TIDMUOG
RNS Number : 9118N
United Oil & Gas PLC
28 September 2023
United Oil & Gas PLC / Index: AIM / Epic: UOG / Sector: Oil
& Gas
28 September 2023
United Oil & Gas Plc
("United" "the Group" or the "Company")
Half-year 2023 results
United Oil & Gas PLC (AIM: "UOG"), the full cycle oil and
gas company with a portfolio of production, development,
exploration and appraisal assets is pleased to announce its
unaudited financial and operating results for the half year ended
30 June 2023. A shareholder call will take place this morning,
details are below .
Brian Larkin, CEO commented:
"We are pleased to be able to report progress across our
portfolio as we seek to explore further opportunities for growth to
deliver greater value to our shareholders.
Looking at Egypt, we successfully drilled and brought 2
development wells onstream during the first half of 2023. Notably,
we maintained our excellent safety record throughout these
operations. Our active drilling programme continues with the
drilling of a further near field exploration well planned for the
fourth quarter of the year. Simultaneously, we continue to work
with our JV partners to optimise production from our existing well
stock through a comprehensive programme of workovers and well
intervention activity. Whilst the macroeconomic situation In Egypt
remains challenging, we do continue to be paid a portion of our
receivables in US dollars.
In Jamaica we are engaged in discussions with the Government and
with high-quality potential farm-in partners on our exciting
high-impact exploration asset. Identifying a partner with the right
skillset to complement our work is of paramount importance to
advancing this project and we expect to move forward to commercial
discussions with a preferred partner over the coming weeks.
Whilst Quattro have not yet completed their funding process and
are likely to require a further extension to the long stop date on
the sale agreement for licence P2519, we are hopeful that this
transaction will complete over the coming weeks, given the renewed
interest in the North Sea
We enter the last quarter of 2023 well placed, and will continue
to work hard on delivering on our strategy in order to return value
to our shareholders."
1H 2023 Operational summary
-- 1H 2023 Group net 22% working interest production averaged
1,051 bopd and 93 boepd gas with full year average net production
forecast to be in the range of 930 to 1,030 boepd.
-- In Egypt
- Active drilling programme continues with two wells drilled in
1H, and one additional exploration well planned for H2
- Successful ASH-8 development well brought onstream in March
- Successful ASD-3 development well brought onstream in May
- Zero - Lost Time Incident Frequency rate and Fatal Accident
Frequency rate. No environmental spills, Restricted Work Incidents
or Medical Treatment Incidents
- We continue to have a portion of our Egyptian receivable balance settled in USD
-- In Jamaica, discussions continuing with the Ministry and with
potential farm-in partners with commercial discussions with a
preferred partner expected to commence in Q4.
-- In the UK, whilst the current deadline for completion of the
deal with Quattro has been extended to 30th September, this is
likely to be extended further as Quattro have not yet completed
their funding process.
1H 2023 Financial summary
-- Group revenue for the first half of 2023 was $6.4m(1) (1H 2022:$9.8m)
-- Realised oil price of $78.19/bbl (1H 2022:$105.5/bbl)
-- Gross Profit (excluding Egypt tax gross up) $2.2m (1H 2022: $5.6m)
-- Cash Operating Expenses of $10.65/boe (1H 2022: $8.40/boe)
-- Profit After Tax of $0.6m (1H 2022: $2.4m)
-- Cash collections in the six-month period of $7.0m (1H 2022: $8.7m)
-- Repayments on BP Pre-payment facility of $1.2 (1H 2022: $1.6m)
-- A 30% reduction in Corporate G&A to $830k (1H 2022:
$1.2m) and on target to deliver the 15% full year reduction.
-- Group cash balances at period end were $0.6m (1H 2022: $3.8m)
(1) 22% working interest net of Government Take
1H 2023 Corporate summary
-- Jonathan Leather, Executive Director and Chief Operating
Officer stepped down from the Board on 31 August 2023. Jonathan
will continue to provide support to the company on the Jamaican
farm out process on a consultancy basis.
Outlook
-- In Egypt we look forward to drilling the ASD-S-1X near-field
exploration well, which we expect to spud in October. This is an
exciting exploration well located to the south of the prolific ASD
Field. The well is targeting an estimated gross in-place mean
volume of 10.1 million barrels of oil in multiple stacked reservoir
targets across the productive Abu Roash and Bahariya
reservoirs.
-- The ASD-S-1X exploration well will be followed by additional
development drilling on the Abu Sennan concession - likely
targeting an undrained crestal area that has been identified on the
ASH Field.
-- In Jamaica, we continue discussions with high-quality
potential partners and expect to commence commercial discussions
with a preferred party over the coming weeks. We will provide
further updates to the markets in due course.
-- In the UK, we are looking to complete the transaction with
Quattro on the P2519 licence containing the Maria discovery.
CEO Statement
The first half of the year saw us deliver positive results from
our Egyptian drilling programme, with notable success from both the
ASH-8 and ASD-3 development wells. The high initial rates at ASH-8
demonstrates the productivity and rapid payback, that can be
delivered from development wells drilled into this field. This
success was followed up with a good result from the ASD-3 well
which was drilled 1.1 km to the west of the prolific ASD-2 well and
was brought onto production In May. The results of ASD-3
significantly improved our understanding of the ASD field and has
led to a significant increase in our in-place volumetric estimates
for the field by 16% from 11.4 to 13.2 MMBO in the mid case. Both
new wells had strong initial production rates when they came online
and overall have performed in line with expectations. Our
year-to-date average production to September 2023 was 1,067 boepd
net on the Abu Sennan concession. We continue to work with the
operator and Joint Venture partners on initiatives to offset the
natural production decline in the wells and re-instate production
from temporarily shut in wells.
Safety will always be of the highest priority within our
business and we are pleased to report that during the period the
operator has achieved an excellent record of safety in Egypt and
has reported zero Lost Time Incidents, Medical Treatment Injuries,
Restricted Work Injury, Spills, fires or environmental
incidents.
In the short term, the macroeconomic issues in the Egyptian
economy have resulted in reduced USD liquidity, which in turn has
impacted our ability to repatriate funds from Egypt. Whilst we have
been successful in repatriating some USD the liquidity constraints
imposed by the Egyptian Central bank has resulted in increased
foreign exchange charges being incurred by the company.
As announced in January 2023, the Company has entered into an
agreement with Quattro Energy Limited ("Quattro") for the sale of
our UK North Sea licence that contains the Maria discovery. The
parties have agreed to extend the long stop date on the agreement
to the end of September to provide Quattro with sufficient time to
raise the additional funding needed to complete this transaction.
Whilst Quattro have not yet completed their funding process and are
likely to require a further extension to the long stop date on the
sale agreement for licence P2519, we are hopeful that this
transaction will complete over the coming weeks, given the renewed
interest in the North Sea.
From a financial perspective, we have continued to apply our
free cashflow from operations to fully fund our capital programme
and also the repayment of debt, with net debt reduced to $1.1m at
30 June and period end cash balances of $0.6m. We continue to
receive both USD and EGP in payment for our receivable balances
with our steady cashflows from the Egypt production being leveraged
to the current high commodity prices. We maintain a disciplined
approach to capital allocation in parallel to a close focus on
optimising G&A and operating costs. Our drilling and workover
program in Abu Sennan has yielded robust operational results,
positioning us well to maximize returns for all stakeholders.
Looking to the second half of the year, the third well of our
fully funded drilling programme in Egypt is the ASD-S-1X
exploration well which is due to spud in October. Although the spud
of the well experienced delays due to rig availability, we are
pleased to confirm that the ECDC-6 drilling rig has been secured by
the joint venture for this operation. This is an exciting
exploration well located to the south of the recently drilled ASD
Field. The exploration well is targeting 10.1 million barrels of
oil in place in multiple stacked reservoir targets across the
productive Abu Roash and Bahariya reservoirs. A successful outcome
on this well has the potential to increase production levels, add
reserves, and boost the longer-term value from the Abu Sennan
licence.
In Jamaica, we remain incredibly focussed on delivering a
farmout partner to participate alongside us in the drilling of an
exploration well on this highly prospective acreage. We are
continuing to make progress towards securing a partner to move
forward with us to the next stage of the licence and we expect to
commence commercial discussions with a preferred party over the
coming weeks. We remain confident that a successful outcome can be
ultimately delivered and further updates will be provided in due
course. In parallel to our farmout discussions, we continue to
engage with the Jamaican authorities as we work together to deliver
the long-term value of this licence to all stakeholders.
I would like to extend the Company's gratitude to United's
former Chief Operating Officer, Jonathan Leather, for his dedicated
eight years of service with United. While he embarks on new
endeavours outside our company, we are excited to continue building
upon the foundation of success we've achieved together. Jonathan
will continue to provide support to the Company on the Jamaican
farm out process on a consultancy basis.
Our strategy remains the same to create value by actively
managing our existing assets whilst growing our business through
additional high-margin opportunities. This growth strategy is
supported by four pillars;
- the strength of our assets;
- commitment to managing a responsible business;
- effective financial and risk management; and
- an experienced and capable team
United is well placed to deliver on our strategy and with solid
assets, a dynamic team, and supportive shareholders, we look
forward to embracing the opportunities towards continued growth and
success that lie ahead.
Brian Larkin
Chief Executive Officer
28 September 2023
Operations Update
Operations Update
Egypt, Abu Sennan (22% non-operated working interest, operated
by Kuwait Energy Egypt)
1H 2023 Production
Oil production from the Abu Sennan Licence in H1 2023 averaged
1,051 bopd (net to United's 22% working interest) with an
additional 93 boepd net gas. The exit rate from the first half was
1,011 bopd net, plus 111 boepd net gas with Group working interest
production forecast to average between 930 and 1,030 boepd for the
full year 2023.
2023 Work Programme
Two development wells, ASH-8 and ASD-3, were drilled in the
first half of the year. Both of these wells were successful and
came onstream in March and May respectively.
In parallel to the development drilling, a number of workovers
have also been completed, and we have enhanced production from
existing wells through low-cost interventions. Further workovers
are planned as we continue through the second half of 2023.
After producing for a number of months at rates in excess of
2,800 bopd (616 bopd net) and producing 390,000 barrels to end of
August, production from the ASH-8 well is now declining, and is
currently producing at a flow rate of 601 bopd (132 bopd net). This
decline is broadly in line with expectations and the performance of
the other production wells in the ASH Field. Based on our previous
experience of the field, the impact of the decline is expected to
be partially mitigated by the installation of artificial lift in
the well during H2, and by continued production-enhancing workover
activity across the Abu Sennan Licence.
The results of ASD-3 significantly improved our understanding of
the ASD field and has led to a significant increase in our in-place
volumetric estimates for the field by 16% from 11.4 to 13.2 MMBO in
the mid case . This well also had strong initial production rates
which have now declined in line with expectations.
We continue to work with the operator and Joint Venture partners
on initiatives including additional drilling, water injection, and
stimulation to offset the natural production decline in the wells
and re-instate production from temporarily shut in wells.
Additional drilling in 2H 2023 has now been agreed by the JV
partners and is expected to commence in October with the drilling
of the ASD-S-1X exploration well. This exciting exploration
prospect lies to the south of the prolific ASD Field and is
expected to take approximately 40 days to drill. The exploration
well is targeting a gross mean in-place volume of 10.1 million
barrels of oil in multiple stacked reservoir targets across the
productive Abu Roash and Bahariya reservoirs.
Once ASD-S-1X has been completed, additional development
drilling is planned and will likely target an undrained crestal
area that has been identified on the ASH Field. Subject to rig
availability, this well is expected to spud in Q1 2024.
Jamaica, Walton Morant Licence (100% working interest)
The farm-out campaign remains a key focus for United, as we seek
to take this potentially transformational project forward into the
next phase of the Licence. We have continued to engage with
potential partners to participate alongside us in drilling an
exploration well and have been encouraged by the quality of the
companies who have undertaken in-depth evaluations. The initial
deadline for indicative offers that was set at the end of 1H was
extended to allow these evaluations to be completed. Commercial
discussions with a preferred partner are now expected to commence
in Q4 . Additional updates will be provided in due course.
UK Central North Sea, Maria Discovery, Licence P2519 (100%
working interest)
United entered into a binding Asset Purchase Agreement ("APA")
on the licence with Quattro Energy Limited ("Quattro") on 18(th)
January 2023. This APA had a long-stop date of 31(st) July 2023,
and although the NSTA approval was received for this transaction,
Quattro had not completed the required fundraising by this
long-stop date.
After receiving further assurances from Quattro and a
non-refundable deposit of $0.1m, the parties subsequently agreed an
extension of the long stop date in the APA to 30(th) September
2023. It was also agreed that a further extension may be required
for all conditions precedent to be met to allow completion of the
sale, namely regulatory approvals to enable the transfer of funds
to United, and the Licence assignment to Quattro, with such
extension to be automatically granted on the satisfaction of the
Quattro funding condition being met by 30 September 2023. Whilst we
understand that Quattro has made progress towards completing their
funding process it is likely that they will require a further
extension to the long stop date to facilitate this process. A
further update will be provided in due course.
UK Onshore, Licence PL090 (26.25% non-operated working interest,
operated by Egdon Resources UK Ltd)
Licence PL090 contains the shut-in Waddock Cross Field, situated
in the onshore Wessex Basin, UK. Work continues on securing
planning and permitting consents, finalising the site facilities
and well designs, ahead of a potential 2024 drilling campaign.
There is clearly value within this asset, and United will continue
to evaluate all the options for realising this potential, including
the option of participating in a well in 2024.
Financial Update
Highlights
1H 2023 1H 2022
Net average production
volumes (boepd) 1,144 1,552
-------- --------
Oil price realised
($/bbl) $78.19 $105.5
-------- --------
Revenue(1) $6.4m $9.8m
-------- --------
Gross profit((2)
) $2.2m $5.6m
-------- --------
Profit after tax $0.6m $2.4m
-------- --------
Cash from operating
activities $4.4m $4.9m
-------- --------
Capital expenditure $3.5m $3.4m
-------- --------
Debt repayments $1.2m $1.6m
-------- --------
Cash operating
cost per boe $10.65 $8.40
-------- --------
(1) 22% working interest stated net of government take
(2) Gross profits excluding Egypt tax gross up
Group Production and Commodity Prices
Total group working interest production for 1H 2023 was 1,144
boepd. The average realised oil price was $78.19/bbl and the
average realised gas price was $2.61/mmbtu.
Revenues
Group Revenues for the six month period ending 30 June 2023 was
$6.4m (1H 2022 $9.8 m), due to a 26% reduction in average
production and a 26% reduction in realised oil prices in the
period. The entire revenue for the Group is generated from our 22%
interest in the Abu Sennan concession in Egypt and is stated after
accounting for government entitlements under each of the production
sharing contracts. The 1H 2023 average realised oil price per
barrel achieved was $78.19/bbl (representing a discount to Brent of
circa $2.37/bbl).
Group Operating costs, Depreciation, Depletion &
Amortisation ("DD&A"), and expenses
Cash Operating costs amounted to $10.65/boe (1H 2022:
$8.40/boe). The increase in the per barrel cost is being primarily
driven by the predominantly fixed nature of the cost base, and the
reduction in average daily production in the period. DD&A
charges on production and development assets amounted to $2.1m for
the six months to 30 June 2023.
Administrative Expenses
Group administrative expenses for the six month period ending 30
June 2023 was $1.6m (1H 2022 $1.8 m). Adjusted for the non-cash
items under IFRS Share Based payments and IFRS 16 leases, the
administrative expense is $1.4m (2022 $1.6m) Included in
Administrative expenses are foreign exchange losses of $0.5m (2022:
$0.2m) with the increase being due primarily to realised losses on
the devaluation of the Egyptian pound versus the USD during the
year and the additional costs to translate EGP to USD.
As previously announced in January 2023, the Group is currently
implementing a number of initiatives to further reduce General and
Administration costs whilst ensuring continuity of operational
capability. In 1H 2023 other Administrative Expenses have been
reduced by approximately 30% to $0.8m from $1.2m in 1H 2022. This
decrease has been delivered primarily through a reduction in
Corporate Headcount and reduction in the size of the Board. The
Company remains on track to deliver the overall 15% reduction for
the full year compared to 2022.
Derivative Financial Instrument
In 2022 the Group extended the final maturity date on the BP
facility from 30 September 2022 to 31 December 2023. This amendment
required the Group to recognise a fair value loss on the derivative
of $1.5m in the prior year period, rather than recognising the
charge over the remaining maturity of the facility. No additional
charge to the income statement in relation to the fair value of the
derivative arose in the period as the prevailing oil price remained
above $70 per barrel throughout the period.
Exploration Costs
There were no exploration costs written off in the period; $302K
has been spent assessing New Venture activities and has been
expensed as these costs are pre-licence.
Impairment
There were no impairment triggers in the period.
Taxation and other income
In Egypt under the terms of the Production Sharing Agreement all
corporate taxes are paid by EGPC who receive production
entitlements from the licence. The Egypt concession is subject to
corporate income tax at the standard rate of 40.55%. However,
responsibility for payment of corporate income taxes falls upon
EGPC on behalf of UOG Egypt Pty Ltd. The Group records a tax charge
with a corresponding increase in other income for the tax paid by
EGPC on its behalf. Due to accumulated tax- deductible balances
there was no tax due in the prior period.
Cash
US$'000
Opening Cash at 1 January
2023 1,345
Net cash inflow from
operations 3,463
Movements in working
capital 909
Exploration Expenditure (492)
Development Expenditure (2,992)
Repayment of Debt facility (1,158)
Exchange movements
and other (521)
Closing Cash at 30
June 2023 554
The continued effect of macroeconomic challenges on the broader
Egyptian economy has resulted in both a devaluation of the Egyptian
Pound and restrictions on outgoing US Dollar transfers by the
Central Bank of Egypt. This has resulted in businesses in Egypt
suffering from reduced and occasionally unpredictable USD
liquidity.
As previously announced, we have continued to receive a portion
of our USD receivable balances in USD with the remainder received
in EGP, the latter of which are primarily used to fund our active
drilling and operations programme in country. The Group continues
to manage its cash and working capital position through this period
with the continued support of our joint venture partners in Egypt
and our strategic long term financing partner BP.
Capital Expenditure
The Group continues to engage in an active work programme across
our portfolio of assets with forecast cash capital expenditure for
the full year 2023 of c. $6m of which $3.5m was incurred in 1H
2023, including $3.2m on the drilling programme in Egypt and
workover activity in addition to $0.3m on Jamaica and UK
assets.
Events today
Management is hosting a shareholder call at 1100 BST today.
Investors that wish to participate in the event,
please click on this link to register https://bit.ly/46rS2FF
Confirmation email with the details of the dialling in process
will be sent to your email address.
A presentation will be available today on www.uogplc.com.
S
This announcement contains inside information for the purposes
of Article 7 of Regulation 2014/596/EU which is part of domestic UK
law pursuant to the Market Abuse (Amendment) (EU Exit) regulations
(SI 2019/310).
Glossary:
1H- first half
bbl - barrel of crude oil
boe - barrel of oil equivalent
bopd - barrels of oil per day
boepd - barrels of oil equivalent per day
EGP - Egyptian pound
EGPC - Egyptian General Petroleum Corporation
JV - Joint Venture
mmbbls - million barrels of oil
m- million
NSTA - Noth Sea Transition Authority
USD - US Dollar
Enquiries
United Oil & Gas Plc (Company)
Brian Larkin, CEO brian.larkin@uogplc.com
Peter Dunne, CFO peter.dunne@uogplc.com
Beaumont Cornish Limited
(Nominated Adviser)
Roland Cornish | Felicity
Geidt | Asia Szusciak +44 (0) 20 7628 3396
Tennyson Securities (Joint
Broker)
Peter Krens +44 (0) 20 7186 9030
Optiva Securities Limited
(Joint Broker)
Christian Dennis +44 (0) 20 3137 1902
Camarco (Financial PR)
Andrew Turner | Emily Hall +44 (0) 20 3757 4983
| Sam Morris | uog@camarco.co.uk
Notes to Editors
United Oil & Gas is a high growth oil and gas company with a
portfolio of low-risk, cash generative production, development,
appraisal and exploration assets across Egypt, UK and a high impact
exploration licence in Jamaica.
The business is led by an experienced management team with a
strong track record of growing full cycle businesses, partnered
with established industry players and is well positioned to deliver
future growth through portfolio optimisation and targeted
acquisitions.
United Oil & Gas is listed on the AIM market of the London
Stock Exchange. For further information on United Oil and Gas
please visit www.uogplc.com
CONSOLIDATED INCOME STATEMENT
Period ended 30 June 2023
Note Period Period Year ended
ended ended 31 December
30 June 30 June 2022
2023 2022
Unaudited Unaudited Audited
$ $ $
Revenue 6,401,660 9,782,239 15,831,237
Other income 1,167,603 3,360,093 5,181,458
Cost of sales 4 (4,159,685) (4,172,012) (8,143,910)
Gross profit 3,409,578 8,970,320 12,868,785
Administrative expenses:
------------------------------------ ----- ------------ ------------ --------------
Other administrative expenses (830,823) (1,167,226) (1,773,154)
Impairment of intangible
assets - - (483,611)
Exploration and New Venture
write offs (301,656) (122,793) (284,275)
Decommissioning provision
on impaired exploration licence - (290,609) -
Foreign exchange (losses)
/ gains (499,892) (158,346) (1,106,614)
(Loss) / gain on disposal
of business / non-current
assets held for sale - (21,768) -
------------------------------------ ----- ------------ ------------ --------------
Operating profit 1,777,207 7,209,578 9,221,131
Finance expense (10,690) (1,467,980) (1,690,896)
Profit before taxation 1,766,517 5,741,598 7,530,235
Taxation (1,167,603) (3,360,093) (5,181,458)
------------ ------------ --------------
Profit for the financial
period attributable to the
Company's equity shareholders 598,914 2,381,505 2,348,777
Earnings per share from continuing
operations expressed in cents
per share:
Basic 3 0.09 0.37 0.36
Diluted 3 0.09 0.35 0.36
------------ ------------ --------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Period Period Year ended
ended ended 31 December
30 June 30 June 2022
2023 2022
Unaudited Unaudited Audited
$ $ $
Profit for the financial
period 598,914 2,381,505 2,348,777
Foreign exchange difference 45,512 (241,389) 337,866
---------- ---------- --------------
Profit for the financial
period attributable to
the Company's equity shareholders 644,426 2,140,116 2,686,643
CONSOLIDATED BALANCE SHEET
On 30 JUNE 2023
Note 30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
$ $ $
NON-CURRENT ASSETS
Intangible assets 5 7,937,945 6,104,920 7,385,326
Property, plant and equipment 6 22,317,006 18,261,905 20,368,299
30,254,951 24,366,825 27,753,625
CURRENT ASSETS
Inventory 373,918 272,341 268,859
Trade and other receivables 7 3,789,268 6,334,151 4,469,493
Derivative financial instruments - - 120,168
Cash and cash equivalents 553,920 3,806,121 1,345,463
----------- ----------- -----------
4,717,106 10,412,613 6,203,983
CURRENT LIABILITIES
Trade and other payables (5,173,107) (3,923,213) (3,709,667)
Derivative financial instruments - (1,229,802) -
Borrowings 9 (1,728,712) (1,413,983) (2,964,225)
Lease liabilities (42,092) (28,517) (83,985)
(6,943,911) (6,595,515) (6,757,877)
NON-CURRENT LIABILITIES
Borrowings 9 - (709,753) -
Decommissioning Provisions (249,244) (274,262) (233,630)
Derivative financial instruments - (611,199) -
Lease liabilities (7,356) (24,495) (7,356)
----------- ----------- -----------
(256,600) (1,619,709) (240,986)
NET ASSETS 27,771,546 26,564,214 26,958,745
=========== =========== ===========
CAPITAL AND RESERVES ATTRIBUTABLE
TO EQUITY -
HOLDERS OF THE COMPANY
Share capital 8 8,839,679 8,416,182 8,839,679
Share premium 8 16,798,823 16,215,361 16,798,823
Share-based payment reserve 2,716,063 2,376,659 2,547,688
Merger reserve (2,697,357) (2,697,357) (2,697,357)
Translation reserve (962,625) (799,493) (1,008,137)
Retained earnings 3,076,963 3,052,862 2,478,049
----------- ----------- -----------
TOTAL EQUITY 27,771,546 26,564,214 26,958,745
=========== =========== ===========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Period ended 30 June 2023
Share-
based
Share Share payment Retained Translation Merger Total
capital premium reserve earnings reserve reserve equity
$ $ $ $ $ $ $
For the period ended
30 June 2023
Balance at 1 January
2023 8,839,679 16,798,823 2,547,688 2,478,049 (1,008,137) (2,697,357) 26,958,745
Profit for the period - - - 598,914 - - 598,914
Foreign exchange
difference - - - - 45,512 - 45,512
---------- ----------- ---------- ---------- ------------ ------------ -----------
Total comprehensive
income for the period - - - 598,914 45,512 - 644,426
Contributions by
and distributions
to owners:
Share based payments - - 168,375 - - - 168,375
Total contributions
by and distributions
to owners - - 168,375 - - - 168,375
---------- -----------
Balance at 30 June
2023 (Unaudited) 8,839,679 16,798,823 2,716,063 3,076,963 (962,625) (2,697,357) 27,771,546
---------- ----------- ---------- ---------- ------------ ------------ -----------
For the period ended
30 June 2022
Balance at 1 January
2022 8,416,182 16,215,361 2,247,465 671,357 (558,104) (2,697,357) 24,294,904
Profit for the period - - - 2,381,505 - - 2,381,505
Foreign exchange
difference - - - - (241,389) - (241,389)
---------- ----------- ---------- ---------- ------------ ------------ -----------
Total comprehensive
income for the period - - - 2,381,505 (241,389) - 2,140,116
Contributions by
and distributions
to owners:
Share based payments - - 129,194 - - - 129,194
Total contributions
by and distributions
to owners - - 129,194 - - - 129,194
---------- -----------
Balance at 30 June
2022 (Unaudited) 8,416,182 16,215,361 2,376,659 3,052,862 (799,493) (2,697,357) 26,564,214
---------- ----------- ---------- ---------- ------------ ------------ -----------
For the period ended
31 December 2022
Balance at 1 January
2022 8,416,182 16,215,361 2,247,465 201,543 (558,104) (2,697,357) 23,825,090
Profit for the period - - - 2,348,777 - - 2,348,777
Foreign exchange
difference - - - - 337,866 - 337,866
Total comprehensive
income for the year - - - 2,348,777 337,866 - 2,686,643
Contributions by
and distributions
to owners:
Foreign exchange
adjustment arising
on change of parent
company functional
currency to USD 283,278 523,376 53,516 (72,271) (787,899) - -
Shares issued 140,219 60,086 - - - - 200,305
Share-based payments - - 246,707 - - - 246,707
Balance at 31 December
2022 (Audited) 8,839,679 16,798,823 2,547,688 2,478,049 (1,008,137) (2,697,357) 26,958,745
CONSOLIDATED STATEMENT OF CASHFLOWS
Period ended 30 June 2023
Period ended 30 June 2023 Period ended 30 June 2022 Year ended 31 December
2022
Unaudited Unaudited Audited
$ $ $
Cash flows from operating
activities
Profit before taxation 1,766,517 5,741,598 7,530,235
Adjustments for:
Share-based payments 168,375 129,194 246,707
Depreciation & amortisation 2,185,290 1,860,040 3,309,940
Fair value loss on
derivatives - 1,457,545 1,562,467
Impairment, decommissioning
and NV costs - 413,403 483,611
Gain on non-current assets /
disposal groups held for
sale - 57,926 -
Interest expense 10,690 10,435 128,429
Foreign exchange movements 499,892 158,344 1,106,614
Tax paid (1,167,603) (3,417,339) (5,238,704)
-------------------------- -------------------------- --------------------------
3,463,161 6,411,146 9,129,299
(Increase) in inventories (105,058) (126,771) (123,289)
Decrease / (increase) in
trade and other receivables 680,225 (132,129) 732,529
(Decrease) / increase in
trade and other payables 334,163 (1,224,657) (1,032,853)
-------------------------- -------------------------- --------------------------
Net cash from operating
activities 4,372,491 4,927,589 8,705,686
Cash flows from investing
activities
Proceeds received on
disposal of non-current
assets - 3,887,275 4,887,275
Purchase of property, plant
& equipment (2,992,206) (2,138,247) (5,610,924)
Spend on exploration
activities (492,145) (1,318,314) (2,972,201)
Net cash used in investing
activities (3,484,351) 430,714 (3,695,850)
Cash flows from financing
activities
Issue of ordinary shares
(net of expenses) - - 200,305
Repayments on swap financing
arrangement (1,118,250) (710,824) (1,452,118)
Payments on oil price
derivatives - (922,286) (1,522,892)
Capital payments on lease (45,829) (46,195) (90,096)
Interest paid on lease (3,213) (3,888) (86,669)
-------------------------- -------------------------- --------------------------
Net cash used in financing
activities (1,167,292) (1,683,193) (2,951,470)
Increase / (decrease) in
cash and cash equivalents (279,152) 3,675,110 2,058,366
Cash and cash equivalents at
beginning of period / year 1,345,463 397,308 397,308
Effects of exchange rate
changes (512,391) (266,297) (1,110,211)
-------------------------- -------------------------- --------------------------
Cash and cash equivalents at
end of period / year 553,920 3,806,121 1,345,463
========================== ========================== ==========================
Notes to the financial information
Period ended 30 June 2023
1. GENERAL
The interim financial information for the period to 30 June 2023
is unaudited.
2. ACCOUNTING POLICIES
The interim financial information in this report has been
prepared on the basis of the accounting policies set out in the
audited financial statements for the period ended 31 December 2022,
which complied with International Financial Reporting Standards as
adopted for use in the European Union ("IFRS").
IFRS is subject to amendment and interpretation by the
International Accounting Standards Board ("IASB") and the IFRS
Interpretations Committee and there is an on-going process of
review and endorsement by the European Commission.
The financial information has been prepared on the basis of IFRS
that the Directors expect to be applicable as at 31 December
2023.
The Directors have adopted the going concern basis in preparing
the financial information. In assessing whether the going concern
assumption is appropriate, the Directors have taken into account
all relevant available information about the foreseeable
future.
The condensed financial information for the year ended 31
December 2022 set out in this interim report does not comprise the
Group's statutory accounts as defined in section 434 of the
Companies Act 2006.
The statutory accounts for the year ended 31 December 2022,
which were prepared under IFRS, have been delivered to the
Registrar of Companies. The auditors reported on these accounts;
their report was unqualified and did not contain a statement under
section 498(2) or 498(3) of the Companies Act 2006.
Foreign currency
The Group's presentation currency is USD with its functional
currency being the Egyptian Pound.
Going Concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the CEO's statement.
United regularly monitors its business activities, financial
position, cash flows and liquidity through the preparation and
review of detailed forecasts. Scenarios and sensitivities are also
regularly presented to the Board, including changes in commodity
prices and in production levels from the existing assets, plus
other factors which could affect the Group's future performance and
position. A base case forecast has been considered which uses
budgeted commitments and prevailing forward curve assumptions for
oil prices. The directors have also considered the potential
impacts of a delay in the payment of receivables in Egypt, a
reduction in forecasted revenue and an increase in forecast capital
expenditure in Egypt. The cashflow forecasts incorporates a
scenario whereby the sale of Maria P2519 to Quattro does not
complete in the period.
The likelihood of all these ' downside sensitivities ' taking
place simultaneously and lasting for the entire forecast period is
considered to be remote. If required, we have identified
appropriate mitigating actions, including the deferral of
additional uncommitted capital expenditure, seeking a restructuring
of debt arrangements and adjustment of the Group cost base, which
would be available to us and have been demonstrated as effective
strategies in previous periods of low oil prices. Our business in
Egypt remains stable given cash operating costs of less than
$11/boe, flexible drilling contracts and gas contracts that are
fixed price in nature. There are limited capital commitments in the
other assets in our portfolio. The forecasts outlined above show
that the Group will have sufficient financial resources for the 12
months from the date of approval of the interim financial
statements. Based on this analysis, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Therefore, they
continue to use the going concern basis of accounting in preparing
the annual Financial Statements.
Revenue
Revenue comprises invoiced sales of hydrocarbons to customers,
excluding value added and similar taxes. Also disclosed within
revenue is tariff income recognised, excluding value added and
similar taxes, for gas transportation facilities provided to third
parties.
Revenue from hydrocarbon sales represents the Group's share of
sales from its producing interest in Egypt, at the point in time
when ownership of the oil has passed to the buyer. This includes
adjustments to invoiced quantities for entitlement share
adjustments calculated on a licence-by-licence basis that arise in
the period. The Group does not have performance obligations
subsequent to delivery.
Other Income - Tax Entitlement Volumes
Under the concession agreements in Egypt, income tax due on
taxable profit is paid on the Group's behalf by EGPC. To achieve
this through the agreements, the Group notionally receive a greater
share of hydrocarbon production in excess of the Group's
entitlement interest share of production equal to the amount
required to cover the tax payable. The oil is produced and sold on
the Group's behalf and proceeds remitted to the tax authorities.
This income does not fall within the definition of revenue and is
therefore shown as other income with an equal and opposite tax
charge recorded through current taxation.
Exploration and evaluation assets
The group accounts for oil and gas expenditure under the full
cost method of accounting.
Costs (other than payments to acquire the legal right to
explore) incurred prior to acquiring the rights to explore are
charged directly to the profit and loss account. All costs incurred
after the rights to explore an area have been obtained, such as
geological, geophysical, data costs and other direct costs of
exploration and appraisal are accumulated and capitalised as
intangible exploration and evaluation ("E&E") assets.
E&E costs are not amortised prior to the conclusion of
appraisal activities. At the completion of appraisal activities if
technical feasibility is demonstrated and commercial reserves are
discovered, then following development sanction, the carrying value
of the relevant E&E asset will be reclassified as a development
and production asset within tangible fixed assets.
If after completion of appraisal activities in an area, it is
not possible to determine technical feasibility or commercial
viability, then the costs of such unsuccessful exploration and
evaluation are impaired to the Income Statement. The costs
associated with any wells which are abandoned are fully amortised
when the abandonment decision is taken.
Development and production assets are accumulated generally on a
field by-field basis and represent the costs of developing the
commercial reserves discovered and bringing them into production,
together with the E&E expenditures incurred in finding
commercial reserves which have been transferred from intangible
E&E assets.
The net book values of development and production assets are
depreciated generally on a field-by-field basis using the unit of
production method based on the commercial proven and probable
reserves. Assets are not depreciated until production
commences.
Depreciation of production assets
Production assets are accumulated into cash generating units
(CGUs) and the net book values are depreciated on a prospective
basis using the unit-of production method by reference to the ratio
of production in the year and the related economic commercial
reserves, taking into account future development expenditures
necessary to bring those reserves into production.
The gain or loss arising on disposal or scrapping of an asset is
determined as the difference between the sales proceeds, net of
selling costs, and the carrying amount of the asset and is
recognised in the income statement.
Each asset's estimated useful life has been assessed with regard
to both its own physical life limitations and the present
assessment of economically recoverable reserves of the oil and gas
asset at which the item is located, and to possible future
variations in those assessments. Estimates of remaining useful
lives are made on a regular basis for all oil and gas assets,
machinery and equipment, with annual reassessments for major items.
Changes in estimates which affect unit production calculations are
accounted for prospectively.
Classification and measurement of financial liabilities
The Group's financial liabilities include borrowings, trade and
other payables and embedded derivative financial instruments.
Financial liabilities are initially measured at fair value, and,
where applicable, adjusted for transaction costs unless the Group
designated a financial liability at fair value through profit or
loss.
Subsequently, financial liabilities are measured at amortised
cost using the effective interest method except for derivatives and
financial liabilities designated at FVTPL, which are carried
subsequently at fair value with gains or losses recognised in
profit or loss.
All interest-related charges and, if applicable, changes in an
instrument's fair value that are reported in profit or loss are
included within finance costs or fair value gains/(losses) on
derivative financial instruments.
Embedded derivative financial instruments
A borrowing arrangement structured as a prepaid commodity swap
with monthly repayments over 30 months has embedded in it a
derivative that is indexed to the price of the commodity. This is
considered to be a separable embedded derivative of a loan
instrument.
At the date of issue, the fair value of the embedded derivative
is estimated by considering the derivative as a series of forward
contracts with modelling of the fixed and floating legs to
determine a repayment schedule and derive a net present value for
the forward contract embedded derivative.
This amount is recognised separately as a financial liability or
financial asset and measured at fair value through the income
statement. The residual amount of the loan is then recorded as a
liability on an amortised cost basis using the effective interest
method until extinguished upon conversion or at the instrument's
maturity date.
3. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Basic and diluted earnings per share
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 June 2023 30 June 2022 31 December 2022
Profit for the period ($) 598,914 2,381,505 2,348,777
Weighted average number of ordinary shares for the purposes
of basic earnings per share(number) 656,353,969 644,803,969 649,550,544
Dilutive shares - 37,200,000 6,803,425
Weighted average number of ordinary shares for the purposes
of diluted earnings per share(number) 656,353,969 682,003,969 656,353,969
Basic earnings per share from continuing operations (cents
per share) 0.09 0.37 0.36
Diluted earnings per share from continuing operations (cents
per share) 0.09 0.35 0.36
============== ============== ==================
4. COST OF SALES
Unaudited Unaudited Audited
Period ended Period ended Year ended
30 June 30 June 2022 31 December
2023 2022
$ $ $
Production Operating costs 2,026,203 2,360,166 4,930,038
Depreciation, depletion and
amortisation 2,133,482 1,811,846 3,213,872
Inventories - - -
4,159,685 4,172,012 8,143,910
============= ============== =============
5. INTANGIBLE ASSETS
Intangible assets comprise the Group's exploration and
evaluation projects which are pending determination.
Management review the intangible exploration assets for
indications of impairment at each balance sheet date based on IFRS
6 criteria. Commercial reserves have not yet been established and
the evaluation and exploration work is ongoing. The Directors do
not consider that any indications of impairment have arisen and
accordingly the assets continue to be carried at cost.
6. PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment assets primarily consist of the
group's producing assets in the Abu Senan concession in Egypt, plus
some office assets and right of use leased office space.
Management reviews the property, plant and equipment for
indications of impairment at each balance sheet date in accordance
with IAS 36. No indications of impairment have been identified at
either 30 June 2023 or 31 December 2022.
7. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December 2022
$ $ $
Trade receivables 2,640,577 1,545,991 3,549,051
Prepayments and deposit 34,802 6,739 6,941
Accrued income 1,078,232 3,732,373 873,206
Other tax receivables 35,657 49,048 40,295
Crown disposal proceeds due - 1,000,000 -
------------- ------------- -----------------
3,789,268 6,334,151 4,469,493
============= ============= =================
8. SHARE CAPITAL & SHARE PREMIUM
Allotted, issued, and fully paid:
30 June 2023
Share capital Share premium
No $ $
Ordinary shares of GBP0.01 each
Opening balance 656,353,969 8,839,679 16,798,823
At 30 June 656,353,969 8,839,679 16,798,823
30 June 2022
Share capital Share premium
No $ $
Ordinary shares of GBP0.01 each
Opening balance 644,803,969 8,416,182 16,215,361
At 30 June 644,803,969 8,416,182 16,215,361
31 December 2022
Share capital Share premium
No $ $
Ordinary shares of GBP0.01 each
Opening balance 644,803,969 8,416,182 16,215,361
Effect of Parent company functional currency change - 283,278 523,376
Allotments:
Share issued for cash (exercise of warrants) 11,550,000 140,219 60,086
At 31 December 656,353,969 8,839,679 16,798,823
9. BORROWINGS AND DERIVATIVES
Summary of borrowing arrangements:
In February 2020, the Group entered into a prepaid commodity
swap arrangement for $8m to part-finance the acquisition of
Rockhopper Egypt Pty Ltd. The funds were to be repaid through 30
monthly repayments which are structured as a fixed notional amount
with variations based on movements in oil prices. Due to the price
structure, the arrangement includes an embedded derivative (a
forward contract). For financial reporting purposes, this must be
separately accounted for at fair value at each balance sheet date.
The balance of proceeds that did not relate to the derivative were
treated as the opening carrying amount of the loan which will then
be measured at amortised cost over its life, with finance charges
recognised to give an even return over the loan life and repayments
of capital allocated appropriately.
In January 2022, the Group refinanced the swap arrangement, with
the remaining balance to be repaid through a further 24 monthly
repayments which are structured as a fixed notional amount with
variations based on movements in oil prices. The refinanced swap
arrangement is a substantial modification and has therefore been
accounted for as a termination of the old debt and commencement of
a new arrangement. This has again been accounted for as a loan at
amortised cost with an embedded derivative which is separately
accounted for at fair value.
The amount outstanding at the period end was c$1.7m (1H 2022:
$4m), included in current liabilities in the balance sheet.
10. EVENTS AFTER THE BALANCE SHEET DATE
There have been no events since the Balance Sheet date that have
any material impact on the half year results for the period ended
30 June 2023.
Glossary
Non-IFRS measures
The Group uses certain measures of performance that are not
specifically defined under IFRS or other generally accepted
accounting principles.
Cash-operating costs per barrel
Cash operating costs are defined as cost of sales less
depreciation, depletion and amortisation, and movements in
inventories. The cash operating costs are then divided by barrels
of oil equivalent produced to demonstrate the cash cost of
producing oil and gas from the Group's producing assets.
Period Year ended
Period ended ended 30 31 December
30 June 2023 June 2022 2022
Unaudited Unaudited Audited
$ $ $
Cost of Sales 4,159,685 4,172,012 8,143,910
Less:
Depreciation, depletion, and amortisation (2,133,482) (1,811,846) (3,213,872)
Inventories - - -
--------------- ------------ --------------
Cash Operating costs
* 2,026,203 2,360,166 4,930,038
--------------- ------------ --------------
Production (BOEPD)
* 1,051 1,552 1,312
--------------- ------------ --------------
Cash Operating cost per BOE ($) 10.65 8.40 10.29
--------------- ------------ --------------
EBITDAX
EBITDAX is a non-IFRS measure that represents earnings
(exclusive of Egypt income relating to tax entitlement volumes)
before Interest, tax, depreciation, amortisation, exploration
expense and impairment.
Exploration expense excluded as write off is one-off in nature
and not normal annual activity.
Presented to help users understand the cash profitability of the
Group.
Period Year ended
Period ended ended 30 31 December
30 June 2023 June 2022 2022
Unaudited Unaudited Audited
$ $ $
Operating Income (Excl. Egypt tax
gross-up) 609,604 3,849,486 9,221,131
Depreciation, Depletion & Amortisation 2,185,290 1,858,201 3,307,462
Exploration/NV, Impairment & Decommissioning
Expense 301,656 413,402 767,886
--------------- -------------- --------------
EBITDAX 3,096,550 6,121,089 13,296,479
--------------- -------------- --------------
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END
IR NKOBKKBKBDCB
(END) Dow Jones Newswires
September 28, 2023 02:00 ET (06:00 GMT)
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