United Oil & Gas PLC / Index: AIM / Epic: UOG / Sector: Oil & Gas
27 April 2023
United Oil & Gas plc
("United" or "the Company")
Final audited results for the year ended 31 December 2022
United Oil & Gas PLC (AIM: "UOG"), the full-cycle oil and gas company with a portfolio of production, development, exploration and appraisal assets is pleased to announce its audited results for the year ended 31 December 2022. A shareholder and an analyst call will take place this morning, details are below.
Brian Larkin, CEO, commented:
"2022 was filled with extensive corporate and operational activity across our portfolio, all completed with zero LTI's, TRIR's and environmental incidents. In Egypt it was a challenging year for United, with five wells drilled and completed in addition to a number of workovers, delivering mixed results following an exceptional 100% drilling success rate during 2020 and 2021. Abu Sennan remains integral to our portfolio and going forward activity on the licence will focus on maintaining and extending long-term production rates to generate operational cashflows for many years to come. In Jamaica, the farm-out efforts of this high impact exploration licence continued with the addition of a new advisor to support the process. In the UK post year-end, an agreement was signed for the conditional sale of the Maria discovery, which is in line with our strategy to actively manage our portfolio.
"Our work programme in Egypt in the first half has started strongly, with a focus on development drilling and workovers. We were delighted with the result of the ASH-8 well which is producing at stable rates and look forward to the results of the ASD-3 well which spud in March. For the remainder of the year, newsflow will centre around the results from our ongoing Egyptian drilling programme, the expected completion of the sale of Maria and further progress on the Jamaica farm-out.
"We remain committed to our growth ambitions with a focus for new ventures in the Greater Mediterranean and North and West African regions, where the Board and management's experience and relationships can be leveraged. As such, United is well placed to execute our growth strategy, with a continued focus on disciplined capital allocation to generate the best returns for shareholders."
Operational summary
· Group full-year 2022 production averaged 1,312 boepd net (1,137 bopd oil and 175 boepd gas) in line with revised 2022 guidance of 1,300-1,325 boepd
· 2022 Egypt work programme completed, consisting of three development wells, two exploration wells, and eight workovers
· Safety and the environment: Zero lost time incident frequency rate. No environmental spills, restricted work incidents or medical treatment incidents
· In Jamaica, the completion of additional technical studies that were agreed as part of the licence extension have provided additional positive support to the farm-out process
· 2023 Egypt work programme has commenced positively, with the ASH-8 development coming onstream in March ahead of schedule and above expectations (post period)
· The second well in the 2023 drilling campaign, the ASD-3 development well, spud at the beginning of April 2023 (post period)
Financial summary
· Group revenue for full year 2022 was $15.8m (1) (2021 : $19.2m)
· The average realised oil price per barrel from Egypt achieved was $96.1/bbl ( 2021 : $68.9/bbl)
· Gross Profit of $12.9m (2021 : $12.3m)
· Profit After Tax $2.3m (2021 : $3.6m)
· Cash Collections of $16.9m (2021: $17.3m)
· Group Cash balances as at 31 December 2022 were $1.4m with Net Debt of $1.5m (FY 2021: Cash balances $0.4m, Net Debt $3.9m)
· BP Acquisition facility to be fully repaid in 2023
· Capital expenditure for the year was $8.6m (FY 2021 : $6.9m)
· Egyptian receivables of $4.4m (FY 2021 : $5.1m)
(1)22% working interest net of Government Take
Corporate summary
· Appointment of Peter Dunne, as Chief Financial Officer, effective from 5 May 2022
· Amounts due from Anasuria Hibiscus UK Ltd for Crown disposal fully satisfied in the year ($2.5m)
· Completion and receipt of proceeds in relation to the sale of UOG Italia Srl to Prospex Energy for €2.2m plus €0.1m working capital adjustment
· Directors' purchases increase total directors' shareholding to 5.64% of issued share capital as at year-end
· Tom Hickey, non-executive director stepped down from the Board on 23 September 2022
· A binding Asset Purchase Agreement signed for the conditional sale of UK Central North Sea Licence P2519 containing the Maria discovery for a total consideration of up to £5.7 million (post period)
· United intends to seek the requisite shareholder approvals at this year's Annual General Meeting to approve a limited share buyback programme, which will be subject to completion of the Maria sale and market conditions (post period)
· The Company initiated a full review of its G&A expenditure in Q4 2022 and has commenced a programme to reduce these costs by up to 15% in 2023 compared to 2022 (post period)
Outlook
· Q1 2023 oil production averaged 841 bopd net, with an exit rate for the quarter of 1,275 bopd net
· The first well in the 2023 campaign, the ASH-8 development well, came onstream in March at rates above expectations and six weeks ahead of the anticipated start-up
· The ASH-8 result, coupled with the continuing development drilling in the first half of the year has the potential to have a positive impact on production levels for 2023, and actual quarterly production information will be provided in H2
· 2023 Egypt work programme consists of two firm wells, and at least eight workovers, with the potential to add additional wells and workover activity to the programme later in the year:
- ASH-8 Development well: Onstream in March 2023
- ASD-3 Development well: Commenced drilling on 1 April
- AJ14 workover: well drilled in 2022 is now onstream
- The potential for additional drilling in 2023 will be finalised with JV partners once the results of the ASD-3 well are available
· Farm-out campaign for the Walton Morant licence, Jamaica, continues to be a focus with the appointment of Energy Advisors Group ("EAG"), a Houston-based M&A advisory group, targeting US companies and investment funds. Process is ongoing with indicative offers due Q2 2023
· Group cash capital expenditure for the full year is forecasted to be approx. $5m, funded from existing operations, with circa $4.5m to be invested in Egypt and up to $0.5m across the other assets in the portfolio
· ESG focus on evaluating emissions baseline in Egypt with operator and contributions to social investment programmes
· Continued evaluation of new opportunities in the Greater Mediterranean area and North and West Africa regions to grow the business in line with the strategy
Events today
Management is hosting a call today at 0930 BST for analysts. For dial in details please contact uog@camarco.co.uk
A shareholder call will take place at 1130 BST today. Investors that wish to participate in the event, please click on this link to register https://bit.ly/3oyhzMH
Confirmation email with the details of the dialling in process will be sent to your email address.
A presentation will be available today on www.uogplc.com.
ENDS
This announcement contains inside information for the purposes of Article 7 of Regulation 2014/596/EU which is part of domestic UK law pursuant to the Market Abuse (Amendment) (EU Exit) regulations (SI 2019/310).
|
Enquiries
| | |
| United Oil & Gas Plc (Company) | | |
| Brian Larkin, CEO | | |
| Sharan Dhami, Head of IR & ESG | | |
| | | |
| Beaumont Cornish Limited (Nominated Adviser) | | |
| Roland Cornish | Felicity Geidt | Asia Szusciak | | +44 (0) 20 7628 3396 |
|
Tennyson Securities (Joint Broker) | | |
| Peter Krens | | +44 (0) 020 7186 9030 |
|
Optiva Securities Limited (Joint Broker) | | |
| Christian Dennis | | +44 (0) 20 3137 1902 |
| | | |
| Camarco (Financial PR) | | |
| Georgia Edmonds | Emily Hall |Sam Morris
| | +44 (0) 20 3757 4983 |uog@camarco.co.uk
|
Notes to Editors
United Oil & Gas is a full-cycle oil and gas company with a portfolio of low-risk, cash generative production, development, appraisal and exploration assets across Egypt, UK and a high impact exploration licence in Jamaica.
The business is led by an experienced management team with a strong track record of growing full cycle businesses, partnered with established industry players and is well positioned to deliver future growth through portfolio optimisation and targeted acquisitions.
United Oil & Gas is listed on the AIM market of the London Stock Exchange. For further information on United Oil and Gas please visit www.uogplc.com
CHAIR'S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
Dear Shareholders,
Introduction
2022 has been another active year for the Company between our operations in Egypt, the progression of our farm-out campaign for the high-impact Walton Morant licence in Jamaica, and post year end the announcement of the conditional sale of our Maria licence. Although average production on our non-operating position in Egypt is down in 2022 compared to 2021, it continues to generate positive cashflows, and we see good potential from the existing fields to maintain and potentially increase production for many years to come. I feel we remain well placed to capitalise on new opportunities which we continue to explore in the Greater Mediterranean and North and West African regions and that we have a strong management and technical team with the capability to realise our growth strategy.
In Jamaica we completed various technical studies which lent support to the farm-out process which continued throughout 2022. We have seen growing momentum in the level of interest from parties that possess both the technical and financial capacity to add value to the project and discussions are ongoing with a number of potential partners. Business development opportunities across the full cycle continued to be offered to and assessed by the team in the course of 2022, and while a number of such opportunities are still under consideration only the most attractive ones consistent with our strategy and investment criteria will be taken forward. The war in Ukraine caused uncertainty in oil and gas markets with prospective sellers and buyers of assets having difficulty in forecasting prices with enough certainty to complete transactions. There are positive signs now that commodity markets are settling down which should lead to more opportunities being concluded.
Strategy
We are a full-cycle oil and gas company with the operational cashflow to support our existing business. We aim to create value by actively managing our existing assets whilst growing our business through additional high-margin opportunities in the Greater Mediterranean and North and West African area.
Post year end
The key event since the year end has been the signing of an agreement for the sale of the licence containing the Maria discovery for a consideration of up to circa $7m (£5.7m), which is expected to complete in May this year. This sale was at a materially higher maximum consideration than we had agreed in 2021, reflecting the increased value of the asset following work by our technical team.
The proceeds from this sale will be used to further our new venture activities and if market conditions are right to fund a limited share buyback programme for which we intend to seek shareholder approval at our forthcoming AGM.
The company remains focussed on reducing costs and allocating capital where it delivers the best returns. In anticipation of the Maria sale and the reduction of our operational footprint in 2023 we carried out a full review of our G&A expenditure in late 2022, as a result of which we announced in our Trading and Operations update, on 26 January 2023, a programme to reduce our G&A by 15% across all categories of expenditure. This programme is now well underway.
Board and governance
David Quirke stepped down as CFO in June 2022 to pursue interests outside of the industry. We are very grateful to David for the commitment and professionalism he brought to the role and wish him every success in his future endeavours. David was replaced as CFO by Peter Dunne who comes with a wealth of professional and industry experience and has very quickly taken to the role with energy and enthusiasm. In September 2022, Tom Hickey stepped down as an independent non-executive Director to take up an executive role outside the oil and gas industry.
An internal Board and Committee evaluation was carried out post-year end, the findings, and conclusions from which will be reported in the Annual Report. Despite only having two non-executives at the moment, I believe that we continue to have a good balance of technical, financial, commercial and ESG experience on the Board, that all Committees continue to function effectively and that the non-executive directors give appropriate support and challenge to the executives both at and outside of Board and Committee meetings.
Dialogue with shareholders
Shareholders' views on the company, its strategy, remuneration policy and indeed all aspects of our business and operations are very important to the Board and we welcome every opportunity to engage. I can be reached via the Company Secretary at info@uogplc.com.
Conclusion and outlook for 2023
2022 was another very active but challenging year for the Company in the development and pursuit of our strategy and I would like to record my thanks once again to our executives and all our staff for their continued commitment and energy throughout the year.
We have a full-cycle portfolio, the cash flow to support our operations, a farm-out process in Jamaica is continuing and a variety of new venture opportunities under consideration. We look forward positively to the year ahead.
Graham Martin
Chair
CEO'S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 was filled with operational activity across our portfolio, all completed with zero LTI's, TRIR's and environmental incidents. In Egypt, five wells were drilled and completed in addition to a number of workovers. In Jamaica, the farm-out efforts have continued to be a focus with the addition of a new advisor, and in the UK post year end an agreement was put in place for the conditional sale of the Maria discovery.
Operationally, it was a challenging year for United, delivering mixed results from our Egyptian drilling campaign, following an exceptional 100% drilling success during 2020 and 2021. The JV has executed a number of targeted drilling campaigns since 2020 and having assessed the production and exploration results from these, our expectation is that operational activity at Abu Sennan will now focus more on maintaining and extending long term production rates to generate operational cashflows throughout the period of the licence. We continue to strive to execute our strategy to grow our business and to drive business performance against a global backdrop that highlighted the importance of energy security both at home and across the locations in which we operate.
Our place in the global energy transition
Reliable access to clean, affordable energy supplies is required as a fundamental building block to the delivery of sustainable development of economies and society as we transition to a less carbon intensive energy mix. What is required is responsible, transparent, and safe investment in traditional sources of energy given the absolute need for clean, safe, reliable and affordable energy supply to communities around the world. We see a place for United to responsibly and safely develop oil and gas resources to aid global economic development, contribute to energy security and the energy transition whilst delivering value for all our stakeholders.
In 2022 we have also seen increased volatility in global commodity prices with oil prices increasing following the invasion of Ukraine. This, combined with other macro supply risks, resulted in the Brent benchmark price reaching a peak of nearly $125 a barrel in March, with the Group realising on average of 96/bbl for our production in the period.
The fundamentals of the business and our business model remain resilient against this backdrop of oil price volatility, geopolitical shocks and the macroeconomic challenges that have impacted Egypt. Our portfolio of assets across the energy life cycle mitigates risks; in Egypt our producing asset provides important cashflows; in Jamaica the exploration opportunity has the potential to be transformative for both United and the region; and in the UK our track record of adding value to and realising value from assets means we can look to invest further to grow the business.
Financial resilience
Revenue for the Company was approx. $16m (2021: $19m) generated from Abu Sennan, which benefited from the continued high oil price partially offsetting the impact of lower production in the second half of 2022. In the year we also continued to pay down the BP facility which will be fully repaid during 2023. There is potential in 2023 to consider refinancing the asset given the long term cashflow forecast to be generated from Abu Sennan. The Egyptian pound devalued by circa 60% against the USD in 2022 but since the beginning of 2023 following the announced agreement with the IMF, we have seen improved USD liquidity and a recommencement of regular payments from EGPC. The Group remains focussed on the optimisation of the cost base and as announced earlier in the year, we are undertaking a Company wide review of G&A targeting a reduction of 15% from 2022.
Abu Sennan - maintaining and extending long term production
Abu Sennan remains integral to our portfolio, offering a low-cost onshore operating environment, production and cashflows for the business which has shown to be resilient even in a period of prolonged oil price volatility. In addition, the flexibility of the work programme means that we can tailor our capital allocation as needed.
Production in 2022 averaged 1,312 boepd net compared to 2,327 boepd in 2021. This decrease reflects the substantial decline in production that occurred during H2 2021 as water broke through at the ASH Field, as well as expected decline from the existing well-stock during 2022, partially offset by additional production from drilling activity and workovers. In 2022 United and its Joint Venture ("JV") partners executed another active work programme of five wells and a number of workovers. Although the two exploration wells have not delivered on their pre-drill potential, two of the three development wells came on production in 2022 with the third one commencing production following remedial works carried out in 2023. Abu Sennan has been producing since 2012 and has generated material cashflows to United since we acquired it in 2019. As the fields mature, the operational activities will focus more on maintaining and extending long term production rates to generate operational cashflows for many years to come.
Jamaica - focus on accelerating the farm-out process
In the latter part of 2022 United engaged with Energy Advisors Group ("EAG"), a Houston based advisory company to work alongside Envoi. EAG has the potential to open up new pools of interest in North America, and the United team met with a number of potential parties in Houston at the beginning of 2023, to market the Jamaican opportunity. The farm-out of our high impact exploration licence with 2.4 billion barrels of un-risked mean prospective oil resource remains a key focus with a timetable for receipt of indicative offers due in Q2 2023.
Portfolio Management - acquire and create value
Acquiring assets, adding value and monetising them in excess of our investment has always been part of United's DNA. Licence P2519, containing the Maria Discovery was awarded to United by the OGA in December 2020. Following a low-cost work programme conducted by the Company's technical team, adding immense value, United has agreed to a conditional sale of 100% of our interest in this licence for a total consideration of up to $7m (£5.7m).
Environmental and Social
Energy security, transition and climate change have again been a focus this year, especially in Egypt during COP27 which was held in Sharm El Sheikh. United and JV partners continue to work with EGPC to identify and measure emissions, and initiatives to reduce them. We are pleased to report that the JV has had another year of zero LTI's and environmental incidents and the community investment programmes have focused on youth education, mentoring and empowerment.
Looking ahead - in good shape to execute our strategy
There are a number of catalysts in 2023 that have the potential to provide a material increase in the Group's value. During the first half of 2023, we look forward to closing the conditional sale of the Maria licence and to updating the market on progress on the Jamaica farm-out. The work programme in Egypt commenced in January. ASH-8, the first well in the 2023 drilling campaign encountered 22 meters of net pay and was brought on stream at nearly 3,000 bopd gross six weeks earlier than anticipated. The ASD-3 development well commenced drilling at the beginning of April, and we look forward to providing updates on this well in due course.
We remain committed to our growth ambitions with a focus of new ventures in the Greater Mediterranean and North and West African regions, where the Board's experience and relationships can be leveraged. We enter 2023 in a good place to execute our strategy, and a business focussed on disciplined capital allocation to generate the best returns. I would like to take this opportunity to thank all our stakeholders for their support and our employees for their hard work, commitment and tenacity.
Brian Larkin
Chief Executive Officer
REVIEW OF OPERATIONS
There was a significant amount of operational activity for United in 2022, and it was very pleasing to once again be able to report zero LTI's, TRIR's and environmental incidents. In Egypt, five wells were drilled and completed in addition to a number of workovers. In Jamaica, the farm-out efforts continued, with the addition of a new advisor, and in the UK an agreement is in place for the conditional sale of the Maria discovery.
Egypt (22% non-operated working interest, operated by Kuwait Energy Egypt)
The Abu Sennan licence is located in the prolific Abu Gharadig Basin in the Western Desert, onshore Egypt, circa 200km west of Cairo. United acquired its 22% working interest in the licence in April 2020. Since that time, we have seen production and reserves growth, and although we are now entering a more mature phase of the licence life cycle, the assets continue to offer low-risk development and exploration opportunities. There are eight producing fields within the licence, the largest of which are the Al Jahraa, ASD, and ASH fields.
Production
Group full-year 2022 production averaged 1,312 boepd net (1,137 bopd oil and 175 boepd gas) (2021: 2,327 boepd). The 2021 figures are somewhat skewed by the high production that was achieved in H1 before the impact of water breakthrough at the ASH wells that occurred in Q3 2021. Higher value oil production from the asset in H2 2021 averaged 1,514 bopd net, compared to 1,137 bopd achieved in 2022, reflecting decline from the existing well-stock partially offset by additional production from drilling activity - the main contributor being the ASD-2 well which came onstream in March 2022. The 2022 average production achieved is in line with the revised guidance that was issued in November of last year.
2022 Abu Sennan work programme
The 2022 work programme consisted of three development wells, two exploration wells and eight workovers. The drilling programme achieved mixed results, with production added from ASD-2 and ASH-4, but with disappointing results from the two exploration wells. A number of workovers which were planned for late 2022 were delayed due to operational issues and are now expected to be completed in H1 2023.
Development drilling
The drilling programme commenced with the ASD-2 development well. The well encountered over 25.5 metres of net pay and was brought onstream in March 2022 at rates above expectations and has continued to outperform projections throughout the year, with over 400,000 barrels now produced from the well. The AJ-14 development well found 7 metres of good quality net pay in the Abu Roash-C ("ARC") target, in line with the higher end of the pre-drill estimates. However, due to near-borehole formation damage, consistent flow was not established. Workover activity required to bring this well onstream was completed in April 2023, with production commencing in late April. The ASH-4 development well encountered 20 metres of net pay in the Alam El Bueib reservoir in an area that appears to be at least partially separated from the previously producing wells. The well was brought onstream in November 2022, and despite a steep initial decline, production from the well had stabilised by early 2023.
Exploration drilling
Two of the larger, but higher risk, prospects in the Abu Sennan exploration portfolio were drilled in 2022. The ASV-1X well spud in April, and although there were some encouraging signs indicating the presence of hydrocarbons, the well did not flow on test. The ASW-1X well did not encounter hydrocarbons in any of the multiple pre-drill targets and was plugged and abandoned at the beginning of 2023.
2023 work programme
The proposed 2023 Egypt work programme consists of two firm wells and at least eight workovers. In 1H 2023 the focus will be on development drilling and in optimising production from existing wells through low-cost interventions. The first development well, ASH-8, commenced drilling at the beginning of the year and encountered 22 meters of net pay. This well was brought onstream in March, with an initial stabilised rate of circa 2,980 bopd and 2.64 mmscf/d gross (circa 656 bopd and 0.58 mmscf/d net) achieved on a 32/64" choke. The second development well, ASD-3, spud at the beginning of April and is aiming to build on the success achieved with ASD-2 in 2022. In parallel to the development drilling, workovers in Q1 2023 have targeted enhanced production from multiple reservoirs across a number of wells. Although we have seen some delays to the uplift in production expected from these workovers due to a combination of permitting and mechanical issues, the activity performed on both AS-5 and AJ-14 is now contributing positively to production from the asset. Additional potential clearly remains in the targeted reservoirs, and work is continuing to ensure that we maximise the production potential from all of the existing wells.
In line with previous years, where there has been flexibility in the drilling programmes, we expect any additional drilling in 2023 to be finalised with partners once we have seen the results of both of the development wells. There remains a portfolio of additional prospects within the Abu Sennan licence that continues to benefit from the ongoing seismic reprocessing efforts. The potential value that could be added by future exploration drilling continues to be considered carefully by the JV partners.
1H 2023 production guidance of 700-900 bopd net was provided in January 2023. Unlike previous years, where production has comprised circa 15% gas, the guided range is based on 100% oil production, as with the installation of pumps at the ASH Field and expected recompletions, the lower-value gas production in 1H 2023 was expected to be negligible.
Oil production in Q1 averaged 841 bopd net. With the ASH-8 well coming onstream in March at rates above expectations and six weeks ahead of the anticipated start-up, the exit rate from the quarter was 1,275 bopd net, with an additional 170 boepd of gas.
The continuing development drilling in the first half of the year has the potential to have a positive impact on production levels in H2, and actual quarterly production information will be provided in H2.
Jamaica, Walton Morant licence (100% working interest)
The Walton Morant licence is a 22,400km2 offshore exploration block situated to the south of the island of Jamaica. The licence benefits from excellent data coverage, including 2,250km2 of 3D data, and this has helped define multiple plays, and material prospects within the acreage. Over 2.4 billion barrels of recoverable unrisked potential has been identified on the licence, including the 400mmbbl drill-ready Colibri prospect. United is currently running a farm-out campaign to attract a partner to accompany us in drilling Colibri - and potentially unlock the huge value that lies in this under-explored area.
The farm-out campaign remains a key focus as we seek to move this potentially transformational project forward within the current phase of our licence term, which expires at the end of January 2024. Energy Advisors Group ("EAG") have been engaged alongside our existing advisors, Envoi Ltd, with the aim of accessing capital from US companies and investment funds. There are a number of companies currently evaluating the opportunity and a deadline for indicative offers has been set for Q2 2023.
UK Central North Sea
Maria Discovery, Licence P2519 (100% working interest)
Licence P2519 containing the Maria discovery covers an area of circa 225 km2 in the Outer Moray Firth Basin of the UK Central North Sea (CNS).
In January 2023, the Company announced that it had entered into an Asset Purchase Agreement ("APA") with Quattro Energy Limited ("Quattro") to sell Licence P2519 for a maximum consideration including contingent bonus payments of up to £5.7 million (circa US$7.0 million).
The divestment of the Licence reflects United's strategy to focus its new ventures programme on opportunities in the Greater Mediterranean and North and West African regions whilst remaining opportunistic for value accretive transactions outside of these core areas.
UK Onshore
Waddock Cross, Licence PL090 (26.25% working interest, non-operator)
Licence PL090 containing the shut-in Waddock Cross Field is situated circa 11km to the east of Dorchester, in the onshore Wessex Basin, UK.
Recent work that has been completed by the operator, Egdon Resources U.K. Limited, has clearly shown the commercial viability of a phased development of Waddock Cross. Work continues on securing planning and permitting consents, finalising the site facilities and well designs, ahead of a potential 2024 drilling campaign. Although Waddock Cross remains non-core to United, there is clearly value within this asset, and United will continue to evaluate all the alternatives for realising this potential.
Health, Safety and Environment
While United had no field activity in 2022 in which we were the operator, we continued to work with our Joint Venture partners and as part of the Joint Operating Company (JOC) in Egypt. It is very pleasing to be able to report that our operator in Egypt maintained another year of zero Fatalities, Medical Treatment Cases, Restricted Work Injuries and a zero rate for Lost Time Injury frequency and Total recordable incidents frequency or environmental spills. There were two minor incidents reported from Abu Sennan - one involving property damage, and the other a small fire that was extinguished by the emergency team. Both of these were fully investigated to provide lessons learnt and to allow mitigation measures to be put in place.
Group reserves and resources
| Country | Egypt | Jamaica | UK
| Total | ||
| Asset | Abu Sennan | Walton Morant | Maria | | Waddock Cross | |
| Working Interest | 22% | 100% | 100% | | 26.25% | |
| Net 2P Reserves (mmboe) | 2.31 | | | | | 2.3 |
| Net 2C Resources (mmboe) | | | 10.25 | | 0.44 | 10.6 |
| Net Prospective Resources (mmboe) | 8.43 | 2,4212 | | | 2.33 | 2,431.7 |
1 ERCE reserves report, April 2023. Reserves of 2.3 MMboe are Net Working Interest and do not represent the Net Entitlement share of future production legally accruing under the terms of the development and production contract
2 GaffneyCline & Associates report, December 2020; Summation of Walton Morant Prospective Resources completed by United
3 Figures based on United interpretation and calculations
4 ERCE Competent Persons Report, December 2019
5 GaffneyCline & Associates report, January 2023; Converted to mmboe by United
FINANCIAL REVIEW
This Financial Review provides an overview of the Group's Financial Performance for the year end 31 December 2022 and of United's financial position as at that date.
The Groups operations have continued to be both highly cash generative and profitable in the year, with Operating Cashflow of $8.7m (2021: $9.1m) and EBITDAX of $13.2m (2021: $13.6m) being generated. This strong cashflow and profitability has enabled the Group to fund an extensive $7.0m Capital Programme in the year to maximise the long-term value of the Group's assets whilst at the same time continuing to pay down the Group's debt, with the current BP facility to be fully repaid in 2023. The Group's financial performance in the year has been impacted by the reduction in Net Average production compared to the prior year which has resulted in a 18% reduction in revenue.
| Financial results summary | 2022 | 2021 |
| Net Average Production volumes (boepd) | 1,312 | 2,327 |
| Oil Price Realised ($/bbl) | 96.10 | 68.90 |
| Gas Price Realised ($/mmbtu) | 2.63 | 2.63 |
| Revenue 1 | $15.8m | $19.2m |
| Gross Profit | $12.9m | $12.3m |
|
| | |
| Cash operating cost per boe 2 | $10.3 | $5.9 |
| Exploration costs written off | $0.7m | $0.4m |
| Profit after Tax | $2.3m | $3.6m |
| Basic profit per share (cents) | 0.36 | 0.64 |
| Capex | $8.6m | $6.9m |
| EBITDAX 2 | $13.3m | $13.6m |
| Cashflow from Operating Activities | $8.7m | $9.1m |
1 22% interest net of government take
2 See Non-IFRS measure
Group Production and Commodity Prices
Total group working interest production for 2022 was 1,312 boepd, a decrease of 44% for the year (2021: 2,327 boepd) This decrease reflects the substantial decline in production that occurred during H2 2021 as water broke through at the ASH Field, as well as expected decline from the existing well-stock during 2022, partially offset by additional production from drilling activity and workovers. The Group's average realised oil price was $96/bbl representing an increase of 39% on the prior year, and the fixed gas price was $2.63/mmbtu. Group revenue for the year totalled $15.8m representing a reduction of 18% on the prior year with the increase in commodity prices being offset by the impact of declining production in the year. Revenues from the Abu Sennan concession are stated after accounting for government entitlements under the production sharing contract. Crude oil from Abu Sennan is sold as Western Desert Blend and the average discount to Brent was $4/bbl.
Group Operating Costs
Total Group cash operating costs were $4.9m (2021: $4.9m). The cash operating cost per barrel has increased to $10.3/boe in 2022 (2021: $5.9/boe) with this increase primarily relating to the increase in variable costs due to higher fuel costs coupled to a reduction in production compared to the prior year.
Group Depreciation, Depletion and Amortisation (DD&A)
Group DD&A associated with producing and development assets amounted to $3.3m (2021: $4m). DD&A per boe is currently $6.72/boe.
Administrative Expenses
Administrative Expenses for the year totalled $3.6m (2021: $3.8m restated) Adjusting for the non-cash items under IFRS 2 Share Based Payment and IFRS 16 Leases, the administrative expense is $3.2m (2021:$3m). Included in Administrative expenses are foreign exchange losses of $1.1m (2021: $0.4m) with the increase being due primarily to realised losses on the devaluation of the Egyptian pound versus the USD during the year.
As previously announced in January 2023, the Group is currently implementing a number of initiatives to further reduce General and Administration costs whilst ensuring continuity of operational capability. Following a detailed review the Group's cost base a programme is now in place for 2023 that is targeting a 15% reduction compared to 2022.
Divestments
During 2022 the Group completed the sale of UOG Italia Srl to Prospex Energy for a total of $2.5m. In addition the Group entered into a settlement agreement with Anasuria Hibiscus UK relating to the Crown milestone payments for a total of $2.5m, with all payments being settled in the period.
Post year end, in January 2023, the Company signed an agreement with Quattro Energy for the conditional sale of UK Central North Sea (UK CNS) Licence; P2519 for a consideration of up to £5.7m (c. $7m). This maximum consideration consists of a c$3m payment on completion with an additional c$1.1m due on approval of the Field Development plan expected in late 2023. Additional contingent payments are due upon reaching gross production thresholds from the field. The exploration asset value of P2519 remains capitalised as Intangible, as no agreement was in place prior to year end, and therefore no disposal costs or profits on disposal have been recognised in 2023. The carrying value of the Maria licence in the Balance Sheet as at 31 December 2022 is $1.2m.
Derivative financial instrument
On January 31 2022 the Company and BP extended the maturity of its pre-payment facility that was put in place to support the acquisition of Rockhopper Egypt in 2020, to 31 December 2023 to create further financial flexibility for the Company. The new terms provide downside protection by effectively hedging a volume of barrels at $70/bbl per month through to December 2023. As at 31 December 2022, an unrealised loss of $1.5m has been recognised as a result of oil price movements in the period.
Taxation and Other Income
The Egypt concession is subject to corporate income tax at the standard rate of 40.55%. However, responsibility for payment of corporate income taxes falls upon EGPC on behalf of UOG Egypt Pty Ltd. The Group records a tax charge with a corresponding increase in other income for the tax paid by EGPC on its behalf.
Profit/loss post tax
The profit for the year from continuing operations was $2.3m (2021: restated: $3.6m).
Cash flow
Net cashflow from continuing operations amounted to $8.7m (2021: $9.1m), a small decrease of 3% compared to 2021. Cost control and liquidity management both served to protect the cashflows.
Capital investment
Total capital expenditure on continuing operations for the year amounted to $8.6m (2021: $6.9m), with $2.4m incurred on the three successful development wells, $1.4m on two exploration wells, and $3.2m on other development and infrastructure projects in Abu Sennan. The remaining $1.4m was invested in other assets across the remainder of the portfolio.
The Group will continue to focus on capital discipline with 2023 capital investment largely directed at maximising value from the Group's producing assets. The Group's cash capital expenditure for the full year is forecasted to be approx.$5m, fully funded from existing operations, with circa $4.4m to be invested in Egypt and up to $0.6m across the other assets in the portfolio.
Balance Sheet
Intangibles Assets increased during the year to $7.4m (2021: $5m). Additions for the year amounted to $2.6m in Egypt, $0.8m Jamaica and $0.4m on UK assets. The Group has written off $0.5m on unsuccessful exploration drilling costs in Egypt.
The movement in Property, Plant and Equipment was $2.5m which represents cost in relation to three development wells, additional facilities and workovers on the Abu Sennan producing assets in Egypt. Additions were $5.7m in total, with a DD&A charge of $3.3m on a unit of production basis.
Trade and other receivables amounted to $4.4m and included $0.9m of accrued income on oil and gas sales. Borrowings at year end were $2.8m.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chair's statement.
United regularly monitors its business activities, financial position, cash flows and liquidity through the preparation and review of detailed forecasts. Scenarios and sensitivities are also regularly presented to the Board, including changes in commodity prices and in production levels from the existing assets, plus other factors which could affect the Group's future performance and position. A base case forecast has been considered which uses budgeted commitments and prevailing forward curve assumptions for oil prices. The key assumptions and related sensitivities include a "Reasonable Worst Case" ("RWC") sensitivity where the Board has considered a scenario with significant aggregated downside, including a delay in the payment of receivables in Egypt, a reduction in forecasted revenue of 12% and an increase in forecast capital expenditure in Egypt by 15%. The RWC incorporates a scenario whereby the sale of Maria P2519 l to Quattro does not complete in the period. Under the combined RWC, the Group forecasts there will be sufficient resources to continue in operational existence for the foreseeable future.
The likelihood of all these downside sensitivities taking place simultaneously and lasting for the entire forecast period is considered to be remote. Under such a RWC scenario, we have identified appropriate mitigating actions, including the deferral of additional uncommitted capital expenditure, seeking a restructuring of debt arrangements and adjustment of the Group cost base, which would be available to us and have been demonstrated as effective strategies in previous periods of low oil prices. Our business in Egypt remains robust given cash operating costs of less than $11/boe, flexible drilling contracts and downside price protection on our hedged volumes and gas contracts that are fixed price in nature. There are limited capital commitments in the other assets in our portfolio. The forecasts outlined above show that the Group will have sufficient financial headroom for the 12 months from the date of approval of the 2022 Accounts. Based on this analysis, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to use the going concern basis of accounting in preparing the annual Financial Statements.
Financial Outlook
United's financial strength is founded on our long-term approach to prudently managing capital to generate value. United has a streamlined portfolio of assets which are funded from operating cashflow. We have taken significant steps to strengthening our balance sheet and generate investment flexibility, via the completion of two of our asset divestments, extending the maturity on our pre-paid swap facility with the ongoing support of our debt provider BP and the conditional sale of the Maria P2519 licence to Quattro which is due to be completed in May. The measures that we have taken and the value of our stable low-cost production benefitting from the prevailing stronger commodity price environment ensures that our balance sheet provides a stable platform for growth from both organic and inorganic opportunities.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
|
|
|
| Restated (note 3) |
|
| Notes | 2022 | 2021 |
|
|
| $ | $ |
|
| | | |
| Revenue | 4 | 15,831,237 | 19,228,698 |
| Other revenue | 4 | 5,181,458 | 1,940,574 |
| Cost of sales | 5 | (8,143,910) | (8,911,815) |
| | | | |
| Gross profit | | 12,868,785 | 12,257,457 |
| | | | |
| Administrative expenses: | | | |
| Other administrative expenses | | (1,773,154) | (1,763,363) |
| Impairment of intangible assets | | (483,611) | (624,546) |
| Impairment of receivable | | - | (394,686) |
| New Venture write offs | | (282,275) | (377,934) |
| Foreign exchange (losses) / gains | | (1,106,614) | (356,850) |
| Loss on non-current assets held for sale | | - | (351,162) |
| | | | |
| | | | |
| Operating profit | 6 | 9,221,131 | 8,388,916 |
|
| | | |
| Finance expense | 7 | (1,690,896) | (2,922,754) |
| | | | |
| Profit before taxation | | 7,530,235 | 5,466,162 |
|
| | | |
| Taxation | 8 | (5,181,458) | (1,861,882) |
| | | | |
| Profit for the financial year attributable to the Company's equity shareholders | | 2,348,777 | 3,604,280 |
|
| | | |
|
| | | |
| Earnings per share from continuing operations expressed in pence per share: | 9 | | |
| Basic | | 0.36 | 0.57 |
| Diluted | | 0.36 | 0.54 |
|
| | | |
Consolidated Statement of Comprehensive Income
| |
|
| Restated (note 3) |
| |
| 2022 | 2021 |
| | | $ | $ |
| | | | |
| Profit for the financial year | | 2,348,777 | 3,604,280 |
| Foreign exchange gains / (losses) | | 337,866 | (209,164) |
| | | | |
| Total comprehensive income for the financial year attributable to the Company's equity shareholders | | 2,686,643 | 3,395,116 |
| | | | |
Consolidated Balance Sheet as at 31 December 2022
|
|
|
| Restated (note 3) |
|
| Notes | 2022 | 2021 |
| Assets |
| $ | $ |
| Non-current assets | | | |
| Intangible assets | 10 | 7,385,326 | 4,970,091 |
| Property, plant and equipment | 11 | 20,368,299 | 17,990,809 |
|
| | 27,753,625 | 22,960,900 |
|
| | | |
| Current assets | | | |
| Inventory | 13 | 268,859 | 145,570 |
| Trade and other receivables | 14 | 4,469,493 | 7,702,021 |
| Derivative financial instruments | | 120,168 | - |
| Cash and cash equivalents | 15 | 1,345,463 | 397,308 |
|
| | 6,203,983 | 8,244,899 |
| Assets in disposal groups held for sale | 12 | - | 2,091,437 |
|
| | 6,203,983 | 10,336,336 |
|
| | | |
| Current liabilities: | | | |
| Trade and other payables | 17 | (3,709,667) | (5,422,734) |
| Derivative financial instruments | | - | (1,346,044) |
| Borrowings | | (2,964,225) | (2,422,212) |
| Lease liabilities | | (83,985) | (83,368) |
| Current tax payable | | - | (57,246) |
| | | (6,757,877) | (9,331,604) |
| Liabilities associated with assets in disposal groups held for sale | | - | (116,048) |
| | | | |
| Non-current liabilities: | | | |
| Provisions | | (233,630) | - |
| Lease liabilities | | (7,356) | (24,494) |
| | | (240,986) | (24,494) |
|
| | | |
| Net assets | | 26,958,745 | 23,825,090 |
|
| | | |
| Equity and liabilities | | | |
| Capital and reserves | | | |
| Share capital | 16 | 8,839,679 | 8,416,182 |
| Share premium | 16 | 16,798,823 | 16,215,361 |
| Share-based payment reserve | | 2,547,688 | 2,247,465 |
| Merger reserve | | (2,697,357) | (2,697,357) |
| Translation reserve | | (1,008,137) | (558,104) |
| Retained earnings | | 2,478,049 | 201,543 |
|
| | | |
| Shareholders' funds | | 26,958,745 | 23,825,090 |
| Consolidated Statement of Changes in Equity | |||||||
|
| Share | Share premium | Share-based payments reserve | Retained | Translation reserve | Merger reserve | Total |
|
| $ | $ | $ | $ | $ | $ | $ |
|
|
|
|
|
|
|
|
|
| For the year ended 31 December 2022 | | | | | | | |
| Balance at 1 January 2022 | 8,416,182 | 16,215,361 | 2,247,465 | 201,543 | (558,104) | (2,697,357) | 23,825,090 |
| Profit for the year | - | - | - | 2,348,777 | - | - | 2,348,777 |
| Foreign exchange difference | - | - | - | - | 337,866 | - | 337,866 |
| Total comprehensive income | - | - | - | 2,348,777 | 337,866 | - | 2,686,643 |
| Foreign exchange adjustment arising on change of parent company functional currency to USD | 283,278 | 523,376 | 53,517 | (72,272) | (787,899) | - | - |
| Shares issued | 140,219 | 60,086 | - | - | - | - | 200,305 |
| Share-based payments (Note 17) | - | - | 246,707 | - | - | - | 246,707 |
| Balance at 31 December 2022 | 8,839,679 | 16,798,823 | 2,547,688 | 2,478,049 | (1,008,137) | (2,697,357) | 26,958,745 |
| | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the year ended 31 December 2021 | | | | | | | |
| Balance at 1 January 2021 | 8,138,619 | 16,047,975 | 1,922,090 | (3,402,737) | (348,940) | (2,697,357) | 19,659,650 |
| Profit for the year (restated, note 1) | - | - | - | 3,604,280 | - | - | 3,604,280 |
| Foreign exchange difference | - | - | - | - | (209,164) | - | (209,164) |
| Total comprehensive income | - | - | - | 3,604,280 | (209,164) | - | 3,395,116 |
| Shares issued | 277,563 | 167,386 | - | - | - | - | 444,949 |
| Share-based payments | - | - | 325,375 | - | - | - | 325,375 |
| Balance at 31 December 2021 | 8,416,182 | 16,215,361 | 2,247,465 | 201,543 | (558,104) | (2,697,357) | 23,825,090 |
| | | | | | | | |
|
| | | | | | | |
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
| |
|
| Restated (note 3) |
| |
| 2022 | 2021 |
| |
| $ | $ |
| Cash flow from operating activities | | | |
| Profit for the financial year before tax | | 7,530,235 | 5,466,162 |
| Share-based payments | | 246,707 | 325,375 |
| Depreciation & Amortisation | | 3,309,940 | 4,111,670 |
| Fair value loss on derivatives | | 1,562,467 | 1,527,250 |
| Impairment of intangible assets | | 483,611 | 624,546 |
| Loss on non-current assets / disposal groups held for sale | | - | 325,479 |
| Interest expense | | 128,429 | 1,395,504 |
| Foreign exchange movements | | 1,106,614 | 356,850 |
| Tax paid | | (5,238,704) | (1,940,574) |
| | | | |
| | | 9,129,299 | 12,192,262 |
| Changes in working capital | | | |
| Increase in inventory | | (123,289) | (109,841) |
| Decrease / (increase) in trade and other receivables | | 732,529 | (2,276,303) |
| Decrease in trade and other payables | | (1,032,853) | (697,544) |
|
| | | |
| Cash inflow from operating activities | | 8,705,686 | 9,108,574 |
|
| | | |
| Cash outflow from investing activities | | | |
| Proceeds received on disposal of non-current assets | | 4,887,275 | 160,404 |
| Purchase of property, plant & equipment | | (5,610,924) | (3,607,826) |
| Spend on exploration activities | | (2,972,201) | (2,121,050) |
|
| | | |
| Net cash used in investing activities | | (3,695,850) | (5,568,472) |
|
| | | |
| Cash flow from financing activities | | | |
| Issue of ordinary shares net of expenses | | 200,305 | 444,949 |
| Repayments on oil swap financing arrangement | | (1,452,118) | (3,518,359) |
| Payments on oil price derivatives | | (1,522,892) | (1,805,086) |
| Capital payments on lease | | (90,096) | (68,914) |
| Interest paid on lease | | (86,669) | (14,421) |
|
| | | |
| Net cash used in financing activities | | (2,951,470) | (4,961,831) |
| | | | |
| | | | |
| Net increase / (decrease) in cash and cash equivalents | | 2,058,366 | (1,421,729) |
| | | | |
| Cash and cash equivalents at beginning of financial year | | 397,308 | 2,188,903 |
| Effects of exchange rate changes | | (1,110,211) | (369,866) |
|
| | | |
| Cash and cash equivalents at end of financial year | | 1,345,463 | 397,308 |
| | | | |
1. Statutory Accounts
The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2022 or 2021, but is derived from those accounts. The Auditor has reported on those accounts, and its reports were unqualified and did not contain statements under sections 498(2) or (3) of the Companies Act 2006.
The statutory accounts for 2022 will be delivered to the Registrar of Companies following publication.
While the financial information included in this preliminary announcement has been prepared in accordance with UK-adopted International Accounting Standards ("framework"), this announcement does not itself contain sufficient information to comply with the framework. The Company expects to distribute the full financial statements that comply with UK-adopted International Accounting Standards by 30 June 2022.
2. Principal Accounting Policies
Basis of consolidation
The financial statements for the year ended 31 December 2022 incorporate the results of United Oil & Gas plc ("the Company") and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Going Concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Director's Report.
United regularly monitors its business activities, financial position, cash flows and liquidity through the preparation and review of detailed forecasts. Scenarios and sensitivities are also regularly presented to the Board, including changes in commodity prices and in production levels from the existing assets, plus other factors which could affect the Group's future performance and position. A base case forecast has been considered which uses budgeted commitments and prevailing forward curve assumptions for oil prices. The key assumptions and related sensitivities include a "Reasonable Worst Case" ("RWC") sensitivity where the Board has considered a scenario with significant aggregated downside, including a delay in the payment of receivables in Egypt, a reduction in forecasted revenue of 12% and an increase in forecast capital expenditure in Egypt by 15%. The RWC incorporates a scenario whereby the sale of Maria P2519 to Quattro does not complete in the period. Under the combined RWC, the Group forecasts there will be sufficient resources to continue in operational existence for the foreseeable future.
The likelihood of all these downside sensitivities taking place simultaneously and lasting for the entire forecast period is considered to be remote. Under such a RWC scenario, we have identified appropriate mitigating actions, including the deferral of additional uncommitted capital expenditure, seeking a restructuring of debt arrangements and adjustment of the Group cost base, which would be available to us and have been demonstrated as effective strategies in previous periods of low oil prices. Our business in Egypt remains robust given cash operating costs of less than $11/boe, flexible drilling contracts and downside price protection on our hedged volumes and gas contracts that are fixed price in nature. There are limited capital commitments in the other assets in our portfolio. The forecasts outlined above show that the Group will have sufficient financial headroom for the 12 months from the date of approval of the 2022 Accounts. Based on this analysis, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to use the going concern basis of accounting in preparing the annual Financial Statements.
New and amended International Financial Reporting Standards adopted by the Group
The Group has adopted the following standards, amendments to standards and interpretations which are effective for the first time this year. The impact is shown below:
| New/Revised International Financial Reporting Standards | Effective Date: Annual periods beginning on or after: | UKEB | Impact on | |
| Various | Amendments to • IFRS 3 Business Combinations; • IAS 16 Property, Plant and Equipment; • IAS 37 Provisions, Contingent Liabilities and Contingent Assets • Annual Improvements 2018-2020 | 1 January 2022 | Yes | No material impact |
International Financial Reporting Standards in issue but not yet effective
At the date of authorisation of the consolidated financial statements, the IASB and IFRS Interpretations Committee have issued standards, interpretations and amendments which are applicable to the Group. For the next reporting period, applicable International Financial Reporting Standards will be those endorsed by the UK Endorsement Board (UKEB).
Whilst these standards and interpretations are not effective for, and have not been applied in the preparation of, these consolidated financial statements, the following could potentially have a material impact on the Group's financial statements going forward:
| New/Revised International Financial Reporting Standards | Effective Date: Annual periods beginning on or after: | UKEB | |
| IAS 12 | Amendments to IAS 12: Deferred Tax relating to Assets and Liabilities arising from a Single Transaction | 1 January 2023 | No |
| IAS 1 | Amendments to IAS 1: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current | 1 January 2023 | No |
New / revised International Financial Reporting Standards which are not considered to potentially have a material impact on the Group's financial statements going forwards have been excluded from the above.
| New/Revised International Financial Reporting Standards | Effective Date: Annual periods beginning on or after: | UKEB | |
| IFRS 17 | Insurance contracts (and subsequent amendments to IFRS 17) | 1 January 2023 | Yes |
| IAS 8 | Definition of accounting estimate (amendment to IAS 8)) | 1 January 2023 | Yes |
| IFRS 16 | Lease liability in a sale and leaseback (amendment to IFRS 16) | 1 January 2024 | No |
| IAS 1 | Disclosure of accounting policies (amendments to IAS 1 and IFRS Practice Statement 2) | 1 January 2023 | Yes |
| IFRS 10 and IAS 28 | Sale or contribution of assets between an investor and its associate or joint venture | No confirmed date | no |
Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not listed above are not expected to have a material impact on the Group's financial statements.
3. Restatements
3(a) Restatement of prior year financial statements: correction of error in accounting for the disposal of UOG Italia
The results for the year to 31 December 2021 have been restated to reflect final costs associated with the Italian disposal within the group in the calculation of the loss in disposal of UOG Italia in 2021, and a corresponding error in the amounts reported as non-current assets held for sale at 31 December 2021. In the Balance Sheet the adjustment has been restated and reclassified from non- current to current assets.
The error has been corrected by restating each of the affected line items for the previous period as follows:
| | 2021 | Decrease | 2021 Restated |
| | $ | $ | $ |
| Balance sheet (extract) | | | |
| Assets held for sale | 2,561,250 | (469,813) | 2,091,437 |
| Net assets | 24,294,903 | (469,813) | 23,825,090 |
| Retained earnings | 671,356 | (469,813) | 201,543 |
| Total equity | 24,294,903 | (469,813) | 23,825,090 |
| | | | |
| Income statement (extract) | | | |
| Profit/(loss) on non-current assets held for sale | 118,651 | (469,813) | (351,162) |
| Operating profit | 8,858,729 | (469,813) | 8,388,916 |
| Profit before taxation | 5,935,975 | (469,813) | 5,466,162 |
| Profit for the financial year | 4,074,093 | (469,813) | 3,604,280 |
The restatement affecting profit also affects the statement of changes in equity. Basic and diluted earnings per share, and the note reconciling the tax charge, have also been restated.
3(b) Effect of the change in functional currency of the Company on the Group's financial statements
On 1 January 2022, the Company's functional currency changed from GBP to USD reflecting the fact that USD mainly influences both sales prices and costs. This has resulted in a restatement of equity items in the consolidated balance sheet at the date of the functional currency change.
The quantitative effect on the components of equity in the consolidated financial statements is as follows:
| | 2022 |
| | $ |
| | Increase / (decrease) |
| Share capital | 283,278 |
| Share premium | 523,376 |
| Share-based payment reserve | 53,517 |
| Retained earnings | (72,272) |
| Translation reserve | (787,899) |
|
| - |
4. Segmental reporting
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources, assessing the performance of the operating segment and making strategic decision, has been identified as the Board of Directors.
The Group operates in four geographic areas - the UK, Europe and greater Mediterranean, Latin America and Egypt. The Group's revenue from external customers and information about its non-current assets (other than financial instruments, deferred tax assets and post-employment benefit assets) by geographical location are detailed below.
| 2022 |
|
|
|
|
|
| $ | UK & EU |
| Latin America |
Egypt | Total |
| | | | | | |
| Revenue | - | | - | 15,831,237 | 15,831,237 |
| Other revenue | - | | - | 5,181,458 | 5,181,458 |
| | | | | | |
| Non-current assets | 1,340,605 | | 5,228,625 | 21,184,395 | 27,753,625 |
| 2021 |
|
|
|
|
|
| $ | UK & EU |
| Latin America |
Egypt | Total |
| | | | | | |
| Revenue | - | | - | 19,228,698 | 19,228,698 |
| Other revenue | - | | - | 1,940,574 | 1,940,574 |
| | | | | | |
| Non-current assets | 579,403 | | 4,460,303 | 17,921,194 | 22,960,900 |
Other Revenue
Under the concession agreements in Egypt, Income Tax due on taxable profit is paid on the Group's behalf by EGPC. To achieve this through the agreements, the Group notionally receives a greater share of hydrocarbon production in excess or Group's entitlement share of the production equal to the amount required to cover the tax payable. The oil is produced and sold on the Group's behalf by EGPC, who discharge the Group's tax liability. This income is shown as other revenue and an equal and opposite tax charge recorded through the current taxation.
5. Cost of sales
| | 2022 | 2021 |
| | $ | $ |
| | | |
|
Production costs | 4,930,038 | 4,906,713 |
|
Depreciation, depletion & amortisation | 3,213,872 | 4,005,102 |
| | | |
| | 8,143,910 | 8,911,815 |
6. Operating Profit
| | 2022 | 2021 |
| | $ | $ |
| Operating profit is stated after charging: | | |
| Depreciation: | | |
| - Owned assets |
3,219,080 |
4,009,427 |
| - Right of use leased assets | 88,382 | 98,258 |
| Amortisation | 2,478 | 3,985 |
| Share based payments | 246,707 | 325,375 |
| Foreign exchange losses | 1,106,614 | 356,850 |
| Fees payable to the Company's auditors for the audit of the annual financial statements | 90,000 | 70,000 |
7. Finance expense
| | 2022 | 2021 |
| | $ | $ |
| | | |
| Fair value loss on loan & derivatives | 1,562,467 | 1,527,250 |
| Effective interest on borrowings | 41,760 | 1,381,083 |
| Interest expense on lease liabilities | 86,669 | 14,421 |
| | | |
| | 1,690,896 | 2,922,754 |
8. Taxation
| | 2022 | 2021 |
| | $ | $ |
| | | |
| Profit/(Loss) before tax | 7,530,235 | 5,466,162 |
| Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19% (2021: 19%) | 1,430,744 | 1,038,571 |
| Tax effects of: | | |
| Foreign tax | 5,181,458 | 1,940,574 |
| Utilisation of tax losses | - | (1,038,571) |
| Adjustments in respect of prior periods | - | (78,692) |
| Double tax relief | (1,430,744) | - |
| | | |
| Corporation tax charge | 5,181,458 | 1,861,882 |
The Group has accumulated tax losses of approximately $6.8m (2021: $5.5m). No deferred tax asset was recognised in respect of these accumulated tax losses as there is insufficient evidence that the amount will be recovered in future years.
9. Earnings per share
The Group has issued share warrants and options over Ordinary shares which could potentially dilute basic earnings per share in the future.
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
There were 69,179,818 (2021: 113,697,454) share warrants and options outstanding at the end of the year that could potentially dilute basic earnings per share in the future.
Basic and diluted earnings per share
| | 2022 | 2021 |
| | Cents | Cents Restated |
| |
|
|
| Basic earnings per share from continuing operations | 0.36 | 0.57 |
| | | |
| Diluted earnings per share from continuing operations | 0.36 | 0.54 |
The profit and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
| | 2022 | 2021 |
| | $ | $ |
| Profit used in the calculation of total basic and diluted earnings per share | 2,348,777 | 3,604,280 |
| Number of shares | 2022 | 2021 |
| | Number | Number |
| |
|
|
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 649,550,544 | 637,482,325 |
| Dilutive shares | 6,803,425 | 24,871,644 |
| Weighted average number of ordinary shares for the purposes of diluted earnings per share | 656,353,969 | 662,353,969 |
10. Intangible assets
| |
| Exploration and Evaluation assets $ | Computer software $ |
Total $ |
| Cost |
|
| | |
| At 1 January 2021 | | 10,131,978 | 12,444 | 10,144,422 |
| Additions | | 3,013,536 | - | 3,013,536 |
| Disposals | | (2,576,724) | - | (2,576,724) |
| Transferred to non-current assets held for sale | | (2,519,240) | - | (2,519,240) |
| Foreign exchange differences | | (236,009) | (970) | (236,979) |
| | | | | |
| At 31 December 2021 | | 7,813,541 | 11,474 | 7,825,015 |
| Additions | | 2,972,201 | - | 2,972,201 |
| Foreign exchange differences | | (44,093) | (657) | (44,750) |
| | | | | |
| At 31 December 2022 | | 10,741,649 | 10,817 | 10,752,466 |
| | | | | |
| Amortisation and impairment |
|
| | |
| At 1 January 2021 | | 2,248,531 | 4,148 | 2,252,679 |
| Charge for the year | | - | 3,985 | 3,985 |
| Impairment | | 624,546 | - | 624,546 |
| Foreign exchange differences | | (25,803) | (483) | (26,286) |
| | | | | |
| At 31 December 2021 | | 2,847,274 | 7,650 | 2,854,924 |
| Charge for the year | | - | 2,478 | 2,478 |
| Impairment | | 483,611 | - | 483,611 |
| Foreign exchange differences | | 26,531 | (403) | 26,128 |
| | | | | |
| At 31 December 2022 | | 3,357,416 | 9,725 | 3,367,141 |
| | | | | |
| Net book value |
| | | |
| At 31 December 2022 |
| 7,384,234 | 1,092 | 7,385,326 |
| |
| | | |
| At 31 December 2021 |
| 4,966,267 | 3,824 | 4,970,091 |
At 31 December 2022 the group's E&E carrying values of $7.4m related to our high impact exploration activity in Jamaica, exploration drilling in the Abu Sennan concession in Egypt, and the UK North Sea and Waddock Cross development and exploration campaigns, respectively.
In Egypt United and its partners drilled two of its larger, but higher risk exploration prospects in 2022. ASV-1X was drilled in Q2, and although it did not flow on test there were encouraging signs indicating the presence of hydrocarbons, and the well has a workover planned and approved in the 2023 work programme. As a result, $0.9m spent net to United remains as an Intangible asset at BS date. The second exploration well, ASW-1X well did not encounter hydrocarbons in any of the multiple pre-drill targets and was plugged and abandoned at the beginning of 2023. This resulted in a write off of all costs incurred of $0.5m. On 31 December 2022 the balance of Egypt Intangible assets was $0.9m
In Jamaica United continues with a farm-out campaign with the intention of attracting partners to the licence ahead of drilling the Colibri prospect. This farm out campaign has recently seen us add Energy Advisors Group (''EAG'') to our existing advisors, Envoi Ltd, with the aim of accessing capital from the US companies and investment funds. At present there are a number of companies evaluating the opportunity with the intention of seeing final offers by the end of 1H 2023. The current licence phase expires at end of January 2024 and we have until then to make a well drilling commitment. As such all costs incurred to date remain capitalised as Intangibles, and at year end the carrying value of our exploration activity in Jamaica amounted to $5.2m.
In the UK North Sea, the Company carries an Intangibles balance of $1.0m at year end, representing amount capitalised to date on the Maria discovery. In January 2023 United announced an asset purchase agreement (''APA'') with Quattro Energy Limited (''Quattro'') to sell the Maria licence, P2519 for a maximum consideration of up to $7m. The APA was signed post year end and as a result we do not account for these assets as held for sale at the BS date. As a result, management believe no impairment indicators exist and we continue to carry the Maria licence at cost of $1.0m at 31 December 2022.
In the UK Waddock Cross licence, following a review of the updated operator development plan and in light of the increased importance of energy security in the UK coupled with the sustained high commodity prices, the directors are of the view that all costs incurred on the licence in 2022 are fully recoverable given the commercial viability of the development demonstrated by the operator, Egdon Resources Ltd. As a result, United continue to carry capitalised costs of $0.3m at the 31 December 2022 Balance sheet date, which includes a decommissioning asset recognised of $0.2m.
Management reviews the intangible exploration assets for indications of impairment at each balance sheet date based on IFRS 6 criteria such as where commercial reserves have not yet been established and the evaluation, exploration work is ongoing and a development plan has not been approved. As a result of these reviews the Directors believe no impairment indicators exist on the company's exploration portfolio, and as a result carry intangibles at cost value of $7.4m at 31 December 2022.
11. Property, plant and equipment
| |
| Production assets $ | Computer equipment $ | Fixtures and fittings $ | Right of use asset $ |
Total $ |
| Cost |
|
|
|
|
|
|
| At 1 January 2021 | | 15,976,659 | 13,706 | 2,971 | 204,764 | 16,198,100 |
| Transfer from production assets | | 2,576,724 | - | - | - | 2,576,724 |
| Additions | | 5,900,375 | - | - | 42,951 | 5,943,326 |
| Disposals | | - | - | - | (43,862) | (43,862) |
| Foreign exchange differences | | - | (1,068) | (231) | (13,820) | (15,119) |
| | | | | | | |
| At 31 December 2021 | | 24,453,758 | 12,638 | 2,740 | 190,033 | 24,659,169 |
| Additions | | 5,600,238 | 10,686 | - | 87,012 | 5,697,936 |
| Foreign exchange differences | | - | (724) | (157) | (3,508) | (4,389) |
| | | | | | | |
| At 31 December 2022 | | 30,053,996 | 22,600 | 2,583 | 273,538 | 30,352,717 |
| | | | | | | |
| Depreciation |
|
|
|
|
|
|
| At 1 January 2021 | | 2,563,268 | 7,316 | 248 | 20,101 | 2,590,933 |
| Charge for the year | | 4,005,103 | 3,373 | 951 | 98,258 | 4,107,685 |
| Disposals | | - | - | - | (16,625) | (16,625) |
| Foreign exchange differences | | - | (706) | (57) | (12,870) | (13,633) |
| | | | | | | |
| At 31 December 2021 | | 6,568,371 | 9,983 | 1,142 | 88,864 | 6,668,360 |
| Charge for the year | | 3,213,872 | 4,359 | 849 | 88,382 | 3,307,462 |
| Foreign exchange differences | | - | (509) | (54) | 9,158 | 8,595 |
| | | | | | | |
| At 31 December 2022 | | 9,782,242 | 13,834 | 1,937 | 186,404 | 9,984,417 |
| | | | | | | |
| Net book value |
| | | | | |
| At 31 December 2022 |
| 20,271,754 | 8,766 | 646 | 87,133 | 20,368,300 |
| |
| | | | | |
| At 31 December 2021 |
| 17,885,387 | 2,655 | 1,598 | 101,169 | 17,990,809 |
Depreciation is recognised within cost of sales for Egypt operations, and administrative expenses for office assets. Included in PP&E additions are internal costs of $0.6m incurred by the Group allocated to Egyptian producing assets.
At 31 December 2022 an impairment indicator of IAS 36 was triggered following the material reduction in average production in 2022 compared to the prior year resulting in management testing the Egyptian Production and Development assets for impairment. The recoverable amount has been determined using a discounted cashflow model to estimate the value in use. Calculating the net present value of the cashflows involves key assumptions which include the commodity prices, 2P reserves estimates and discount rates. Other assumptions include production profiles, future operating and capital expenditure and the relevant fiscal terms.
As at 31 December 2022, the fair value of the assets are estimated based on a post-tax nominal discount rate of 12% (2021:10%) and a flat Oil price of $80/bbl (2021:$75/bbl) for the period.
The Egyptian oil and gas asset has a carrying value of $20.4 million at 31 December 2022. Testing of sensitivity cases indicated that a $10/bbl reduction in the long term oil price used would not result in an impairment. We have also run a sensitivity using a 15% discount rate which would also not result in an impairment.
12. Non-current assets and disposal groups held for sale (restated)
During the year, on 11 April 2022, United announced the completion of the sale of 100% of the share capital of UOG Italia Srl to PXOG Marshall Limited, a subsidiary of Prospex Energy PLC (Prospex), for a consideration of €2,164,701 (c. $2.54m).
Assets and liabilities held for sale
The following major classes of assets and liabilities relating to these operations have been classified as held for sale in the comparative consolidated balance sheet at 31 December 2021:
| | Total held for sale |
| | $ |
|
| |
| Intangible assets | 2,062,341 |
| Trade and other receivables | 28,588 |
| Cash at bank and in hand | 508 |
| Assets held for sale | 2,091,437 |
| | |
| Trade and other payables | (116,048) |
| Liabilities held for sale | (116,048) |
| | |
Fair value measurement
The fair value of the net assets of $1,975,389 are categorised as level 3 non-recurring fair value measurements.
The fair valuations have been determined by reference to signed disposal agreements, in relation to which non-refundable deposits have been received.
Loss on disposal
The net loss on disposal recognised in the income statement is comprised of:
| | 2022 | 2021 |
| | $ | $ |
| | | |
| Loss on disposal of UOG Italia net of disposal expenses incurred | - | (236,456) |
| Costs incurred on disposal of UK assets | - | (114,706) |
| | | |
| | - | (351,162) |
13. Inventory
|
| 2022 | 2021 |
| | $ | $ |
| | | |
| Oil in tanks | 268,859 | 145,570 |
| | | |
| | 268,859 | 145,570 |
In the year ended 31 December 2022, the movement in Oil Inventory of $123,289 was recognised in the Income Statement.
14. Trade and other receivables
|
| 2022 | 2021 |
| | $ | $ |
| | | |
| Trade receivables | 3,549,051 | 2,257,609 |
| Prepayments | 6,940 | 7,361 |
| Contract assets | 873,206 | 2,865,287 |
| Other tax receivables | 40,295 | 71,764 |
| Crown disposal proceeds due | - | 2,500,000 |
| | | |
| | 4,469,492 | 7,702,021 |
The Directors consider that the carrying values of trade and other receivables are approximate to their fair values.
No expected credit losses exist in relation to the Group's receivables as at 31 December 2022 (2021: $nil).
Trade receivables represent amounts invoiced for oil and gas sold in the year, not yet received from EGPC. Contract assets relate to one month Oil & Gas invoices not received at year-end for the Abu Sennan producing assets in Egypt under the receivable terms of the agreement with EGPC.
15. Cash and cash equivalents
|
| 2022 | 2021 |
| | $ | $ |
| | | |
| Cash at bank (GBP) | 52,251 | 50,831 |
| Cash at bank (EUR) | 23,620 | 16,286 |
| Cash at bank (USD) | 799,390 | 3,226 |
| Cash at bank (EGY) | 470,202 | 326,965 |
| | | |
| | 1,345,463 | 397,308 |
At 31 December 2022 and 2021 all significant cash and cash equivalents were deposited in creditworthy financial institutions in UK, Ireland and Egypt.
16. Share capital, share premium and merger reserve
Allotted, issued, and fully paid:
|
|
|
|
| 2022 |
|
|
|
| Share capital | Share premium |
|
|
| No. | $ | $ |
| Ordinary shares of $0.01 each | | | | |
| At 1 January 2022 | | 644,803,969 | 8,416,182 | 16,215,361 |
| Effect of Parent company functional currency change | | | 283,278 | 523,376 |
| | | | | |
| Allotments: | | | | |
| Shares issued for cash (exercise of warrants & options) | | 11,550,000 | 140,219 | 60,086 |
| | | | | |
| At 31 December 2022 | | 656,353,969 | 8,839,679 | 16,798,823 |
| | | | | |
|
|
|
|
| 2021 |
|
|
|
| Share capital | Share premium |
|
|
| No | $ | $ |
| Ordinary shares of $0.01 each | | | | |
| At 1 January 2021 | | 625,153,969 | 8,138,619 | 16,047,975 |
| | | | | |
| Allotments: | | | | |
| Shares issued for cash (exercise of warrants) | | 19,650,000 | 277,563 | 167,386 |
| | | | | |
| At 31 December 2021 | | 644,803,969 | 8,416,182 | 16,215,361 |
| | | | | |
As regards income and capital distributions, all categories of shares rank pari passu as if the same constituted one class of share.
17. Trade and other payables
|
| 2022 | 2021 |
| | $ | $ |
| | | |
| Trade payables | 499,217 | 1,180,088 |
| Other payables | 1,295,681 | 1,599,414 |
| Deferred shares | 40,475 | 40,476 |
| Accruals | 1,874,294 | 2,602,756 |
| | | |
| | 3,709,667 | 5,422,734 |
18. Events after the balance sheet date
On the 17th of January 2023 United announced the signing of a binding Asset Purchase Agreement (''APA'') with Quattro Energy Limited (''Quattro'') to sell the Maria licence, P2519 for a maximum consideration of up to $6.95m (£5.7m) inclusive of contingent bonus payments.
Consideration comprises:
- Initial cash payment of £2.45 million to United (c.US$3 million) at completion.
- An additional £1.0 million to be paid to United upon approval of an FDP (expected late 2023) for Block 15/18e.
- Contingent bonus payments of up to £2.25 million upon reaching gross production thresholds from the field of three, four and five million barrels.
The completion of the APA is subject to a number of pre-conditions including the North Sea Transition Authority ("NSTA") approval to the Licence acquisition and Quattro having available an amount equal to the completion payment of £2.45 million in cash. It is anticipated that completion of the APA will be in May 2023.
Glossary
| Bbl | Barrels |
| /Bbl | Per barrel |
| Bn | Billion |
| bopd | Barrels of oil per day |
| Boepd | Barrels of oil equivalent per day |
| Capex | Capital Expenditure |
| EGPC | Egyptian General Petroleum Corporation |
| ESG | Environment, Social, Governance |
| ESP | Electrical Submersible Pumps |
| HCIIP | Hydrocarbon initially in place |
| HSE | Health, safety and environment |
| JOC | Joint Operating Company |
| JV | Joint Venture |
| km | Kilometres |
| km2 | Square kilometres |
| KPI(s) | Key performance indicator(s) |
| m | Metres |
| M | Thousand |
| MBbl | Thousand barrels |
| Mbopd | Thousands of barrels of oil per day |
| MM | Million |
| MMBbl | Million barrels |
| MMboe | Million barrels of oil equivalent |
| MSET | Ministry for Science, Energy and Technology |
| NPV | Net present value |
| OGA | Oil and Gas Authority |
| OPEX | Operating expenditure |
| Q1 | First Quarter |
| Q2 | Second Quarter |
| Q3 | Third Quarter |
| Q4 | Fourth Quarter |
| scf | Standard cubic feet |
| SPA | Sales and Purchase Agreement |
| TD | Total Depth |
| UK CNS | UK Central North Sea |
| WI | Working interest |
| % | Percentage |
| 2C | Best estimate of contingent resources |
| 2D | Two-dimensional |
| 3D | Three-dimensional |
| 2P | Proved plus probable reserves |
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.