28 June 2023
Molecular Energies PLC
("Molecular", "the Company", or "the Group")
Audited Results for the year ended 31 December 2022
2023 update and outlook
AGM date
Molecular (AIM: MEN), the international energy company is pleased to announce its audited results for the year ended 31 December 2022 and a 2023 update and outlook.
The Company's Annual Report will be posted to Shareholders on 30 June 2023 together with the Notice for the Annual General Meeting.
Peter Levine, Chairman, commented:
"The year under report was challenging and volatile in certain ways, rewarding in others and, considering all the circumstances, the results were sound. However, activities since the start of the year point to a more stable future and there is potential for some exciting developments in the Group as a whole going forward.
"As separately announced today, we are encouraged by the progress made in Green House Capital and look forward to developing its potential as a separate listed entity."
Highlights FY2022
Financial
· Adjusted EBITDA contribution from Argentina US$9.8 million (2021: US$10.5 million) with adjusted Group EBITDA* of US$7.0 million (2021: US$7.5 million).
· Group revenue of US$33.2 million (2021: US$34.1 million) as lower sales volumes, due in part to the Rio Negro incident, were offset by higher realised prices in both Argentina and the USA.
· The average price across the Group was US$55.9/boe (2021: US$40.7/boe) due to the recovery in market prices in the year.
· Net cash generated by operating activities increased by 3% to US$11.4 million (2021: US$11.1 million).
· Free cash generation from core operations* (excluding workovers) of US$11.3 million (2021: US$12.8 million).
· Year-end cash balances US$7.9 million (2021: US$2.0 million).
· After depreciation, depletion and amortisation of US$8.8 million (2021: US$11.5 million) loss after tax of US$10.5 million (2021 profit US$4.6 million).
· Borrowings at year end increased to US$47.5 million (2021: US$29.3 million). Of this, US$35 million is third party financial debt in Argentina with no recourse to the Group. The majority of this is dollar-based debt at low average interest rates of less than 5%. This has no material impact on the Group as it is a dollar-based business. The balance is in effect peso-denominated which is advantageous to the Group. The balance of US$11.9 million is owed by the Group to IYA, an affiliate company of Chairman Peter Levine. The increase in third party debt in Argentina relates to the heavy capex programme last year and the incident at the Puesto Flores facility. All borrowings are being serviced in accordance with their terms.
· Since the end of the period, the IYA debt has been converted to an interest free loan with a maturity now out to the end of 2025 and financial borrowings in Argentina have been measurably reduced with much of the remaining debt refinanced and extended on attractive terms.
Corporate
· Name of Company changed from 'President Energy PLC' to 'Molecular Energies PLC' to reflect the expansion of our interests in alternative energies and related technologies.
· Capital reorganisation consolidating every 200 existing ordinary shares into one consolidated share, and the sub-division of every such consolidated share into one new ordinary share and one deferred share.
· Further tranche of US$3.585 million in bonds issued to the Argentine market to fund further working capital and capital expenditure. The interest rate was 3.89% with a 25-month repayment period and an initial 16-month capital repayment holiday.
· Market value of retained 22.5% holding in Atome Energy PLC ("Atome"), the Company's green hydrogen and ammonia affiliate, increased in US dollar terms by approximately 14% throughout the year, whilst the share price in GB pound terms increased by approximately 28%.
· Became 75% beneficial shareholder in Green House Capital, an incubator company for alternative energy projects which is subject to a separate RNS today regarding the potential forthcoming spin-off.
Operations
· Group net average production 1,708 boepd (2021: 2,473 boepd).
· Production in Argentina adversely impacted by the incident in Rio Negro concession announced on 11 August 2022 that impacted on production from the Puesto Flores oil field in the latter parts of the year.
· Three new well drilling programme in Salta, Argentina commenced late 2021 and successfully completed during the year. All three wells on stream and now producing.
· Argentina well operating costs per boe in 2022, excluding royalties and workovers* US$25.9 per boe (2021: US$17.0) due to lower production.
· Group-wide administrative costs stable at US$4.5m (2021: US$4.4m) excluding directly attributable Atome expenses in 2021.
· Work on our Paraguay exploration well progressed with our partners.
· Studies continued regarding potential secondary recovery project in the Rio Negro concession.
· Exploration planning continued at the Martinez del Tineo field which, subject to rig availability, is slated to be drilled towards the end of 2023.
· Matorras and Ocultar licences in Salta successfully relinquished.
Production and reserves
· Net 2P (proven and probable) reserves in Argentina at year end, as confirmed by an independent reserves audit of 18.9 mmboe (2021: 24.4 mmboe).
· Louisiana 1P current proven producing reserves to be written off completely this year and contingency for liabilities released.
Production | Oil (bbls) | Natural Gas (mmcf) | Total (mmboe) | |||
Country | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
Argentina | 408,999 | 561,947 | 1,172.5 | 1,838.9 | 604.4 | 868.4 |
USA | 15,470 | 19,831 | 22.6 | 87.0 | 19.2 | 34.3 |
| 424,469 | 581,778 | 1,195.1 | 1,925.9 | 623.6 | 902.7 |
Net Reserves (mboe) | Argentina | USA | Total |
As at 31 December 2021 | 24,399.5 | 723.8 | 25,123.3 |
Revisions in reserves | (4,894.2) | (681.6) | (5,575.8) |
Production | (604.4) | (19.2) | (623.6) |
As at 31 December 2022 | 18,900.9 | 23.0 | 18,923.9 |
Reserve revisions in Argentina reflect the results of production performance, drilling and workovers in the year and the subsequent independent auditor's reserve report by J&R Consultora. It is important to note that the reserves as at 31 December 2022 do not represent the total of what is present and/or recoverable in the respective fields in Rio Negro but only what are present and/or recoverable over the remaining term of Molecular's current licenses to 2026 / 2027. It is contemplated that, in due course, Molecular's core licences will be extended for a further 10 years which would then increase the reserves, ceteris paribus.
* Calculation of all quoted metrics not directly corresponding to GAAP measures are detailed in the Alternative Performance Measure glossary and cross referenced to the Notes where applicable
Current Trading
Argentina
With a second separator this month brought up to full capacity in the core area of Puesto Flores, oil production is climbing, with an anticipated level from that field by the beginning of July of over 150m3/day. This excludes oil and gas production from our other fields in Rio Negro such as Estancia Vieja and Puesto Prado. Production from Salta Province is stable at approximately 60m3/day.
A frac campaign is slated to commence in the Puesto Flores field by September targeting, on a success case, an initial additional 60m3/day of oil production. A mobile workover/light drilling rig has been identified to be acquired by the Group and put into working order within the next few months which will enable Molecular to react to downhole issues in wells as and when they arise and reactivate relevant shut-in wells whether in Rio Negro or Salta Province. The rig, which, if purchased, is expected to cost some US$1.5 million, is intended to be funded without recourse to equity dilution.
A new high-impact exploration well is scheduled to start to be drilled before the end of the year at the Martinez del Tineo field in the Puesto Guardian Concession, Salta. Previously considered as a farm-out candidate, Molecular has decided to go it alone. The well is going through its planning and permission stages, and it will be targeting both an oil rim with existing 2P reserves of 1.1 mmboe in the Martinez del Tineo field and a deeper gas exploration reservoir of a potentially larger size of some 110 mmboe of unrisked resources (as estimated by Gaffney, Cline) but with a lower chance of success. The size of the prize is however too big to ignore. The well's cost is still being assessed but is likely to be in the region of US$5 million and is intended to be funded without recourse to equity dilution.
With elections coming up later this year, it is hoped that 2024 will see a more stable macro environment for Argentina with the EBITDA for our Argentine business expected to increase for Q2 from the US$2 million in Q1.
Paraguay
The high-impact well to be drilled at the Tapir location in the Chaco, Paraguay is now scheduled to commence mid-August with the further delay due to a further inspection of the rig by Molecular requiring the drilling company to make additional repairs with drill safety a paramount concern. The delays place no further cost burden on Molecular or its partner, CPC.
All other necessary preparations are in hand, and we look forward to at last getting down to business. I plan to be on site when this happens.
Atome
This spin-out from Molecular has proved to be a great success with the Company founding Atome from scratch within the last three years. Since the IPO at the end of 2021, Atome has gone from strength to strength with the share price increasing approximately 30% since the IPO. With a market capitalisation of some US$55 million, Molecular retains a solid investment of 22.5% in Atome after providing Molecular shareholders with a substantial dividend in specie at the time of the 2021 IPO.
With the recent Baker Hughes investment into Atome, Molecular looks forward to Atome's future with confidence.
Green House
Following on from the success of the spin-off of Atome, Molecular has initiated steps towards spinning-off this division in the latter part of this year to unlock the value in Green House not currently reflected by being part of the Molecular Group. The spin-off will expose Green House to a wider investor audience that is more focussed on green-energy solutions in a similar manner to Atome. Reference is made to the separate announcement made by the Group in this regard at the same time as announcement of these report and accounts.
Management
The Board appointed Jordan Coleman as CEO (non-board) of our hydrocarbons division late last year and these results prove the positive impact he is having on operations. Similarly, the Board now intends to appoint a CEO of our Green House division in the near term.
Outlook
The outlook for Molecular is looking a tad brighter. With good traction and new elections in Argentina this year, two high-impact wells planned, material progress on the business within Green House, allied with its potential spin-off later this year, there are many moving parts. Whilst one has to be severely realistic as to the chances of success in exploration wells, the Group has positives to look forward to over the next 12 months.
The Company's Annual Report will be posted to shareholders on 30 June 2023.
Annual General Meeting and Investor Q&A
The Annual General Meeting will be held on Tuesday 25 July 2023 at 1.00 p.m. BST at Carrwood Park, Selby Road, Leeds LS15 4LG.
For further information, please visit www.molecularenergiesplc.com or contact:
Molecular Energies PLC Peter Levine, Chairman Rob Shepherd, Group FD | +44 (0) 207 016 7950
|
finnCap (Nominated Advisor and Broker) Christopher Raggett, Tim Harper | +44 (0) 207 220 0500 |
Notes to Editors
Molecular Energies PLC is an AIM listed company at the forefront of energy development and has interests across the energy spectrum, from oil and gas projects to subdivisions in the green and alternative energy sub-sectors.
The Company has oil and gas production in Argentina as well as exploration assets in both Argentina and Paraguay. The Company has two separate subdivisions which are focused on early-stage opportunities in the green and/or alternative energy sub- sector.
Activities in the green and alternative energy space are being carried out under the Green House Capital brand and through AIM listed Atome Energy PLC, a green hydrogen, ammonia, and fertiliser company operating in Paraguay, Costa Rica and Iceland, in which Molecular currently has 22.5%.
With a strong strategic and institutional base of support, an in-country management team as well as the Chairman whose interests as the largest shareholder are aligned to those of its shareholders, Molecular gives UK investors access to an energy growth story combined with world class standards of corporate governance, environmental and social responsibility.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR"). The person who arranged for the release of this announcement on behalf of the Company was Peter Levine, Chairman.
Detailed Financial Review
2022 has proved a challenging year as production decline in both Argentina and USA hydrocarbon businesses have impacted on the financial returns. While world oil prices have been higher than 2021, controlled prices in Argentina and restricted access to export markets has limited the ability of the Group to benefit from these. However, efforts have continued to focus on developing alternative energy businesses with the establishment of Green House Capital to pursue opportunities akin to that achieved with Atome in 2021 which will assist in rebalancing the assets and business of the Group going forward. The Group retains a 22.5% stake in Atome, with the accounting rules governing consolidation of investments in associate undertakings with significant influence, shareholders will need to look to the Company Balance Sheet to see the improvement in the market value of the investment in the period as highlighted in Note 9.
Revenue fell by 3% to US$33.2 million (2021: US$34.1 million) as lower sales volumes were offset by higher realised prices in both Argentina and the USA; the average Group product price was US$55.9/boe (2021: US$40.7/boe) due to the recovery in market prices in the year. Overall Group production fell by 31% to 1,708 boepd (2021: 2,473 boepd).
Production in Argentina was adversely impacted by an incident in our Rio Negro concession that impacted on production from the Puesto Flores oil field in the latter part of the year although the financial impact was partially offset by a successful insurance claim.
Cost of sales decreased to US$30.3 million (2021: US$33.4 million) due to lower production related depreciation and a one-off credit arising on the release of an abandonment provision.
Free cash generation from core operations excluding changes in working capital, administrative expense and non-recurring workovers fell by 12% to US$11.3 million (2021: US$12.8 million).
After depreciation, depletion and amortisation of US$8.8 million (2021: US$11.5 million) and administrative expenses of US$4.5 million (2021: US$5.8 million), the Group recorded a reduced operating loss of US$1.6 million (2021: loss US$5.0 million).
Included within administrative expenses in 2021 were US$1.4 million of directly attributable Atome expenses largely offset by the US$1.3 million non-operating gain arising on migration to an associate investment, and directly linked to the US$1.3 million receivable ultimately recovered in 2022. The overall impact of Atome related expenses was essentially neutral in 2021.
An impairment of US$10.0 million (2021: US$0.1 million) was recognised in the period. Following a decision to focus exploration efforts the Hernadarias concession was relinquished in 2023 resulting in an impairment of the carrying value at the end of 2022 of US$8.5 million. While the reduction in USA reserves triggered an impairment review and an impairment of US$1.4 million.
Non-operating gains largely arising on recoveries of previously impaired costs, insurance proceeds and asset disposals resulted in a US$1.3 million gain (2021: gain US$14.5 million) in contrast to the Atome related gains in the prior period. Higher interest on Argentina related borrowings were offset by foreign exchange gains including related treasury income. Loss before tax for the year was US$12.2 million (2021: profit US$5.7 million) with loss after tax totalling US$10.5 million (2021 profit: US$4.6million).
Argentine operating performance
Production in Argentina decreased by 30% to 604,411 boe (2021: 868,427 boe) or 1,656 boepd (2021: 2,379 boepd). Average realised sales prices in Argentina rose by 35% to US$54.7 per boe (2021: US$40.6 per boe) benefitting from partial exposure to world market prices on export sales.
Well operating costs in Argentina before non-recurring items* rose by 52% to US$25.9/boe (2021: US$17.0/boe) on lower volumes associated with production decline. Depreciation fell during the year to US$12.1/boe (2021: US$12.9/boe)* reflecting changes in future reserve development cost estimates. The extension of the Rio Negro licence period and/or the secondary recovery project which are both under discussion with the Neuquén Province would lead to a significant reduction in depreciation rates. Overall, following the annual independent review, proved and probable reserves in Argentina decreased by 21% largely on the Rio Negro assets. This change triggered an impairment review for these cash generating units, but no impairment was considered necessary.
USA operating performance
Overall production from the Group's working interest in US operations fell by 44% to 53 boepd (2021: 94 boepd). Despite production rates returning to previous levels in May 2022, production stagnated in middle of the year requiring a two-month shut-in and further workover of the well. Production resumed in early November, but it became apparent by the end of the year that future performance from the new reservoir zone would be materially below historic levels triggering a reduction in future reserves and an impairment review. Subsequent to the higher depreciation charge, an impairment of US$1.4 million was recognised.
Average realised prices in the US more than doubled over the prior year to US$87.8/boe (2021: US$43.1/boe). Well operating costs excluding royalty related expenses and non-recurring workovers* rose to US$44.1 /boe (2021: US$14.3 /boe) due to lower production levels. Depreciation rose during the year to US$72.4/boe (2021: US$6.3/boe)* due to the reduction in future reserves estimates.
This asset has now been sold by the Group and the accounts for 2023 will show a release of the associated contingent liabilities.
Corporate
While much of the focus in 2021 was on the value creation in bringing Atome to the market, development drilling in Argentina and concluding the farm out of the Pirity Concession in Paraguay, activity through 2022 focused on transition. The Group changed its name to Molecular Energies plc and with the sub-division of shares in October 2022, the emphasis was on preparing the business for the future. New entities have been created under the Green House Capital division that are expected to develop new alternative energy opportunities in future periods. Argentina remains the core hydro-carbon division and continues to self-fund through access to local capital markets. Through 2022, preparations to drill the exploration well on the Pirity concession in 2023 continued. Accordingly, management consider that it is appropriate to continue to capitalise the balance of US$46 million at 31 December 2022 (2021: US$54 million).
Investment in the Oil & Gas Assets component of Property, Plant and Equipment in the year amounted to US$24.2 million (2021: US$ 14.7 million) with the completion and re-entry of four wells in the Salta Concession in Argentina, installation of new facilities in Rio Negro following fire damage and capitalised workovers in Argentina. In the USA, ownership of the Pacific Enterprises well was acquired for future use as a saltwater disposal well.
Overall, Trade and Other Payables increased to US$24.1 million (2021: US$22.0 million) due to obligations arising on drilling commitments.
Trade and Other Receivables decreased to US$11.7 million (2021: US$11.9 million). In financing Argentine drilling activity, the Group managed currency exposure by prepaying for US$1.6 million (2021: US$3.2 million) of drilling costs to be discharged on future activity. Under borrowing arrangements, proceeds are received net of interest earned in future periods resulting in a prepayment of interest.
At the end of the year, the Group had a net current liability of US$19.4 million (2021: US$9.2 million). However, after deducting the liabilities on drilling and capital accruals, which are periodic in nature as detailed in Note 19, the underlying net current liability from ongoing operations is lower at US$7.1 million (2021: US$3.2 million). Year-end cash balances were US$7.9 million (2021: US$2.0 million).
Key Performance Indicators
Key Performance Indicators are used to measure the extent to which Directors and management are reaching key business objectives for the Group. The principal methods by which the Directors monitor the Group's performance are volumes of net production, well operating costs and the extent of exploration success. The Directors also carry out a regular review of cash available for exploration and development and review actual capital expenditure and operating expenses against forecasts and budgets.
| 2022 | | 2021 | | Increase/ (Decrease) |
Production mboe |
| | | | |
USA | 19.2 | | 34.3 | | -44.0% |
Argentina | 604.4 | | 868.4 | | -30.4% |
Total net hydrocarbons | 623.6 | | 902.7 | | -30.9% |
| | | | | |
Well operating costs US$000* |
| | | | |
USA | 1,000 | | 488 | | 104.9% |
Argentina | 15,917 | | 15,538 | | 2.4% |
Total operating costs | 16,917 | | 16,026 | | 5.6% |
| | | | | |
Well operating costs per boe US$* |
| | | | |
USA | 52.1 | | 14.2 | | 266.1% |
Argentina | 26.3 | | 17.9 | | 47.2% |
Total well operating costs per boe US$ | 27.1 | | 17.8 | | 52.8% |
* calculation of all quoted metrics not directly corresponding to GAAP measures are detailed in the Alternative Performance Measure glossary and cross referenced to the Notes where applicable
Underlying operating costs excluding non-recurring items have been calculated and detailed in the Alternative Performance Measure section of this report.
Consolidated Statement of Comprehensive Income
Year ended 31 December 2022
| Note | | 2022 | | 2021 |
Continuing Operations | | | | | |
Revenue | | | 33,233 | | 34,147 |
Cost of sales | 2 | | (30,344) | | (33,431) |
Gross profit/(loss) | | | 2,889 | | 716 |
Administrative expenses | 3 | | (4,543) | | (5,764) |
Operating profit /(loss) before impairment and non-operating gains/(losses) | | | (1,654) | | (5,048) |
Presented as: | | | | | |
Adjusted EBITDA | | | 6,947 | | 7,526 |
Non-recurring items | | | (407) | | (751) |
EBITDA excluding share options | | | 6,540 | | 6,775 |
Release of abandonment provision | | | 711 | | - |
Depreciation, depletion & amortisation | | | (8,790) | | (11,456) |
Share based payment expense | | | (115) | | (367) |
Operating profit / (loss) | | | (1,654) | | (5,048) |
| | | | | |
Non-operating gains / (losses) | 4 | | 1,270 | | 14,494 |
Loss on investment in associate undertaking | | | (25) | | - |
Impairment credit / (charge) | 5 | | (10,016) | | (51) |
Profit / (loss) after impairment and non-operating gains/(losses) | | | (10,425) | | 9,395 |
| | | | | |
Finance income | | | 4,907 | | 1,633 |
Finance costs | | | (6,649) | | (5,324) |
Profit / (loss) before tax | | | (12,167) | | 5,704 |
| | | | | |
Income tax (charge)/credit comprises: | | | | | |
Current tax income tax (charge)/credit | | | (59) | | - |
Deferred tax: foreign exchange arising on provision for future taxes | | | (3,409) | | (1,341) |
Deferred tax being underlying provision for future taxes | | | 5,137 | | 216 |
Total income tax (charge)/credit | | | 1,669 | | (1,125) |
Profit / (loss) for the year from continuing operations | | | (10,498) | | 4,579 |
| | | | | |
Other comprehensive income, net of tax | | | | | |
Items that may be reclassified subsequently to profit or loss | | | | | |
Exchange differences on translation of foreign operations | | | 5 | | - |
Total comprehensive profit /(loss) for the year attributable | | | | | |
to the equity holders of the parent | | | (10,493) | | 4,579 |
| | | | | |
Earnings / loss per share | 6 | | US cents | | US cents |
Basic profit/(loss) per share from continuing operations | | | (102.02) | | 45.07 |
Diluted profit(loss) per share from continuing operations | | | (102.02) | | 44.17 |
The accompanying accounting policies and notes form an integral part of these financial statements.
Consolidated Statement of Financial Position
31 December 2022
ASSETS | | 2022 | | 2021 |
Non-current assets | | | | |
Intangible exploration & evaluation assets | | 45,721 | | 54,304 |
Goodwill | | 705 | | 705 |
Property, plant and equipment | | 71,937 | | 59,148 |
Investment in associate | | - | | 25 |
Deferred tax | | 45 | | 350 |
Other non-current assets | | 103 | | 103 |
| | 118,511 | | 114,635 |
Current assets | | | | |
Trade and other receivables | | 11,710 | | 11,887 |
Stock | | - | | 1,336 |
Cash and cash equivalents | | 7,941 | | 2,014 |
| | 19,651 | | 15,237 |
| | | | |
TOTAL ASSETS | | 138,162 | | 129,872 |
| | | | |
LIABILITIES | | | | |
Current liabilities | | | | |
Trade and other payables | | 20,708 | | 17,424 |
Borrowings | | 18,391 | | 7,014 |
| | 39,099 | | 24,438 |
Non-current liabilities | | | | |
Trade and other payables | | 3,362 | | 4,580 |
Long-term provisions | | 7,854 | | 7,480 |
Borrowings | | 29,134 | | 22,250 |
Deferred tax | | 250 | | 2,283 |
| | 40,600 | | 36,593 |
| | | | |
TOTAL LIABILITIES | | 79,699 | | 61,031 |
| | | | |
EQUITY | | | | |
Share capital | | 36,179 | | 36,179 |
Share premium | | 48 | | 48 |
Translation reserve | | (50,235) | | (50,240) |
Profit and loss account | | 64,647 | | 75,145 |
Reserve for share-based payments | | 7,824 | | 7,709 |
TOTAL EQUITY | | 58,463 | | 68,841 |
TOTAL EQUITY AND LIABILITIES | | 138,162 | | 129,872 |
Consolidated Statement of Changes in Equity
Year ended 31 December 2022
| | | | | | | | | Reserve | | |
| | | | | | | Profit | | for share- | | |
| Share | | Share | | Translation | | and loss | | based | | |
| capital | | premium | | reserve | | account | | payments | | Total |
| US$000 | | US$000 | | US$000 | | US$000 | | US$000 | | US$000 |
| | | | | | | | | | | |
Balance at 1 January 2021 | 35,708 | | 257,992 | | (50,240) | | (174,631) | | 7,538 | | 76,367 |
| | | | | | | | | | | |
Share-based payments | - | | - | | - | | - | | 367 | | 367 |
Debt conversion | 82 | | 58 | | - | | - | | - | | 140 |
Subscription | 241 | | 254 | | - | | - | | - | | 495 |
Exercise of options | 148 | | 48 | | - | | - | | (196) | | - |
Capital reduction | - | | (258,304) | | - | | 258,304 | | - | | - |
Dividend in specie | - | | - | | - | | (13,130) | | - | | (13,130) |
| | | | | | | | | | | |
Transactions with the owners | 471 | | (257,944) | | - | | 245,174 | | 171 | | (12,128) |
| | | | | | | | | | | |
Profit for the year | - | | - | | - | | 4,579 | | - | | 4,579 |
Other comprehensive income | | | | | | | | | | | |
Exchange differences on | | | | | | | | | | | |
translation | - | | - | | 23 | | - | | - | | 23 |
Reclassified to profit and loss | - | | - | | (23) | | 23 | | - | | - |
Total comprehensive income for | | | | | | | | | | | |
the year | - | | - | | - | | 4,602 | | - | | 4,602 |
| | | | | | | | | | | |
Balance at 1 January 2022 | 36,179 | | 48 | | (50,240) | | 75,145 | | 7,709 | | 68,841 |
| | | | | | | | | | | |
Share-based payments | - | | - | | - | | - | | 115 | | 115 |
| | | | | | | | | | | |
Transactions with the owners | - | | - | | - | | - | | 115 | | 115 |
| | | | | | | | | | | |
Loss for the year | - | | - | | - | | (10,498) | | - | | (10,498) |
Other comprehensive income | | | | | | | | | | | |
Exchange differences on | | | | | | | | | | | |
translation | - | | - | | 5 | | - | | - | | 5 |
Total comprehensive income for | | | | | | | | | | | |
the year | - | | - | | 5 | | (10,498) | | - | | (10,493) |
| | | | | | | | | | | |
Balance at 31 December 2022 | 36,179 | | 48 | | (50,235) | | 64,647 | | 7,824 | | 58,463 |
Attributable to the owners of the Company
Consolidated Statement of Cash Flows
Year ended 31 December 2022
| 2022 | | 2021 |
Cash flows from operating activities |
| | |
Cash generated by operating activities (note 7) | 11,366 | | 11,078 |
Interest received | 244 | | 145 |
| 11,610 | | 11,223 |
Cash flows from investing activities |
| | |
Expenditure on exploration and evaluation assets | - | | (1,652) |
Expenditure on development and production assets | (21,832) | | (19,431) |
Proceeds from asset sales | - | | 29 |
Insurance proceeds | 1,289 | | - |
Recovery of previously impaired costs | 748 | | - |
Proceeds from Paraguay farmout | - | | 4,000 |
Acquisition & licence extension in Argentina | - | | (284) |
USA acquisition | (450) | | - |
Deposits with state authorities | - | | (1) |
| (20,245) | | (17,339) |
| | | |
Cash flows from financing activities |
| | |
Loan drawn | 40,345 | | 11,731 |
Proceeds from issue of shares (net of expenses) | - | | 495 |
Repayment of obligations under leases | (1,067) | | (1,332) |
Repayment of borrowings | (21,747) | | (3,130) |
Payment of interest and loan fees | (4,366) | | (1,338) |
| 13,165 | | 6,426 |
| | | |
Net increase/(decrease) in cash and cash equivalents | 4,530 | | 310 |
Opening cash and cash equivalents at beginning of year | 2,014 | | 1,144 |
Exchange gains/(losses) on cash and cash equivalents | 1,397 | | 560 |
Closing cash and cash equivalents | 7,941 | | 2,014 |
Notes
1. Accounting policies and preparation
The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2022 or 2021 but is derived from the 2022 accounts.
A copy of the statutory accounts for the year to 31 December 2021 has been delivered to the Registrar of Companies and is also available on the Company's website. Statutory accounts for 2022 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2021 nor 2022.
Whilst the financial statements from which this preliminary announcement is derived have been prepared in accordance with International Financial Reporting Standards ("IFRS") and applicable law, this announcement does not itself contain sufficient information to comply with IFRS. The Annual Report, containing full financial statements that comply with IFRS, will be sent out to shareholders by the end of June.
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, in the preparation of the 2022 financial statements they continue to adopt the going concern basis.
| | | 2022 | | 2021 |
2 | Cost of sales |
| US$000 | | US$000 |
| | | | | |
| Depreciation | | 8,686 | | 11,374 |
| Release of abandonment provision | | (711) | | - |
| Royalties & production taxes | | 5,452 | | 6,031 |
| Well operating costs | | 16,917 | | 16,026 |
| | | 30,344 | | 33,431 |
Well operating costs include US$407,000 (2021: US$751,000) in non-recurring workover costs expensed in the period.
| | | 2022 | | 2021 |
3 | Administrative expenses |
| US$000 | | US$000 |
| | | | | |
| Directors and staff costs (including non-executive Directors) | | 2,519 | | 2,530 |
| Share-based payments | | 115 | | 367 |
| Depreciation | | 104 | | 82 |
| Other | | 1,805 | | 2,785 |
| | | 4,543 | | 5,764 |
| Attributable to Atome business included above | | - | | (1,397) |
| | | 4,543 | | 4,367 |
To allow for meaningful comparison, staff costs, share based payments and depreciation expenses are reflected gross before the effect of allocations to operating costs or balance sheet assets. Other expenses are shown net of the effect of allocations totalling US$1.3 million (2021: US$1.3 million).
Included with administrative expenses in 2021 are US$1.4 million directly attributable to the Atome businesses which are no longer part of the Group following the flotation at the end of December 2021.
4 | Other non-operating (gains)/losses |
| 2022 | | 2021 |
| | | US$000 | | US$000 |
| | | | | |
| Gain on dividend in specie of Atome shares | | - | | (13,130) |
| Recovery of impaired costs | | (748) | | - |
| Gain on insurance proceeds net of costs derecognized | | (115) | | - |
| Gain on termination of leases | | (52) | | (18) |
| Other (gains)/losses arising on asset disposals | | (355) | | (29) |
| Gain on Atome transition to an associate investment | | - | | (1,317) |
| | | (1,270) | | (14,494) |
Gains on insurance proceeds recovered in December 2022 relate to an incident at a facility in Argentina and are net of the cost of the asset impaired.
| | | 2022 | | 2021 |
5 | Impairment (credit) / charge |
| US$000 | | US$000 |
| | | | | |
| Matorras & Ocultar in Argentina (intangible) | | - | | 51 |
| Hernandarias concession in Paraguay (intangible) | | 8,583 | | - |
| USA operations (tangible) | | 1,433 | | - |
| | | 10,016 | | 51 |
6 Earnings / (Loss) per share | 2022 | | 2021 |
| US$000 | | US$000 |
Net profit / (loss) for the period attributable to | | | |
the equity holders of the Parent Company | (10,498) | | 4,579 |
| | | |
| Number | | Number |
| '000 | | '000 |
Weighted average number of shares in issue | 10,290 | | 10,159 |
| | | |
| US cents | | US cents |
Earnings /(loss) per share | | | |
Basic earnings / (loss) per share from continuing operations | (102.02) | | 45.07 |
Diluted earnings / (loss) per share from continuing operations | (102.02) | | 44.17 |
Following the conversion and subdivision of shares in October 2022 the weighted average number of shares for 2021 have been adjusted based on the conversion 200 to 1 share ratio duly approved.
At 31 December 2022, 134,255 (2021: 207,544) share option and share warrant awards were in issue that, if exercised, would dilute earnings per share in the future. No dilution per share was calculated for 2022 as with the reported loss they are anti-dilutive.
7 Notes to the consolidated statement cash flows | 2022 | | 2021 |
| US$000 | | US$000 |
| | | |
Profit / (loss) from operations before taxation | (12,167) | | 5,704 |
Interest on bank deposits | (244) | | (145) |
Interest payable and loan fees | 6,649 | | 5,324 |
Depreciation of property, plant and equipment | 8,790 | | 11,456 |
Impairment (credit)/charge | 10,016 | | 51 |
Release of abandonment provision | (711) | | - |
(Gain) / loss on non-operating transaction | (1,270) | | (14,494) |
Loss on investment in associate undertaking | 25 | | - |
Share-based payments | 115 | | 367 |
Foreign exchange difference | (4,663) | | (1,488) |
Operating cash flows before movements in working capital | 6,540 | | 6,775 |
Decrease / (increase) in receivables | (3,137) | | (2,430) |
Movement in stock | 1,691 | | - |
Increase / (decrease) in payables | 6,272 | | 6,733 |
Net cash generated by operating activities | 11,366 | | 11,078 |
8 Segment reporting
| Argentina | | Paraguay | | USA | | UK | | Total |
| 2022 | | 2022 | | 2022 | | 2022 | | 2022 |
| US$000 | | US$000 | | US$000 | | US$000 | | US$000 |
Revenue | 31,463 | | - | | 1,686 | | 84 | | 33,233 |
Cost of sales |
| | | | | | | | |
Depreciation | 7,296 | | - | | 1,390 | | - | | 8,686 |
Release of abandonment provision | (711) | | - | | - | | - | | (711) |
Royalties & production taxes | 4,968 | | - | | 484 | | - | | 5,452 |
Well operating costs | 15,917 | | - | | 1,000 | | - | | 16,917 |
Administrative expenses | 1,126 | | 11 | | 473 | | 2,933 | | 4,543 |
Segment costs | 28,596 | | 11 | | 3,347 | | 2,933 | | 34,887 |
| | | | | | | | | |
Segment operating profit/(loss) | 2,867 | | (11) | | (1,661) | | (2,849) | | (1,654) |
| | | | | | | | | |
| Argentina | | Paraguay | | USA | | UK | | Total |
| 2021 | | 2021 | | 2021 | | 2021 | | 2021 |
| US$000 | | US$000 | | US$000 | | US$000 | | US$000 |
Revenue | 32,669 | | - | | 1,478 | | - | | 34,147 |
Cost of sales |
| | | | | | | | |
Depreciation | 11,158 | | - | | 216 | | - | | 11,374 |
Royalties & production taxes | 5,612 | | - | | 419 | | - | | 6,031 |
Well operating costs | 15,538 | | - | | 488 | | - | | 16,026 |
Administrative expenses | 1,889 | | 64 | | 389 | | 3,422 | | 5,764 |
Segment costs | 34,197 | | 64 | | 1,512 | | 3,422 | | 39,195 |
| | | | | | | | | |
Segment operating profit/(loss) | (1,528) | | (64) | | (34) | | (3,422) | | (5,048) |
Segment assets | Argentina | | Paraguay | | USA | | UK | | Total |
| 2022 | | 2022 | | 2022 | | 2022 | | 2022 |
| US$000 | | US$000 | | US$000 | | US$000 | | US$000 |
Intangible assets | 129 | | 45,592 | | - | | - | | 45,721 |
Goodwill | 705 | | - | | - | | - | | 705 |
Investment in associate | - | | - | | - | | - | | - |
Property, plant and equipment | 71,785 | | - | | 152 | | - | | 71,937 |
| 72,619 | | 45,592 | | 152 | | - | | 118,363 |
Other assets | 9,533 | | 1,657 | | 584 | | 84 | | 11,858 |
| 82,152 | | 47,249 | | 736 | | 84 | | 130,221 |
| | | | | | | | | |
| Argentina | | Paraguay | | USA | | UK | | Total |
| 2021 | | 2021 | | 2021 | | 2021 | | 2021 |
| US$000 | | US$000 | | US$000 | | US$000 | | US$000 |
Intangible assets | 129 | | 54,175 | | - | | - | | 54,304 |
Goodwill | 705 | | - | | - | | - | | 705 |
Investment in associate | - | | - | | - | | 25 | | 25 |
Property, plant and equipment | 57,022 | | - | | 2,126 | | - | | 59,148 |
| 57,856 | | 54,175 | | 2,126 | | 25 | | 114,182 |
Other assets | 10,257 | | 1,350 | | 582 | | 1,487 | | 13,676 |
| 68,113 | | 55,525 | | 2,708 | | 1,512 | | 127,858 |
Segment assets can be reconciled to the Group as follows:
| | | | | 2022 | | 2021 |
| | | | | US$000 | | US$000 |
Segment assets | | | | | 130,221 | | 127,858 |
Group cash | | | | | 7,941 | | 2,014 |
Group assets | | | | | 138,162 | | 129,872 |
Segment liabilities | Argentina | | Paraguay | | USA | | UK | | Total |
| 2022 | | 2022 | | 2022 | | 2022 | | 2022 |
| US$000 | | US$000 | | US$000 | | US$000 | | US$000 |
Total liabilities | 50,710 | | 8,892 | | 1,956 | | 18,141 | | 79,699 |
| | | | | | | | | |
| Argentina | | Paraguay | | USA | | UK | | Total |
| 2021 | | 2021 | | 2021 | | 2021 | | 2021 |
| US$000 | | US$000 | | US$000 | | US$000 | | US$000 |
Total liabilities | 39,095 | | 4,056 | | 1,963 | | 15,917 | | 61,031 |
9 Atome Energy plc
Selected key financial extracts |
| 2022 | | 2021 |
| | US$000 | | US$000 |
Group Statement of Comprehensive Income |
| | | |
Administrative expense per Note 3 | | - | | (1,397) |
Gain on Atome transition to an associate investment per Note 4 | | - | | 1,317 |
Gain on dividend in specie of Atome shares per Note 4 | | - | | 13,130 |
Loss on investment in associate undertaking | | (25) | | - |
| | (25) | | 13,050 |
Group Statement of Financial position |
| | | |
Non-current Investment in associate at cost | | - | | 25 |
| | | | |
Current receivable due from Atome | | - | | 1,291 |
| | | | |
Company Profit & Loss Statement |
| | | |
Gain on dividend in specie of Atome shares per Note 4 | | - | | 13,096 |
Gain arising on mark to market of investment | | 1,414 | | 10,150 |
| | 1,414 | | 23,246 |
Company Statement of Financial position |
| | | |
Investment in Atome Energy plc at market value | | 11,589 | | 10,175 |
Alternative Performance Measures
The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted accounting principles. These non-IFRS measures include net debt and well operating and underlying well operating costs per boe and free cash flow. Where used in the context of segmental disclosure the metrics are calculated in the same manner.
Net debt
Net debt is a useful indicator of the Group's indebtedness, financial flexibility, and capital structure because it indicates the level of cash borrowings after taking account of cash and cash equivalents within the Group's business. Net debt is defined and calculated as follows:
| 2022 | | 2021 |
Net debt | US$000 | | US$000 |
Borrowings Current | (18,391) | | (7,014) |
Borrowings Non-current | (29,134) | | (22,250) |
Cash | 7,941 | | 2,014 |
Net (debt)/ net cash | (39,584) | | (27,250) |
Total operating cost and underlying well operating cost per boe
Total operating cost per boe is a useful straight forward indicator of the Group's costs incurred to produce oil and gas including all relevant expenses. However, since royalty, production taxes and similar expenses are not controllable these have been disaggregated to allow well operating costs to be measured.
| 2022 | | 2021 |
Total operating cost per boe | US$000 | | US$000 |
Royalties & production taxes (Note 2) | 5,452 | | 6,031 |
Well operating costs (Note 2) | 16,917 | | 16,026 |
Total operating costs | 22,369 | | 22,057 |
Production (mmboe) | 623.6 | | 902.7 |
Total operating costs per boe US$ | 35.87 | | 24.43 |
Where one-off or cyclical costs, such as workovers, are material these have been disclosed and the underlying well cost per boe referred to show the core performance. These have been defined and calculated as follows:
| 2022 | | 2021 |
Underlying well operating cost per boe | US$000 | | US$000 |
Well operating costs (Note 2) | 16,917 | | 16,026 |
Less workover costs (per text in Note 2) | (407) | | (751) |
| 16,510 | | 15,275 |
Production (mmboe) | 623.6 | | 902.7 |
Underlying well operating costs per boe US$ | 26.48 | | 16.92 |
Core operating performance arose in Argentina and was calculated as follows:
| 2022 | | 2021 |
| US$000 | | US$000 |
Well operating costs (Note 2) | 15,917 | | 15,538 |
Less workover costs | (252) | | (751) |
| 15,665 | | 14,787 |
Production (mmboe) | 604.4 | | 868.4 |
Underlying well operating costs per boe US$ | 25.92 | | 17.03 |
Administrative cost per barrel
Underlying administrative expense excluding non-recurring items is calculated as follows:
| 2022 | | 2021 |
Administrative cost per boe | US$000 | | US$000 |
Administrative expense (note 3) | 4,543 | | 5,764 |
Attributable to Atome business included above (note 3) | - | | (1,397) |
| 4,543 | | 4,367 |
Production (mmboe) | 623.6 | | 902.7 |
Administrative cost per boe | 7.29 | | 4.84 |
Adjusted EBITDA
The calculation is detailed on the Income Statement with further details on the non-recurring items include below. The Adjusted EBITDA for Argentina is calculated as follows:
| 2022 | | 2021 |
Adjusted EBITDA Argentina | US$000 | | US$000 |
Operating profit / (loss) | 2,867 | | (1,528) |
Release of abandonment provision | (711) | | - |
Depreciation, depletion & amortisation | 7,400 | | 11,278 |
EBITDA excluding share options | 9,556 | | 9,750 |
Non-recurring items | 252 | | 751 |
Adjusted EBITDA | 9,808 | | 10,501 |
Non-recurring items
Where referred to in the calculation of Adjusted EBITDA and in alternative performance measures these comprise the following:
| 2022 | | 2021 |
Non-recurring | US$000 | | US$000 |
Workover costs (per text in Note 2) | 407 | | 751 |
| 407 | | 751 |
Free cash generation from core operations
A measure of cash generation from operations excluding changes in working capital, administrative expense and non-recurring workovers. Used by management as an indication of cash generation at asset level.
| 2022 | | 2021 |
| US$000 | | US$000 |
Sales | 33,233 | | 34,147 |
Royalties & production taxes (Note 2) | (5,452) | | (6,031) |
Well operating costs (Note 2) | (16,917) | | (16,026) |
Add back non-recurring workovers | 407 | | 751 |
| 11,271 | | 12,841 |
Included within the foreign exchange gains of US$4.7 million (2021: US$1.5 million) as detailed in Note 9 are gains of US$ 1.4 million which arise on the treasury management of cash resources ("treasury income") takes the cash generation in the period to US$12.7 million (2021: US$14.3 million).
Reconciliation to cash flow from operations
The reported cash flow generated from operating activities can be reconciled to free cashflows from core operations as follows:
| 2022 | | 2021 |
| US$000 | | US$000 |
Net cash generated by operating activities | 11,366 | | 11,078 |
Working capital movement | (4,826) | | (4,303) |
Add back administrative expense per Note 3 | 4,543 | | 5,764 |
Add back non cash depreciation in admin expense (Note 3) | (104) | | (82) |
Add back non cash share based payments in admin expense (Note 3) | (115) | | (367) |
Add back non-recurring workovers | 407 | | 751 |
| 11,271 | | 12,841 |
Depreciation per boe
Depreciation per barrel of oil equivalent can change between accounting periods due to costs incurred, changes in reserves or changes in future costs and hence is a useful metric for reporting purposes.
Where calculated on at a group or segment level the calculation is as follows:
· Reported depreciation charge as reported in Cost of Sales per Note 2 in accordance with IFRS GAAP reporting.
· Divided by the barrel of oil equivalent of production reported in the Chairman's Statement in accordance with industry standards and state reports.
Glossary
Boe | barrels of oil equivalent |
Bopd | barrels of oil per day |
Boepd | barrels of oil equivalent per day |
M³/day | cubic metres of oil per day |
MMscf/d | million standard cubic feet of gas production per day |
1P | proven hydrocarbon reserves |
2P | proven and probable hydrocarbon reserves |
Contingent Resources | quantities of hydrocarbons estimated to be potentially recoverable from known accumulations |
Prospective Resources | quantities of hydrocarbons estimated to be potentially recoverable from undiscovered accumulations |
NPV10 | net present value over the life of the concessions/licences discounted by 10% |
-ends-
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