THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY PETRO MATAD LIMITED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AS IT FORMS PART OF UNITED KINGDOM DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
19 June 2024
Petro Matad Limited
("Petro Matad" or the "Company")
Final results for year ended 31 December 2023
Petro Matad Limited ("Petro Matad" or "the Company"), the AIM quoted Mongolian oil company, announces its audited final results for the year ended 31 December 2023. All monetary values are expressed in United States dollars unless otherwise stated.
2023 Operational Highlights
· The Company continued to push the Mongolian government and authorities to register Block XX Exploitation Area as State Special Purpose land and secured Cabinet approval for the certification in July. Continued bureaucratic delays in the government's regulatory processes to complete the certification led the Company to seek local level approvals in parallel.
· The Company raised $6.6 million to finance exploration drilling in Block V and its renewable energy joint venture focused on projects in Mongolia.
· The Velociraptor-1 wildcat well was drilled in Block V in mid-2023. Although the well was plugged and abandoned as a dry hole, it penetrated good quality reservoirs and source rocks and provides an excellent data point to high-grade other exploration areas in Mongolia. The operation also demonstrated that very low-cost exploration drilling can be done in-country with truck mounted equipment and a very small environmental footprint.
· Close cooperation and community support in Block V demonstrated that the Company's community outreach is fit for purpose.
· Petro Matad was chosen as the preferred contractor for the two new Production Sharing Contracts for which it had applied in the Mongolian Exploration Licensing round.
· The company formed the Sunsteppe joint venture with an experienced developer to pursue opportunities in the Mongolian renewable energy sector.
Mid-2024 update
· Local land access approvals are now in hand allowing operations to go ahead on Block XX in 2024 whilst the State Special Purpose Certification process is completed in parallel.
· Preparations are being finalised for completion of the Heron 1 well and the contractor has indicated that it should be ready to mobilise in July.
· Progress is being made on the exclusive green energy development projects that the Sunsteppe joint venture has high-graded at Choir (50MW Battery Storage) and at the major Oyu Tolgoi mine (24MW renewable energy supply for green hydrogen production).
2023 Financial Highlights
· As of 31 December 2023, the Group's cash position was $4.5 million (inclusive of Financial Assets) (31 December 2022: $5.1 million).
· The Group's net loss after tax for the twelve months ended 31 December 2023 was $5.93 million (31 December 2022: loss $2.95 million).
· As announced on 2 February 2023, the Company raised gross proceeds of US$6.6 million from a Capital Raise comprising of the issue of 215,121,952 new Ordinary Shares at a price of 2.5p per share.
Mike Buck, CEO of Petro Matad, said:
"2023 proved to be a frustrating year on Block XX, where the significant step of Cabinet approval of State Special Purpose Certification for the area did not translate into a rapid renewal of Petro Matad's licence to operate. Whilst that certification is still to be finalised and is having to wait until after the imminent Mongolian parliamentary elections, the fact that we were recently able to secure locally approved land use agreements for the areas in which our next operations are planned, ends a very long wait. We share our shareholders' relief and excitement that the completion operations on Heron 1 will go ahead with contractors planned to mobilise in July to prepare the well for production. Negotiations with PetroChina for oil transport, processing, export and sale are ongoing with the support of the industry regulator.
Our shareholders' patience and support are much appreciated as is the dedication and motivation of our staff. The Company will be focussing maximum effort on moving the Heron development forward through the second half of 2024 and I look forward to updating you further."
About Petro Matad
Petro Matad is the parent company of a group focused on oil exploration, as well as future development and production in Mongolia. Currently, Petro Matad holds 100% working interest and the operatorship of two Production Sharing Contracts with the government of Mongolia. Block XX has an area of 214 square kilometres in the far eastern part of the country, and Block V has an area of 7,937 square kilometres in the central part of the country.
Petro Matad Limited is incorporated in the Isle of Man under company number 1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle of Man, IM1 1EQ.
For more information, please contact:
| Petro Matad Limited |
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| Mike Buck, CEO | +976 7014 1099 / +976 7575 1099 |
| Shore Capital (Nominated Adviser and Joint Broker) | |
| Toby Gibbs Rachel Goldstein
| +44 (0) 20 7408 4090 |
| Zeus Capital Limited (Joint Broker) Simon Johnson Louisa Waddell |
+44 (0) 20 7614 5900 |
| FTI Consulting (Communications Advisory Firm) |
|
| Ben Brewerton Christopher Laing | +44 (0) 20 3727 1000 |
Annual Report and Accounts
The Company's statutory annual report and accounts will be dispatched electronically to shareholders shortly and will be posted to shareholders who have elected to receive hard copies of the Annual Report. Additional copies of the Annual Report may be requested directly from the Company and an electronic copy will be available on the Company's website www.petromatadgroup.com.
Annual General Meeting ("AGM")
A notice of the Company's AGM will be distributed in due course and made available on the Company's website www.petromatadgroup.com.
Directors' Statement 2023
Summary
During 2023 the Company continued with its procurement and planning activities for the development of the Heron discovery in Block XX in eastern Mongolia. Unfortunately, the land access issue remained unresolved during the year which continued to prevent the completion of the Heron-1 well into a production well, installation of the surface infrastructure and first oil. With Petro Matad's land access applications being blocked by refusal at District (Soum) and Provincial (Aimag) levels, the Company sought State Special Purpose certification of Block XX from the Mongolian cabinet to give the Company full rights to access the entirety of the Block XX Exploitation Area for the duration of the Exploitation Licence. This certification process had not been used before for an oil project and this contributed to the bureaucracy moving slowly. However, through continuous lobbying and effort from the Company, Cabinet approval of State Special Purpose designation was secured in July 2023. Whilst this was a major achievement, unfortunately, under legislation introduced in 2017, several further steps were required to be executed by central and provincial authorities and the process continued to be obstructed by the Dornod Province Governor due to a government created partial overlap of the Block XX Special Purpose Area with an Aimag declared protected area. Recognising the difficulties that the regulations were presenting, in parallel, the Company pursued District level land approvals of the three areas within the Exploitation Licence area where its initial development operations are planned. 2023 ended without the Company securing land access but this was remedied at the end of May 2024 when the Company secured District level approvals. The land permits for these areas are valid for 5 years and allow work to go ahead whilst the State Special Purpose Certification process is completed. Discussions with PetroChina Daqing Tamsag (PetroChina), the operator of the producing fields adjacent to Block XX, continued through 2023 covering production operations support, access to oil processing and export facilities for the initial phase of the Heron development.
On the Company's central Mongolian exploration acreage, Block V, the Velociraptor-1 wildcat exploration well was drilled during the second quarter of 2023 but did not encounter any hydrocarbons and was plugged and abandoned. Major Drilling drilled the well to the planned total depth of 1500m and the operation was completed on budget without any environmental or safety incidents occurring. The lack of hydrocarbon indications was disappointing but some very thick and good quality sandstone reservoirs were encountered as predicted by the pre-drill geological model. Good quality source rocks were also penetrated and the well provides important data for future exploration efforts in the region where exploration activity has been very limited to date. The well cost was less than $2 million which is an exceptionally low cost operation considering in particular the remoteness of the location. This operation proved that very low cost exploration drilling can be executed in Mongolia when targets are at depths shallower than 2000m. The Production Sharing Contract (PSC) for Block V is due to expire at the end of July 2024 and the Company's efforts are now focused on completing environmental restoration and compiling all necessary documents for the acreage to be handed back to the State.
The Company submitted applications for two blocks offered in Mongolia's Exploration Licensing round and was selected as the preferred contractor for both areas. The government's approval process for the award of new exploration licences continued through the year.
A Renewable Energy joint venture partnership was set up by Petro Matad and an experienced Mongolian renewables developer, Wolfson LLC, in early 2023. Sunsteppe Renewable Energy (SRE) was very active through the year and has identified several attractive opportunities in battery storage and green energy generation. Two projects were high-graded and SRE secured exclusivity. The permitting and detailed design of both projects is progressing with pace with the potential for revenue generation in 2025. Numerous other initiatives are being generated by the renewables team.
Block XX Exploitation Area - Land access
The land access dispute that prevented the Company's access to the Heron development location continued throughout 2023. This ongoing situation came about due to conflicts in the Mongolian Land Law and local disquiet in Dornod Aimag in which Block XX is located. This Aimag is home to 95% of Mongolia's current oil production and the local communities in the area feel that they have suffered all the impacts of oil exploitation activities since these started up in the late 1990s with little or no benefit to the local community.
The Mongolian government's process to certify Petro Matad's Block XX Exploitation Licence area as Special Purpose land progressed very slowly. During the first quarter of 2023, the relevant ministries prepared the relevant documentation to present to Cabinet to secure approval to certify the Block XX Exploitation Area as a State Special Purpose Area. At the Cabinet meeting on 5 July, the certification of the Block XX Exploitation Area, including the Heron oil discovery, as a State Special Purpose Area was approved and Cabinet instructed officials to conclude the follow up formalities required under the 2017 Regulations on the management of special purpose areas. The Central Land Agency completed registration of the area and issued and signed the key Tripartite Agreement as did the Ministry of Mining and Heavy Industry (MMHI) leaving only the Governor of Dornod Aimag to sign. However, the Governor of Dornod Aimag insisted that compensation payments to the 10 herder families impacted by the certification of the area had to be completed before he would sign. Following a series of meetings, all the herders agreed to be compensated. Under the legislation, compensation payments should be made from the State budget but recognizing that this could be a very slow process, industry regulator the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) and the Company investigated ways to expedite these payments.
While the above issue was being addressed, the Company with the support of MRPAM, discussed with local authorities the potential to secure Soum level land usage permits for three areas within the Exploitation Licence where 2024 operational activities were planned. Whilst the land access issue remained unresolved at year end 2023, the Matad Soum Citizens' Representatives Committee approved the Company's land access request in early 2024. The Soum Governor issued his decree and executed land use agreements valid for 5 years in May 2024. As part of the local level approval, with the support of the Land Agency and MRPAM, Petro Matad paid compensation to the herders whose registered pastures will be impacted by the Block XX Exploitation Area.
2023 Review
HSSE
The Health, Safety, Security, and Environmental Management System (HSSE MS) of the Company is designed to adhere to best practices set by the International Association of Oil and Gas Producers (IOGP)
According to Mongolian national and international best practices, all reported HSSE incidents are thoroughly investigated, documented, and classified in accordance with IOGP guidelines. Moreover, the lessons learned from these incidents are openly shared through the management review process. We are pleased to report that Petro Matad, together with its sub-contractors, adhered to all Mongolian laws and national standards throughout the 2023 operations. Importantly, there were no environmental incidents, lost time incidents, or recordable incidents during the year.
The Company is fully committed to environmental protection and consistently strives to implement all necessary measures to fully comply with national and international best practices, with ISO 14001 serving as the benchmark.
The technical and biological restoration of the Velociraptor-1 wildcat exploration wellsite including the drilling mud sump was carried out by a specialized restoration contractor. The provincial handover committee conducted a formal inspection of the wellsite and signed off that the work had been completed in full compliance with the relevant regulations. Before starting construction of our VR-1 well lease in Block V in 2023, we had relocated and replanted 44 Zag trees in the lease area to another location to ensure their survival. We also worked with local authorities to plant over 670 Zag seedlings on the lease area during the biological restoration with the hope that the area will eventually develop into a Zag forest.
With the necessary approvals, the Company was also able to complete the restoration of the Heron-1 drilling location in preparation for the mobilization of well completion equipment and the installation of the beam pump, tanks and generator.
Social impact
In 2023, Petro Matad successfully implemented projects in Block V within the framework of corporate social responsibility, based upon requests from the local communities in the Guchin-Us and Baruunbayan-Ulaan Soums. The exploration well location and the well supplying the operation with water were located in these districts. Projects such as furnishings for a secondary school, water wells for herders, provision of traditional gers for use in ceremonies and other events, greenhouses, and livestock restocking for low income families were successfully implemented and highly appreciated by local communities. Following the Velociraptor-1 well operations, the Company received letters of gratitude from Guchin-Us and Baruunbayan-Ulaan Soums for the successful implementation of local projects and the safe and environmentally friendly completion of operations.
In December 2023, the Company hosted the Matad District Citizens' Representatives Committee on a visit to the South Gobi where mining and other development projects are providing tangible benefits to the local communities in which they operate. The trip was very successful and at a meeting to conclude the trip in Petro Matad's Ulaanbaatar headquarters the Committee thanked the Company, declared their support for the Company's development activities in Matad and agreed the terms of the Cooperation Agreement which governs community aid expenditure during oil exploitation activities.
Operations
Block XX: The Company continues to ensure that operational contracts and environment permits are in place to get the Heron-1 well onstream. Beam pump unit and related equipment, downhole completion and power generation equipment and power control systems are ready to be mobilised from storage and installed at Heron-1. Production tanks, sourced from PetroChina, will be relocated to the production site where installation fabrication and electrical work will commence once the well is completed. The Company and MRPAM have continued engagement with PetroChina, the operator of the Block XIX exploitation area and facilities located immediately north of Block XX, for co-operation with production operations and contracts to process crude oil at their facilities, crude export and sales at least during the initial phase of the Heron development. All crude oil will be supplied to the Mongol Refinery via pipeline, once the refinery is commissioned. Whilst these facilities continue to be constructed, trucking of Mongolia's oil production to China for refining will continue. The construction of the refinery and pipelines progressed in 2023.
The Company was in discussion with DQE Drilling (DQE), the main provider of drilling services in Mongolia for a multi-well development drilling and completion programme and signed a Memorandum of Understanding (MOU) in 2023. The terms included some deferral of costs to allow a portion of the drilling expenditure to be settled from future production revenue. However, MRPAM insisted that current regulations do not cater for multi-year contracting and accordingly the Company has concluded a Tender inviting all potential contractors to bid on drilling on Block XX. DQE was the lowest bidder and has been chosen to do the work. Final contract negotiations are underway and the Company will seek to incorporate the terms of the previous MOU within the framework of the current regulations.
Block V: The Velociraptor-1 wildcat exploration well located in the Taats Basin of Block V located in central Mongolia was drilled in June/July 2023 and reached a total depth (TD) of 1500m as planned, having encountered more than 350 metres of good quality reservoir sections. Unfortunately, the evaluation of cuttings and wireline logs did not identify any hydrocarbons and the well was plugged and abandoned. The well encountered geological markers close to prognosis at all levels. The primary objective Late Jurassic/Early Cretaceous Undur Formation was encountered at 1170m and had good quality reservoir sands interbedded with shales over a c.200m interval. In the secondary objective Early Cretaceous Shinehudag Formation, three thick sand units were drilled with average porosity of around 18%. The well was drilled by Major Drilling and operations were carried out on time and within budget with the full support and cooperation of the local community. Post-well studies concluded that excellent source rocks were encountered in the well, similar to those encountered in the nearby Snow Leopard-1 well drilled in 2018. The wells proved the presence of both excellent quality source rocks and good quality reservoir units in the Taats Basin and provide excellent data points for the evaluation of similar basins in this part of the country.
The Block V PSC is due to expire at the end of July 2024 and the Company's efforts will now focus on completing and obtaining all required permits and agreements from local authorities and MRPAM for the acreage to be handed back to the State without issue. The Company has fulfilled all of its obligations under the PSC.
2023 Exploration Licencing Round
The Company submitted applications for two blocks offered in the MRPAM promoted Exploration licensing round. Working Groups, comprising experts from MRPAM and MMHI were established and the Company successfully completed negotiations on the terms of the PSC and work programmes for each block. The Company's has focused on blocks in Mongolia that contain extensions of basins proven productive for oil across the international border in China. The government's approval process for the award of new exploration licences continued through 2023 and MRPAM expects awards once the new government is formed after the mid-2024 parliamentary elections.
Renewable Energy Opportunities in Mongolia
The Company's renewable energy vehicle, Sunsteppe Renewable Energy (SRE), made very good progress in 2023. In consultation with the Ministry of Energy, the need for a 50MW/150MWh battery energy storage facility in central Mongolia was defined. SRE's team completed the required feasibility studies and the grid connection study for the project was approved by the National Dispatching Centre. All required documentation was submitted to and accepted by the Technology Committee of the Ministry of Energy which subsequently approved the project. The application for the License to construct is now being prepared. SRE expects that this project can be brought onstream and be generating revenue e in 2025.
A second project involving a utility scale wind farm to supply renewable energy to generate green hydrogen for use at the major Oyu Tolgoi mine operation in the South Gobi is also progressing with a forecast timescale similar to SRE's battery storage project. The project is designed to demonstrate the viability of green hydrogen as a fuel for use in the mining industry in Mongolia and SRE is very excited to be involved. This initiative has the strong support of the Mongolian Government and a memorandum of understanding has been signed with the Ministry of Energy. A Japanese government grant has also been secured to support the project with another grant to be applied for later in 2024.
SRE and Petro Matad will determine, as these two projects proceed towards construction ready status, how best to fund them. Debt funding for similar projects is already established in Mongolia, leaving open the possibility that SRE can aspire to stay involved in the construction phase and establish itself as a key renewable power producer in the country. The potential for renewable energy in Mongolia is huge with solar and wind power set to make up an increasing part of the country's energy mix in the coming decades. This has been embraced by lawmakers, with Mongolia ratifying international conventions including the Paris Agreement. SRE has made good progress so far and has identified several other projects for consideration.
Community Relations
The Company takes its responsibilities in community engagement and community relations very seriously. In advance of any work programme activity being undertaken, the Company ensures that it obtains the necessary approvals from MRPAM and all other relevant authorities. Company staff participate in joint meetings with the regulator and the local communities to present and discuss planned activities. In addition to meeting local government officials, the socialisation programmes will typically include town hall meetings where questions from local residents are answered. Company representatives will also meet with nomadic herders who may be in proximity to planned operations to ensure all parties are listened to. Representatives from the Relations team are stationed at site during all operational activities.
A focused programme of community projects is undertaken in areas where operations are conducted, and this is done in cooperation with local government. The Company views engagement with local communities as key to conducting safe and successful operations that will in turn benefit the local area.
Conclusions
Throughout 2023 the Company vigorously pursued solutions to the Block XX land access issue working closely with MRPAM, MMHI and local communities. The securing of local land approvals in 2024 will now enable the Company to carry out its intended work programme for the year. Preparations to complete Heron-1 and achieve first oil are well advanced. The Velociraptor-1 well operations were completed within budget, without any HSSE incident and with excellent co-operation with the local community which is a significant achievement for the Company's Mongolian staff especially considering the remoteness of the location. The low cost operation demonstrates that extremely cost effective exploration can be conducted in Mongolia. The Block V PSC expires end July 2024 and the acreage will be handed back to the state. The Company is optimistic that its successful applications for two new areas will see the blocks awarded in late 2024 or early 2025. The progress made in the renewable energy sector is very encouraging and could provide a significant growth opportunity for the Company.
Acknowledgements
The Company is very appreciative of the support and collaboration shown by MRPAM and MMHI through the long struggle to secure land access. Petro Matad is confident that the Special Purpose certification of Block XX will finally be resolved and is very happy to have secured local land access approvals to allow work to continue in parallel.
The Directors would like to reiterate their appreciation to the staff of Petro Matad who have continued to work with enthusiasm, diligence, and dedication. Shareholders continued support is also highly appreciated. The Board looks forward to an exciting operational period in 2024.
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2023
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| Consolidated |
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| 31 Dec 2023 | 31 Dec 2022 |
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| Note | $'000 | $'000 |
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| Continuing operations | |
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| Revenue | |
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| Interest income | 4(a) | 216 | 201 |
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| Other income | 4(a) | 135 | - |
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| | | 351 | 201 |
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| Expenditure | |
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| Consultancy fees | | (136) | (129) |
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| Depreciation and amortisation | | (190) | (149) |
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| Employee benefits expense | 4(b) | (2,076) | (1,687) |
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| Exploration and evaluation expenditure | 4(c) | (2,212) | (137) |
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| Other expenses | 4(d) | (1,663) | (1,048) |
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| (Loss)/Profit from continuing operations before income tax | | (5,926) | (2,949) |
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| Income tax expense | 5 | - | - |
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| (Loss)/Profit from continuing operations after income tax | | (5,926) | (2,949) |
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| Net (loss)/profit for the year | | (5,926) | (2,949) |
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| Other comprehensive income | |
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| Items that may be reclassified subsequently to profit or loss: | |
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| Exchange differences on translating foreign operations, net of income tax of $Nil (2022: $Nil) | | 26 | (149) |
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| Other comprehensive (loss)/income for the year, net of income tax | | 26 | (149) |
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| Total comprehensive (loss)/income for the year | | (5,900) | (3,098) |
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| (Loss)/Profit attributable to owners of the parent | | (5,926) | (2,949) |
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| Total comprehensive (loss)/income attributable to owners of the parent | | (5,900) | (3,098) |
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| (Loss)/Earnings per share (cents per share) | |
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| Basic (loss)/earnings per share | 6 | (0.5) | (0.3) | ||
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Diluted (loss)/earnings per share | 6 | (0.5) | (0.3) | ||
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
As at 31 December 2023
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| Consolidated | |
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| 31 Dec 2023 | 31 Dec 2022 |
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| Note | $'000 | $'000 |
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| ASSETS | |
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| Current Assets | |
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| Cash and cash equivalents | 7 | 503 | 1,476 |
| Trade and other receivables | 8 | 438 | 2,607 |
| Prepayments | 9 | 159 | 138 |
| Financial assets | 10 | 3,529 | 1,017 |
| Inventory | 11 | 215 | 215 |
| Total Current Assets | | 4,844 | 5,453 |
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| Non-Current Assets | |
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| Exploration and evaluation assets | 12 | 15,275 | 15,275 |
| Investment in SunSteppe Power LLC | | 946 | - |
| Property, plant and equipment | 13 | 239 | 261 |
| Right-of-Use asset | 13 | 99 | 92 |
| Total Non-Current Assets | | 16,559 | 15,628 |
| TOTAL ASSETS | | 21,403 | 21,081 |
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| LIABILITIES | |
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| Current Liabilities | |
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| Trade and other payables | 14 | 348 | 456 |
| Total Current Liabilities | | 348 | 456 |
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| TOTAL LIABILITIES | | 348 | 456 |
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| NET ASSETS | | 21,055 | 20,625 |
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| EQUITY | |
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| Equity attributable to owners of the parent | |
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| Issued capital | 15 | 160,176 | 154,057 |
| Reserves | 16 | 243 | 8 |
| Accumulated losses | | (139,364) | (133,440) |
| TOTAL EQUITY | | 21,055 | 20,625 |
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The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
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| Consolidated | |
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| 31 Dec 2023 | 31 Dec 2022 |
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| Note | $'000 | $'000 |
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| Cash flows from operating activities | | | |
| Payments to suppliers and employees | | (3,590) | (2,860) |
| Interest received | | 102 | 130 |
| Other income | | - | - |
| Net cash flows (used in)/provided by operating activities | 7 | (3,488) | (2,730) |
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| Cash flows from investing activities | |
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| Purchase of property, plant and equipment | | (28) | (212) |
| Proceeds from sale of financial assets | | (2,512) | 3,527 |
| Investment in SunSteppe Power LLC | | (946) | |
| Proceeds from the sale of property, plant and equipment | | - | - |
| Net cash flows used in investing activities | | (3,486) | 3,315 |
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| Cash flows from financing activities | |
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| Proceeds from issue of shares | | 6,523 | - |
| Capital raising cost | | (404) | - |
| Payments of lease liability principal | | (144) | (122) |
| Net cash flows from financing activities | | 5,975 | (122) |
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| Net (decrease)/increase in cash and cash equivalents | | (999) | 463 |
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| Cash and cash equivalents at beginning of the year | | 1,476 | 1,162 |
| Net foreign exchange differences | | 26 | (149) |
| Cash and cash equivalents at the end of the year | 7 | 503 | 1,476 |
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The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
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| Attributable to equity holders of the parent |
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| Issued Capital | Accumulated Losses | Other Reserves | Total |
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| | Note 16 | |
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| Note | $'000 | $'000 | $'000 | $'000 |
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| As at 1 January 2022 |
| 154,057 | (130,524) | 182 | 23,715 |
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| Net loss for the year | | - | (2,949) | - | (2,949) |
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| Other comprehensive income | | - | - | (149) | (149) |
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| Total comprehensive gain/(loss) for the year |
| - | (2,949) | (149) | (3,098) |
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| Issue of share capital | 15 | - | - | - | - |
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| Cost of capital raising | 15 | - | - | - | - |
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| Share-based payments | 15 & 16 | - | - | 8 | 8 |
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| Exercise of Conditional Share Awards | 15, 16 & 17 | - | - | - | - |
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| Expiry of Options | 16 & 17 | - | 33 | (33) | - |
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| As at 31 December 2022 | | 154,057 | (133,440) | 8 | 20,625 |
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| Net loss for the year | | - | (5,926) | - | (5,926) | |
| Other comprehensive income | | - | - | 26 | 26 |
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| Total comprehensive gain/(loss) for the year |
| - | (5,926) | 26 | (5,900) |
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| Issue of share capital | 15 | 6,523 | - | - | 6,523 |
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| Cost of capital raising | 15 | (404) | - | - | (404) |
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| Share-based payments | 15 & 16 | - | - | 211 | 211 |
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| Exercise of Conditional Share Awards | 15, 16 & 17 | - | - | - | - |
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| Expiry of Options | 16 & 17 | - | 2 | (2) | - |
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| As at 31 December 2023 | | 160,176 | (139,364) | 243 | 21,055 |
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The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2023
1 Corporate information
The financial report of Petro Matad Limited (Company) for the year ended 31 December 2023 was authorised for issue in accordance with a resolution of the Directors dated 18 June 2024 which was approved on 19 June 2024.
This financial report presents the consolidated results and financial position of Petro Matad Limited and its subsidiaries.
Petro Matad Limited (Company) incorporated in the Isle of Man on 30 August 2007 has five wholly owned subsidiaries, which are: Capcorp Mongolia LLC and Petro Matad LLC (both incorporated in Mongolia), Central Asian Petroleum Corporation Limited (Capcorp) and Petromatad Invest Limited (both incorporated in the Cayman Islands), and Petro Matad Energy Limited (incorporated in Isle of Man). Petro Matad Limited owns 50% of Sunsteppe Renewable Energy Pte. Ltd. (formerly known as Petro Matad Singapore Pte. Ltd.), which is incorporated in Singapore, which is owned jointly together with Sunsteppe Energy LLC to pursue renewables energy projects. The Company and its subsidiaries are collectively referred to as the "Group". The Group's principal activity in the course of the financial year consisted of oil exploration and development and investment in renewable projects in Mongolia.
Petrovis Matad Inc. (Petrovis) is a major shareholder of the Company, holding approximately 19.92% of the shareholding at the year end of 2023.
2 Summary of significant accounting policies
(a) Basis of preparation
This financial report complies with International Financial Reporting Standards (IFRS) as adopted by the European Union.
This financial report has been prepared on a historical cost basis, except where otherwise stated. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
· Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
· Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
· Level 3 inputs are unobservable inputs for the asset or liability.
For the purpose of preparing the consolidated financial statements, the Company is a for-profit entity.
(b) Statement of compliance
This general-purpose financial report has been prepared in accordance with the requirements of all applicable IFRS as adopted by the European Union and related Interpretations and other authoritative pronouncements.
(c) Going concern
The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business.
The Group generated a loss of $5.93 million for year 2023 (2022 Loss: $2.95 million) and experienced net cash outflows from operating activities of $3.49 million (2022 Outflow: $2.73 million). In addition, as outlined in Note 18(b) the Group is required to meet minimum exploration commitments on its Block XX Production Sharing Contract (PSC) of approximately $6.4 million. The Company previously reached an agreement with the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) that this underspent minimum exploration commitment can be transferred to and spent on exploration and appraisal activities during the exploitation period, which has commenced as the application for a 25-year Exploitation Licence (EL) for Block XX was approved in July 2021. The Company raised an additional $6.6 million funds in February 2023, which has provided sufficient working capital to continue operations including the drilling of an exploration well in Block V and investing in renewable energy projects. The Company had planned to commence production operations in 2023 with the completion and production of the Heron-1 discovery well. However, issues not within the Company's control resulted in being unable to access Block XX to undertake planned operations. The relevant government bodies have since designated Block XX as special purpose land. The final steps before total access is granted are the remaining steps under Regulation 287 which directs the procedures to formalize a land as special purpose land. The Company expects these steps to be completed in the near future. The delay in obtaining land access, while unfortunate, has not jeopardised the Company's going concern status. Accordingly, the Company believes that the current cash balance is sufficient to continue operations until at least July 2025. Production operations are expected to commence in the second half of 2024. This production will provide the Company with a revenue source and ensure that the Company remains a going concern. It is also important to note that the Company can access loans up to $1.5 million from Petrovis under an existing loan agreement.
Cumulative expenditures to end 2023 in Block V exceed financial commitments by $5.0 million. The Block V PSC exploration term expires in July 2024, at which point the Block will be relinquished with no outstanding commitments remaining.
The Directors have prepared a cash flow forecast which indicates that the Group will have sufficient cash to meet their working capital requirements for the twelve-month period from the date of signing the financial report.
(d) Application of new and revised Accounting Standards
Accounting Standards that are mandatorily effective for the current reporting year
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to its operations and effective for an accounting period that begins on or after 1 January 2020.
The Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Group and, therefore, no material change is necessary to Group accounting policies.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Group has not applied the new and revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet effective. Based on a preliminary review of the standards, interpretations and amendments, the Directors do not anticipate a material change to the Group's accounting policies, however further analysis will be performed when the relevant standards are effective.
(e) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:
· has power over the investee;
· is exposed, or has rights, to variable returns from its involvement with the investee; and
· has the ability to use its power to affect its returns.
The Company reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.
A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity transaction.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
(f) Foreign currency translation
Functional and presentation currency
Both the functional and presentation currency of Petro Matad Limited is United States Dollars (USD). The Cayman Islands and Singaporean subsidiaries' functional currency is USD. The Mongolian subsidiaries' functional currency is Mongolian Tugrugs (MNT) which is then translated to the presentation currency, USD.
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
· Exchange differences on transactions entered into to hedge certain foreign currency risks; and
· Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal on the net investment.
Translation of subsidiaries' functional currency to presentation currency
The results of the Mongolian subsidiaries are translated into USD (presentation currency) as at the date of each transaction. Assets and liabilities are translated at exchange rates prevailing at the reporting date.
Exchange differences resulting from the translation are recognised in other comprehensive income and accumulated in the foreign currency translation reserve in equity.
On consolidation, exchange differences arising from the translation of the net investment in Mongolian subsidiaries are recognised in other comprehensive income and accumulated in the foreign currency translation reserve. If a Mongolian subsidiary was sold, the proportionate share of exchange difference would be transferred out of equity and recognised in profit and loss.
(g) Cash and cash equivalents
Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
(h) Trade and other receivables
Trade receivables, which generally have 30-60 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for impairment.
Collectability of trade receivables is reviewed on an ongoing basis. An impairment provision is recognised when there is objective evidence that the Group will not be able to collect the receivable. Objective evidence of impairment includes financial difficulties of the debtor, default payments or debts more than 60 days overdue. The amount of the impairment loss is the amount by which the receivable carrying value exceeds the present value of the estimated future cash flows, discounted at the original effective interest rate.
(i) Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and any impairment in value.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset and is currently estimated to be an average of 6 years.
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.
(j) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instruments. For financial assets, this is equivalent to the date that the Company commits itself to either purchase or sell of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instruments is classified at 'Fair value through profit or loss' in which case transaction costs are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.
Classification and subsequent measurement
Financial instruments are subsequently measured at either fair value, amortised cost using the effective interest rate method or cost. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in orderly transaction between market participants at the measurement date. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.
Amortised cost is calculated as (i) the amount at which the financial asset or financial liability is measured at initial recognition; (ii) less principal repayments; (iii) plus or minus the cumulative amortization of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and (iv) less any reduction for impairment.
The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carry amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. The Group does not designate any interest in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial statements.
(i) Financial assets at fair value through profit and loss or through other comprehensive Income
Financial assets are classified at 'Fair value through profit or loss' or 'Fair value through other comprehensive Income' when they are either held for trading for purposes of short term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss if electing to choose 'fair value through profit or loss' or other comprehensive income if electing 'Fair value through other comprehensive income'.
(ii) Financial Liabilities
The Group's financial liabilities include trade and other payables, loan and borrowings, provisions for cash bonus and other liabilities which include deferred cash consideration and deferred equity consideration for acquisition of subsidiaries & associates.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, and payables, net of directly attributable transaction costs.
Fair value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm's length transactions, reference to similar instruments and option pricing models.
Derecognition
Financial assets are derecognised where the contractual rights to receipts of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risk and benefits associated with the asset. Financial liabilities are recognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
(k) Inventory
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first-out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
(l) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred by the Group is expensed separately for each area of interest. The Group's policy is to expense all exploration and evaluation costs funded out of its own resources.
(m) Exploration and evaluation assets
Exploration and evaluation assets arising out of business combinations are capitalised as part of deferred exploration and evaluation assets. Subsequent to acquisition, exploration expenditure is expensed in accordance with the Group's accounting policy.
(n) Impairment of tangible and intangible assets other than goodwill
At each reporting date, the Group assesses whether there is any indication that tangible and intangible asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount for each asset or cash generating unit to determine the extent of the impairment loss (if any). Where the carrying amount of an asset (or cash-generating unit) exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset's value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the assets (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of impairment loss is treated as a revaluation increase.
Impairment review for deferred exploration and evaluation assets are carried out on a project-by-project basis, where each project representing a single cash generating unit. An impairment review is undertaken when indicators of impairment arise, typically when one of the following circumstances apply:
· Unexpected geological occurrences that render the resource uneconomic;
· Title to asset is compromised;
· Variations in prices that render the project uneconomic; or
· Variations in the currency of operation.
(o) Trade and other payables
Trade and other payables are initially recognised at fair value. After initial recognition, trade and other payables are carried at amortised cost and due to their short-term nature are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.
(p) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. If the effect of the time-value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
(q) Leases
The Group as lessee
At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability are recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (ie a lease with a remaining lease term of 12 months or less) and leases of low-value assets are recognised as an operating expense on a straight-line basis over the term of the lease.
Initially the lease liability is measured at the present value of the lease payments still to be paid at the commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate.
Lease payments included in the measurement of the lease liability are as follows:
· fixed lease payments less any lease incentives;
· variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
· the amount expected to be payable by the lessee under residual value guarantees;
· the exercise price of purchase options, if the lessee is reasonably certain to exercise the options;
· lease payments under extension options, if the lessee is reasonably certain to exercise the options; and
· payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, any lease payments made at or before the commencement date and any initial direct costs. The subsequent measurement of the right-of-use assets is at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest.
Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset.
The Group as lessor
Upon entering into each contract as a lessor, the Group assesses if the lease is a finance or operating lease.
A contract is classified as a finance lease when the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases not within this definition are classified as operating leases.
Rental income received from operating leases is recognised on a straight-line basis over the term of the specific lease.
Initial direct costs incurred in entering into an operating lease (for example, legal cost, costs to set up equipment) are included in the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.
Rental income due under finance leases are recognised as receivables at the amount of the Group's net investment in the leases. When a contract is determined to include lease and non-lease components, the Group applies IFRS 15 to allocate the consideration under the contract to each component.
(r) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
(s) Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific criteria must also be met before revenue is recognised:
Interest revenue
Revenue is recognised on an accrual basis using the effective interest method.
(t) Share-based payment transactions
The Group provides to certain key management personnel share-based payments, whereby they render services in exchange for rights over shares (equity-settled transactions).
The cost of these equity-settled transactions is measured by reference to the fair value at the date at which they are granted. The fair value is determined by use of the Black Scholes model.
In determining the fair value of the equity-settled transactions, vesting conditions that are not market conditions are not taken into account.
The cost of equity-settled transactions is recognised as an expense on a straight-line basis, together with a corresponding increase in equity, over the period in which they vest.
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects:
· the extent to which the vesting period has expired; and
· the number of awards that, in the opinion of the Directors of the Group, will ultimately vest.
This opinion is formed based on the best available information at the reporting date. The impact of the revision of original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.
Where the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.
(u) Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the year. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by the reporting date. Current tax for current and prior years is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) that affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax is recognised as an expense or income in the profit or loss, except when it relates to items credited or debited directly to equity/other comprehensive income, in which case the deferred tax is also recognised directly in equity/other comprehensive income, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill.
(v) Earnings per share
Basic earnings per share is calculated as net profit attributable to owners of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to owners of the parent, adjusted for:
· Costs of servicing equity (other than dividends);
· The after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
· Other non-discretionary changes in revenues or expenses during the year that would result from the conversion of dilutive potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(w) Significant accounting judgments, estimates and assumptions
In applying the Group's accounting policies, management continually evaluates judgments, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Group. All judgments, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgments, estimates and assumptions.
Any revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both the current and future periods.
The following are the most critical estimates and judgments made by management in applying the accounting policies and have the most significant effect on the amounts recognised in the financial statements.
Share-based payments
The Group measures the cost of equity-settled transactions with Directors and employees at the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black Scholes model. One of the inputs into the valuation model is volatility of the underlying share price which is estimated on the historical share price.
Recovery of the exploration and evaluation assets
The ultimate recoupment of the exploration and evaluation assets is dependent upon successful development and commercial exploitation or alternatively the sale of the respective areas of interest at an amount at least equal to book value. At the point that it is determined that any capitalised exploration and evaluation expenditure is not recoverable, it is written off.
Going Concern
The Group assesses the going concern of the Group on a regular basis, reviewing its cash flow requirements, commitments and status of PSC requirements and funding arrangements. Refer to Note 2(c) for further details.
3 Operating segments
Operating segments have been identified on the basis of internal reports of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.
The chief operating decision maker has been identified as the Board of Directors. On a regular basis, the Board receives financial information on a consolidated basis similar to the financial statements presented in the financial report, to manage and allocate their resources. Based on the information provided to the Board of Directors, the Group has one operating segment and geographical segment, being Mongolia; as such no separate disclosure has been provided.
|
|
| 31 Dec 2023 | 31 Dec 2022 | ||
|
| | $'000 | $'000 | ||
|
| |
| |
| |
4 Revenues and expenses
(a) Revenue
| Interest income | | 216 | 201 |
| Other income: | |
| |
| Other income | | 135 | - |
| | | 351 | 201 |
(b) Employee benefits expense
Included in employee benefits expense are the following:
| Wages and salaries | | 1,676 | 1,488 |
| Bonuses | | 11 | - |
| Non-Executive Directors' fees (including Directors of affiliates) | 142 | 161 | |
| Consultancy fees | | 36 | 30 |
| Share-based payments | | 211 | 8 |
| | | 2,076 | 1,687 |
(c) Exploration and evaluation expenditure
Exploration and evaluation expenditure relates to the following PSCs:
| Block XX | | 262 | 128 |
| Block V | | 1,950 | 9 |
| | | 2,212 | 137 |
(d) Other expenses
Included in other expenses are the following:
| Administration costs | | 1,027 | 511 |
| PSC administration costs | | 335 | 285 |
| Audit fees | | 72 | 71 |
| Travel expenses | | 229 | 181 |
| | | 1,663 | 1,048 |
|
|
| 31 Dec 2023 | 31 Dec 2022 |
|
| Note | $'000 | $'000 |
5 Income tax
Income tax recognised in the statement of profit or loss:
| Tax expense/(benefit) comprises: | |
|
| |
| Current tax expense/(benefit) | | - | - | |
| Deferred tax expense/(benefit) relating to the origination and reversal of temporary differences | | - | - | |
| Total tax expense/(benefit) reported in the statement of profit or loss | | - | - | |
The prima facie income tax benefit on pre-tax accounting loss from continuing operations reconciles to the income tax expense/(benefit) in the financial statements as follows:
| Net (loss)/profit for the year | | (5,926) | (2,949) |
| | |
| |
| Income tax benefit calculated at 10% | (i) | 593 | 295 |
| Effect of different tax rates on entities in different jurisdictions | (ii) | (115) | (92) |
| Change in unrecognised deferred tax assets | | (478) | (203) |
| | | - | - |
(i) The tax rate used in the above reconciliation is the corporate tax rate of 10% payable by Mongolian corporate entities on taxable profits up to 6 billion MNT under Mongolian tax law.
(ii) Petromatad Invest Limited and Capcorp are exempt of Mongolian corporate tax on profits derived from the sale of oil under their PSCs once production commences and are subject to Cayman Islands income tax at a rate of 0%. As a consequence, no provision for Mongolian corporate tax or Cayman Islands current tax or deferred tax has been made in the Company's accounts in relation to them.
Petro Matad Limited is subject to Isle of Man income tax at a rate of 0%. As a consequence, no provision for Isle of Man current tax or deferred tax has been made in the Company's accounts.
6 (Loss)/Earnings per share
The following reflects the loss and share data used in the total operations basic and diluted (loss)/earnings per share computations:
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| |||
| |
|
| ||
| | 31 Dec 2023 | 31 Dec 2022 | ||
| | cents per share | cents per share | ||
|
| | | ||
| Basic (loss)/earnings per share | (0.5) | (0.3) | ||
| |
| | ||
| Diluted (loss)/earnings per share | (0.5) | (0.3) | ||
| | | | ||
| | | | ||
|
| $'000's | $'000's | ||
| The loss and weighted average number of ordinary shares used in the calculation of basic and diluted (loss)/earnings per share are as follows: | | | ||
| | | | ||
| Net (loss)/profit attributable to owners of the parent | (5,926) | (2,949) | ||
| | | | ||
| Weighted average number of ordinary shares for the purposes of diluted (loss)/earnings per share (in thousands) | 1,090,898 | 898,812 | ||
| | | | ||
| Weighted average number of ordinary shares for the purposes of basic (loss)/earnings per share (in thousands) | 1,090,898 | 898,762 | ||
| | | | ||
|
| | 31 Dec 2023 | 31 Dec 2022 | ||
|
| | $'000 | $'000 |
| |
7 Cash and cash equivalents
|
| |
| |
| Cash at bank and in hand | | 503 | 1,476 |
|
| | 503 | 1,476 |
Cash at bank and in hand earns interest at fixed and floating rates based on prevailing bank rates, and the fair value of the above cash and cash equivalents is $503,000 (2022: $1,476,000) due to the short-term nature of the instruments.
Reconciliation from the net gain/(loss) after tax to the net cash flows from operations:
| Net (loss)/gain after tax | | (5,926) | (2,949) |
| | |
| |
| Adjustments for: | |
| |
| Depreciation and amortisation | | 190 | 149 |
| Expired bond recorded as an account receivable | | - | 2,501 |
| Share based payments | | 211 | 8 |
| Unrealised foreign exchange (gains)/ losses | | (3) | 24 |
| | |
| |
| Changes in assets and liabilities | |
| |
| Decrease/(increase) in trade and other receivables | | 2,169 | (2,586) |
| Decrease/(increase) in prepayments | | (21) | 38 |
| Decrease/(increase) in inventory | | - | 6 |
| Increase/(decrease) in trade and other payables | | (108) | 79 |
| | |
| |
| Net cash flows used in operating activities | | (3,488) | (2,730) |
Non-cash investing and financing activities
There were no non-cash investing or financing activities undertaken in the 2023 financial year or prior year (2022: $0.00).
8 Trade and other receivables
| Current | |
| |
| Other debtors | | 438 | 2,607 |
| | | 438 | 2,607 |
All amounts are recoverable and are not considered past due or impaired.
2022 account receivables include the receivable from TDB Capital for expired bond for which the money was received on 4 January 2023.
9 Prepayments
| Prepayments | | 159 | 138 |
| | | 159 | 138 |
10 Financial assets
| Long Term Deposits | | 3,529 | 1,017 |
| | | 3,529 | 1,017 |
The Group holds term deposits with an average weighted interest rate of 6.74%. The deposits have maturity dates greater than 3 months. None of these assets had been past due or impaired at the end of the reporting period.
|
|
| 31 Dec 2023 | 31 Dec 2022 |
|
| | $'000 | $'000 |
11 Inventory
| Raw materials | | 215 | 215 |
| | | 215 | 215 |
Inventory are mainly consumables, including casing, mud and drilling materials purchased for Block XX.
12 Exploration and evaluation assets
| Exploration and evaluation assets | | 15,275 | 15,275 |
| | | 15,275 | 15,275 |
The exploration and evaluation asset arose following the initial acquisition in February 2007 of 50% of Petromatad Invest Limited, together with acquisition on 12 November 2007 of the remaining 50% not already held by the Group, for a consideration of 23,340,000 ordinary shares credited as fully paid up and with an estimated fair value of $0.50 per share, taking into account assets and liabilities acquired on acquisition. This relates to the exploration and evaluation of PSC Block XX.
The ultimate recoupment of exploration and evaluation expenditure is dependent upon successful development and commercial exploitation or alternatively the sale of the respective areas of interest at an amount at least equal to book value.
Management have reviewed for impairment indicators on Block XX and no impairment has been noted.
During 2020, the Company was focused on providing all necessary documentation to the Mongolian regulator in an effort to obtain approval for its Exploitation Licence application, which would then enable development of its 2019 Heron discovery in the northern area of Block XX. The Exploitation Licence was approved on 5 July 2021, which allows the Company to be able to appraise, develop and produce oil from the area for a 25-year term, extendable by up to 10-years (two times 5-years)
13 Property, plant and equipment and Right-of-Use asset
| Plant and equipment at cost | | 939 | 925 |
| Accumulated depreciation and impairment | | (700) | (664) |
| | | 239 | 261 |
| | |
| |
| Right-of-Use asset | | 132 | 122 |
| Accumulated depreciation - Right-of-Use asset | | (33) | (30) |
| | | 99 | 92 |
Reconciliation of carrying amounts at the beginning and end of the year:
| | | | | | ||||
| | | Plant and equipment Total | Right-of-Use asset Total | Total Total |
| |||
| | | $'000 | $'000 | $'000 |
| |||
| | | | | |
| |||
| As at 1 January 2022 (net of accumulated depreciation) | | 99 | 93 | 192 |
| |||
| Additions | | 212 | 122 | 334 |
| |||
| Disposals | | - | - | - |
| |||
| Foreign exchange | | (16) | (8) | (24) |
| |||
| Depreciation charge for the year | | (34) | (115) | (149) |
| |||
| As at 31 December 2022 (net of accumulated depreciation) |
| 261 | 92 | 353 |
| |||
| | | | | |
| |||
| Additions | | 28 | 144 | 172 |
| |||
| Foreign exchange | | 2 | 1 | 3 |
| |||
| Depreciation charge for the year | | (52) | (138) | (190) |
| |||
| As at 31 December 2023 (net of accumulated depreciation) |
| 239 | 99 | 338 |
| |||
The following useful lives are used in the calculation of depreciation: Plant and equipment - 2 to 10 years
|
|
| 31 Dec 2023 | 31 Dec 2022 | ||
|
| | $'000 | $'000 | ||
|
| |
| |
| |
14 Trade and other payables (current)
| Trade payables | | 348 | 456 |
| | | 348 | 456 |
Trade payables are non-interest bearing and are normally settled within 60 day terms.
15 Issued capital
| Ordinary Shares | | | |
| |
| 1,113,883,601 shares issued and fully paid (2022: 898,761,649) | | 160,176 | 154,057 | ||
| | | 160,176 | 154,057 | ||
Movements in ordinary shares on issue:
| | Number of Shares | Issue Price $ | $'000 |
| | | | |
| As at 1 January 2022 | 898,761,649 | | 154,057 |
| | | | |
| No transactions during 2022 | | | - |
| As at 31 December 2022 | 898,761,649 | | 154,057 |
| | | | |
| Placement shares through Shore Capital on 10 Feb 2023 (note (a)) | 94,787,994 | $0.030 | 2,866 |
| Placement shares through Zeus on 10 February 2023 (note (b)) | 67,000,626 | $0.030 | 2,027 |
| Direct subscription shares on 10 February 2023 (note (c)) | 33,333,332 | $0.031 | 1,025 |
| Open Offer shares on 10 February 2023 (note (d)) | 20,000,000 | $0.030 | 605 |
| Capital raising cost | | | (404) |
| As at 31 December 2023 | 1,113,883,601 | | 160,176 |
| | | | |
(a) On 10 February 2023, the Company concluded a placing by issuing 94,787,994 shares at a price of GBP0.025 per share arranged through its nominated adviser, broker and joint book runner for the purposes of the Placing, Shore Capital Stockbrokers.
(b) On 10 February 2023, the Company concluded a placing by issuing 67,000,626 shares at a price of GBP0.025 per share arranged through its broker and joint book runner for the purposes of the Placing, Zeus Capital.
(c) On 10 February 2023, the Company issued 33,333,332 shares through direct subscriptions at a price of GBP0.025 per share.
(d) On 10 February 2023, the Company issued 20,000,000 shares to shareholders at a price of GBP0.025 per share through a retail offering on the Bookbuild platform.
16 Reserves
A detailed breakdown of the reserves of the Group is as follows:
| |
Merger reserve | Equity benefits reserve | Foreign currency translation | Total |
|
| $'000 | $'000 | $'000 | $'000 |
| | | | | |
| As at 1 January 2022 | 831 | 570 | (1,219) | 182 |
| Currency translation differences | - | - | (149) | (149) |
| Expiry of Options | - | (33) | - | (33) |
| Exercise of Awards | - | - | - | - |
| Share based payments | - | 8 | - | 8 |
| As at 31 December 2022 | 831 | 545 | (1,368) | 8 |
| | | | | |
| Currency translation differences | - | - | 26 | 26 |
| Expiry of Options | - | (2) | - | (2) |
| Exercise of Awards | - | - | - | - |
| Share based payments | - | 211 | - | 211 |
| As at 31 December 2023 | 831 | 754 | (1,342) | 243 |
Nature and purpose of reserves
Merger reserve
The merger reserve arose from the Company's acquisition of Capcorp on 12 November 2007. This transaction is outside the scope of IFRS 3 'Business Combinations' and as such Directors have elected to use UK Accounting Standards FRS 6 'Acquisitions and Mergers'. The difference, if any, between the nominal value of the shares issued plus the fair value of any other consideration, and the nominal value of the shares received in exchange are recorded as a movement on other reserves in the consolidated financial statements.
Equity benefits reserve
The equity benefits reserve is used to record the value of Options and Conditional Share Awards provided to employees and Directors as part of their remuneration, pursuant to the Group's Long-Term Equity Incentive Plan (Plan or Group's Plan). Refer to Note 17 for further details of these plans.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
17 Share based payments
(a) Long Term Equity Incentive Plan (Plan or Group's Plan)
The Group provides long term incentives to employees (including Executive Directors), Non-Executive Directors and consultants through the Group's Plan based on the achievement of certain performance criteria. The Plan provides for share awards in the form of Options and Conditional Share Awards. The incentives are awarded at the discretion of the Board, or in the case of Executive Directors, the Remuneration Committee of the Board, who determine the level of award and appropriate vesting, service and performance conditions taking into account market practice and the need to recruit and retain the best people.
Options may be exercised, subject only to continuing service, during such period as the Board may determine. Options have a term of 10 years.
Conditional Share Awards shall vest subject to continuing service and appropriate and challenging service and performance conditions determined by the Remuneration Committee relating to the overall performance of the Group.
Conditional Share Awards based on performance conditions will vest on achievement of the following performance conditions:
· 25% vest on the first discovery of oil on a commercial scale, determined by management as being 5 July 2021 upon the award of the Exploitation License;
· 25% vest on the first production of oil on a commercial scale, estimated by management as to be achieved prior to 31 December 2024; and
· 50% vest on the Company achieving the sale of 1 million barrels of oil, estimated by management as being by 31 December 2025.
Other Conditional Share Awards have service conditions tied to employment continuity and are available for vesting in three equal annual instalments on various dates.
(b) Option pricing model
The fair value of Options granted is estimated as at the date of grant using the Black Scholes model, taking into account the terms and conditions upon which the Options were granted.
No Options have been issued during 2022 and following table summarizes Options granted during 2023, along with relevant details in relation to the grant.
| | 29 May 2023 |
| Options Granted | 12,147,000 |
| Share price at grant date | $0.0593 |
| Expected Volatility (%) | 55 |
| Risk-free interest rates (%) | 4.5% |
| Exercise Price (in GBP) | 0.0480 |
| Estimate fair value of option | $0.0407 |
Options granted above are exercisable as follows:
· 33% one year after grant date
· 33% two years after grant date
· 34% three years after grant date
(c) Movement in Share Options
The weighted average fair value for all Options in existence as at 31 December 2023 is 0.04 (2022: 0.05).
| |
Opening balance at 1 January 2022 | Granted during the year | Forfeited during the year |
Exercised during the year | Closing balance as at 31 December 2022 |
Exercisable as at 31 December 2022 |
| Grant of Options on 25 Apr 2012 | 100,000 | - | (100,000) | - | - | - |
| Grant of Options on 16 Jul 2012 | 24,000 | - | (24,000) | - | - | - |
| Grant of Options on 4 Dec 2012 | 6,000 | - | (6,000) | - | - | - |
| Grant of options on 9 July 2013 | 50,000 | - | - | - | 50,000 | 50,000 |
| | 180,000 | - | (130,000) | - | 50,000 | 50,000 |
| Weighted Average Exercise Price (cents per option) | 24.2 | - | 31.07 | - | 6.33 | 6.33 |
| |
Opening balance at 1 January 2023 | Granted during the year | Lapsed during the year |
Exercised during the year | Closing balance as at 31 December 2023 |
Exercisable as at 31 December 2023 |
| Grant of options on 9 July 2013 | 50,000 | - | (50,000) | - | - | - |
| Grant of options on 29 May 2023 | - | 12,147,000 | (759,000) | - | 11,388,000 | - |
| | 50,000 | 12,147,000 | (809,000) | - | 11,388,000 | - |
| Weighted Average Exercise Price (cents per option) | 6.33 | 5.93 | 5.56 | - | 5.93 | - |
(d) Share Options Contractual Life
The weighted average remaining contractual life of outstanding share Options is 9.4 year (2022: 0.5 years).
(e) Conditional Share Awards pricing model
The fair value of Conditional Share Awards granted is estimated as at the date of grant using the Black Scholes model, taking into account the terms and conditions upon which the Awards were granted.
No awards were granted in 2022 and 2023.
(f) Movement in Conditional Share Awards
The weighted average fair value for all Awards in existence as at 31 December 2023 is 0.84 (2022: 0.84)
| Consolidated |
Opening balance at 1 January 2022 | Granted during the year | Exerci-sed during the year | Forfei-ted during the year | Closing balance as at 31 December 2022 | Exercisable as at 31 December 2022 | ||||
| | | | | | | | ||||
| Grant of Conditional Share Awards on 3 Jun 2008 | 123,750 | - | - | - | 123,750 | - | ||||
| Grant of Conditional Share Awards on 8 Apr 2009 | 60,000 | - | - | - | 60,000 | - | ||||
| Grant of Conditional Share Awards on 9 Jul 2010 | 214,500 | - | - | - | 214,500 | - | ||||
| Grant of Conditional Share Awards on 6 Apr 2011 | 18,000 | - | - | - | 18,000 | - | ||||
| Grant of Conditional Share Awards on 5 Jul 2011 | 135,000 | - | - | - | 135,000 | - | ||||
| Grant of Conditional Share Awards on 22 Nov 2011 | 37,500 | - | - | - | 37,500 | - | ||||
| Grant of Conditional Share Awards on 5 Dec 2011 | 21,450 | - | - | - | 21,450 | - | ||||
| Grant of Conditional Share Awards on 25 Apr 2012 | 75,000 | - | - | - | 75,000 | - | ||||
| Grant of Conditional Share Awards on 4 Dec 2012 | 2,250 | - | - | - | 2,250 | - | ||||
| Grant of Conditional Share Awards on 9 Jul 2013 | 90,000 | - | - | - | 90,000 | - | ||||
| | 777,450 | - | - | - | 777,450 | - | ||||
| |
|
|
|
|
|
| ||||
| Weighted Average Exercise Price (cents per award) | 1.00 | - | - | - | 1.00 | - | ||||
| Consolidated |
Opening balance at 1 January 2023 | Granted during the year | Exercis-ed during the year | Lapsed during the year | Closing balance as at 31 December 2023 | Exercisable as at 31 December 2023 | |
| | | | | | | | |
| Grant of Conditional Share Awards on 3 Jun 2008 | 123,750 | - | - | - | 123,750 | - | |
| Grant of Conditional Share Awards on 8 Apr 2009 | 60,000 | - | - | - | 60,000 | - | |
| Grant of Conditional Share Awards on 9 Jul 2010 | 214,500 | - | - | - | 214,500 | - | |
| Grant of Conditional Share Awards on 6 Apr 2011 | 18,000 | - | - | - | 18,000 | - | |
| Grant of Conditional Share Awards on 5 Jul 2011 | 135,000 | - | - | - | 135,000 | - | |
| Grant of Conditional Share Awards on 22 Nov 2011 | 37,500 | - | - | - | 37,500 | - | |
| Grant of Conditional Share Awards on 5 Dec 2011 | 21,450 | - | - | - | 21,450 | - | |
| Grant of Conditional Share Awards on 25 Apr 2012 | 75,000 | - | - | - | 75,000 | - | |
| Grant of Conditional Share Awards on 4 Dec 2012 | 2,250 | - | - | - | 2,250 | - | |
| Grant of Conditional Share Awards on 9 Jul 2013 | 90,000 | - | - | - | 90,000 | - | |
| | 777,450 | - | - | - | 777,450 | - | |
| |
|
|
|
|
|
| |
| Weighted Average Exercise Price (cents per award) | 1.00 | - | - | - | 1.00 | - | |
(g) Conditional Share Awards Contractual Life
The weighted average remaining contractual life of outstanding Conditional Share Awards is 4.5 years (2022: 5.5 years).
(h) Summary of Share Based Payments
A reconciliation of all share-based payments made during the year is as follows:
|
|
| 31 Dec 2023 | 31 Dec 2022 |
|
| Note | $'000 | $'000 |
| | | | |
| Vesting of Options and Awards | 17 | 211 | 8 |
| | | 211 | 8 |
| | | | |
| Lapsed Options | 17 | (2) | (33) |
| | | (2) | (33) |
18 Commitments and contingencies
(a) Operating lease commitments
Operating leases relate to premises used by the Group in its operations, generally with terms between 2 and 5 years. Some of the operating leases contain options to extend for further periods and an adjustment to bring the lease payments into line with market rates prevailing at that time. The leases do not contain an option to purchase the leased property.
| Operating Leases: | | | |
| |
| Within one year | | - | - | ||
| After one year but not more than five years | | - | - | ||
| Greater than five years | | - | - | ||
| | | - | - | ||
(b) Exploration expenditure commitments
Petromatad Invest Limited and Capcorp have minimum spending obligations, under the terms of their PSCs on Blocks V and XX with MRPAM.
The amounts set out below do not include general and administrative expenses.
| Production Sharing Contract Fees: | | | |
| Within one year | | 200 | 286 |
| After one year but not more than five years | | 434 | 548 |
| Greater than five years | | 1,433 | 1,518 |
| | | 2,067 | 2,352 |
| Minimum Exploration Work Obligations: | | | |
| Within one year | |
| |
| Greater than one year but no more than five years | | - | - |
| Greater than five years | | 6,449 | 6,480 |
| | | 6,449 | 6,480 |
(c) Contingencies
On 5 August 2016, Shell through its Affiliate company announced it would be withdrawing from Blocks IV and V in West/Central Mongolia. As part of the negotiations leading to formal Mongolian Government approval of the reassignment of interest from Shell's Affiliate to the Company's Affiliate, Shell agreed to a payment of $5 million to be remitted to the Company's Affiliate upon such government approval being received. A condition to the payment by Shell is that the proceeds are required to be repaid to Shell by the Company in the event a farmout is concluded in future prior to the development of either Block IV or V. Block IV has since been relinquished by the Company in its entirety and Block V will be relinquished in its entirety in July 2024, at which point the conditional payment will no longer be applicable. The $5 million payment was received on 1 February 2017.
19 Related party disclosures
The immediate parent and ultimate controlling party of the Group is Petro Matad Limited.
The consolidated financial statements include the financial statements of Petro Matad Limited and the subsidiaries listed in the following table:
|
|
| Equity Interest | ||
| |
|
| | |
|
| Country of | 2023 | 2022 | |
| | Incorporation | % | % | |
|
| |
| | |
| Central Asian Petroleum Corporation Limited | Cayman Islands | 100 | 100 | |
| Capcorp Mongolia LLC | Mongolia | 100 | 100 | |
| Petromatad Invest Limited | Cayman Islands | 100 | 100 | |
| Petro Matad LLC | Mongolia | 100 | 100 | |
| Sunsteppe Renewable Energy Pte. Ltd. (formerly Petro Matad Singapore Pte. Ltd.) | Singapore | 100 | 100 | |
| Petro Matad Energy Limited | Isle of Man | 100 | - | |
| Sun Steppe Power LLC | Mongolia | 50 | - | |
|
| |
| | |
Subsidiary Details
Central Asian Petroleum Corporation Limited (Capcorp) was acquired on 12 November 2007. Petro Matad Limited holds 43,340,000 ordinary shares of $0.01 each.
Capcorp Mongolia LLC is 100% owned by Capcorp. Capcorp holds 1,000,000 ordinary shares of MNT150 each.
Petromatad Invest Limited was acquired on 12 November 2007. 25,000 shares of $1 each held by Capcorp was transferred to Petro Matad Limited on 25 November 2019 resulting in Petro Matad Limited holding 50,000 shares of $1 each.
Petro Matad LLC is 100% owned by Petromatad Invest Limited. Petromatad Invest Limited holds 15,000 ordinary shares of MNT10,000 each.
Petro Matad Singapore Pte. Ltd was 100% owned by Petro Matad Limited who held 50,000 ordinary shares of SG$1.On 20 February 2024, the Company transferred 50% of Petro Matad Singapore Pte. Ltd to Sunsteppe Energy LLC and is currently holding 25,000 ordinary shares of SG$1. Petro Matad Singapore Pte. Ltd was also renamed as Sunsteppe Renewable Energy Pte. Ltd.
Petro Matad Energy Limited is 100% owned by Petro Matad Limited. Petro Matad Limited holds 50,000 Ordinary shares of $1 each.
On 13 April 2023, the Company formed Sun Steppe Power LLC, incorporated in Mongolia, which is a 50% owned subsidiary of Petro Matad LLC and 50% owned by Sunsteppe Energy LLC.
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
Petrovis Matad Inc. (Petrovis) is a major shareholder of the Company, holding approximately 19.92% of the shareholding at year end of 2023.
20 Key management personnel
(a) Details of Directors
The names of the Company's Directors, having authority and responsibility for planning, directing and controlling the activities of the Group, in office during 2022 and 2023, are as below:
The Directors were in office until the date of this report and for this entire period unless otherwise stated.
Directors
Enkhmaa Davaanyam Non-Executive Chairperson
Timothy Paul Bushell Non-Executive Director
Michael James Buck Chief Executive Officer
Shinezaya Batbold Non-Executive Director
(b) Compensation of Directors
|
|
| Consolidated |
| |||
| |
|
| |
| ||
|
|
| 31 Dec 2023 | 31 Dec 2022 |
| ||
| | | $'000 | $'000 |
| ||
|
| |
| |
| ||
| Short-term employee benefits | | 672 | 685 |
| ||
| Share based payment expense | | 15 | 3 |
| ||
|
| | 687 | 688 |
| ||
|
|
|
|
| |||
| |
|
| |
| ||
(c) Other key management personnel transactions
There were no other key management personnel transactions during the year (2022: Nil).
21 Financial risk management objectives and policies
The Group's principal financial instruments comprise cash and short-term deposits classified as loans and receivables financial assets.
The main purpose of these financial instruments is to raise capital for the Group's operations.
The Group also has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations. It is, and has been throughout the year under review, the Group's policy that no trading in financial instruments shall be undertaken.
The main risks arising from the Group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk.
The Board is responsible for identification and control of financial risks. The Board reviews and agrees policies for managing each of these risks as summarised below.
Risk Exposures and Responses
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or cash flow associated with the instrument will fluctuate due to changes in market interest rate. Interest rate risk arises from fluctuations in interest bearing financial assets and liabilities that the Group uses. Interest bearing assets comprise cash and cash equivalents which are considered to be short-term liquid assets. It is the Group's policy to settle trade payables within the credit terms allowed and the Group does therefore not incur interest on overdue balances.
The following table sets out the carrying amount of the financial instruments that are exposed to interest rate risk:
|
|
| 31 Dec 2023 | 31 Dec 2022 |
| | Weighted Average Int. rate | $'000 | $'000 |
| Financial Assets | |
| |
| Cash and cash equivalents | 0.00% | 503 | 1,476 |
| *Other financial assets | 6.74% | 3,529 | 1,017 |
| | | 4,032 | 2,493 |
| Trade and other receivables | 0% | 438 | 2,607 |
| | | 4,470 | 5,100 |
| Financial Liabilities | |
| |
| Trade and other payables | 0% | 348 | 456 |
| | | 348 | 456 |
| Net exposure | | 4,122 | 4,644 |
*Other financial assets are comprised of cash deposits placed in the banks for terms exceeding 90 days.
Sensitivity Analysis
If the interest rate on cash balances at 31 December 2022 and 2023 weakened/strengthened by 1%, there would be no material impact on profit or loss. There would be no effect on the equity reserves other than those directly related to other comprehensive income movements.
Foreign currency risk
As a result of operations overseas, the Group's statement of financial position can be affected by movements in various exchange rates.
The functional currency of Petro Matad Limited and presentational currency of the Group is deemed to be USD because the future revenue from the sale of oil will be denominated in USD and the costs of the Group are likewise predominately in USD. Some transactions are however dominated in currencies other than USD. These transactions comprise operating costs and capital expenditure in the local currencies of the countries where the Group operates. These currencies have a close relationship to the USD and management believes that changes in the exchange rates will not have a significant effect on the Group's financial statements.
The Group does not use forward currency contracts to eliminate the currency exposures on any individual transactions.
The following significant exchange rates applied during the year:
|
|
| Average rate | Spot rate at the balance date | ||
| USD |
| 2023 | 2022 | 2023 | 2022 |
|
| |
| |
| |
| Mongolian Tugrug (MNT) 1 | | 3,465.85 | 3,139.80 | 3,410.69 | 3,444.60 |
| | |
| |
| |
| Australian Dollar (AUD) 1 | | 1.506204 | 1.450052 | 1.468020 | 1.472423 |
| Great British Pound (GBP) 1 | | 0.804479 | 0.811255 | 0.785462 | 0.829194 |
Sensitivity Analysis
A 5% strengthening/weakening of the MNT against USD at 31 December 2022 and 2023 would not have a material effect on profit and loss or on equity.
Price risk
The Group's exposure to price risk is minimal as the Group is currently not revenue producing other than from interest income.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk on its cash and cash equivalents and other receivables as set out in Notes 7 and 8 which also represent the maximum exposure to credit risk. The Group only deposits surplus cash with well-established financial institutions of high quality credit standing.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant.
There are no significant concentrations of credit risk within the Group.
Maximum exposure to credit risk at reporting date:
|
|
|
| |
| |
|
| |
|
|
| 31 Dec 2023 | 31 Dec 2022 |
| | Note | $'000 | $'000 |
| Financial Assets | |
| |
| Trade and other receivables | 8 | 438 | 2,607 |
| Net exposure | | 438 | 2,607 |
Impairment Losses:
None of the Group's receivables are past due at 31 December 2023 (2022: Nil)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
The Group's objective is to ensure that sufficient funds are available to allow it to continue its exploration and development activities.
The following table details the Group's expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted maturities of the financial assets including interest that will be earned on those assets.
| | Weighted average interest rate |
6 months or less | 6-12 months | 1-5 years | over 5 years | Total |
|
| $'000 | $'000 | $'000 | $'000 | $'000 | |
| | | | | | | |
| Cash and cash equivalents | 0.00% | 503 | - | - | - | 503 |
| Trade and other receivables | - | 438 | - | - | - | 438 |
| Financial Assets | 6.74% | 3,529 | - | - | - | 3,529 |
| As at 31 December 2023 | | 4,470 | - | - | - | 4,470 |
| | | | | | | |
| Cash and cash equivalents | 0.00% | 1,476 | - | - | - | 1,476 |
| Trade and other receivables | - | 2,607 | - | - | - | 2,607 |
| Financial Assets | 2.92% | 1,017 | - | - | - | 1,017 |
| As at 31 December 2022 | | 5,100 | - | - | - | 5,100 |
The remaining contractual maturities of the Group's and parent entity's financial liabilities are:
|
|
| 31 Dec 2023 | 31 Dec 2022 |
| | | $'000 | $'000 |
|
| |
| |
| 6 months or less | | 348 | 456 |
| 6-12 months | | - | - |
| 1-5 years | | - | - |
| over 5 years | | - | - |
|
| | 348 | 456 |
All of the Group's amounts payable and receivable are current.
Further, the Group has exploration expenditure commitments on its PSCs as disclosed in Note 18(b).
Fair Value of Financial Assets and Liabilities
The fair value of cash and cash equivalents and non-interest bearing financial assets and financial liabilities of the Group approximate their carrying value due to their short term duration.
|
|
| Fair Value Hierarchy as at 31 December 2023 | |||
|
|
| Level 1 | Level 2 | Level 3 | Total |
| Financial Assets | | | | | |
| Trade and other receivables | | - | 438 | - | 438 |
| Total |
| - | 438 | - | 438 |
| | | | | | |
| Financial Liabilities |
|
|
|
|
|
| Trade and other payables | | - | 348 | - | 348 |
| Total |
| - | 348 | - | 348 |
|
|
| Fair Value Hierarchy as at 31 December 2022 | |||
|
|
| Level 1 | Level 2 | Level 3 | Total |
| Financial Assets | | | | | |
| Trade and other receivables | | - | 2,607 | - | 2,607 |
| Total |
| - | 2,607 | - | 2,607 |
| | | | | | |
| Financial Liabilities |
|
|
|
|
|
| Trade and other payables | | - | 456 | - | 456 |
| Total |
| - | 456 | - | 456 |
The fair values of the financial assets and financial liabilities included in the level 2 category above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties.
22 Capital management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The management of the Group and the Group's capital is regularly reviewed by the Board. The capital structure of the Group consists of cash and bank balances (Note 7) and equity of the Group (comprising issued capital, reserves and retained earnings as detailed in Notes 15 and 16). This is reviewed by the Board of Directors as part of their regular Board meetings.
The Group monitors its capital requirements based on the funding required for its exploration and development activities in Mongolia and operations of the Company.
The Group is not subject to externally imposed capital requirements.
23 Events after the reporting date
On 20 February 2024, the Company transferred 50% of Petro Matad Singapore Pte. Ltd to Sunsteppe Energy LLC. Petro Matad Singapore Pte. Ltd was also renamed as Sunsteppe Renewable Energy Pte. Ltd. The Company is currently in process of transferring Sun Steppe Power LLC to be a wholly owned subsidiary of Sunsteppe Renewable Energy Pte. Ltd.
The Company has had its application for land access for 2024 operations approved by the Matad District Citizen Representative Hural. A land use agreement enabling access to land for 2024 planned operations is in process of being finalized.
24 Auditors' remuneration
The auditor of Petro Matad Limited is Hall Chadwick (WA) Pty Ltd.
|
|
| 31 Dec 2023 | 31 Dec 2022 |
| | | $'000 | $'000 |
| Amounts received or due and receivable by Hall Chadwick (WA) Pty Ltd: | |
| |
| - an audit or review of the financial report of the entity and any other entity in the Group | | 41 | 33 |
| - other services in relation to the entity and any other entity in the Group | | - | - |
| | | 41 | 33 |
| Amounts received or due and receivable by Deloitte Onch Audit LLC for: | |
| |
| - an audit or review of the financial report of subsidiary entities | | 23 | 23 |
| - other services in relation to the subsidiary entities | | - | - |
| | | 23 | 23 |
| Amounts received or due and receivable by Deloitte Infinity Assurance LLP for: | |
| |
| - an audit or review of the financial report of subsidiary entities | | 8 | 15 |
| - other services in relation to the subsidiary entities | | - | - |
| | | 8 | 15 |
| | | 72 | 71 |
25 Other Information
Registered Office:
Victory House
Douglas
Isle of Man
IM1 1EQ
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