interests (as of May 2022):
Ghana
Tano 2A Petroleum Agreement: 30% Petrel Working Interest.
Awaiting ratification, then exploration periods of 3 years initial
term + 2 extension periods of 3.5 years.
Iraq
Western Desert Block 6: 100% Petrel Interest. Awaiting
ratification since 2002. 30 year term, or until early pay-out.
Prior Technical Cooperation Agreement (TCA studies, with 50%
Itochu interest) on the Merjan oil-field.
What should Iraq's oil policy be now?
Unfortunately, the combination of suspicion of foreign oil
companies, sanctions, and wars (including internal sectarian
conflict and resistance since 2003) have held back Iraq's
development, including the building of necessary oil and other
infrastructure. Iraq's government earnings and economy remains
dependent on oil.
Have Service Contracts achieved their objectives for companies
and Iraq? No: even at its pre-C-19 peak of c.4.7 million barrels of
oil daily (mmbod) output, Iraq fell short of its 6 to 9 mmbod 1989
plan, and the high hopes of rivalling Saudi Arabia. There is
insufficient incentive for contractors to boost production, and
recoveries - while the Ministry of Oil has been hollowed out by
sanctions and wars, and now unable to fill the gap.
Should the Federal Ministry of Oil negotiate Production Sharing
Agreements?
Yes: this would better align the interests of the parties, and
create more wealth, value-added in downstream industries like
refined products and petrochemicals, infrastructure and employment
for Iraq.
The success of Qatar in LNG - or even the Emirates and Oman show
what can be done with more pragmatism.
Future
Petrel is confident that necessary funding will be available for
medium term ongoing activities.
David Horgan
Chairman
26 September 2022
For further information please visit http://www.petrelresources.com/ or contact:
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this announcement.
In addition, market soundings (as defined in MAR) were taken in
respect of the matters contained in this announcement, with the
result that certain persons became aware of inside information (as
defined in MAR), as permitted by MAR. This inside information is
set out in this announcement. Therefore, those persons that
received inside information in a market sounding are no longer in
possession of such inside information relating to the company and
its securities.
S
For further information please visit http://www.petrelresources.com/ or contact:
Petrel Resources
David Horgan, Chairman +353 (0) 1 833 2833
John Teeling, Director
Nominated Adviser and Broker
Beaumont Cornish - Nominated Adviser
Roland Cornish
Felicity Geidt +44 (0) 020 7628 3396
Novum Securities Limited - Broker
Colin Rowbury +44 (0) 20 399 9400
BlytheRay - PR +44 (0) 207 138 3206
Megan Ray +44 (0) 207 138 3553
Madeleine Gordon-Foxwell +44 (0) 207 138 3208
Teneo
Luke Hogg +353 (0) 1 661 4055
Alan Tyrrell +353 (0) 1 661 4055
Petrel Resources plc
Financial Information (Unaudited)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six Months Ended Year Ended
30 June 22 30 June 21 31 Dec 21
unaudited unaudited audited
EUR'000 EUR'000 EUR'000
Administrative expenses (140) (162) (322)
- - -
------------------------ ------------------------ ------------------------
OPERATING LOSS (140) (162) (322)
LOSS BEFORE TAXATION (140) (162) (322)
Income tax expense - - -
------------------------ ------------------------ ------------------------
LOSS FOR THE PERIOD (140) (162) (322)
Other comprehensive income] - - -
TOTAL COMPREHENSIVE PROFIT FOR THE
PERIOD (140) (162) (322)
======================== ======================== ========================
LOSS PER SHARE - basic and diluted (0.09c) (0.10c) (0.21c)
======================== ======================== ========================
CONDENSED STATEMENT OF FINANCIAL POSITION 30 June 22 30 June 21 31 Dec 21
unaudited unaudited audited
EUR'000 EUR'000 EUR'000
ASSETS:
NON-CURRENT ASSETS
Intangible assets 933 932 933
----------- ----------- ----------
933 932 933
----------- ----------- ----------
CURRENT ASSETS
Trade and other receivables 12 18 25
Cash and cash equivalents 30 255 102
----------- ----------- ----------
42 273 127
TOTAL ASSETS 975 1,205 1,060
----------- ----------- ----------
CURRENT LIABILITIES
Trade and other payables (847) (777) (792)
----------- ----------- ----------
(847) (777) (792)
----------- ----------- ----------
NET CURRENT LIABILITIES (805) (504) (665)
NET ASSETS 128 428 268
=========== =========== ==========
EQUITY
Share capital 1,963 1,963 1,963
Capital conversion reserve fund 8 8 8
Capital redemption reserve 209 209 209
Share premium 21,786 21,786 21,786
Share based payment reserve 27 27 27
Retained deficit (23,865) (23,565) (23,725)
----------- ----------- ----------
TOTAL EQUITY 128 428 268
=========== =========== ==========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital Capital Share based
Share Share Redemption Conversion Payment Retained Total
Capital Premium Reserves Reserves Reserves Losses Equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
As at 1 January 2021 1,963 21,786 209 8 27 (23,403) 590
Total comprehensive income - (162) (162)
-------- -------- ----------- ----------- ---------------------- --------- --------
As at 30 June 2021 1,963 21,786 209 8 27 (23,565) 428
Total comprehensive income - (160) (160)
-------- -------- ----------- ----------- ---------------------- --------- --------
As at 31 December 2021 1,963 21,786 209 8 27 (23,725) 268
Total comprehensive income - (140) (140)
----------- ----------- ----------------------
As at 30 June 2022 1,963 21,786 209 8 27 (23,865) 128
======== ======== =========== =========== ====================== ========= ========
CONDENSED CONSOLIDATED CASH FLOW Six Months Ended Year Ended
30 June 22 30 June 21 31 Dec 21
unaudited unaudited audited
EUR'000 EUR'000 EUR'000
CASH FLOW FROM OPERATING ACTIVITIES
Loss for the period (140) (162) (322)
Foreign exchange 2 (8) (10)
----------- ----------- -----------
(138) (170) (332)
Movements in Working Capital 68 83 91
----------- ----------- -----------
CASH USED IN OPERATIONS (70) (87) (241)
NET CASH USED IN OPERATING ACTIVITIES (70) (87) (241)
----------- ----------- -----------
INVESTING ACTIVITIES
Payments for exploration and evaluation assets 0 0 (1)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES 0 0 (1)
----------- ----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (70) (87) (242)
Cash and cash equivalents at beginning of the period 102 334 334
Exchange gains/(losses) changes on cash and cash equivalent (2) 8 10
CASH AND CASH EQUIVALENT AT THE OF THE PERIOD 30 255 102
=========== =========== ===========
Notes:
1. INFORMATION
The financial information for the six months ended 30 June 2022
and the comparative amounts for the six months ended 30 June 2021
are unaudited.
The interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the European Union. The interim financial statements have been
prepared applying the accounting policies and methods of
computation used in the preparation of the published consolidated
financial statements for the year ended 31 December 2021.
The interim financial statements do not include all of the
information required for full annual financial statements and
should be read in conjunction with the audited consolidated
financial statements of the Group for the year ended 31 December
2021, which are available on the Company's website
www.petrelresources.com
The interim financial statements have not been audited or
reviewed by the auditors of the Group pursuant to the Auditing
Practices board guidance on Review of Interim Financial
Information.
2. No dividend is proposed in respect of the period.
3. GOING CONCERN
The Group incurred a loss for the period of EUR140,055 (2021:
loss of EUR322,077) and had net current liabilities of EUR804,979
(2021: EUR664,924) at the statement of financial position date.
These conditions as well as those noted below, represent a material
uncertainty that may cast significant doubt on the Group and
Company's ability to continue as a going concern.
Included in current liabilities is an amount of EUR812,531
(2021: EUR767,531) owed to key management personnel in respect of
remuneration due at the statement of financial position date. Key
management have confirmed that they will not seek settlement of
these amounts in cash for a period of at least one year after the
date of approval of the financial statements or until the Group has
generated sufficient funds from its operations after paying its
third party creditors.
The Group and Company had a cash balance of EUR29,806 (2021:
EUR101,843) at the statement of financial position date. The
directors have prepared cashflow projections for a period of at
least twelve months from the date of approval of these financial
statements which indicate that additional finance may be required
to fund working capital requirements and develop existing projects.
As the Group is not revenue or cash generating it relies on raising
capital from the public market.
These conditions as well as those noted below, represent a
material uncertainty that may cast significant doubt on the Group
and Company's ability to continue as a going concern.
As in previous years the Directors have given careful
consideration to the appropriateness of the going concern basis in
the preparation of the financial statements and believe the going
concern basis is appropriate for these financial statements. The
financial statements do not include the adjustments that would
result if the Group and Company were unable to continue as a going
concern.
4. LOSS PER SHARE
Basic loss per share is computed by dividing the loss after
taxation for the year attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue and ranking for
dividend during the year. Diluted earnings per share is computed by
dividing the loss after taxation for the year by the weighted
average number of ordinary shares in issue, adjusted for the effect
of all dilutive potential ordinary shares that were outstanding
during the year.
The following table sets out the computation for basic and
diluted earnings per share (EPS):
30 June 22 30 June 21 31 Dec 21
EUR EUR EUR
Loss per share - Basic and Diluted (0.09c) (0.10c) (0.21c)
Basic and diluted loss per share
The earnings and weighted average number of ordinary shares used in the calculation of basic
loss per share are as follows:
EUR'000 EUR'000 EUR'000
Loss for the period attributable to equity holders (140) (162) (322)
Denominator Number Number Number
for basic and diluted EPS 157,038,467 157,038,467 157,038,467
Basic and diluted loss per share are the same as the effect of
the outstanding share options is anti-dilutive.
5. INTANGIBLE ASSETS
30 June 22 30 June 21 31 Dec 21
Exploration and evaluation assets: EUR'000 EUR'000 EUR'000
Opening balance 933 932 932
Additions - - 1
Impairment - - -
________ ________ ________
Closing balance 933 932 933
Exploration and evaluation assets relate to expenditure incurred
in exploration in Ghana. The directors are aware that by its nature
there is an inherent uncertainty in Exploration and evaluation
assets and therefore inherent uncertainty in relation to the
carrying value of capitalized exploration and evaluation
assets.
During 2018 the Group resolved the outstanding issues with the
Ghana National Petroleum Company (GNPC) regarding a contract for
the development of the Tano 2A Block. The Group has signed a
Petroleum Agreement in relation to the block and this agreement
awaits ratification by the Ghanaian government.
Relating to the remaining exploration and evaluation assets at
the financial year end, the directors believe there were no facts
or circumstances indicating that the carrying value of the
intangible assets may exceed their recoverable amount and thus no
impairment review was deemed necessary by the directors. The
realisation of these intangible assets is dependent on the
successful discovery and development of economic reserves and is
subject to a number of significant potential risks, as set out
below:
-- Licence obligations;
-- Exchange rate risks;
-- Uncertainty over development and operational costs;
-- Political and legal risks, including arrangements with
Governments for licences, profit sharing and taxation;
-- Foreign investment risks including increases in taxes,
royalties and renegotiation of contracts;
-- Financial risk management;
-- Going concern and
-- Ability to raise finance.
Regional Analysis 30 Jun 22 30 Jun 21 31 Dec 21
EUR'000 EUR'000 EUR'000
Ghana 933 932 933
6. SHARE CAPITAL
2022 2021
EUR'000 EUR'000
Authorised:
800,000,000 ordinary shares of EUR0.0125 10,000 10,000
Issued and fully paid
2022 2021
Number Share Capital Share Premium Number Share Capital Share Premium
EUR'000 EUR'000 EUR'000 EUR'000
At 1 January 157,038,467 1,963 21,786 157,038,467 1,963 21,786
Share issue - - - - - -
At end of period 157,038,467 1,963 21,786 157,038,467 1,963 21,786
Movements in issued share capital
There was no movement in the issued share capital of the company
in the current or prior year.
7. POST BALANCE SHEET EVENTS
There are no material post balance sheets events affecting the
Group.
8. The Interim Report for the six months to 30(th) June 2022 was
approved by the Directors on 26 September 2022.
9. The Interim Report will be available on the Company's website at www.petrelresources.com .
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