TIDMWEN
RNS Number : 3936H
Wentworth Resources PLC
06 April 2022
PRESS RELEASE 6 April 2022
WENTWORTH RESOURCES PLC
("Wentworth" or the "Company")
Final Results for the Year Ended 31 December 2021
Declaration of Proposed Final Dividend and Q1 2022 Operations
Update
Wentworth (AIM: WEN), the independent, Tanzania-focused natural
gas producer is pleased to announce its audited financial results
for the year ended 31 December 2021 along with its proposed final
dividend declaration for the full year 2021. All values are
expressed in US dollars unless stated otherwise.
Wentworth confirms that its Sustainability Report 2021 has been
published and is available on the Company's website at
www.wentplc.com .
HIGHLIGHTS
Financial
-- Another year of exceptional operational and financial
performance with record production in Q1 2022
-- Declaring a final dividend of 1.16 pence per share ($2.7
million); a total dividend distribution in respect of 2021 of 1.73
pence per share ($4.0 million) representing a yield of
approximately 8.0% (calculated on an annualised basis), an increase
from 2020 total distributions of $3.8 million
-- Share buyback programme to support capital return philosophy
initiated in December 2021 and c. $2.6 million returned to date
-- Revenues increased by 26% to $23.8 million (2020: $18.9
million), underpinned by long-term fixed gas price contracts and
strong production
-- Adjusted EBITDAX increased by 40% to $13.6 million (2020: $9.6 million)
-- Net profit increased by 79% to $6.1 million (2020: $3.4 million)
-- Increasingly robust balance sheet, remaining debt free with a
cash balance of $22.8 million (2020: $17.8 million)
Operational
-- 5 years without a Lost Time Incident (LTI) and no operational disruption due to COVID-19
-- Average gross daily gas production of 81.6 MMscf/d (2020:
65.5 MMscf/d) exceeded guidance which was revised upwards in June
2021
-- Low operational cost of production of $0.54/Mscf
-- Wentworth gross 2P Reserves estimated to be 135.2 Bcf with an
after-tax NPV10 of US$108.1 million, as at 31 December 2021
Corporate
-- Expanded commitment to established capital return policy with
implementation of share buyback programme
-- Tanzania-focused growth continues to be a key focus to
capitalise on existing operational track record
-- Increased strength and diversity of the Board and management
with appointment of Independent Non-Executive Director and Chief
Operating Operator
Sustainability
-- Wentworth's domestic natural gas continues to play a critical
role in increasing energy access to communities across Tanzania and
remains a key partner for the Government of Tanzania to deliver on
its ambition to provide universal energy access in Tanzania by 2030
in line with the UN Sustainable Development Goals
-- Continued commitment to our local communities through our
corporate social responsibility efforts and dedicated foundation
programmes
-- Publication of Sustainability Report 2021 including
disclosure in accordance with the Sustainability Accounting
Standards Board
-- First year of independent assurance of our greenhouse gas
emissions disclosed in line with the Greenhouse Gas Protocol;
Wentworth's carbon intensity per boe of 0.29 kg CO2 e/boe is one of
the lowest reported in the London E&P sector
-- Partnership established with Vitol to develop SDG aligned
community-focused carbon credit programmes in Tanzania to offset
all our Mnazi Bay Scope 1 and Scope 2 emissions and partially
offset Scope 3 emissions from 2022
-- Membership of the United Nations (UN) Global Compact,
underlining Wentworth's commitment to operating responsibly
Dividend
The Directors propose that a final dividend of 1.16 pence per
ordinary share be paid, subject to shareholder approval at the
Company's Annual General Meeting, to the holders of the ordinary
shares who are on the register of members of the Company at 6.00
p.m. on 1 July 2022. The proposed final dividend will bring
distributions to shareholders with regard to the financial year
ended 31 December 2021 to $4 million, in line with the Company's
stated commitment to a sustainable and progressive dividend policy.
If approved by shareholders, the dividend will be paid according to
the timetable below.
Ø Ex-Dividend Date: 30 June 2022
Ø Record Date: 1 July 2022
Ø UK Payment Date: 29 July 2022
2022 Outlook
-- Production guidance for 2022 has been set at 75 - 85 MMscf/d,
raising the guidance band by 5 MMScf/d across the board compared to
2021
-- The contracted price for gas produced at Mnazi Bay production
has increased from $3.35/MMbtu to $3.44/MMbtu; effective from 1
January 2022
-- Operational costs of production remain low at $0.54/Mscf
-- The Company continues to explore and evaluate growth
opportunities both within the Mnazi Bay licence and the greater
geographical region to support increasing in-country demand for
natural gas
Q1 2022 Operations Update
-- The Mnazi Bay Gas field produced 29.8 Bcf during 2021, an
increase of 25% over 2020 production
-- Mnazi Bay has an estimated 423.3 Bcf of remaining economically recoverable gross 2P sales
-- The Mnazi Bay Gas field achieved a new quarterly average
daily production record of 98.5 MMcf/d in Q1 2022, surpassing the
previous record of 91.5 MMcf/d set during Q4 2021
-- As of 1 April 2022, the Mnazi Bay facility has safely
operated for 2,060 days (5.6 years) without a Lost Time
Incident
-- Mnazi Bay Gas facility is expected to be shut-down for up to
10 days in Q2 2022 to allow for scheduled maintenance on the gas
gathering system
Results Conference Calls
Analyst call
The Company is holding a conference call for analysts at 10.00am
BST today, Wednesday 6 April 2022.
To register for the call, please click on the following
link:
https://secure.emincote.com/client/wentworth/wentworth008/vip_connect
You can view the presentation during the call via the following
link:
https://secure.emincote.com/client/wentworth/wentworth008
Investor call
The Company is holding a live presentation and Q&A webinar
for investors at 12.00pm BST, Wednesday 6 April 2022, via Investor
Meet Company.
To register for the call, please click on the following
link:
https://www.investormeetcompany.com/wentworth-resources-plc/register-investor
Katherine Roe, CEO, commented:
"2021 was an excellent year across the board for Wentworth
during which we demonstrated our commitment to responsible growth
whilst increasing considerable shareholder returns. We are
delighted that through our progressive dividend policy and active
share buyback programme we saw a record $6 million returned to
shareholders in 2021. Our ability to deliver on this is underpinned
by our robust financial position, no debt and ongoing cash
generation.
"We are also very pleased to have seen record production for the
year with a 25% increase in average daily production compared to
2020. This underscores the quality of our asset as well as
highlighting the improvements in industrial demand in Tanzania
enabling us to further increase our production guidance for 2022.
We are also very proud of our exceptional health and safety record.
2021 marked five years without an LTI and it remains an absolute
priority to sustain this performance year in, year out.
"We believe in the value opportunity from aligning business and
society interests. As such, we are committed to playing a
significant role in supporting Tanzania's commitment to deliver
universal energy access by 2030, aligning with the UN's ambitions.
We continue to be well-positioned alongside our JV Partners, Maurel
et Prom and TPDC, to deliver on this and be a key part of the
solution to supply growing demand.
"We would like to thank our shareholders and stakeholders for
their continued support as we look to continue to deliver on our
strategy of responsible, sustainable growth through delivering
reliable, domestic energy supply to communities across
Tanzania."
Enquiries: Katherine Roe, katherine.roe@wentplc.com
Chief Executive Officer +44 (0) 7841 087 230
Wentworth
AIM Nominated Adviser and Joint Broker
Callum Stewart
Ashton Clanfield
Stifel Nicolaus Europe Limited Simon Mensley +44 (0) 20 7710 7600
Joint Broker
Richard Crichton
Peel Hunt LLP Alexander Allen +44 (0) 20 7418 8900
Communications Adviser
Sara Powell
FTI Consulting Ben Brewerton +44 (0) 20 3727 1000
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year-ended 31 December
Note 2021 2020
$000 $000
------------- ----------
Total revenue 5 23,818 18,991
Production and operating costs (3,800) (3,837)
Depletion 13 (6,267) (5,607)
------------------------------------- ----- ------------- ----------
Total cost of sales (10,067) (9,444)
Gross profit 13,751 9,547
Recurring administrative costs 6 (6,424) (5,448)
New venture and pre - licence costs 6 (502) (1,558)
Share-based payment charges 19 (537) (300)
Depreciation 14 (50) (4)
Total costs (7,513) (7,310)
Profit from operations 6,238 2,237
Finance income 9 139 146
Finance expense 9 (369) (154)
------------------------------------- ----- ------------- ----------
Profit before tax 6,008 2, 229
Current tax expense 23 (1,321) (112)
Deferred tax income 23 1,380 1,311
------------------------------------- ----- ------------- ----------
59 1,199
Net and comprehensive profit after
tax 6,067 3,428
------------------------------------- ----- ------------- ----------
Net profit per ordinary share
Basic and diluted (US$/share) 21 0.03 0.02
------------------------------------- ----- ------------- ----------
The accompanying notes form part of these financial
statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 31 December 31 December
2021 2020
$000 $000
----------------------------------- -----
ASSETS
Current assets
Cash and cash equivalents 22,820 17,787
Trade and other receivables 10 5,550 4,847
28,370 22,634
----------------------------------- ----- ------------
Non-current assets
Exploration and evaluation assets 12 8,129 8,129
Property, plant and equipment 13 66,465 72,307
Deferred tax asset 23 8,239 6,859
----------------------------------- ----- ------------ ------------
82,833 87,295
----------------------------------- ----- ------------ ------------
Total assets 111,203 109,929
----------------------------------- ----- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 15 2,503 2,382
2,503 2,382
----------------------------------- ----- ------------
Non-current liabilities
Decommissioning provision 16 1,929 1,514
Lease liability 17 36 -
----------------------------------- -----
1,965 1,514
----------------------------------- ----- ------------ ------------
Equity
Share capital 20 414,919 416,426
Equity reserve 26,695 26,656
Accumulated deficit (334,879) (337,049)
----------------------------------- ----- ------------ ------------
106,735 106,033
----------------------------------- ----- ------------
Total liabilities and equity 111,203 109,929
----------------------------------- ----- ------------ ------------
The accompanying notes form part of these financial
statements
The financial statements of Wentworth Resources plc, registered
number 127571 were approved by the Board of Directors and
authorised for issue on 6 April 2022.
Signed on behalf of the Board of Directors.
Katherine Roe
Chief Executive Officer
6 April 2022
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Number of Share Equity Accumulated Total
Note shares capital reserve deficit equity
$000 $000 $000 $000
------------------------- ------- ------------------------- ---------------- ---------- -------------- ---------
Balance at 31 December
2019 186,488,465 416,426 26,651 (337,203) 105,874
Dividends 22 - - - (3,274) (3,274)
Net profit and
comprehensive
profit - - - 3,428 3,428
Share based compensation 19 - - 300 - 300
Repurchase of own shares 18 - - (295) - (295)
------------------------- ------- -------------------------
Balance at 31 December
2020 186,488,465 416,426 26,656 (337,049) 106,033
Dividends 22 - - - (3,920) (3,920)
Net profit and
comprehensive
profit - - - 6,067 6,067
Share based compensation 19 - - 537 - 537
Cancelled shares (939,326) (318) 295 23 -
Repurchase of own shares 18 (4,500,000) (1,189) (793) - (1,982)
Balance at 31 December
2021 181,049,139 414,919 26,695 (334,879) 106,735
------------------------- ------- ------------------------- ---------------- ---------- -------------- ---------
The accompanying notes form part of these financial
statements
CONSOLIDATED STATEMENT OF CASH FLOWS
Year-ended 31 December
Note 2021 2020
$000 $000
------------------------------------------ -----
Operating activities
Net profit for the year 6,067 3,428
Adjustments for:
Depreciation and depletion 13 6,317 5,611
Finance costs, net 26 172 8
Income tax expense 23 (59) (1,199)
Share based compensation 19 537 300
13,034 8,148
Change in non-cash working capital:
Trade and other receivables (695) 1,229
Trade and other payables 33 284
------------------------------------------ -----
Cash generated from operating activities 12,372 9,661
------------------------------------------ ----- ------------ -----------
Current tax paid (159) (112)
Withholding tax paid (1,162) -
Net cash generated from operating
activities 11,051 9,549
Investing activities
Additions to property, plant and
equipment 13 (62) (60)
Interest income 36 82
------------------------------------------ -----
Net cash from investing activities (26) 22
------------------------------------------ ----- ------------ -----------
Financing activities
Dividends paid 22 (3,920) (3,274)
Repurchase of own shares 18 (1,982) (295)
Principal term loan repayments - (1,664)
Interest on term loan - (38)
Lease payment 17 (50) -
Renewal fee on overdraft facility (19) -
Bank charges 9 (21) -
Net cash used in financing activities (5,992) (5,271)
------------------------------------------ ----- ------------ -----------
Net change in cash and cash equivalents 5,033 4,300
Cash and cash equivalents, beginning
of the period 17,787 13,487
------------------------------------------ -----
Cash and cash equivalents, end
of the period 22,820 17,787
------------------------------------------ ----- ------------ -----------
The accompanying notes form part of these financial
statements
1. Incorporation and basis of preparation
Wentworth Resources plc ("Wentworth" or the "Company") is an
East Africa-focused upstream natural gas production company. These
audited consolidated financial statements include the accounts of
the Company and its subsidiaries (collectively referred to as
"Wentworth Group of Companies" or the "Group"). The Company is
actively involved in oil and gas exploration, development and
production operations. Wentworth is incorporated in Jersey and
shares of the Company as at 31 December 2021 were held and listed
on the AIM part of the London Stock Exchange (ticker: WEN).
The Company's principal place of business is located at 4th
Floor, St Paul's Gate, 22 - 24 New Street, St Helier, Jersey, JE1
4TR.
The Group maintains offices in Jersey and Tanzania.
Basis of presentation and statement of compliance
These consolidated financial statements have been prepared on a
historical cost basis and have been prepared using the accrual
basis of accounting. The consolidated financial statements are
prepared in accordance with UK-adopted international accounting
standards, in conformity with the requirements of the Companies
(Jersey) Law 1991.
The consolidated financial statements were approved by the Board
of Directors on 5 April 2022.
The lifting of COVID-19 restrictions and the reopening of
economies across the world has been welcome news, however, the
Group remains vigilant to the very real risk of a sudden and
unanticipated resurgence of the virus, either globally or in an
isolated incident at its production facility at Mnazi Bay. It is
for this reason that the additional protocols enacted in 2020 to
protect our workforce and to safeguard the continuity of gas
production are largely still in-place will remain so for the
foreseeable future.
The continued strategy of balancing the strengthening of working
capital with increasing dividend returns to shareholders has been
further progressed during 2021, which saw shareholder returns
increase by $220k or 5.8% and the working capital increase by $5.7
million to $28.4 million.
The Group continue to model and, where possible, mitigate all
reasonable downside scenarios. Ultimately, however, it will likely
be the macro-economic environment that will influence any impact
upon the wider Group and there can be no certainty as to what these
will be, especially in light of the recent turmoil experienced in
capital markets following conflict in eastern Europe.
In spite of this, we continue to apply the judgement that the
business will continue, anticipating some short-term capital market
disruption, but do not at this stage foresee this to be material in
nature to the business as a whole. We do, however, continue to
monitor world events as they progress and are mindful of the speed
with which circumstances may change, both for the better or for the
worse.
Functional and presentation currency
These consolidated financial statements are presented in US
dollars which is the functional currency of the majority of its
subsidiaries.
Basis of consolidation
These consolidated financial statements include the accounts of
the Company and its subsidiaries. Subsidiaries are entities that
the Company controls. An investor controls an investee when it is
exposed, or has rights, to variable returns from its involvement
with the investee and can affect those returns through its
authority over the investee. The existence and effect of potential
voting rights are considered when assessing whether a company
controls another entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Company. They are
deconsolidated from the date that control ceases. The legal
entities within the Wentworth Group of Companies are disclosed
within note 14. All inter company transactions, balances and
unrealised gains on transactions between the parent and subsidiary
companies are eliminated on consolidation.
The Group holds a 31.94% participation interest in the Mnazi Bay
Concession through two subsidiaries. Wentworth Gas Limited ("WGL"),
which is a wholly owned subsidiary, owns a 25.40% participation
interest and Cyprus Mnazi Bay Limited ("CMBL") owns a 16.38%
participation interest of which the Group's proportionate share is
6.54% (i.e. Wentworth's interest of 39.925% interest in CMBL
multiplied by 16.38% participation interest). CMBL is considered a
jointly controlled entity and accounted for as a joint operation
rather than a joint venture. The Group the group accounts for its
share of CMBL assets and liabilities as CMBL has contractual
agreements which establish that the parties to the joint
arrangement have rights to the assets and obligations for the
liabilities of ownership in proportion to their interest in the
arrangement.
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 Strategic Report. The financial position of the
Group, its cash flows and liquidity position are described in the
Financial Review contained within this report.
Directors and senior management continue to allocate
considerable resources to ensuring that Wentworth is well placed to
continue to safely produce gas from Mnazi Bay alongside the
Operator, Maurel et Prom. Given the essential nature of services
provided and the forecasted impact of recent world events to both
international capital markets and production operations in the
United Republic of Tanzania, the Group notes that an interruption
to production is remote. The Directors however are mindful of the
speed with which circumstances may change, both for the better or
for the worse, and all modelling is based on the most current
information available.
The Group has a long established and collaborative relationship
with the Government of the United Republic of Tanzania, having
operated in-country for many years, however the Directors do
recognise that the Group is dependent upon the continued collection
of gas sales invoices and ongoing operational support of the
Government as its sole gas sales customer through its operating
agencies TPDC and TANESCO.
The Directors have, therefore, judged that on a risk-weighted
basis, which takes into consideration both the probability of
occurrence and an estimate of the financial impact, the continued
timely settlement of gas-sales invoices by the Government of the
United Republic of Tanzania to be the most significant risk
currently faced by the Group. To this end, should no settlement of
future gas sales invoices be received from the date of approval of
these financial statements, we have assessed that the Group would
be able to continue to operate for a period of up to 23 months
without the need for a further injection of working capital.
Further to this, based on the application of reasonable and
foreseeable sensitivities, which include potential changes in
demand, capital spend and operating costs, the Directors believe
that the Group is well placed to manage its financial exposures.
The Directors have judged that owing to the stability of this
relationship, the Group has sufficient cash resources for its
working capital needs, committed capital and operational
expenditure programmes for at least the next 23 months based on the
Directors a worst case scenario of no settlement of future gas
sales as noted above.
Consequently, the Directors are confident that the Group will
have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the
financial statements and therefore have prepared the financial
statements on a going concern basis.
Changes in accounting policies
A number of new standards are effective from 1 January 2021 but
they do not have material effect on the Group's financial
statements.
New and amended standards
The following amended standards and interpretation are effective
for financial years commencing on or after 1 January 2022. The
Group does not intend to adopt the standards below, before their
mandatory application date.
Standard Description IASB Issue Date IASB Effective Date Secretary of State
Adoption Date
IAS 37 (Amendments) Onerous Contracts - 14 May 2020 1 January 2022 Endorsed
Cost of Fulfilling a
Contract
------------------------ ----------------- -------------------- -------------------------
IAS 16 (Amendments) Property, Plant and 14 May 2020 1 January 2022 Endorsed
Equipment - Proceeds
before Intended Use.
------------------------ ----------------- -------------------- -------------------------
IFRS 3 (Amendments) Reference to the 14 May 2020 1 January 2022 Endorsed
Contractual Framework.
------------------------ ----------------- -------------------- -------------------------
IAS 1 (amendments) Classification of 23 January 2020 1 January 2023 Endorsed
Liabilities as Current
or Non-current.
------------------------ ----------------- -------------------- -------------------------
IFRS 17 Insurance contracts. 25 June 2020 1 January 2023 Endorsed
------------------------ ----------------- -------------------- -------------------------
IAS 12 (Amendments) Deferred tax related to 7 May 2021 1 January 2023 Endorsed
assets and liabilities
arising from a single
transaction.
------------------------ ----------------- -------------------- -------------------------
IAS 8 (amendments) Definition of 12 February 2021 1 January 2023 Endorsed
accounting estimates.
------------------------ ----------------- -------------------- -------------------------
IAS 1 and IFRS Practice Disclosure of 12 February 2021 1 January 2023 Endorsed
Statement 2 accounting policies.
(amendments)
------------------------ ----------------- -------------------- -------------------------
Future accounting pronouncements
The Company intends to adopt the above listed standards and
interpretations in its financial statements for the annual period
beginning 1 January 2023. The Company does not expect the
interpretation to have a material impact on the financial
statements.
2. Summary of accounting policies
The principal accounting policies applied in the preparation of
these Company and Group consolidated financial statements are set
out below. These policies have been consistently applied to all the
years presented, unless otherwise stated.
Joint arrangements
The analysis of joint arrangements requires management to
analyse numerous agreements and the requirements of IFRS 10 and
IFRS 11. Judgements made by management include whether joint
control exists and the extent of exposure to the underlying assets
and liabilities of the joint arrangement. By virtue of the
provisions contained within the underlying shareholder agreements,
to which Cyprus Mnazi Bay Limited (see below for accounting
considerations of this entity) and Wentworth Holdings Gas Limited,
a wholly owned subsidiary of Wentworth Resources plc, are parties
to, management have assessed that the Company has a joint
arrangement through its 31.94% ownership in the license and
accounts for this interest as a joint operation as no single
individual shareholder may exercise absolute control over the
entity. The agreement is bilateral, with Maurel & Prom Mnazi
Bay Holdings SAS (M&P) and whilst the Operator may make
day-to-day decisions, the overall strategic direction of the
partnership requires unanimous consent between M&P and
Wentworth. M&P hold 48.06% share in the license and 20% is
owned by TPDC. As such the Group is entitled to its share of
production from the license and therefore revenue generated from
the sale of this output. Wentworth also recognise its share of all
expenses incurred the joint arrangement, its right to the assets,
as well as its share of the liabilities and obligations.
Accounting treatment of CMBL
The Group holds a 31.94% participation interest in the Mnazi Bay
Concession through two subsidiaries. WGL is a wholly owned
subsidiary, which owns a 25.40% participation interest and
Wentworth Holdings (Jersey) Limited is a wholly owned subsidiary
that holds 39.925% in CMBL, which owns a 16.38% participation
interest, of which the Group's proportionate share is therefore
6.54% (i.e. Wentworth's interest of 39.925% interest in CMBL,
multiplied by 16.38% participation interest). CMBL is considered a
jointly controlled entity and accounted for as a joint operation
rather than a JV. The Group recognises its share of the
following:
-- Assets, including its share of any assets held jointly;
-- Liabilities, including its share of any liabilities incurred
jointly;
-- Revenues arising from the joint operation;
-- Other revenues from the joint operation; and
-- Expenses, including its share of any expenses incurred
jointly
Financial instruments
The Group recognises financial assets and liabilities on its
balance sheet when it becomes a party to the contractual provisions
of the instrument.
(i) Financial assets
Classification and initial measurement
Financial assets within the scope of IFRS 9 are classified as
financial assets at amortised cost, fair value through profit or
loss or fair value through other comprehensive income (OCI). The
Group determines this classification at initial recognition
depending on the business model for managing the financial asset
and the contractual terms of the cash flows.
The Group's financial assets include cash and cash equivalents,
trade and other receivables.
When financial assets are initially recognised, they are
measured at fair value being the consideration given or received
plus directly attributable transaction costs. Any gain or loss at
initial recognition is recognised in the income statement.
The Group's financial assets measured at amortised cost are held
for the collection of contractual cash flows where those cash flows
have specified dates and represent solely payments of principal and
interest, such as cash and cash equivalents or trade
receivables.
The Group's financial assets measured at fair value through
profit or loss are those financial assets where the contractual
cash flows do not solely represent payments of principal and
interest, such as trade receivables.
Subsequent measurement
Financial assets held for the collection of contractual cash
flows that are solely payments of principal and interest (and
classified as amortised cost) are subsequently measured at
amortised cost using the effective interest rate method ("EIR").
Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part
of the EIR. The EIR amortisation is included in finance income in
the income statement. Allowance for impairment is estimated on a
case-by-case basis.
Derecognition
A financial asset is derecognised when the Group loses control
over the contractual rights that comprise that asset. This occurs
when the rights are realised, expire or are surrendered.
Impairment of financial assets
The Group assesses on a forward-looking basis the expected
credit losses that might arise on financial assets measured at
amortised cost. This assessment considers the probability of a
default event occurring that could result in the expected cash
flows due from a counterparty falling short of those contractually
agreed.
Expected credit losses are estimated for default events possible
over the lifetime of a financial asset measured at amortised cost.
However, where the financial asset is not a trade receivable
measured at amortised cost and there have been no significant
increases in that financial asset's credit risk since initial
recognition, expected credit losses are estimated for default
events possible within 12 months of the reporting date.
(ii)
(iii) Financial liabilities
Classification and initial measurement
Financial liabilities within the scope of IFRS 9 are classified
as financial liabilities at amortised cost or fair value through
profit or loss. The Group determines the classification of its
financial liabilities at initial recognition.
The Group's financial liabilities include trade and other
payables, other liabilities and borrowings which are classified as
amortised cost. Trade payables may be designated and measured at
fair value through profit or loss when doing so eliminates or
significantly reduces a measurement or recognition inconsistency
that would otherwise arise from measuring assets or liabilities on
a different basis.
All financial liabilities are recognised initially at fair value
while financial liabilities at amortised cost additionally include
directly attributable transaction costs.
Subsequent measurement
Trade and other payables, borrowings and other financial
liabilities are subsequently measured at amortised cost using the
EIR method after initial recognition. Gains and losses are
recognised in the income statement through the EIR amortisation
process. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included in
finance costs in the income statement.
A gain or loss on a financial liability measured at fair value
through profit or loss is recognised in the income statement in the
period in which it arises.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another on
substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in the
income statement.
(iv) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount reported in the balance sheet when there is an
enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise the assets
and settle the liabilities simultaneously.
(v) Fair value of financial instruments
At each reporting date, the fair value of financial instruments
that are traded in active markets is determined by reference to
quoted market prices, without any deduction for transaction costs.
For financial instruments not traded in an active market, the fair
value is determined using appropriate valuation techniques. Such
techniques may include using recent arm's length market
transactions, reference to the current fair value of another
instrument that is substantially the same, discounted cash flow
analysis or other valuation models.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, term deposits
and short-term highly liquid investments with the original term to
maturity of three months or less, which are convertible to known
amounts of cash and which, in the opinion of management, are
subject to an insignificant risk of changes in value.
Long-term receivables
Long-term receivables plus applicable accrued interest are
initially recognised at their fair value based on the discounted
cash flows. The discounted cash flows are reviewed at least every
year to adjust for variations in the estimated future cash flows
with the change in estimate reported in profit or loss. The
discount rate is based on the credit quality and term of the
financial instrument. The financial instrument is subsequently
valued at amortised costs by accreting the instrument over the life
of the asset. The accretion is reported in profit or loss.
(E&E) Exploration Assets
E&E costs, including costs of licence acquisition, technical
services and studies, exploratory drilling, whether successful or
unsuccessful, and testing and directly attributable overhead, are
capitalised as E&E assets according to the nature of the assets
acquired. These costs are accumulated in cost centres by well,
field or exploration area pending determination of technical
feasibility and commercial viability.
E&E assets are assessed for impairment if (i) sufficient
data exists to determine technical feasibility and commercial
viability, and (ii) facts and circumstances suggest that the
carrying amount exceeds the recoverable amount.
The technical feasibility and commercial viability of extracting
a resource is generally considered to be determinable when proven
and/or probable reserves are determined to exist. A review of each
exploration licence or field is carried out, at least annually, to
ascertain whether it is technically feasible and commercially
viable. Upon determination of technical feasibility and commercial
viability, intangible E&E assets attributable to those reserves
are first tested for impairment with the unimpaired amounts
reclassified from E&E assets to a separate category within
tangible assets within Property, Plant and Equipment referred to as
oil and gas interests.
Once the commercial viability of a resource has been proven
and/or probable and reserves have been determined to exist, the
intangible E&E asset attributable to those reserves are then
transferred to oil and natural gas properties within PP&E and
then depleted over its useful life on a unit of production
basis.
Costs incurred prior to the legal awarding of petroleum and
natural gas licences, concessions and other exploration rights are
recognised in profit or loss as incurred.
PP&E - oil and natural gas properties
Items of PP&E, which include oil and gas development and
production assets, are measured at cost less accumulated depletion
and depreciation and accumulated impairment losses. PP&E assets
include costs incurred in developing commercial reserves and
bringing them into production, such as drilling of development
wells, tangible costs of facilities and infrastructure
construction, together with the E&E expenditures incurred in
finding the commercial reserves that have been reclassified from
E&E assets as outlined above, the projected cost of retiring
the assets and any directly attributable general and administrative
expenses. Expenditures on developed oil and natural gas properties
are capitalised to PP&E when it is probable that a future
economic benefit will flow to the Company as a result of the
expenditure and the cost can be reliably measured. The initial cost
of an asset is comprised of its purchase price or construction
cost, any costs directly attributable to bringing the asset into
operation, the initial estimate of any decommissioning obligations
associated with the asset and borrowing costs on qualifying assets.
When significant parts of an asset with PP&E, including oil and
gas interests, have different useful lives, they are accounted for
as separate items (major components).
Costs incurred subsequent to the determination of technical
feasibility and commercial viability and the costs of replacing
parts of PP&E are recognised as capitalised oil and gas
interests only when they increase the future economic benefits
embodied in the specific asset to which they relate. Subsequent
changes in estimated decommissioning obligation due to changes in
timing, amounts and discount rates are included in the cost of the
asset. Such capitalised oil and gas interests generally represent
costs incurred in developing proved and/or probable reserves and
bringing in or enhancing production from such reserves and are
accumulated on a field or geotechnical area basis. The carrying
amount of any replaced or sold component is derecognised. The costs
of the day-to-day operating of PP&E are recognised in profit or
loss as incurred.
Depletion
The net carrying amount of PP&E is depleted on a field by
field unit of production method by reference to the ratio of
production in the year to the related proven and probable reserves.
These reserves represent full field recoverable reserves and not
just those recoverable to the end of the current licence period. If
the useful life of the asset is less than the reserve life, the
asset is depreciated over its estimated useful life using the
straight-line method. Future development costs are estimated
considering the level of development required to produce the proven
and probable reserves. These estimates are reviewed by third party
independent reserves engineers. Changes in factors such as
estimates of reserves that affect unit-of-production calculations
are dealt with on a prospective basis. Capital costs for assets
under construction included in development and production assets
are excluded from depletion until the asset is available for use,
that is, when it is in the location and condition necessary for it
to be capable of operating in the manner intended by
management.
Disposals
Oil and natural gas properties are derecognised upon disposal or
when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss on derecognition of
the asset, including farm out transactions or asset sales or asset
swaps, is calculated as the difference between the proceeds on
disposal, if any, and the carrying value of the asset, is
recognised in profit or loss in the period of derecognition.
PP&E - office and other equipment
Office and other equipment are carried at cost less accumulated
depreciation and impairment losses. Depreciation of the cost of
these assets less residual value is charged to profit and loss on a
straight-line basis over their estimated useful economic lives of
between three and five years.
Leases
IFRS 16 Leases applies to all leases, including subleases,
except for leases to explore for or use minerals, oil, natural gas
and similar non-regenerative resources.
The Company has elected to recognise right-of-use assets and
lease liabilities for lease of low-value assets and short-term
leases. The Company recognises the lease payments associated with
these leases as an expense on a straight-line basis over the lease
term.
Decommissioning obligation
Decommissioning obligations are recognised for legal obligations
related to the decommissioning of long-lived tangible assets that
arise from the acquisition, construction, development or normal
operation of such assets. A liability for decommissioning is
recognised in the period in which it is incurred and when a
reasonable estimate of the liability can be made with the
corresponding decommissioning provision recognised by increasing
the carrying amount of the related long-lived asset. The recognised
decommissioning provision is subsequently allocated in a rational
and systematic method over the underlying asset's useful life. The
initial amount of the liability is accreted by charges to the
profit or loss to its estimated future value.
Impairment
The carrying values of production assets, E&E expenditures
that have been capitalised and property, plant and equipment (PPE)
are assessed for impairment when indicators of such impairment
exist. In performing impairment reviews, assets are categorised
into the smallest identifiable groups, cash generating units (CGU),
that generate cash flows independently. If any indication of
impairment exists, the estimated recoverable amount of the asset or
CGU is calculated. If the carrying amount of the asset or CGU
exceeds its recoverable amount, it is impaired with the loss
charged to the income statement so as to reduce the carrying amount
to its recoverable amount. Impairment losses are recognised in the
income statement in those expense categories consistent with the
function of the impaired asset or CGU. An assessment is made at
each reporting date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may
have decreased. If such indication exists, the Group makes an
estimate of the recoverable amount.
(i) Calculation of recoverable amount
The recoverable amount of an asset or CGU is the greater of its
value in use and fair value less costs to sell. In assessing value
in use, the estimated future cash flows of the asset or CGU in its
present condition 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. In
determining fair value less costs to sell, consideration will be
given to whether the value of the asset or CGU can be determined
from an active market (e.g. recognised exchange) or a binding sale
agreement which are classified as level 1 in the fair value
hierarchy under IFRS 13 'Fair Value Measurements'. Where this is
not determinable, fair value less costs to sell for a CGU is
usually estimated with reference to a discounted cash flow model,
similar to the method used for value in use, but may include
estimates of future production, revenues, costs and capital
expenditure not currently included in the economic model.
Additionally, cash flow estimates include the impact of tax and are
discounted using a post-tax discount rate. An estimate made on this
basis is classified as level 3 in the fair value hierarchy.
(ii) Reversals of impairment
A previously recognised impairment loss is reversed only if
there has been a change in the estimates used to determine the
asset's recoverable amount since the last impairment loss was
recognised. If this is the case, the carrying amount of the asset
is increased to its recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does
not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had been
recognised for the asset in prior years. Such reversals are
recognised in the income statement. Impairment losses recognised in
relation to
goodwill are not reversed for subsequent increases in the recoverable amount.
Share capital
The proceeds from the exercise of share options and the issuance
of shares from treasury are recorded as share capital in the amount
for which the option, warrant, or treasury share enables the holder
to purchase a share in the Company.
Proceeds for shares in excess of the nominal value are recorded
within share premium.
Share issuance costs
Commissions paid to underwriters, and other related share issue
costs, such as legal, auditing and advisory, on the issue of the
Company's shares are charged directly to share capital, net of tax
within the share premium account.
Share based payments
The fair value of the options at the date of the grant is
determined using the Black-Scholes option pricing model and share
based compensation is accrued and charged to profit or loss, with
an offsetting credit to equity reserve over the vesting periods. A
forfeiture rate is estimated on the grant date and is adjusted to
reflect the actual number of options that vest.
Capitalisation of interest
The Company capitalises interest expense incurred during the
construction phase of the projects, except E&E assets which
were funded by the related financing.
Revenue recognition
Natural gas revenues are recognised upon the transfer of control
over its gas to its customers, TPDC and TANESCO, which is when
delivery is made to them through the offtake network.
Investment income is accrued on a time basis by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that discounts estimated future cash
receipts through the expected life of the financial asset to that
asset's net carrying value.
Income taxes
Tax expense comprises current and deferred tax. Tax is
recognised in the profit or loss except to the extent it relates to
items recognised in other comprehensive income ("OCI") or directly
in equity.
Current income tax
Current tax expense is based on the results for the period as
adjusted for items that are not taxable or not deductible. Current
tax is calculated using tax rates and laws that were enacted or
substantively enacted at the end of the reporting period.
Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is
subject to interpretation. Provisions are established where
appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax
Deferred taxes are the taxes expected to be payable or
recoverable on differences between the carrying amounts of assets
and liabilities in the consolidated statement of financial position
and their corresponding tax basis. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profits are expected to be available
against which deductible temporary differences to the tax basis can
be utilised. Deferred income tax assets and liabilities are not
recognised if the temporary difference arises from the initial
recognition of goodwill, if any, or from the initial recognition
(other than in a business combination) of other assets in a
transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and joint
arrangements except where the reversal of the temporary difference
can be controlled, and it is probable that the difference will not
reverse in the foreseeable future.
Deferred tax assets are reviewed at each reporting period and
reduced to the extent that it is no longer probable that sufficient
future taxable profits are expected to be available to allow all or
part of the asset to be recovered. Deferred tax assets are
recognised for taxable temporary differences arising on investments
in subsidiaries to the extent that it is probable that the
temporary difference will reverse in the foreseeable future and
future taxable profits are expected to be available against which
the temporary difference can be utilised.
Foreign currency translation
Items included in the financial statements of the Company and
its subsidiaries are measured using the currency of the primary
economic environment in which the legal entity operates (the
"functional currency"). Foreign currency transactions are
translated into the functional currency using the exchange rates
prevailing at the dates of the transaction. Foreign exchange gains
and losses resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities not
denominated in the functional currency of an entity are recognised
in profit or loss.
The functional currency of all Wentworth subsidiaries is US
dollars except for Wentworth Resources (UK) Limited ("WRUKL") which
is Pound Sterling. The assets and liabilities of this Company are
translated into US dollars at the period-end exchange rate. The
income and expenses of the Company are translated to US dollars at
the average exchange rate for the period.
Translation gains and losses are included in OCI; however, WRUKL
has limited operations so there is no significant amount of foreign
exchange gains and losses to include in OCI. All other foreign
exchange gains and losses are recognised in profit or loss.
Earnings or loss per share ("EPS")
Basic earnings or loss per share is calculated by dividing
profit or loss attributable to owners of the Company (the
numerator) by the weighted average number of ordinary shares
outstanding (the denominator) during the period. The denominator is
calculated by adjusting the shares outstanding at the beginning of
the period by the number of shares bought back or issued during the
period, multiplied by a time-weighting factor.
Diluted EPS is calculated by adjusting the earnings and number
of shares for the effects of all dilutive potential ordinary shares
deemed to have been converted at the beginning of the period or if
later, the date of issuance. The effects of anti-dilutive potential
ordinary shares are ignored in calculating diluted EPS.
3. Critical accounting judgements and key sources of estimation uncertainty
In applying the Group's accounting policies, the preparation of
consolidated financial statements requires management to make
estimates, judgments and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities as at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual amounts may differ materially from
these estimates due to changes in general economic conditions,
changes in laws and regulations, changes in future operating plans
and the inherent imprecision associated with estimates. Significant
estimates and judgments used in the preparation of these
consolidated financial statements include the assessment of
impairment triggers related to E&E and PP&E assets and
recognition of a deferred tax asset.
Recoverable value of Mnazi Bay E&E and Natural Gas
Properties costs
Significant accounting Judgements
The Directors review the carrying value of the Groups assets to
determine whether there are any indicators if impairment such that
the carrying values of the assets may not be recoverable. The
assessment of whether an indicator of impairment or reversal
thereof has arisen requires considerable judgement, taking account
of factors such as future operational and financial plans,
commodity prices and the competitive environment.
Oil and gas assets are inherently judgemental to value. The
amounts capitalised represent active projects and investments.
These amounts are expensed to profit or loss as unless the
determination process over whether reserves are recoverable or not
is not completed and there are no indications of impairment at the
reporting date or commercial reserves are established. Indictors of
impairment include but are not limited to; declines in market
value; company net assets in excess of market capitalisation;
obsolescence or physical damage; economic performance worse than
expected; or substantive expenditure in the specific area is
neither budgeted nor planned. The outcome of ongoing production and
exploration activities and whether their carrying values will
ultimately be recovered is inherently uncertain and requires
significant judgement.
Management performs impairment testing on the Company's
producing and non-producing assets when indicators of impairment
are present. The assessment of impairment indicators is subjective
and considers the various internal and external factors such as the
financial performance of individual CGUs, market capitalisation and
industry trends.
Key sources of estimation uncertainty
The preparation of discounted cash flows used to assess the
recoverable amount of the Groups CGU includes management's
estimates of future operating costs, economic and regulatory
environments, capital expenditures requirements, long term field
plans and other factors including discount rates and the total
level of reserves deemed to be commercial.
The valuation underpinning the carrying value of producing and
non-producing assets are largely dependent on supply and demand
variables.
The gas sales price is fixed, subject to an annual inflation
index linked to the US consumer prices index to 2031 and the cost
base of production operations is also largely fixed in nature.
Whilst the benefits of increased production volumes are clear, the
opposite is equally true during operational downtime, prolonged or
permanent gas supply outages which may in turn impact upon the
commerciality of the field. Mnazi Bay currently has five producing
wells and formally signed the Commercialisation of Discovery making
all terms contained within the Mnazi Bay GSA legally binding and
fully in effect from 10 September 2019. Mnazi Bay is committed to
supplying a minimum quota of natural gas to TPDC and TANESCO of 90
MMscf/day rising to 130 MMscf/day for the entire remaining term of
the GSA and is guaranteed of future revenue streams via a take or
pay provision of 85% of these amounts. This greatly strengthens and
formally ratifies the long-term commerciality of the Mnazi Bay
asset, and as such it would require significant reductions in daily
production operations to trigger an indication of impairment under
IFRS 6 and IAS 36 and a subsequent write down in the book value of
the Mnazi Bay asset which currently totals $66.4 million.
At the year-end, a full impairment test was conducted on the
Mnazi Bay production asset as there was an indication of impairment
with respect to the discrepancy between the market capitalisation
of the Company at 31 December 2021 of $54.5 million and the
carrying value of $66.4 million. The full impairment testing
ultimately determined that the recoverable amount was materially
higher than the carrying value at the year-end which had been
externally corroborated by the RPS third party Independent Reserves
Assessment Report valuation (NPV10) of $108.1 million. Wentworth's
own internal assessment of value-in-use and recoverable amount also
determined that the carrying value was below the recoverable amount
and that no impairment of natural gas properties was required at
the balance sheet date.
Equally, due to there being no formal agreement between Mnazi
Bay partners to sanction further expenditure on non-producing
assets, a full impairment test was also undertaken carrying value
of $8.1 million at the year-end. The impairment test ultimately
determined that the combined value-in-use exceeded the combined
carrying amount of $74.5 million and that no impairment was
required.
In both of the above cases, the impairment testing was conducted
over the licence term, which expires in 2031.
The key assumptions that went into the impairment modelling
related to:
-- Production supply and demand forecasting, which was largely
in-line with the RPS independent reserves assessment modelling;
-- Gas sales invoice settlement terms, which have been
extrapolated from both historic and future expectations on
terms;
-- Operating cost forecasts, noting both fixed and variable
elements of production operating costs and the impact of future
development expenditures;
-- Future field development expenditures and their anticipated timings;
-- Cost pool recovery expenditures available for future recovery; and
-- Known tax and fiscal changes to the extent that an
interpretation of the legislation was required.
Sensitivities were run on the following variables:
-- Field production per well, noting that the engineering
solutions utilized on Mnazi Bay allow for the production of
multiple hydrocarbon bearing horizons from certain wells;
-- The operating and development costs of producing gas from Mnazi bay.
-- The impact of increased sales invoice delinquency upon future cash flows; and
-- Currency settlement denomination variables, currently in US
dollars, noting that in certain circumstances an election for
settlement in Tanzanian Shillings may be made by TPDC;
Reserves estimates
Significant accounting judgements
The Directors use judgement and experience to determine the
timing and quantum of volumes recovered from producing fields in
order to be able to calculate a probabilistic base-case
value-in-use for its assets. This valuation may vary in response to
changes in field performance over time and the Company expects that
there will likely be revisions upward or downward based on updated
information such as the results of future drilling, oil and gas
production levels and reservoir performance.
Key sources of estimation uncertainty
Oil and natural gas reserves, prepared by an external
independent reserve evaluator as at 31 December 2021, are used in
the calculation of depletion, impairment and impairment reversal
determinations and recognition of deferred tax asset. Reserve
estimates are based on engineering data, estimated future prices
and costs, expected future rates of production and the timing of
future capital expenditures; all of which are subject to many
uncertainties and certain input assumptions. A summary of the
independent RPS reserves assessment report for the year-ended 31
December 2021 can be found within the Strategic Report's Mnazi Bay
Production Operations section of this report in which 2P field
reserves are assessed to be 83.6 Bcf with an indicative NPV10 of
$108.1 million.
Taxes
Significant accounting judgements
The Directors make judgements in relation to the recognition of
various taxes levied on the Group, which are both payable and
recoverable. Judgement applies as the Group operates in countries
where the legal and tax systems are less developed, which increases
the requirement for management to make assumptions as to whether
certain payments will be required related to matters such as income
taxes, value added taxes, and other indirect taxes as well as
outcomes of any tax disputes which would affect the recognition of
tax liabilities and deferred tax assets. A provision is recognized
in the financial statements for such matters if it is considered
probable that a future outflow of cash resources will be required.
The provision, if any, is subject to management estimates and
judgements with respect to the outcome of the event, the costs to
defend, the quantum of the exposure and past practice in the
country.
Key sources of estimation uncertainty
Estimates may be made to determine the amount of taxes
recoverable, principally deferred tax assets. The commencement of
commercial production and gas sales under the Gas Sales Agreement,
allowed for the recognition of a deferred tax asset within the
financial statements. The amount that the company recognizes is
subject to the following estimates:
-- The timing of future profits for the utilization of tax
losses from the current tax pools which are based on management
assessments and forecasts of future performance.
-- The effective tax rate at which the losses will be utilized
at throughout the Group which is currently the tax rate of Tanzania
as this is where all of the Group's operations are;
-- The status of any current tax assessments and disputes and
their impact on the deferred tax pool on a probabilistic basis;
-- Any material changes in legislation that may impact upon the
fiscal regime on which the deferred tax asset is computed.
Changes in these estimates within a reasonably possible range in
the next 12 months are not expected to significantly alter the
carrying amount of the Groups taxes that are recoverable.
The Group engages early with tax authorities where it has or
will enter into a large or complicated transaction that is subject
to interpretation and, in Tanzania, completed its most recent TRA
audit for the years 2018 to 2020 in January 2021, the result of
which was an agreed assessment for taxes totalling $9k. A further
$126k was assessed by the TRA for CIT, against which an objection
has been raised.
4. Segment information
The Company conducts its business through the Tanzania ("Mnazi
Bay Concession") segment. Gas operations include the exploration,
development, and production of natural gas and other hydrocarbons.
The Corporate segment activities include investment income,
interest expense, financing related expenses, share based
compensation relating to corporate activities and general corporate
expenditures. Inter-segment transfers of products, which are
accounted for at market value, are eliminated on consolidation.
Net income/(loss) for the year-ended 31 December 2021
Tanzania Operations Corporate Consolidated
$000
$000 $000
--------------------------------------- -------------------- -------------- --------------
Total revenue 23,818 - 23,818
Production and operating
costs (3,800) - (3,800)
Depletion (6,267) - (6,267)
--------------------------------------- -------------------- -------------- --------------
Total cost of sales (10,067) - (10,067)
Gross profit 13,751 - 13,751
Recurring administrative
costs (1,988) (4,436) (6,424)
New venture and pre - licence
costs - (502) (502)
Share-based payment charges (115) (422) (537)
Depreciation and depletion (50) - (50)
Total costs (2,153) (5,360) (7,513)
Profit/(loss) from operations 11,598 (5,360) 6,238
Finance income 137 2 139
Finance costs 998 (1,367) (369)
--------------------------------------- -------------------- -------------- --------------
Profit/(loss) before tax 12,733 (6,725) 6,008
Current tax expense (1,321) - (1,321)
Deferred tax 1,380 - 1,380
--------------------------------------- -------------------- -------------- --------------
59 - 59
--------------------------------------- -------------------- -------------- --------------
Net profit/(loss) and comprehensive
profit/(loss) from continued
operation 12,792 (6,725) 6,067
--------------------------------------- -------------------- -------------- --------------
Net income/(loss) for the year-ended 31 December 2020
Tanzania Corporate Consolidated
Operations
$000 $000 $000
--------------------------------------- ------------ ------------- -------------
Total revenue 18,991 - 18,991
Production and operating
costs (3,837) - (3,837)
Depletion (5,607) - (5,607)
--------------------------------------- ------------ ------------- -------------
Total cost of sales (9,444) - (9,444)
Gross profit 9,547 - 9,547
Recurring administrative
costs (2,501) (2,947) (5,448)
New venture and pre - licence
costs - (1,558) (1,558)
Share-based payment charges (72) (228) (300)
Depreciation and depletion (3) (1) (4)
Total costs (2,576) (4,734) (7,310)
Profit/(loss) from operations 6,971 (4,734) 2,237
Finance income 36 110 146
Finance costs (68) (86) (154)
--------------------------------------- ------------ ------------- -------------
Profit/(loss) before tax 6,939 (4,710) 2,229
Current tax expense (160) 48 (112)
Deferred tax 1,311 - 1,311
--------------------------------------- ------------ ------------- -------------
1,151 48 1,199
--------------------------------------- ------------ ------------- -------------
Net profit/(loss) and comprehensive
profit/(loss) from continued
operation 8,090 (4,662) 3,428
Selected balances at 31 December 2021
Tanzania Mozambique Corporate Consolidated
Operations (Discontinued)
$000 $000
$000 $000
---------------------------- -------------- ------------------ ------------ ---------------
Current assets 19,764 101 8,505 28,370
Exploration and evaluation
assets 8,129 - - 8,129
Property, plant and
equipment 66,464 - 1 66,465
Deferred tax asset 8,239 - - 8,239
---------------------------- -------------- ------------------ ------------ ---------------
Total assets 102,596 101 8,506 111,203
---------------------------- -------------- ------------------ ------------ ---------------
Current liabilities 1,704 - 799 2,503
Non-current liabilities 1,929 - - 1,929
Lease liability 36 - - 36
---------------------------- -------------- ------------------ ------------ ---------------
Total Liabilities 3,669 - 799 4,468
---------------------------- -------------- ------------------ ------------ ---------------
Capital additions for the year-ended 31 December 2021
Additions to property,
plant
and equipment 169 - - 169
Change in decommissioning
liability 289 - - 289
--------------------------- -------- ---- ------ ------
Total additions 458 - - 458
--------------------------- -------- ---- ------ ------
Selected balances at 31 December 2020
Tanzania Mozambique Corporate Consolidated
Operations (Discontinued)
$000 $000
$000 $000
---------------------------- -------------- ------------------ ------------ ---------------
Current assets 8,535 101 13,998 22,634
Exploration and evaluation
assets 8,129 - - 8,129
Property, plant and
equipment 72,305 - 2 72,307
Deferred tax asset 6,859 - - 6,859
---------------------------- -------------- ------------------ ------------ ---------------
Total assets 95,828 101 14,000 109,929
---------------------------- -------------- ------------------ ------------ ---------------
Current liabilities 1,436 - 946 2,382
Non-current liabilities 1,514 - - 1,514
---------------------------- -------------- ------------------ ------------ ---------------
Total Liabilities 2,950 - 946 3,896
---------------------------- -------------- ------------------ ------------ ---------------
Capital additions for the year-ended 31 December 2020
Additions to property,
plant
and equipment 58 - 2 60
Change in decommissioning
liability 299 - - 299
--------------------------- -------- ---- ------ ------
Total additions 357 - 2 359
--------------------------- -------- ---- ------ ------
5. Revenue
2021 2020
$000 $000
------- -------
Revenue from gas sales 23,622 18,881
Revenue from condensate sales 33 49
Other revenue 163 61
23,818 18,991
------- -------
Other revenue represents the recovery of CIT incurred through
adjustments to TPDC gas sales entitlements.
6. Expenses and auditor's remuneration
2021 2020
$000 $000
------ ------
Employee salaries and benefits 2,842 2,289
Contractors and consultants 1,100 1,043
Travel and accommodation 182 116
Professional, legal and advisory 637 431
Office and administration 408 513
Corporate and public company costs 1,255 1,056
------ ------
6,424 5,448
------ ------
Auditor's remuneration:
Audit of these financial statements 159 163
Audit of financial statements of subsidiaries of the Company 124 125
Other tax advisory services 43 21
326 309
------ ------
During the year the Company incurred legal and consultancy costs
with respect to new venture and pre-licence appraisal expenditures
amounting to $502k (2020: $1.6 million).
2021 2020
$000 $000
------ ------
Legal costs 301 1,351
Consultancy costs 201 207
502 1,558
------ ------
7. Staff numbers and costs
The average number of persons employed during the year, analysed
by category, was as follows:
2021 2020
---------- ----------
Number of employees
----------------------
Senior Managers 2 1
Managers and supervisors 7 5
Support staff 7 8
---------- ----------
16 14
---------- ----------
The aggregate payroll costs were as follows:
2021 2020
$000 $000
------ ------
Salaries 856 798
Social security costs 103 109
Bonuses 205 158
LTIP charges 134 -
Other payroll costs 206 179
1,504 1,244
------ ------
8. Directors' remuneration
2021 2020
$000 $000
------ ------
Director's remuneration 857 1,000
Bonuses 357 313
Contractual termination payments 100 100
Pensions 43 43
Other benefits - 69
LTIP charges 403 228
1,760 1,753
------ ------
The aggregate of remuneration of the highest paid Director was
$427k (2020: $699k). Contractual termination payments for both
periods, relate to amounts paid to Bob McBean who retired as
Company Chairman.
For additional segregation by Director, refer to Total
Remuneration of Executive Director Table and Total Remuneration of
Non-Executive Executive Directors Table contained within the
Remuneration Committee Report.
9. Finance income and finance costs
2021 2020
$000 $000
-------- --------
Finance income
Interest income 128 82
Foreign exchange gain - 37
Reversal of expected credit losses on TANESCO receivable (note 10) 11 -
Other finance income - 27
139 146
-------- --------
Finance costs
Intercompany loan withholding tax costs (58) -
Accretion - decommissioning provision (note 16) (126) (130)
Interest expense - (13)
Lease interest expenses (note 17) (8) -
Foreign exchange loss (137) -
Renewal fee on overdraft facility (19) -
Bank charges (21) -
Expected credit losses on TANESCO receivable (note 10) - (11)
(369) (154)
-------- --------
10. Trade and other receivables
2021 2020
$000 $000
-------- --------
Trade receivable from TPDC 1,917 1,943
Other receivable from Operator - M&P 1,087 -
Trade receivable from TANESCO 351 1,316
Other receivable from TPDC 378 215
Other receivables 1,817 1,373
-------- --------
5,550 4,847
-------- --------
At 31 December 2021, $1.9 million is receivable from TPDC (2020:
$1.9 million) representing one month of gas sales (2020: one
month).
At 31 December 2021, $351k million is receivable from TANESCO
(2020: $1.3 million) representing three months of gas sales (2020:
fourteen months). The recovery of the substantial debt owing by
TANESCO, in conjunction with the agreement to a new Gas sales
Agreement on materially identical terms, have reduced the expected
credit loses to $nil ($2020: $11k).
With the mutual consent of both parties, the receivable of $1.1m
(2020: $nil) includes amounts received by the Operator from TPDC of
$1.0m (2020: $nil) and TANESCO of $62k (2020: $nil) on behalf of
Wentworth. These amounts were retained by the Operator pending the
finalisation of a revised repatriation agreement with the
Government of Tanzania.
Other receivables from TPDC represent income tax of $378k (2020:
$215k) paid by Wentworth Gas Limited, a wholly owned subsidiary of
the Company. The income tax is anticipated to be recovered from
TPDC's share of profit gas within the next 12-months under the
terms of the Mnazi Bay PSA, which provides such a mechanism for the
recovery of all corporate taxes.
Other receivables include VAT recoverable of $886k (2020:
$600k), gas condensate sales of $80k (2020: $47k), corporate tax
prepayments of $483k (2020: $508k), prepaid insurance $88k (2020:
$67k), purchased vehicles not yet delivered $147k (2020: $nil). In
accordance with IFRS 9 the Company notes no material expected
credit losses.
11. Tanzania Government receivables
The Group has an agreement with the Government of the United
Republic of Tanzania (TANESCO, TPDC and the Ministry of Energy and
Minerals) to be reimbursed for all the project development costs
associated with Umoja T&D expenditures at cost. An audit of the
Mtwara Energy Project ("MEP") development expenditures was
completed in November 2012 and costs of approximately $8.1 million
were verified to be reimbursable. After deducting costs associated
with the Tariff Equalisation Fund and VAT input credits associated
with the MEP totalling $1.6 million, the amount agreed to be
reimbursed was $6.5 million.
During 2017, the Government initiated its first review of the
costs to verify the balance owing by it. On 8 February 2018 the
Government issued the results, which differed from the previously
audited and approved gross receivable of $6.5 million, which the
Group maintains was accurate and correct.
The Government is conducting a second review and due to the age
and uncertainty surrounding the receivable and its recoverability,
the Group made a provision in-full during 2018 against the carrying
amount without prejudice to the ongoing commercial discussions with
the Government, the Group has reviewed this at the year-end and
continues to feel the provision is appropriate.
12. Exploration and evaluation assets
Tanzania
$000
---------
Cost
Balance at 31 December 2020 and 2021 8,129
---------
At the year-end, E&E assets totalled $8.1 million (2020:
$8.1 million) and represent the cost of seismic acquisition and
interpretation studies on Mnazi Bay on prospective but, as yet,
non-producing areas of the concession licence. The costs incurred
in evaluating these prospects have been capitalised and, to the
extent that it is possible to do so given their maturity, have been
assessed as being recoverable in full. The Mnazi Bay Concession
agreement will expire in 2031.
At the year-end the carrying value of these assets were assessed
for impairment and due to there being no formal agreement between
Mnazi Bay partners to sanction further expenditure at this time, a
full impairment test was undertaken. The impairment test ultimately
determined that the value-in-use exceeded the carrying amount and
that no impairment was required.
13. Property, plant and equipment
Natural gas properties Office and other equipment Right of use Total
$000 $000 $000 $000
----------------------- ----------------------------------- ------------- --------
Cost
Balance at 31 December 2019 104,043 611 - 104,654
Additions 58 2 - 60
Change in decommissioning
liability 299 - - 299
Balance at 31 December 2020 104,400 613 - 105,013
Additions 28 34 124 186
Disposals - (17) - (17)
Change in decommissioning
liability 289 - - 289
Balance at 31 December 2021 104,717 630 124 105,471
----------------------- ----------------------------------- ------------- --------
Accumulated depreciation and depletion
Balance at 31 December 2019 (26,490) (605) - (27,095)
Depreciation and depletion (5,607) (4) - (5,611)
Balance at 31 December 2020 (32,097) (609) - (32,706)
Depreciation and depletion (6,267) (5) (45) (6,317)
Disposals - 17 - 17
Balance at31 December 2021 (38,364) (597) (45) (39,006)
--------- ------ ----- ---------
Carrying amounts
31 December 2020 72,303 4 - 72,307
31 December 2021 66,353 33 79 66,465
During the year a full impairment test was conducted on the
Mnazi Bay asset as there was an indication of impairment with
respect to the discrepancy between the market capitalisation at 31
December 2021 of $54.5 million and the carrying value of $66.4
million. The full impairment test ultimately determined that the
recoverable amount was significantly higher than the carrying value
of Mnazi Bay assets at the year-end which had been externally
corroborated by the RPS third party Reserves Report valuation
(NPV10) of $108.1 million. Refer to note 3 for additional detail
regarding the assumptions used within the impairment testing.
During the year, the Group made cash additions to PPE totalling
$62k (2020: $60k). Right of use asset addition of $124k (2020: nil)
relate to office space leased in Tanzania. Disposals related to
office furniture and others equipment disposed during the year. A
change to the assumptions used in calculating the decommissioning
and abandonment provisions resulted in further non-cash additions
of $289k (2020: $299k) (see note 16).
14. Subsidiary and joint undertakings
The subsidiary and joint undertakings at 31 December 2021
are:
Name of Company Country Class Types Percentage Nature of
of incorporation of shares of ownership holding business
held
-------------------------- ------------------ ----------- -------------- ----------- -----------------
Wentworth Resources United Ordinary Direct 100% Investment
(UK) Limited Kingdom holding company
Wentworth Holding Jersey Ordinary Direct 100% Investment
(Jersey) Limited holding company
Wentworth Tanzania Jersey Ordinary Indirect 100% Investment
(Jersey) Limited holding company
Wentworth Gas (Jersey) Jersey Ordinary Indirect 100% Investment
Limited holding company
Wentworth Gas Limited Tanzania Ordinary Indirect 100% Exploration
production
company
Cyprus Mnazi Bay Cyprus Ordinary Indirect 39.925% Exploration
Limited (1) production
company
Wentworth Mozambique Mauritius Ordinary Indirect 100% Investment
(Mauritius) Limited holding company
Wentworth Moçambique Mozambique Ordinary Indirect 100% Investment
Petroleos, Limitada holding company
(2)
(1) CMBL is considered a jointly controlled entity and accounted
for as a joint operation rather than a joint venture (see note 1
for further details).
(2) The Wentworth Moçambique Petroleos, Limitada is in the
process of liquidation after relinquishment of the Tembo Block
Appraisal Licence.
15. Trade and other payables
2021 2020
$000 $000
-------- --------
Payable to Maurel et Prom (Operator) 1,222 884
Trade payables 250 181
Other payables and accrued expenses 1,031 1,317
2,503 2,382
-------- --------
Other payables and accrued expenses include bonuses of $606k
(2020: $451k), audit fees of $320k (2020: $364k), other third party
services of $59k (2020: $80k) and current lease liability $46k
(2020: $nil)
16. Decommissioning and abandonment provision
The Company's decommissioning provision results from net
ownership interests in petroleum and natural gas assets including
well sites, pipeline gathering systems and processing facilities in
Tanzania. The operator of the Mnazi Bay Concession has estimated
the Company's share of the undiscounted inflation-adjusted amount
of cash flows required to settle decommissioning obligations for
the infrastructure within the Mnazi Bay Concession to be $4.2
million. An abandonment cost study was undertaken by TBS Offshore
in 2016 at the request of the Operator and estimated the gross cost
of abandonment to the JV to be $9.8 million. The Operator is
currently working on updating these estimates, however, this work
has not yet been completed. Whilst the costs have currently been
discounted back from 2031, the current licence expiry date, a
further 10-year extension beyond this to 2041 would likely be
awarded, deferring this expenditure until that date. The
obligations have been estimated using existing technology at
current prices inflated and discounted using discount rates that
reflect current market assessments of the time value of money and
the risks specific to each liability.
A reconciliation of the decommissioning obligations is provided
below:
2021 2020
$000 $000
------ ------
Balance at 1 January 1,514 1,085
Change in accounting estimates 289 299
Accretion 126 130
Balance at 31 December 1,929 1,514
------ ------
During the year, the inflation rate was updated and amended to
3.2% from 1.4% in 2020. These amendments have materialized an
additional charge in the current period of $289k. During 2020 the
discount rate was amended to 8.3% from 12.0% to better reflect a
United States Dollar interest rate from a Tanzanian Shilling
interest rate as it was felt that this would likely be the
denomination of any the final liability. Additionally, the
inflation rate was updated and amended to 1.4% from 2.0%.
Amendments made in 2020 materialized an additional charge of
$299k.
17. Lease liability
2021 2020
$000 $000
------ ------
Balance at 1 January - -
Additions 124 -
Lease interest expenses 8 -
Lease payment (50)
Balance at 31 December 82 -
------ ------
Current 46 -
Non-current 36 -
------ ------
During the year, the Group recognised a lease liability with
respect to its office premises in Dar es Salaam, Tanzania, of $82k
(2020: nil), $46k of which is current (2020: nil) and is presented
in trade and other payables.
18. Repurchase of own shares
2021 2020
$000 $000
----------------------------------------- ------ ------
Settlement of 7,500,000 ordinary shares
at 20.0 pence (26 cents) each 1,982
Settlement of 702,894 ordinary shares
at NOK 291 (33.9 cents) each - 220
Settlement of 236,452 ordinary shares
at NOK 291 (33.8 cents) each - 75
1,982 295
----------------------------------------- ------ ------
The cost incurred by the Company of $2.0 million to repurchase
7.5 million ordinary shares, includes $1.2 million for 4.5 million
ordinary shares repurchased on 17 December 2021, cancelled and
removed from the share register on 30 December 2021 (see note
20).
The balance of $793k for 3.0 million ordinary shares repurchased
on 17 December 2021 was held in treasury and recognised within
equity reserves at 31 December 2021 (see note 20). 3.0 million of
the ordinary shares acquired at $793k will be held in treasury to
satisfy upcoming obligations in respect of an employee share
plan.
On 17 December 2020 and 18 December 2020, the Company entered
into a settlement agreement with a dissenting shareholder to
purchase 702,874 and 236,452 ordinary shares respectively at NOK
2.91 (33.9 cents) and 2.91 (33.8 cents) per ordinary share
respectively, less dividend payments made with respect to those
shares from the notification of dissent. The cost to the Company
with respect to this buyback was NOK 1.89 million ($222k) and NOK
649k ($80k) respectively.
19. Share-based payments
2021 2020
$000 $000
---------------------------------------------------------------------------- ------
Share based compensation recognised in the statement of Comprehensive loss 537 300
---------------------------------------------------------------------------- ------ ------
Movement in the total number of share options outstanding and
their related weighted average exercise prices are summarised as
follows:
2021 2020
-------------------------------- -------------------------------
Number Weighted average Number of Weighted average
of exercise price options exercise price
options (US$)(1) (US$)
------------- ----------------- ------------ -----------------
Outstanding at 1 January 7,813,711 0.30 6,385,497 0.57
Granted 4,325,815 - 3,428,214 -
Forfeited - - - -
Lapsed (1,390,075) 0.38 (2,000,000) 0.67
Outstanding at 31
December 10,749,451 0.17 7,813,711 0.30
------------- ----------------- ------------ -----------------
The following table summarises share options outstanding and
exercisable at 31 December 2021:
Outstanding Exercisable
Exercise Exercise Number of options Weighted average Number of options
price (NOK) price (US$)(1) remaining
life (years)
------------- ---------------- ------------------ ----------------- ------------------
- - 957,447 9.9 -
- - 3,368,368 9..5 -
- - 942,593 8.9 -
- - 2,485,621 8.0 -
- - 495,422 7.4 -
3.85 0.44 750,000 4.0 750,000
4.08 0.46 250,000 1.3 250,000
5.18 0.59 1,500,000 2.2 1,500,000
10,749,451 2,500,000
------------------ ----------------- ------------------
(1) The US Dollar to Norwegian Kroner exchange rate used for
determining the exercise price at 31 December 2021 is 0.11349.
The following table summarises share options outstanding and
exercisable at 31 December 2020:
Outstanding Exercisable
Exercise Exercise Number of options Weighted Number of options
price (NOK) price (US$)(1) average
remaining
life (years)
------------- ---------------- ------------------ -------------- ------------------
- - 942,593 9.9 -
- - 2,485,621 9.0 -
- - 1,385,497 8.4 -
3.85 0.45 750,000 5.0 750,000
4.08 0.47 250,000 2.3 250,000
5.18 0.60 1,500,000 3.2 1,500,000
5.57 0.64 500,000 0.3 500,000
7,813,711 3,000,000
------------------ -------------- ------------------
(1) The US Dollar to Norwegian Kroner exchange rate used for
determining the exercise price at 31 December 2020 is 0.11676.
20. Share capital
Authorised, called up, allotted and fully paid
Ordinary shares Par value
--------------------------------- -------------------------- ------------------
2021 2020 2021 2020
$000 $000
--------------------------------- ------------ ------------ -------- --------
Balance at 1 January 186,488,465 186,488,465 416,426 416,426
Repurchase of own shares:
Cancelled and removed from
share register on 3 February
2021. (939,326) - (318) -
Repurchase of own shares:
Cancelled and removed from
share register on 30 December
2021. (see note 18) (4,500,000) - (1,189) -
--------------------------------- ------------ ------------ -------- --------
185,549,139 (2020: 186,488,465)
ordinary shares 181,049,139 186,488,465 414,919 416,426
--------------------------------- ------------ ------------ -------- --------
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
The 939k ordinary shares repurchased in December 2020 were
cancelled and removed from the share register on 3 February 2021.
The ordinary shares have also been removed from share capital.
The 4.5 million ordinary shares repurchased on 17 December 2021
were cancelled and removed from the share register on 30 December
2021. The ordinary shares have also been removed from share
capital.
21. Earnings per share
Basic and diluted eps
2021 2020
$000 $000
------------ ------------
Net profit for the period 6,067 3,428
------------ ------------
Weighted average number of ordinary shares outstanding 185,549,139 186,488,465
Weighted average number of own ordinary shares repurchased (287,671) (31,426)
------------ ------------
185,261,468 186,457,039
Dilutive effect of share options outstanding 8,249,451 4,813,711
Dilutive weighted average number of ordinary shares outstanding 193,510,919 191,270,750
------------ ------------
Undiluted net profit per ordinary share 0.03 0.02
------------ ------------
Diluted net profit per ordinary share 0.03 0.02
------------ ------------
During the year-ended 31 December 2021 2,500,000 options (2020:
3,000,000 options) were excluded from the dilutive weighted average
number of shares outstanding because they were anti-dilutive.
On 17 December 2021, the Company repurchased 7.5 million own
ordinary shares from dissenting shareholders. On 30 December 2021,
the Company cancelled all repurchased ordinary shares 4.5 million
(see note 18). The balance of 3.0 million ordinary shares were held
in treasury to satisfy upcoming obligations in respect of an
employee share plan .
22. Dividends
The following dividends were declared and paid by the Company
during the year.
2021 2020
$000 $000
-------------------------------------------------- ------ ------
1.0 pence ($ 0.01388; NOK 0.12205) per ordinary
share (2020: 0.9 pence; $ 0.01137; NOK 0.10872) 2,600 2,120
0.52 pence ($ 0.00711; NOK 0.06035) per ordinary
share (2020:0.48 pence; $ 0.00619; NOK 0.05683) 1,320 1,154
-------------------------------------------------- ------ ------
Total dividend paid 3,920 3,274
-------------------------------------------------- ------ ------
On 23 July 2021, the Company paid shareholders who hold shares
on the UK Register the final year 2020 dividend of 1.0 pence ($
0.01388) per ordinary share. On 6 August 2021, the Company paid
shareholders who hold shares on the VPS Register the final year
2020 dividend of 1.0 pence ($ 0.01388; NOK 0.12205) per ordinary
share. The total final dividend distribution was $2.6 million.
On 8 October 2021, the Company paid shareholders who hold shares
on the UK Register the 2021 interim dividend of 0.52 pence ($
0.00711) per ordinary share. On 22 October 2021, the Company paid
shareholders who hold shares on the VPS Register the 2021 interim
dividend of 0.52 pence ($ 0.00711; NOK 0.05683) per ordinary share.
The total interim dividend distribution was $1.3 million.
On 6 April 2022, the Company proposed a final dividend of $2.7
million for the year ended 31 December 2021 (2020: $2.6 million),
subject to shareholder approval at the 2022 AGM.
23. Income taxes
Income taxes
The Company's income tax expense for the year-end 31 December is
as follows:
2021 2020
$000 $000
---------- ----------
Profit before income taxes 6,008 2,229
---------- ----------
Expected income tax (recovery) expense at combined Tanzanian rate of 30% (2020: 30%) 1,802 669
Rate differentials 514 506
Tanzania cost gas excluded from taxable income (4,661) (3,530)
Tanzania dividend withholding tax 1,162 -
Movement in deferred tax assets not previously recognised and other adjustments (1) 1,124 1,156
Income tax expense (59) (1,199)
---------- ----------
(1) Includes $1.3 million unrecognized temporary difference
(2020: $1.1 million) and others adjustments of ($133k) (2020:
$60k).
During the year, Wentworth Resources plc fully recovered amounts
it had historically loaned to its operating subsidiaries to explore
for, and ultimately develop, gas in Mnazi Bay. The final
intercompany loan repayments were made in May 2021. Subsequent to
this date, the repatriation of funds from the United Republic of
Tanzania to Wentworth Resources plc was made by way of dividends
which carry a 10% withholding tax charge. These charges totalled
$1.2 million (2020: $nil). The Group is in continued dialogue with
the Government of the United Republic of Tanzania on the
applicability of these charges to the PSA at Mnazi Bay, however,
will continue to pay these charges in full until such time as talks
are concluded and a final settlement is reached.
The Company operates in multiple jurisdictions with complex tax
laws and regulations which are evolving over time. The Company has
taken certain tax positions in its tax filings and these filings
are subject to audit and potential reassessment after the lapse of
considerable time. Accordingly, the actual income tax impact may
differ significantly from that estimated and recorded by
management.
At 31 December 2021 there were no provisions or contingent
liabilities for current tax (2020: $nil)
The Company has unrecognised deductible temporary differences
that results in unrecognised deferred income tax assets of:
2021 2020
$000 $000
-------- --------
Non-capital losses 5,375 3,717
Property and equipment (307) (325)
5,068 3,392
-------- --------
The total non-capital losses of the Company are $121.9 million
(2020: $116.6 million) of which $104.0 million (2020: $105.1
million) are in Tanzania, $14.5 million (2020: $10.3 million) are
in the UK and $3.4million (2020: $1.2 million) are in Jersey.
A deferred tax asset is recognised to the extent that it is
probable that taxable profit will be available against which
deductible temporary differences and the loss carry forwards can be
utilised. A deferred tax asset of $8.2 million as at 31 December
2021 (2020: $6.9 million) is attributable to the accumulated tax
loss carry-forward of the Company's Tanzanian subsidiary, which are
expected to be offset against future taxable income. Recognition of
the tax asset is supported by the proven and probable reserves as
determined by a third-party external reserves engineer, RPS.
2021 2020
$000 $000
-------- --------
Balance at 1 January 6,859 5,548
Deferred income tax assets recognised
in profit or loss:
Non-capital losses (518) (179)
Asset retirement obligations and 213 33
Deferred income tax liabilities recognised
in profit or loss:
PP&E 1,688 1,454
Receivables (3) 3
Balance at 31 December 8,239 6,859
-------- --------
24. Financial instruments
The Company's activities expose it to a variety of financial
risks: credit risk, liquidity risk and market risk (currency
fluctuations, interest rates and commodity prices). The Company's
overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse
effects on the Company's financial performance. A full description
of the risks and key risks affecting the business is noted in the
Business Risks section of the Strategic Report.
Credit risk
Wentworth's credit risk exposure is equal to the carrying value
of its cash and cash equivalents, trade, other and long-term
receivables.
Trade and other receivables are comprised predominantly of
amounts due from government owned entities in Tanzania and Value
Added Tax ("VAT") in Tanzania.
The Group's ongoing exposure to trade receivables from TANESCO,
the state power company, relates to the gas sales from the Mnazi
Bay Concession to a TANESCO owned 18-megawatt gas-fired power plant
located in Mtwara, Tanzania. At 31 December 2021, the Mnazi Bay
Concession partners were owed three-months of invoices for gas
sales made to TANESCO, with $350k owing to Wentworth (2020: $1.3
million representing 14-months). The settlement of a large
proportion of these arrears during the year is welcomed by the
Group, however, it continues to engage in discussions with TANESCO
to accelerate the settlement of the balance.
During 2015, the Group commenced gas sales to TPDC under a
long-term gas sales agreement, the operator of the new
transnational gas pipeline in Tanzania. Credit risk relating to
sales to TPDC is substantially mitigated through a two-part payment
guarantee structure. The first part relates to a prepayment amount
of approximately three to four months of gas deliveries at current
sales volumes which has been received and is held by the Operator
of the Mnazi Bay Concession. The second part is a one-month
replenishable letter of credit which is not yet executed. At 31
December 2021, the Mnazi Bay Concession partners were owed one
month gas sales invoices, with $1.9 million owing to Wentworth
(2020: $1.9 million). Subsequent to year-end, TPDC has paid $1.9
million net to Wentworth.
At 31 December 2021, an undiscounted long-term receivable of
$6.5 million (2020: $6.5 million) related to the Group's disposal
of T&D assets, and the costs associated with the MEP incurred
in prior years by a wholly owned subsidiary of Wentworth (see note
11). On 6 February 2012, the Company, TANESCO, TPDC and MEM reached
an agreement that the Group's cost of historical operations in
respect of the Mtwara Energy Project should be reimbursed.
During 2017, the Government initiated its first review of the
costs to verify the balance owing by it. On 8 February 2018 the
Government issued the results which differed from the previously
audited and approved gross receivable of $6.5 million, which the
Group maintains was accurate and correct.
The Government is conducting a second review and due to the age
and uncertainty surrounding the receivable and its recoverability
the Group made a provision in-full during 2018 against the carrying
amount without prejudice to the ongoing commercial discussions with
the Government; the Group has reviewed this at the year-end and
continues to feel the provision is appropriate.
The Group's cash and cash equivalents of $22.8 million as at 31
December 2021 (2020: $17.8 million). The cash and cash equivalents
are held with financial institutions which are rated below.
Wherever possible ratings are provided by Fitch Ratings, however,
where no rating was available from either Fitch Ratings or either
of the other major international credit rating agencies such as
Standard & Poors or Moodys, the bank's local credit rating was
used:
2021 2020
Financial Institutions Rating Cash held Cash held
$000 $000
----------------------------------- ---------- ----------- -----------
Standard Bank BB- 12,270 6,049
Santander A+ 7,553 7,296
FirstRand Bank BB- 2,516 4,066
Tanzania Postal Bank - 245 31
Citibank Group A 120 219
Mauritius Commercial Bank Limited BB- 92 107
RBC Royal Bank AA 10 14
Barclays A+ 12 3
Petty cash N/A 2 2
---------- ----------- -----------
22,820 17,787
---------------------------------------------- ----------- -----------
The exposure to credit risk as at:
2021 2020
$000 $000
------- -------
Trade and other receivables (1) 4,181 4,847
Cash and cash equivalents 22,820 17,787
------- -------
27,001 22,634
------- -------
(1) Trade and other receivable exclude recoverable VAT and
prepaid corporate income tax of $1.4 million.
Aged trade and other receivables
Current 31-60 61-90 >90
1-30 days days days days Total
$000 $000 $000 $000 $000
----------- ------ ------ ------ --------
Balance at 31 December
2021
Trade receivables 2,410 506 397 42 3,355
Other receivables 288 - - 1,907 2,195
----------- ------ ------ ------ --------
2,698 506 397 1,949 5,550
----------- ------ ------ ------ --------
Balance at 31 December
2020
Trade receivables 2,128 94 84 954 3,260
Other receivables 1,061 - - 526 1,587
----------- ------ ------ ------ --------
3,189 94 84 1,480 4,847
----------- ------ ------ ------ --------
The movement in the allowances for impairment in respect of
trade receivables and contract assets during the year was as
follows (see note 10):
2021 2020
$000 $000
------ ------
Balance as at 1 January 11 -
Impairment loss recognized (11) 11
Balance as at 31 December - 11
------ ------
Liquidity risk
Liquidity risk is the risk that the Company will not have
sufficient funds to meet its liabilities as they become payable.
Other than routine trade and other payables, incurred in the normal
course of business.
The table below summarises the maturity profile of the Company's
financial liabilities based on contractual undiscounted payments
including future interest payments on long-term loans.
Less than 1 to 2 2 to 5 Total
1 year years years $000
$000 $000 $000
------------ ------- ------- ------
Balance at December 31,
2021
Trade and other payables 2,503 - - 2,503
Lease liability - 36 - 36
2,503 36 - 2,539
------------ ------- ------- ------
Balance at December 31,
2020
Trade and other payables 2,382 - - 2,382
2,382 - - 2,382
------------ ------- ------- ------
Trade and other payables include current lease liability of $46k
(2020: nil).
The fair value of the Company's trade and other payables
approximates their carrying values due to the short-term nature of
these instruments. The fair value of the long-term loans
approximates their carrying amounts as they bear market rates of
interest. The fair value of the other liability approximates its
carrying amount.
The Company has a working capital surplus at 31 December 2021
and generated positive cash flow from operations in 2021. The
Company plans to pay its financial liabilities in the normal course
of operations and fund future operating and capital requirements
through operating cash flows, bank debt, bank overdraft credit
facility and equity raises, when deemed appropriate. Operating cash
flow of the Company is dependent upon the purchasers of natural
gas, TPDC and TANESCO, continuing to meet their payment obligations
on a timely manner. Any delays in collecting funds from these
purchasers for an extended period of time could negatively impact
the Company's ability to pay its financial liabilities in a timely
manner in the normal course of business (see also capital
management section).
Market risk
Market risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in
market prices. Market risk is comprised of foreign currency risk,
interest rate risk and other price risk (e.g. commodity price
risk). The objective of market risk management is to manage and
control market price exposures within acceptable limits, while
maximising returns.
Commodity price risk
Commodity price risk is the risk that the Company suffers
financial loss as a result of fluctuations in oil or natural gas
prices. The Company's exposure to commodity price risk is mitigated
as the sale prices for gas sold by the Company is fixed under the
existing gas sale and purchase agreements. An increase of 1% in the
gas production would result in an increase of $70k (2020: $58k) in
revenue.
Foreign exchange risk
Foreign exchange rate risk is the risk that the Company suffers
financial loss as a result of changes in the value of an asset or
liability or in the value of future cash flows due to movements in
foreign currency exchange rates. Wentworth operates internationally
and is exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to the Tanzanian
Shilling and Pound Sterling against the functional currency of its
operating entities, the US dollar. The Company's objective is to
minimise its risk by borrowing funds in US dollars as revenues are
denominated in US dollars. In addition, the Company holds
substantially all its cash and cash equivalents in US dollars and
converts to other currencies only when cash requirements demand
such conversion.
Current receivables and liabilities denominated in various
currency:
United States
Pound Sterling Tanzanian Other Currency Dollar
$000 Shilling $000 $000 Total
$000 $000
----------------- ------------ ----------------- -------------- --------
Balance at 31 December
2021
Cash and cash equivalents 91 287 111 22,331 22,820
Trade and other receivables 899 645 92 3,914 5,550
Trade and other payables (49) (193) - (2,261) (2,503)
941 739 203 23,984 25,867
----------------- ------------ ----------------- -------------- --------
United States
Pound Sterling Tanzanian Other Currency Dollar
000 Shilling $000 $000 Total
$000 $000
Balance at 31 December
2020
Cash and cash equivalents 95 110 123 17,459 17,787
Trade and other receivables 935 384 92 3,436 4,847
Trade and other payables (74) (101) (5) (2,202) (2,382)
----------------- ------------ ----------------- -------------- --------
956 393 210 18,693 20,252
----------------- ------------ ----------------- -------------- --------
A 10% increase of the Pound Sterling against US dollar would
result in a change in loss before tax of $3k (2020: $39k) and the
opposite will be true for the decrease. In addition, a 10% increase
of the Tanzanian shilling against the US dollar would result in a
change in loss before tax of approximately $2k (2020: $2k) and the
opposite will be true for the decrease.
Financial instrument classification and measurement
The Company classifies the fair value of financial instruments
according to the following hierarchy based on the amount of
observable inputs used to value the instrument:
-- Level 1 - Quoted prices are available in active markets for
identical assets or liabilities as of the reporting date. Active
markets are those in which transactions occur in sufficient
frequency and volume to provide pricing information on an ongoing
basis.
-- Level 2 - Pricing inputs are other than quoted prices in
active markets included in Level 1. Prices in Level 2 are either
directly or indirectly observable as of the reporting date. Level 2
valuations are based on inputs, including expected interest rates,
share prices, and volatility factors, which can be substantially
observed or corroborated in the marketplace.
-- Level 3 - Valuation in this level are those with inputs for
the asset or liabilities that are not based on observable market
data.
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value
information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable
approximation of fair value.
Carrying amount Fair value Level 1 Level 2 Level 3 Carrying amount Fair value Level 1 Level 2 Level 3
2021 2021 2021 2021 2021 2020 2020 2020 2020 2020
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Loans and
receivables
Cash and
cash
equivalent 22,820 - - - - 17,787 - - - -
Trade and
other
receivables
(note 10) 5,550 - - - - 4,847 4,799 - 4,799 -
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Total
financial
assets 28,370 - - - - 22,634 4,799 - 4,799 -
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Financial
liabilities
measured at
amortised
cost
Trade and
other
payables
(note 15) (2,503) (46) - (46) - (2,382) - - - -
Lease
liability
(note 17) (36) (36) - (36) - - - - - -
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Total
financial
liabilities (2,539) (82) - (82) - (2,382) - - - -
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Total
financial
instruments 25,831 (82) - (82) - 20,252 4,799 - 4,799 -
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Capital management
The Company's objectives when managing capital are to safeguard
the Company's ability to continue as a going concern, in order to
develop its oil and gas properties and maintain a flexible capital
structure for its projects for the benefit of its stakeholders. In
the management of capital, the Company includes the components of
shareholders' equity as well as cash and long-term liabilities.
The Company manages the capital structure and adjusts it in
light of changes in economic conditions and the risk
characteristics of the underlying assets. As part of its capital
management process, the Company prepares budgets and forecasts,
which are used by management and the Board of Directors to direct
and monitor the strategy, ongoing operations and liquidity of the
Company. Budgets and forecasts are subject to judgement and
estimates such as those relating to future gas demand and ultimate
timing of collectability of trade receivables for gas sales. These
factors may not be within the control of the Company, which may
create near term risks that may impact the need to alter the
capital structure. The Company continues to effectively manage its
relationships with its gas purchasers to ensure timely collection
and with external lenders such that lending facilities are
available to the Company as and when needed. The Company may
attempt to issue new shares, enter into joint arrangements or
acquire or dispose of assets in order to maintain or adjust the
capital structure. Management reviews the capital structure on a
regular basis to ensure that the above-noted objectives are met.
The Company's overall strategy remains unchanged from the prior
year.
25. Related party transactions
Transactions with key management personnel
Details of Directors' remuneration, which comprise key
management personnel, are provided below:
2021 2020
$000 $000
-------- --------
Executive director short-term employee benefits 828 906
Non-executive directors short-term employee benefits 529 619
LTIP charges 403 228
-------- --------
1,760 1,753
-------- --------
26. Supplemental cash flow information
Finance income:
2021 2020
$000 $000
-------- --------
Finance income
Interest income 128 82
Foreign exchange gain - 37
Reversal of expected credit losses on TANESCO receivable (note 10) 11 -
Other finance income - 27
-------- --------
139 146
-------- --------
Finance costs
Accretion - decommissioning provision (126) (130)
Interest expense - (13)
Lease interest expenses (8) -
Foreign exchange loss (137) -
Renewal fee on overdraft facility (19) -
Bank charges (21) -
Expected credit losses on TANESCO receivable (note 10) - (11)
(311) (154)
-------- --------
Finance costs, net (172) (8)
-------- --------
27. Commitments
Lease commitment
The Group has an office leasehold agreement in Dar es Salaam,
Tanzania which was entered into on 1 October 2021 and expires on 30
September 2022 at an annual lease cost of $50k.
Capital commitment
At the date of this report, the Company had an outstanding
contractual work programme commitment with respect to the front end
engineering design study for the pipeline gas delivery compression
equipment, a gross firm budget for which totalled $7.3 million
($2.3 million net to Wentworth) and a contingent budget of $4.4
million ($1.4 million net to Wentworth).
28. Subsequent events
On 26 January 2022, the Company provided a financial and
operational update, setting 2022 production guidance at 75-85
MM/scf/day (gross).
On 14 February 2022, the Company announced the completion of the
Independent Reserves Assessment Report in which Wentworth's share
of gross 2P Reserves as at 31 December 2021 was estimated by RPS to
be 135.2 Bcf (22.5 MMboe) with a post-tax NPV10 of $108.1
million.
The Company purchased the following own ordinary shares of no
par value as part of the previously announced Share Buy Back
Programme:
Average price per share Average Price per share
Date No of own ordinary shares (GBP pence) ($ cents) Total cost ($000)
--------------- -------------------------- ------------------------- -------------------------- ------------------
7-Feb-2022 25,000 20.35 27.53 6.88
21-Feb-2022 52,080 21.00 28.52 14.85
22-Feb-2022 46,326 21.00 28.59 13.24
23-Feb-2022 47,500 21.00 28.52 13.55
28-Feb-2022 47,156 21.50 28.82 13.59
7-Mar-2022 52,560 21.11 27.92 14.67
8-Mar-2022 34,321 21.11 27.92 9.58
8-Mar-2022 10,875 21.02 27.67 3.01
11-Mar-2022 61,416 21.00 27.60 16.95
14-Mar-2022 60,973 21.25 27.70 16.89
15-Mar-2022 20,000 21.00 27.36 5.47
16-Mar-2022 25,000 21.05 27.45 6.86
16-Mar-2022 40,000 21.00 27.38 10.95
23-Mar-2022 7,500 21.40 28.26 2.12
24-Mar-2022 50,000 21.40 28.31 14.16
24-Mar-2022 13,890 21.00 27.78 3.86
25-Mar-2022 35,271 21.40 28.31 9.99
28-Mar-2022 64,250 21.00 27.36 17.58
31-Mar-2022 68,157 21.50 28.89 19.69
3-Apr-2022 70,013 21.50 28.82 19.75
--------------- -------------------------- ------------------------- -------------------------- ------------------
Total/average 832,378 21.13 28.04 233.37
--------------- -------------------------- ------------------------- -------------------------- ------------------
Non-IFRS Measures
The Group uses certain performance measures that are not
specifically defined under IFRS, or other generally accepted
accounting principles. These non-IFRS measures include adjusted
EBITDAX and operational costs of production ($/Mscf). The following
note describes why the Group has selected this non-IFRS
measure.
Adjusted EBITDAX
Adjusted EBITDAX is a non-IFRS measure which does not have a
standardised meaning prescribed by IFRS. This non-IFRS measure is
included because management uses the information to analyse cash
generation and financial performance of the Group. Adjusted EBITDAX
is defined as earnings before interest, taxation, depreciation,
depletion and amortisation, impairment, share-based payments,
provisions, and pre-licence expenditure The calculations of
adjusted EBITDAX are as follows:
2021 2020
($000) ($000)
-------------------------------------- -------- --------
Revenue 23,818 18,991
Less: production and operating costs (3,800) (3,837)
Less: recurring administrative costs (6,424) (5,448)
-------------------------------------- -------- --------
EBITDAX 13,594 9,706
Operating costs per Mscf is a non-IFRS measure used to monitor
the Group's operating cost efficiency, as it measures operating
costs to extract hydrocarbons on a unit basis. Operating costs per
Mscf is defined as total production costs excluding depletion.
Adjusted aggregate production cost is then divided by total
production for the prevailing period, to determine the unit cost
per Mscf.
2021 2020
------------------------------------------- -------- --------
Production and operating costs ($000) (3,800) (3,837)
Net entitlement to gas production (MMscf) 6,904 5,564
------------------------------------------- -------- --------
Production and operating cost ($/Mscf) (0.55) (0.69)
Standard
Cameron Snow, Head of Subsurface and Business Development , is a
geologist with 15 years' experience across North America, South
America, Africa, and Europe. He holds a BS in Geology from North
Carolina State University , an MS in Geology from Utah State
University , a PhD in Geological and Environmental Science from
Stanford University , and an MBA from Imperial College London. Mr.
Snow has read and approved the technical disclosure in this
regulatory announcement.
RESERVE DEFINITIONS
The following definitions have been used by RPS Energy Canada
Ltd. (RPS) in evaluating reserves.
These definitions are based on the Petroleum Resources
Management System, published in 2007, and revised in June 2018, and
sponsored by the Society of Petroleum Engineers (SPE), World
Petroleum Council (WPC), American Association of Petroleum
Geologists (AAPG), Society of Petroleum Evaluation Engineers
(SPEE), Society of Exploration Geophysicists (SEG), Society of
Petrophysicists and Well Log Analysts (SPWLA), and the European
Association of Geoscientists & Engineers (EAGE).
Reserves
Reserves are those quantities of petroleum anticipated to be
commercially recoverable by application of development projects to
known accumulations from a given date forward under defined
conditions. Reserves must satisfy four criteria: discovered,
recoverable, commercial, and remaining (as of the evaluation's
effective date) based on the development project(s) applied.
Reserves are classified according to a range of uncertainty
according to the following categories:
Proved Reserves (P1)
Proved Reserves are those quantities of Petroleum that, by
analysis of geoscience and engineering data, can be estimated with
reasonable certainty to be commercially recoverable from known
reservoirs and under defined technical and commercial conditions.
If deterministic methods are used, the term "reasonable certainty"
is intended to express a high degree of confidence that the
quantities will be recovered. If probabilistic methods are used,
there should be at least a 90% probability that the quantities
actually recovered will equal or exceed the estimate.
Probable Reserves (P2)
Probable Reserves are those additional Reserves which analysis
of geoscience and engineering data indicate are less likely to be
recovered than Proved Reserves but more certain to be recovered
than Possible Reserves. It is equally likely that actual remaining
quantities recovered will be greater than or less than the sum of
the estimated Proved plus Probable Reserves (2P). In this context,
when probabilistic methods are used, there should be at least a 50%
probability that the actual quantities recovered will equal or
exceed the 2P estimate.
Glossary
Bcf/Bscf Billion standard cubic feet
BOE Barrels of oil equivalent
------------------------------------------------
MMbbl Million barrels
------------------------------------------------
MMboe Million barrels of oil equivalent
------------------------------------------------
MMscf/d Million standard cubic feet per day
------------------------------------------------
NPV Net present value (at a specified discount rate
and specified discount date)
------------------------------------------------
Inside Information
The information contained within this announcement is deemed by
Wentworth to constitute inside information as stipulated under the
Market Abuse Regulation (EU) no. 596/2014 ("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.
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END
FR BKPBNFBKDOQK
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