RBD Reabold Resources Plc

26 September 2024

REABOLD RESOURCES PLC

("Reabold" or the "Company")

Unaudited Interim Results for the Six Months Ended 30 June 2024

Reabold Resources plc (AIM: RBD), the investing company focussed on developing strategic gas projects for European energy security, announces its unaudited interim results for the six months ended 30 June 2024. The results are included below and are also available at www.reabold.com.

Highlights

·    Cash and cash equivalents up 41% at £7.6 million as at 30 June 2024, compared with £5.4 million as at 31 December 2023.

·    Final tranche cash proceeds of £4.4 million for the sale of Corallian, received from Shell in January 2024.

·    In August 2024, agreed to further increase interest in LNEnergy Limited ("LNEnergy") taking Reabold's total shareholding to approximately 27.1% of LNEnergy's enlarged share capital. LNEnergy is the manager of LNEnergy S.R.L., the Italian company which has applied for the Colle Santo gas field concession, a highly material gas resource with an estimated 65Bcf of 2P reserves¹.

·    Execution of a non-binding Heads of Agreement between Gunvor International B.V. ("Gunvor") and LNEnergy for the purchase of Liquified Natural Gas ("LNG") by Gunvor from LNEnergy from the Colle Santo gas field. 

o  HoA provides for a potential prepayment for a portion of the first five years of deliveries to help fund the development.

·    At West Newton, a Gas Export Feasibility study completed by independent energy consultants, CNG Services Limited, concluded that as a precursor to the intended West Newton full field development, an initial single well development and gas export plan can accelerate production and cash flow whilst requiring limited capital expenditure, giving the joint venture ("JV") partnership the ability to drill future wells out of cash flow. See Review of Operations section below for further details.

o  The single well development plan benefits from early cash generation with the ability to drill future wells out of cash flow. Following drilling and testing of this horizontal well, first gas is expected after 18 months with an associated development capex estimated to be c.£12 million.

·    The North Sea Transition Authority ("NSTA") approved a revised work programme for PEDL 183 onshore UK, which contains the West Newton field. The JV partnership for PEDL 183 is expected to approve a forward plan, which will initially consist of the re-entry and recompletion of an existing West Newton well in order to establish sustained gas flow. The JV partnership believes this is a low risk and low cost approach to derisk the project.

¹ RPS estimate, September 2022

Sachin Oza and Stephen Williams, Co-CEOs of Reabold, commented:

"Reabold enters the second half of the year with a strong balance sheet and a number of exciting catalysts on the horizon.

The Company is excited by the potential of the Colle Santo gas project, which holds significant gas reserves, and the regulatory process continues to be encouraging.  We are pleased LNEnergy has established a strong relationship with Gunvor in the context of a gas offtake partner.

"The revised work programme for PEDL 183 confirms that significant value can be unlocked at West Newton through the early production plan, which is technically robust and economically attractive due to a low capex requirement, and the JV remains focused on delivering this strategic UK gas project.

"We look forward to replicating the success of the Corallian sale elsewhere in the portfolio as we carry out the Reabold strategy to create value for shareholders."

Enquiries:

Forward looking statements

This disclosure contains certain forward-looking statements with respect to the business of Reabold and certain of the plans and objectives of Reabold that involve substantial known and unknown risks and uncertainties. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future and are outside the control of Reabold. Actual results or outcomes, may differ materially from those expressed in such statements, depending on a variety of factors, including: the impact of general economic conditions where Reabold operates, industry conditions, changes in consumer preferences and societal expectations, the pace of development and adoption of alternative energy solutions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the timing of bringing new fields onstream, fluctuations in foreign exchange or interest rates, stock market volatility, the success or otherwise of partnering, Reabold's access to future credit resources, and other risk factors discussed in Reabold's 2023 Annual Report. Accordingly, no assurances can be given that any of the events anticipated by the forward looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that Reabold will derive therefrom.

Review of Operations

LNEnergy - Colle Santo gas field, Italy

Following the Company's further purchase of shares in LNEnergy announced on 20 August 2024, Reabold holds a 27.1% stake in LNEnergy (26.1% as at 30 June 2024). LNEnergy's primary asset is an exclusive option over a 90% interest in the onshore Colle Santo gas field in Abruzzo, Italy. LNEnergy may exercise the option at any time until 1 February 2025. The exercise price is US$11 million. With 65bcf of 2P reserves, as estimated by RPS as of 30 September 2022, this is a highly material undeveloped onshore gas resource. Reabold believes this is the largest onshore proven undeveloped gas field in mainland Western Europe. The field is development ready subject to permits and approvals. Two wells have already been drilled and are available for production, with no additional drilling being required. The development will consist of a small-scale LNG facility to produce initially at 10mmcf/d from the existing two wells with over 20 years of ultimate production. LNEnergy believes that the field has the potential to generate an estimated €11-12 million of gross post-tax free cash flow per annum.

Demand for LNG is expected to continue to grow. LNG is critical to the energy transition and plays an important role in enabling countries to replace higher carbon-intensive forms of energy. The Italian government approved a decree, which was converted into law in February 2024, to boost the country's renewable energy production and energy security. The decree provides incentives to build renewable power plants and prioritise onshore LNG projects which are deemed strategically essential; the release of new licences for the exploitation of gas fields aimed at providing gas to industries with high gas consumption, at competitive prices; and incentives for carbon dioxide storage programmes.

The Company also notes that LNEnergy's application for concession has been recognised by the Italian Ministry of Environment and Energy Security ("MASE") as a project that meets the requirements of the Italian government's National Integrated Plan for Energy and Climate and National Plan for Economic Recovery, for which €12 billion in grants and economic incentives have been made available by executive decree.

On 2 May 2024, Reabold announced the execution of a non-binding Heads of Agreement ("HoA") between Gunvor and LNEnergy for the purchase of LNG by Gunvor from LNEnergy from the Colle Santo gas field. The HoA provides the terms on which Gunvor would purchase LNG from LNEnergy at its planned small-scale LNG production facility at the Colle Santo gas field and envisages Gunvor purchasing approximately 44,000 tonnes of LNG per annum. The point of sale would be the truck loading flange at the small-scale LNG plant, and the LNG would then be delivered by truck in Italy. The price for the LNG would be aligned with the Italian PSV price and the contract term would be for an indefinite period with a minimum term of five years.

The HoA also provides for a potential prepayment by Gunvor for a portion of the first five years of deliveries, with such amounts subject to prepayment being a total of approximately 66,000 tonnes of LNG, or 999,000 MWh. The average forward Italian PSV gas price for the years 2025-2030, at the time of executing the HoA, was approximately €30 / MWh. The prepayment is conditional on agreeing definitive transaction documentation and LNEnergy obtaining the required permits to construct and operate the LNG production facility and will help fund the development.

On the basis of the HoA, LNEnergy and Gunvor intend to negotiate a fully-termed LNG sale and purchase agreement over the next three months. During such time, LNEnergy will exclusively discuss the sale and purchase of LNG from Colle Santo with Gunvor, whilst concurrently focusing its efforts on obtaining the required permits to construct and operate the LNG production facility.

In August 2024, Reabold announced it had increased its interest in LNEnergy by a further 1.0% through the subscription of 17 new LNEnergy ordinary shares for a cash consideration of approximately £205,000, at a price of £12,047 per share. This takes Reabold's total shareholding to approximately 27.1% of LNEnergy's enlarged share capital. LNEnergy also agreed to grant Reabold a warrant (the "Warrant") to subscribe in cash, at the Company's sole discretion, for a further approximately £747,000 worth of new LNEnergy ordinary shares at a price of £12,047 per share. The Warrant has an exercise period of six months and, if exercised, would take Reabold's shareholding in LNEnergy to approximately 30.6% of its enlarged share capital.

UK Onshore

Rathlin Energy (UK) Limited and West Newton - PEDL 183

West Newton is an onshore hydrocarbon discovery located north of Hull, England. To date, three wells have been drilled at West Newton (A-1, A-2 and B-1Z) confirming a major discovery - potentially one of the largest hydrocarbon fields discovered onshore UK. Rathlin Energy (UK) Limited ("Rathlin") is the operator of the licence and holds a 66.67% interest. Reabold holds a 59.5% shareholding in Rathlin and holds a direct 16.67% in the licence giving the Company an aggregate c. 56% economic interest in West Newton. The other co-venturer on the licence is Union Jack Oil (AIM: UJO) with a 16.67% direct interest.

A Gas Export Feasibility study completed by CNG Services Limited in the first half of 2024, concluded that, as a precursor to the intended West Newton full field development, an initial single well development and gas export plan is economically and technically feasible, allowing for accelerated production and cash flow whilst requiring limited capital expenditure. With the industry currently suffering from a lack of available development capital, the ability to achieve early production with limited capex is strategically extremely valuable. Initial gas production is planned to be from a single horizontal well, processed through a modular plant, tied in from the West Newton A site to the National Transmission System at an existing above ground installation via a pipeline. The single well development plan benefits from early cash generation with the ability to drill future wells out of cash flow. Following drilling and testing of this horizontal well, first gas is expected 18 months later with an associated gross development capex estimated to be c.£12 million. Although early production from the single well development demonstrates highly attractive standalone economics and would support future wells being drilled from cashflow, it is envisaged that it will be a precursor to the full field conceptual development plan.

In addition, the North Sea Transition Authority ("NSTA") has approved a revised work programme for PEDL 183 onshore UK, which contains the West Newton field. With the necessary approval from the NSTA for the revised work programme for PEDL 183 secured, Reabold can continue to progress this important UK gas project in the most optimal manner. The revised minimum work programme for PEDL 183 is as follows:

·    Re-enter and recomplete or sidetrack one of the currently suspended wells on or before 30 June 2026;

·    Re-enter and recomplete or sidetrack one of the remaining suspended wells or drill and complete a new deviated or horizontal well on or before 30 June 2027; and

·    Submit a field development plan on or before 30 June 2027.

The JV partnership for PEDL 183 is expected to approve a forward plan, which will initially consist of the re-entry and recompletion of the West Newton A-2 well in order to establish sustained gas flow. The JV partnership believes this is a low risk and low cost approach to derisk the project.

Rathlin, has been informed by the Environment Agency that its application on behalf of the JV for the recompletion of the West Newton A-2 well has been 'Duly Made'. For the recompletion of the West Newton A-2 well to proceed, Rathlin is required to obtain the NSTA's consent and receive a permit from the Environment Agency. The JV is fully funded for re-entry and recompletion which is expected to commence in 1H 2025. Further updates will be provided in due course.

Alongside our strategy to unlock significant near-term value from West Newton, we have also considered the carbon intensity of the project. In May 2024, Reabold commissioned GaffneyCline & Associates Limited ("GaffneyCline") to perform a carbon intensity study for the West Newton field which highlighted the following:

·    The West Newton project has an AA rating for Carbon Intensity for its potential upstream gas and condensate production, the lowest possible carbon intensity rating category on GaffneyCline's scale;

·    The West Newton field has a Carbon Intensity significantly lower than the UK average and onshore and offshore analogues. It is also significantly lower than the average imported LNG, based on the NSTA Natural Carbon Footprint Analysis published in July 2023;

·    Based on the study, GaffneyCline estimates that West Newton could produce the equivalent of just 2.87 grams of CO₂ per megajoule of energy developed (gCO₂e/MJ); and

·    As the development proceeds and project knowledge increases, there is potential to improve the Carbon Intensity by further reducing fugitive, flaring and venting emissions and by gas-to-grid development, reducing on site gas and condensate processing, and using the shortest possible route to the National Grid.

The AA rating demonstrates the low carbon credentials of the West Newton project and is an example of the opportunities available in the UK to power the country through lower carbon, home grown energy, rather than relying on expensive and more carbon intensive imports.

We believe West Newton is an important strategic asset to the UK as the country looks to secure domestic energy supply for secure and affordable energy, at a time when the country is exposed to potentially significant gas supply disruptions. The study proves that the operator, Rathlin, is a responsible hydrocarbon producer complying with best environmental practice to produce much needed UK hydrocarbons in the most efficient and environmentally friendly way possible.

Reabold is committed to the highest standards of environmental processes, and we incorporate these responsibilities into our operational decision-making and investments.

UK Offshore

Victory contingent consideration receivable

In January 2024, Reabold received the final tranche payment of £4.4 million, following Shell's receipt of development and production consent for the Victory gas field from the North Sea Transition Authority. This follows the £8.3 million already received by the Company in previous periods, taking the total proceeds for the sale of Reabold's 49.99% interest in Corallian, to £12.7 million.

North Sea licences

At the beginning of 2024, Reabold had interests in four North Sea licences: P2605, P2504 (both 100%), P2478 (36%) and P2486 (10%). Reabold relinquished its 36% interest in licence P2478 in March 2024, following unavoidable and significant delays to the acquisition of 3D seismic data, as had been stipulated in the deed of variation concerning the extension to phase A of the Licence. The delays were largely a result of continuous wind farm construction activities in the area. All commitments have been fulfilled and there remain no further obligations.

Licence P2486 was relinquished in July 2024. Reabold have retained licences P2605 and P2504, however there is a drill or drop deadline of 30 November 2024 on both of these licences. Despite the Company's best efforts, we have been unable to farm down these assets. The ability of potential counterparties to commit to investment in the North Sea has been negatively affected by the Labour party's pledge to increase the Energy Profits Levy ("EPL") and remove investment allowances attached to the EPL, in the lead up to the UK General Election held in July 2024. Therefore, the Company expects to relinquish these licences in November 2024.  

On 29 July 2024, the Chancellor's statement to Parliament outlined plans to increase the EPL by 3% to 78% from November 2024, to remove the main investment allowance attached to the EPL and extend the policy until March 2030. The announced changes continue to leave material uncertainty, particularly around capital allowances, and we hope to have more clarity following the October budget.

Award of UKCS Licence - P2659 (10%)

In July 2024, Reabold was awarded a 10% interest in Licence P2659 in the Southern North Sea, as part of the UK's 33^rd Offshore Licensing Round. The other partners on the licence are Horizon Energy Acquisition Limited (45%) and Horizon Energy Partners Limited (45%). The licence covers blocks 37/26 and 37/27 and the initial four year Phase A work programme commitments for the licence are focused on completing an advanced geophysical processing study using 475 sq km of existing 3D seismic data.

Daybreak Oil and Gas Inc - USA

Reabold has a 42% shareholding in Daybreak Oil and Gas Inc ("Daybreak"). Daybreak is an OTC traded oil and gas company engaged in the exploration, development and production of onshore crude oil and natural gas, primarily in California. Further details on Daybreak can be found on its website at www.daybreakoilandgas.com/.

Danube Petroleum Limited - Parta and Iecea Mare licences, Romania

Reabold has a 50.8% equity position in Danube Petroleum Limited ("Danube"), with ASX listed ADX Energy Ltd ("ADX") holding the remaining 49.2%. Danube has a 100% interest in the Parta exploration licence and a 100% interest in the Iecea Mare production licence.

ADX is engaged in ongoing discussions with the authorities in relation to options for the Parta exploration licence extension. ADX has delivered a number of requested reports in support of the extension discussions. The Iecea Mare production licence, which has a term of 20 years, is not affected. Options to exploit the geothermal potential of the Romanian part of the Pannonian Basin are under investigation with the authorities in combination with a subsurface review of the likely prospectivity.

Other Business and corporate

·    In January 2024, the Board successfully defended a second attempt, from a group of beneficial shareholders, to remove the entire Board of directors of Reabold and replace them with four new directors. All resolutions proposed by the requisitioning shareholders were rejected at a general meeting. The resolutions were broadly unchanged from the 2022 requisitioned general meeting which was also rejected by shareholders and the requisitioning shareholders received support from approximately 21% of shareholders who voted.

·    78 million Ordinary Shares were repurchased in the first half of the year, for a total cost of £75,000.

·    On 9 May 2024, Reabold announced that Cavendish Capital Markets Limited would act as the Company's sole broker.

Financial Review

Group Income Statement

The Group's loss for the first half of 2024 was £2.0 million (1H 2023: loss of £3.7 million).

Exploration expenses of £0.3 million were incurred in the first half of 2024 (1H 2023: 1.3 million), reflecting lower exploration write-offs in the North Sea. See Note 4 for further details.

Reabold's share of loss of associates was £0.5 million (1H 2023: £0.3 million). The increase was due to pre-development expenditure at LNEnergy. See Note 8 for a breakdown per associate.

The Group's administrative expenses for the period were in line with the first half of 2023 at £1.0 million (1H 2023: £1.1 million).

In the first half of 2024, Reabold incurred £80,000 in legal and professional fees, which Reabold has classified as non-underlying items. See Note 11 for further details.

Group Balance Sheet

Reabold retains a strong balance sheet. At the end of first half of 2024, cash balances were £7.6 million compared with £5.4 million at the end of 2023.

Exploration and evaluation assets decreased from £7.0 million at 31 December 2023 to £6.9 million at 30 June 2024. Additions of £0.2 million at West Newton were offset by write-offs of £0.3 million within the North Sea portfolio. See Note 6 for further details.

Other current investments decreased from £4.4 million at year end to £nil at 30 June 2024 following the receipt of £4.4 million of contingent consideration for the sale of Corallian to Shell, as announced on 1 November 2022.

At the end of the first half of 2024, investments in associates was £26.1 million (1H 2023: £26.1 million). A £0.5 million investment in LNEnergy was offset by £0.5 million of losses from associates.

Group cash flow

Net cash used in operating activities for the first half of 2024 was £1.5 million compared with £1.3 million in the same period in 2023, driven by an increase in working capital outflows. 

Cash flow from investing activities was an inflow of £3.7 million compared to an outflow of £1.5 million in the same period in 2023. The inflow included divestment proceeds of £4.4 million received as part of the deferred consideration from the sale of Corallian to Shell in 2022, offset by the purchase of £0.5 million of loan notes from LNEnergy Limited, as well as £0.2 million of expenditure at West Newton. 

Cash flow from financing activities in the first half of 2024 was an outflow of £0.1 million. The cash flows related to the repurchase of shares and office lease liability payments.

Future commitments

The Group has obligations to carry out defined work programmes on its licences under the terms of the award of rights to these licences.

Onshore PEDL 183 - West Newton

Reabold's minimum work programme for PEDL 183 is as follows:

·    Re-enter and recomplete or sidetrack one of the currently suspended wells on or before 30 June 2026

·    Re-enter and recomplete or sidetrack one of the remaining suspended wells or drill and complete a new deviated or horizontal well on or before 30 June 2027, and

·    Submit a field development plan on or before 30 June 2027

Reabold anticipates re-entering and recompleting an existing West Newton well in 2025 in order to establish sustained gas flow The gross cost to re-enter and re-complete is expected to be c.£1.4 million (c.£0.2 million net cost for Reabold).

Southern North Sea - P2659

The initial four year Phase A work programme commitments for the licence are focused on completing an advanced geophysical processing study using 475 sq km of existing 3D seismic data.

Approved on behalf of the Board

Sachin Oza and Stephen Williams

Co-Chief Executive Officers

25 September 2024

Reabold Resources plc

Group Income Statement

Group statement of comprehensive income

For the period ended 30 June 2024

There is no comprehensive income attributable to the shareholders of the company other than the loss for the period.

Reabold Resources plc

Group statement of changes in equity

¹ See Note 7 "Called-up Share Capital"

Reabold Resources plc

Group cash flow statement