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 30th 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.
ENDS
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 Felicity Geidt
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| Novum Securities Limited - Broker |
+44 (0) 20 399 9400
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| BlytheRay - PR | +44 (0) 207 138 3206 +44 (0) 207 138 3553 +44 (0) 207 138 3208 |
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| Teneo Luke Hogg Alan Tyrrell
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+353 (0) 1 661 4055 +353 (0) 1 661 4055
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| 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 |
|
| €'000 |
| €'000 |
| €'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 |
|
| €'000 |
| €'000 |
| €'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 |
|
| €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | €'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 |
|
| €'000 |
| €'000 |
| €'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 END 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 €140,055 (2021: loss of €322,077) and had net current liabilities of €804,979 (2021: €664,924) 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 €812,531 (2021: €767,531) 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 €29,806 (2021: €101,843) 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 |
| | € | € | € |
| 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: | |||
| | €'000 | €'000 | €'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: | €'000 | €'000 | €'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 €'000 | 30 Jun 21 €'000 | 31 Dec 21 €'000 |
| Ghana | 933 | 932 | 933 |
| |
|
|
|
6. SHARE CAPITAL
|
| 2022 | 2021 |
| | €'000 | €'000 |
| Authorised: |
|
|
| 800,000,000 ordinary shares of €0.0125 | 10,000 | 10,000 |
| |
|
|
Issued and fully paid
|
| 2022 | 2021 | ||||
|
| Number | Share Capital | Share Premium | Number | Share Capital | Share Premium |
|
|
| €'000 | €'000 |
| €'000 | €'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 30th 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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