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President Energy PLC FY Results for year ended 31 Dec 2018 & Q1 update

23/05/2019 7:01am

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President Energy PLC

23 May 2019

23 May 2019

PRESIDENT ENERGY PLC

("President", "the Company", or "the Group")

Audited Results for the year ended 31 December 2018

and unaudited first quarter 2019 update

President (AIM: PPC), the upstream oil and gas company with a diverse portfolio of production and exploration assets focused primarily in Argentina, is pleased to announce its audited results for the year ended 31 December 2018 and an unaudited first quarter 2019 update.

2018 was a transformational year for the Company and has provided President with the platform to deliver significant future growth as it begins to carry out its planned fully funded US$50 million work programme in 2019/20 in Argentina and with a target exit 2019 production in excess of 4,900 boepd.

Highlights - A record year for the group

Financial:

   --   Group turnover increased 163% to US$47.2 million (2017: US$17.9 million) 
   --   Adjusted EBITDA of US$16.7 million (2017: loss of US$1.4 million) 
   --   Gross profit (revenues less operating costs) of US$14.7 million (2017: loss of US$3.4 million) 

-- Free cash generation from core operations (excluding workovers) increased by 500% to US$21.7 million (2017: US$ 3.6 million)

   --   First operating profit in 10 years of US$8.7 million (2017: loss of US$8.8 million) 

-- Profit before tax (after all depreciation and impairments) of US$6.1 million (2017: loss of US$13.2 million)

-- Cash capital expenditure and acquisition costs of US$24 million in the year, with net borrowings at year end of US$28.1 million (2017 borrowings: US$17.1 million)

-- Material 2018 currency devaluation and macroeconomic volatility in Argentina managed with negligible (<US$0.1 million) cash losses

Corporate:

-- Two new concessions in Rio Negro acquired in 2018 for a cash consideration of US$9.9 million, of which US$8.7 million was paid in the period - the assets include a 60 km strategic pan-regional gas pipeline through part of which gas is already flowing

   --   Acquisition of 20% operational interest of exploration licence at Jefferson Island, Louisiana 

Operations:

-- Group net exit year production increased to 3,300 boepd (2017: 1,900 boepd) due to multiple workovers and three successfully drilled new wells

   --   An increase of 103% in Group net average production to 2,279 boepd (2017: 1,121 boepd) 
   --   All operating fields in Argentina and Louisiana generating positive operating profits 

-- Significant improvement in core operating performance with well operating costs per boe in 2018, excluding royalties and workovers, reduced by 34% in Argentina and 42% in Louisiana over 2017 to US$22.7 and US$7.8 respectively per barrel

-- Group-wide administrative costs per barrel reduced by 51% over previous year to US$6.4 per boe (2017: US$12.9 per boe)

Reserves:

-- Net 1P (proven) reserves in Argentina at year end, as confirmed by an independent reserves audit, increased by 6% to 15.4 mmboe with the higher value Rio Negro assets increasing by 83% to 8.1 mmboe

   --   Argentine assets 2P (proven and probable) reserves of 24.9 mmboe (2017: 26.5 mmboe) 

-- Argentine assets NPV 10 pre-tax value of US$291 million with total Group value of over US$300 million (2017: US$250 million and US$256 million respectively) demonstrating drive to better, higher value reserves

Q1 Unaudited Results and Update:

   --   President remains on track to achieve its year end exit target of some 4,900 boepd 

-- Unaudited turnover in the period increased year on year by 12.6% to US$12.5 million (Q1 2018: US$11.1 million)

   --   Unaudited Group EBITDA increased year on year by 41% to US$4.5 million (2018:US$3.2 million) notwithstanding 14.7% lower realisable oil prices from Rio Negro assets compared to the same period the previous year (Q1 2019: US$54.8 per barrel; Q1 2018 US$64.2 per barrel). Current realisable prices for May production are approximately US$62 per barrel. 

-- Production in Q1 increased by 39% year on year to 2,801 boepd which, given no capital expenditure, is commendable taking into account natural declines in wells and material disruption to production in the core Puesto Flores field due to serial electricity grid outages

-- The natural declines are being addressed by the current multi-well workover programme and the future powering of the Puesto Flores field using President's own gas will mitigate the disruptive electricity grid outages

-- Long lead items in process of being ordered for first wells in the drilling programme in Rio Negro with drilling contractor selected and multi-well drilling programme now due to start in August and extending through 2020. The programme comprises both development wells aimed at increasing production and also exploration wells to increase valuable reserves and is substantially in excess of the Company's work commitments to the relevant Province

-- The Puesto Prado oil treatment plant acquired in December 2018 has been successfully repaired and re-commissioned with production from that field being treated on site and will be sold direct to local refineries at higher margins

-- The Puesto Prado oil field is being powered by gas from President's Estancia Vieja field which is flowing through part of the recently acquired pipeline

-- Planning continues for the replacement of 16km of flexible gas pipeline with a 6" steel pipeline, thereby facilitating a greater volume of gas flow from the Estancia Vieja field which is expected to commence at that time. Completion is targeted in the latter part of the year

-- The drive for material gas production continues with positive progress being achieved in relation to the work related to repair and re-commissioning of the large-scale gas plant at Las Bases. The necessary long lead time compressors have now been ordered and the planned stage by stage reactivation through the next 18 months is on track, as a necessary precursor to the start of gas sales which are expected to start in H2. Full re-activation of the gas plant to its original designed capacity of 35 MMscf/d is now estimated to come in materially under original budget during course of 2020

-- Permitting work commenced on electrification of the Puesto Flores field using Estancia Vieja gas which is targeted to be completed in Q3 2019, with all long-lead items already purchased

-- Locations have been identified for new wells in the Puesto Guardian Concession, Pirity Concession, Paraguay and soon Jefferson Island, Louisiana. In relation to Puesto Guardian, advanced negotiations are underway with the Company's preferred drilling contractor and well site permit applications are being submitted

-- Group wide well operating costs, excluding workovers and royalties, reduced by 21.6% to US$16.44 per boe

-- Third party gas being transported through the Company's Rio Negro pipeline generating value-added revenue of US$ 200,000 per annum, the current volume of which gas President expects will increase during the course of the year

Outlook:

   --   President remains on track to achieve year end exit target of some 4,900 boepd 
   --   Fully funded US$50 million 2019/2020 Work Programme: 

- 15 new wells, some 20 workovers with pipeline and infrastructure works

- Programme set to deliver 50% exit production growth year on year

-- In Paraguay, the farm-out process continues whilst preparations are underway in any event to enable drilling operations to commence at Delray Main in late Q4 2019 or Q1 2020

-- Jefferson Island licence is progressing with seismic re-interpretation scheduled to be completed by the end of June with drilling now expected to commence in H2

-- The drive for material gas production from Rio Negro continues with positive progress being achieved with intriguing new potential prospects identified some of which will be addressed by drilling before the end of the year

Peter Levine, Chairman, commented:

"2018 was a record year for the Group in terms of all key performance indicators.

"We delivered on the transformation programme promised in 2017 and ended the year with two significant value enhancing acquisitions in Argentina and a strategic gas pipeline under our belt. The Group is well placed to materially expand its medium and longer-term capacity and profitability following our recently announced US$50 million work programme of multiple workovers and drilling, the first part of which has already commenced.

"We have a clear roadmap, concentrating on fast track growth in cash flow, profitability and margins. Our free cash flow is focused on our capex programme and we look to the future with confidence especially given the Group's multiple gas and oil production and exploration opportunities.

"Finally, it would not have been possible to achieve such a performance without the hard work of all our employees and I want to express my sincere gratitude and heartfelt thanks to all."

President Energy will be hosting an analyst and investor conference call at 14:00 (BST) on 23 May 2019. Please find below dial-in details:

Conference call dial-in details:

United Kingdom toll free: 08003589473

United Kingdom toll: +44 3333000804

PIN: 91151518#

Contact:

 
 President Energy PLC 
  Peter Levine, Chairman 
  Rob Shepherd, Group FD                  +44 (0) 207 016 7950 
 finnCap (Nominated Advisor) 
  Christopher Raggett, Scott Mathieson    +44 (0) 207 220 0500 
 Panmure Gordon (Joint Broker) 
  Charles Lesser, Dominic Morley           +44 (0) 207 886 2500 
 Whitman Howard (Joint Broker) 
  Hugh Rich, Grant Barker                 +44 (0) 207 659 1234 
 
   Tavistock (Financial PR) 
   Nick Elwes, Simon Hudson                 +44 (0) 207 920 3150 
 

Chairman's Statement

Summary

In my last Chairman's statement, I stated that 2017 was a year of transition and transformation. The record results for 2018 demonstrate that such transformation has not only been delivered but has provided the platform for what we believe will be the significant future growth and prosperity of our Group.

Following the acquisitions in late 2017 and 2018, turnover leapt to US$47.2 million, adjusted EBITDA to US$16.7 million, there was a 500% increase in free cash generation from operations and underlying well operating costs per barrel were reduced by nearly 30%. Whilst these as well as all the other numbers from 2018 are now consigned to history, the trends so established continue apace as we enter the business end of 2019, being the busiest three quarters of the year, embarking as we are on rolling drilling and workover campaigns as well as major infrastructure works on a number of fronts and in a number of geographic locations.

All our producing fields whether they be in Rio Negro Province and Salta Province, Argentina or Louisiana contributed profitably to Group and continue to do so. Nineteen well interventions (workovers, well tests and pulling operations) and three new wells were successfully completed in 2018, all in Rio Negro as the Group pivoted to extract expeditious value-added production from the Puesto Flores field. The success of our work was vindicated by the increase in proven reserves of 6% in that Province powering an increase in Group 2P NPV10 to over US$300 million pre-tax as calculated by the independent reserves auditor using a 10% discount rate.

By the end of the year, President's portfolio had increased with the acquisition of a further two concessions in Rio Negro, Las Bases and Puesto Prado, providing the Group with a valuable 60km pan-regional pipeline which the Company is already putting to good use. Puesto Prado is in fact already producing oil which is now treated by its own newly repaired and re-commissioned field processing plant.

With the prospects of the Company supercharged by those acquisitions and the infrastructure which unlocks President's gas potential, the Company is now pivoting towards driving gas output in tandem to oil production.

Country by Country performance

Argentina:

   --   All producing concessions are operationally profitable and contributing to the Group 

-- In Rio Negro, a total of 19 well interventions (workovers, well tests and pulling operations) were carried out and three new wells were successfully drilled and placed on production at the Puesto Flores field

-- Infrastructure work carried out in 2018 included new tank capacity and increased water disposal facilities at the Puesto Flores field, Rio Negro

-- The concessions of Las Bases and Puesto Prado together with the 60km strategic pipeline were acquired for a cash consideration of US$9.9 million

-- Rio Negro delivered an operating netback of US$33.4 per barrel after royalties, water disposal and transportation

-- Whilst no workovers have been carried out at Puesto Guardian since 2017, Puesto Guardian delivered an average of 438 boepd during the year compared to 476 boepd the previous year

-- On its current businesses, no corporate tax on profits is payable in Argentina until 2021 due to carried forward tax losses

   --   Farm-out process of exploration assets continues 

-- Litigation from the DP1002 well now settled amicably with the Company benefiting from a US$2.6 million credit being released from the provision previously provided therefore in the 2017 accounts

Paraguay:

-- During the year and into 2019 significant sub surface studies were carried out which have enabled a precise location of the forthcoming exploration well to be established

-- These intensive peer group studies have now determined that the Delray Main is the prospect that should be drilled first. That prospect together with the satellite prospects of Delray West and Delray South have a combined estimated mean oil in place of 254 MMbbls

   --   The term of the Pirity Exploration Concession was successfully extended until September 2020 

-- The farm-out process continues whilst preparations are underway in any event currently with drilling operations expected to commence at Delray Main in late Q4 2019 or Q1 2020

Louisiana, USA:

   --   Louisiana continues to contribute profitably and deliver cash to the Group 
   --   In 2018 it generated strong positive cash from core operations of US$226k per month 
   --   The very prospective Jefferson Island licence, acquired in 2018, is progressing with seismic re-interpretation now scheduled to be completed by June 2019 with drilling expected to commence in mid H2 

-- No federal tax is currently payable as carried forward losses are being utilised and this will continue for the foreseeable future

Corporate

In December 2018, President acquired two new Concessions in Rio Negro Province together with a strategic pan-regional pipeline, the cash consideration for which was US$9.9 million. Of this sum, US$8.7 million was paid on closing and US$1.2 million is to be paid by December 2019.

The acquisition was funded by a US$4 million extension of the banking facilities with Bank Hipotecario and a US$4 million extension of the IYA loan facility.

The balance of the monies outstanding from the Puesto Flores/Estancia Vieja acquisition being US$7 million was also paid in the year.

In April 2018, Rob Shepherd stepped up from his Non-Executive role to become Group Finance Director with Alex Moody-Stuart, formerly of Schlumberger, being welcomed as a Non-Executive Director. Taking into account the increase in executive directors, to ensure a balanced Board, Miles Biggins stepped down at the 2017 AGM and is no longer employed by the Group though continues to act as a consultant when required.

Financial review of 2018

In 2018, the Group recognized a gross profit of US$14.7 million (2017: loss US$3.4 million) that is now fully reflecting the transformational impact from the Puesto Flores and Estancia Vieja acquisitions in 2017. Group-wide administrative expenses outside of Argentina remained flat with the increase in overall Group administrative expense to US$6.1 million (2017: US$5.3 million) arising due to non-recurring legal expenses. Agreement was reached in 2018 to settle all claims in relation to the DP1002 well, which was rendered incapable of completion, resulting in an impairment of the full potential cost of US$10.9 million in 2016. While we remain confident in the strength of our claims, it was a distraction and we have therefore moved to conclude this matter. This agreement has resulted in an impairment credit of US$2.6 million recognized in the current year.

The profit for the year before tax of US$6.1 million (2017: loss US$13.2 million) marked the step change in activity. After considering the accounting provision for future taxes and minor current tax charges, a US$ 0.1 million was recognized in the year (2017: US$8.8 million loss).

Conclusion and Prospects

2018 was a record year for the Group in terms of all key performance indicators and it delivered on the transformational promise shown in 2017. The year ended with two new acquisitions in Argentina, including a strategic pan-regional gas pipeline and large scale gas plant, which we intend to put to good use in the near future.

The Company has the potential to achieve material expansion and our recently announced US$50 million work programme of multi workovers and drilling is aimed at delivering just that.

As I stated last year, our roadmap is clear, concentrating on fast track growth in cash flow, profits and margins complemented by our new drive for gas and potentially game changing exploration in due course.

It was not possible to achieve a record year in 2018 without the hard work of all our people and I express my sincere gratitude to all. We believe the best is yet to come.

Detailed financial review

In 2018, the Group recognized a gross profit of US$14.7 million (2017: loss US$3.4 million) that is now fully reflecting the transformational impact from the Puesto Flores and Estancia Vieja acquisition in 2017. Throughout 2018, the Group continued to build for the future growth in Argentina with development drilling, workover activity and asset acquisitions which will assist in developing Rio Negro into a core integrated regional business. After administrative expenses of US$6.1 million (2017: US$5.3 million) are taken in to account, this led to an operating profit before impairment and non-operating gains / (losses) of US$8.7 million (2017: loss US$8.8 million). The profit for the year before tax of US$6.1 million (2017: loss US$13.2 million) was after an impairment credit adjustment of US$2.6 million (2017: US$ 1.3 million charge) relating to the settlement of the DP1002 dispute as the well was fully impaired in 2016; 2017 related to the impairment of the East White Lake field in the USA. In addition, following a review of the expected costs and discount rate applied to the provision for decommissioning, a US$1.8 million credit to the income statement arose. Reflecting its nature as a non-cash accounting income in the period, it has been excluded from the Adjusted EBITDA calculation. After considering the accounting provision for future taxes and minor current tax charges, a profit of US$ 0.1 million was recognized in the year (2017: US$8.8 million loss)

Revenue increased by 163% to US$47.2 million (2017: US$17.9 million), as the first full year of sales from Puesto Flores are recognized. Overall Group production more than doubled for the second year running reaching 2,279 boepd (2017: 1,121 boepd) which was driven by acquisitions and higher production rates in both Argentina and the USA. Higher average product prices for the year of US$59.6/boe (2017: US$50.6/boe) supported the growth in sales. Cost of sales of US$32.5 million (2017: US$21.4 million) increased in line with the step changes in production levels but fell on a per boe basis reflecting the higher production volumes achieved.

Argentine operating performance

Production in Argentina increased by 138% to 721,764 boe (2017: 302,849 boe) or 1,977 boepd (2017: 830 boepd). Oil sales in Argentina averaged US$61.5 per bbl (2017: US$53.4 per bbl) as the transition to a fully de-regulated market progressed during 2018. Oil prices are now set to move in line with the prevailing Brent oil price adjusted for locational variations.

In order to have more visibility on the controllable element of operating costs, royalty and production related taxes have been split out and reflected in our key performance measures. Well operating costs in Argentina before workover expenses were managed down during the year to US$22.7/boe (2017: US$34.6/boe). Depreciation fell during the year to US$9.6/boe (2017: US$12.3/boe) due to higher production from Puesto Flores which has a lower than average depreciation charge per barrel. Independently assessed proved and probable reserves in Puesto Flores rose by 41% despite the overall reserve reduction in Argentina. Reserves in the Salta Province were prudently adjusted due to deliberately reduced capex activity as the Group focused on the higher value added Rio Negro fields.

A move to a deregulated oil price environment in Argentina in early 2018 triggered the reassessment of the functional currency for the Argentine subsidiary. In December 2017, President had completed the transformational acquisition of Chevron's interest in the Puesto Flores field and subsequent licence extension with the Rio Negro Province in Argentina. The cost of the acquisition and the payment terms for the licence extension were defined and settled in US Dollars. US Dollar denominated loans with 3rd party lenders in country and related party lenders were arranged to part fund these investments. Consequently, the functional currency was determined as US Dollars and the change effected on 1 January 2018.

USA operating performance

Production from the Group's working interest in US operations remained stable at 301 boepd (2017: 291 boepd). A full year of production from the Triche well following the additional interest and operatorship acquired in April 2017, more than offset the sale the East White Lake wells at the start of 2018.

Average Realised prices in the US rose 13% on the prior year to US$47.7/boe (2017: US$42.1/boe).

Well operating costs excluding royalty related expenses fell by over 40% to US$7.8 (2017: US$13.4) as the higher cost East White Lake production was replaced by the lower cost Triche operation. This switch also had a corresponding reduction in depreciation which fell by 58% in the year to US$3.1/boe (2017: US$ 7.2/boe). The resulting higher margins have led to an increased contribution from the USA business in 2018.

Group-wide administrative expenses outside of Argentina remained flat with the increase in overall Group administrative expense to US$6.1 million (2017: US$5.3 million) arising due to non-recurring legal expenses. Agreement was reached in 2018 to settle all claims in relation to the DP1002 well which was rendered incapable of completion resulting in an impairment of the full potential cost of US$10.9 million 2016. This agreement has resulted in an impairment credit of US$2.6 million, but with US$0.7 million recognized in administrative expense for associated legal expenses. Total impairment charges during 2017 of US$1.3 million related to the impairment of the East White Lake field in the USA. The sale of this field, presented as an asset held for resale in 2017, was completed on 1 January 2018 with no gain or loss recognized in 2018.

With an improved oil price environment, albeit with a dip at the end of 2018, a number of opportunities were considered in 2018 to grow the business. This culminated in the acquisition of the Puesto Prado and Las Bases concessions at the end of the year. The concessions, which are adjacent to the Puesto Flores / Estancia Vieja concession, include access to reserves, infrastructure and a strategic pipeline. The acquisition was funded in part out of existing resources and with additional borrowing of US$4.0 million from both IYA Limited and Banco Hipotecario. In order to accelerate the development an open offer for subscription was held in March 2019 which raised cash proceeds of approximately US$4.6 million.

2018 saw a turbulent economic environment in Argentina with high inflation and a dramatic devaluation in the Argentine Peso. Fundamentally, the Argentine business is a US dollar driven business with revenues in US dollars and a supplier cost base for the industry determined in US dollars so mitigating exposure to the environment in which we operate. Active treasury management avoided foreign exchange holding losses on cash resources. While we have benefitted from the fall in US dollar terms on Peso denominated costs, we have also suffered some erosion on Peso denominated tax receivables and Peso denominated tax basis. In light of the economic climate the Company has suspended the process to obtain a listing on the Bolsa de Comercio de Buenos Aires (BCBA) - the Argentine Stock Exchange.

The Group's primary investment focus during 2018 was on growth in core areas, increasing production in Argentina whist continuing to evaluate farm out opportunities in Paraguay and Argentina.

Investment in Property, Plant and Equipment in the year included US$11.6 million on the acquisition of licences in Argentina and US$16.4 million (2017: US$ 10.3 million) on the drilling of three development wells and capitalised workovers at the Puesto Flores field, facility enhancement work and capitalised workovers on the Puesto Guardian field and well conversion work linked to East Lake Verret facilities in the USA. Following the change in functional currency in Argentina, exchange differences arising on the translation are no longer reflected in the movement in the period.

Intangible Fixed Asset additions amounted to US$0.7 million (2017: US$0.7 million) including the acquisition of the Jefferson Island licence in the USA and capitalised expenses related to Paraguay and Argentina.

During 2018, the Pirity licence was extended by two years through to September 2020 and, while the farm-out process continued to attract interest in 2018, no firm agreement has yet been reached. The Company remains committed to drilling a well towards the end of 2019 or early 2020. An extensive geological review has been completed with a review by independent third party consultants completed in early 2019. This has determined the prospect and site location for the well.

The farm out process on the Matorras/Ocultar block in Argentina launched in 2017 continues to progress.

Trade and other payables increased to US$23.7 million (2017: US$18.1 million) largely due to the carry over of drilling creditors from the campaign in late 2018. Year-end cash balances were US$2.0 million (2017: US$4.0 million).

Key Performance Indicators

Key Performance Indicators are used to measure the extent to which Directors and management are reaching key objectives. The principal methods by which the Directors monitor the Group's performance are volumes of net production, well operating costs and the extent of exploration success. The Directors also carry out a regular review of cash available for exploration and development and review actual capital expenditure and operating expenses against forecasts and budgets.

In order to have more visibility on the controllable element of operating costs royalty and production related taxes have been split out prospectively and reflected in our key performance measures.

 
                                                     Increase/ 
                                     2018     2017    (Decrease) 
 Production mboe 
 USA                                110.0    106.3          3.5% 
 Argentina                          721.8    302.8        138.4% 
 Total net hydrocarbons             831.8    409.1        103.3% 
                                  -------  -------  ------------ 
 
 Well operating costs US$000* 
 USA                                  855    1,423        -39.9% 
 Argentina                         17,904   13,038         37.3% 
 Total operating costs             18,759   14,461         29.7% 
                                  -------  -------  ------------ 
 
 Well operating costs per boe 
  US$* 
 USA                                  7.8     13.4        -41.9% 
 Argentina                           24.8     43.1        -42.4% 
 Total well operating costs per 
  boe US$                            22.6     35.3        -36.2% 
                                  -------  -------  ------------ 
 

*Total operating costs including the royalty expense element are included with Alternative Performance measure for reference.

Consolidated Statement of Comprehensive Income

Year ended 31 December 2018

 
                                                                        2018       2017 
                                                             Note     US$000     US$000 
 Continuing Operations 
 Revenue                                                              47,181     17,945 
 Cost of sales                                                2     (32,452)   (21,402) 
                                                                   ---------  --------- 
 Gross profit/(loss)                                                  14,729    (3,457) 
 Administrative expenses                                      3      (6,059)    (5,295) 
                                                                   ---------  --------- 
 Operating profit /(loss) before impairment and non-operating 
  gains/(losses)                                                       8,670    (8,752) 
 Presented as: 
 Adjusted EBITDA                                                      16,660    (1,439) 
 Non-recurring items                                                 (2,275)    (2,566) 
 EBITDA excluding share options                                       14,385    (4,005) 
 Depreciation, depletion & amortisation                              (7,291)    (4,491) 
 Release of abandonment provision                                      1,817          - 
 Share based payment expense                                           (241)      (256) 
 Operating profit / (loss)                                             8,670    (8,752) 
----------------------------------------------------------  -----  --------- 
 
 Non-operating gains / (losses)                               4         (29)          1 
 Impairment credit / (charge)                                 5        2,610    (1,337) 
                                                                   ---------  --------- 
 Profit / (loss) after impairment and non-operating 
  gains/(losses)                                                      11,251   (10,088) 
 
 Finance income                                                          394        251 
 Finance costs                                                       (5,565)    (3,405) 
                                                                   ---------  --------- 
 Profit / (loss) before tax                                            6,080   (13,242) 
 
 Income tax (charge)/credit comprises: 
 Current tax income tax (charge)/credit                                 (19)       (62) 
 Deferred tax: foreign exchange arising on provision 
  for future taxes                                                   (6,415)          - 
 Deferred tax being underlying provision for 
  future taxes                                                           474      4,506 
----------------------------------------------------------  -----  ---------  --------- 
 Total income tax (charge)/credit                                    (5,960)      4,444 
 Profit / (loss) for the year from continuing 
  operations                                                             120    (8,798) 
 
 Other comprehensive income, net of tax 
 Items that may be reclassified subsequently 
  to profit or loss 
    Exchange differences on translation of foreign 
     operations                                                            -    (8,495) 
 Total comprehensive profit /(loss) for the 
  year attributable 
                                                                   ---------  --------- 
    to the equity holders of the parent                                  120   (17,293) 
                                                                   =========  ========= 
 
 Earnings / loss per share                                    6     US cents   US cents 
 Basic profit/(loss) per share from continuing 
  operations                                                            0.01     (0.91) 
                                                                   =========  ========= 
 Diluted profit(loss) per share from continuing 
  operations                                                            0.01     (0.91) 
                                                                   =========  ========= 
 

Consolidated Statement of Financial Position

31 December 2018

 
                                                      2018       2017 
 ASSETS                                  Note       US$000     US$000 
 Non-current assets 
 Intangible exploration & evaluation 
  assets                                           103,950    103,299 
 Goodwill                                              705        705 
 Property, plant and equipment                      92,117     72,016 
 Deferred tax                                        1,800      1,190 
 Other non-current assets                              351        352 
                                                   198,923    177,562 
                                                 ---------  --------- 
 Current assets 
 Trade and other receivables                        10,658      8,310 
 Asset held for resale                                   -      1,313 
 Stock                                                  84         77 
 Cash and cash equivalents                           1,970      4,026 
                                                    12,712     13,726 
                                                 ---------  --------- 
 
 TOTAL ASSETS                                      211,635    191,288 
                                                 =========  ========= 
 
 LIABILITIES 
 Current liabilities 
 Trade and other payables                           23,739     18,043 
 Asset held for resale                                   -        788 
 Borrowings                                          3,792      1,846 
                                                    27,531     20,677 
                                                 ---------  --------- 
 Non-current liabilities 
 Long-term provisions                                4,509      5,015 
 Borrowings                                         26,306     19,313 
 Deferred tax                                        6,857        306 
                                                    37,672     24,634 
                                                 ---------  --------- 
 
 TOTAL LIABILITIES                                  65,203     45,311 
                                                 =========  ========= 
 
 EQUITY 
 Share capital                                      23,654     23,642 
 Share premium                                     240,904    240,822 
 Translation reserve                              (50,240)   (50,240) 
 Profit and loss account                          (75,069)   (75,189) 
 Reserve for share-based payments                    7,183      6,942 
 TOTAL EQUITY                                      146,432    145,977 
                                                 ---------  --------- 
 TOTAL EQUITY AND LIABILITIES                      211,635    191,288 
                                                 =========  ========= 
 

Consolidated Statement of Changes in Equity

Year ended 31 December 2018

 
                                                                         Reserve 
                                                                           for 
                                                                Profit    share- 
                                                                   and 
                              Share     Share   Translation       loss    based 
                            capital   premium       reserve    account   payments      Total 
                             US$000    US$000        US$000     US$000     US$000     US$000 
 
 Balance at 1 January 
  2017                       22,086   227,325      (41,745)   (66,391)      6,686    147,961 
 
 Share-based payments             -         -             -          -        256        256 
 Issue of ordinary 
  shares                      1,534    13,809             -          -          -     15,343 
 Costs of issue                         (507)             -          -          -      (507) 
 Issue to service 
  provider                       22       195             -          -          -        217 
 
 Transactions with 
  the owners                  1,556    13,497             -          -        256     15,309 
                           --------  --------  ------------  ---------  ---------  --------- 
 
 Loss for the year                -         -             -    (8,798)          -    (8,798) 
 Other comprehensive 
  income 
    Exchange differences 
     on 
    translation                   -         -       (8,495)          -          -    (8,495) 
 Total comprehensive 
  income for 
 the year                         -         -       (8,495)    (8,798)          -   (17,293) 
                           --------  --------  ------------  ---------  ---------  --------- 
 
 Balance at 1 January 
  2018                       23,642   240,822      (50,240)   (75,189)      6,942    145,977 
 
 Share-based payments             -         -             -          -        241        241 
 Issue of ordinary 
  shares                         12        82             -          -          -         94 
 Costs of issue                             -             -          -          -          - 
 Transfer to P&L account          -         -             -          -          -          - 
 
 Transactions with 
  the owners                     12        82             -          -        241        335 
                           --------  --------  ------------  ---------  ---------  --------- 
 
 Profit for the year              -         -             -        120          -        120 
 Other comprehensive 
  income 
    Exchange differences 
     on 
    translation                   -         -             -          -          -          - 
 Total comprehensive 
  income for 
 the year                         -         -             -        120          -        120 
                           --------  --------  ------------  ---------  ---------  --------- 
 
 Balance at 31 December 
  2018                       23,654   240,904      (50,240)   (75,069)      7,183    146,432 
                           ========  ========  ============  =========  =========  ========= 
 

Consolidated Statement of Cash Flows

Year ended 31 December 2018

 
                                                       2018       2017 
                                                     US$000     US$000 
 Cash flows from operating activities 
 Cash generated by operating activities 
  (note 7)                                           14,723    (7,438) 
 Interest received                                      394        251 
 Taxes paid                                             (5)       (82) 
 Taxes refunded                                           - 
                                                     15,112    (7,269) 
                                                  ---------  --------- 
 Cash flows from investing activities 
 Expenditure on exploration and evaluation 
  assets                                              (558)      (655) 
 Expenditure on development and production 
  assets                                            (7,865)   (11,746) 
 Proceeds from asset sales                              503        475 
 Acquisition & licence extension in Argentina      (15,806)   (15,618) 
 USA acquisition                                       (93)    (2,218) 
 Deposits with state authorities                          1      (184) 
 Expenditure on abandonment                            (34)          - 
                                                   (23,852)   (29,946) 
                                                  ---------  --------- 
 
 Cash flows from financing activities 
 Loan drawn                                          11,670     15,495 
 Proceeds from issue of shares (net of 
  expenses)                                               -     14,836 
 Loan converted to equity                                 -    (2,205) 
 Shares issued to service provider                        -        217 
 Repayment of borrowings                            (2,206)    (1,207) 
 Payment of interest and loan fees                  (2,713)    (1,971) 
                                                      6,751     25,165 
                                                  ---------  --------- 
 
 Net decrease in cash and cash equivalents          (1,989)   (12,050) 
 Opening cash and cash equivalents at beginning 
  of year                                             4,026     17,586 
 Exchange gains on cash and cash equivalents           (67)    (1,510) 
 Closing cash and cash equivalents                    1,970      4,026 
                                                  =========  ========= 
 

Notes

   1.    Accounting policies and preparation 

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2018 or 2017 but is derived from the 2018 accounts.

A copy of the statutory accounts for the year to 31 December 2017 has been delivered to the Registrar of Companies and is also available on the Company's website. Statutory accounts for 2018 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2017 nor 2018.

Whilst the financial statements from which this preliminary announcement is derived have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the EU, this announcement does not itself contain sufficient information to comply with IFRS. The Annual Report, containing full financial statements that comply with IFRS, will be sent out to shareholders later in May 2019.

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, in the preparation of the 2018 financial statements they continue to adopt the going concern basis.

 
                                              2018     2017 
  2   Cost of sales                        US$000    US$000 
 
  Depreciation                               7,245    4,495 
      Release of abandonment provision     (1,817)        - 
  Royalties & production taxes               8,265    2,446 
  Well operating costs                      18,759   14,461 
                                            32,452   21,402 
                                          ========  ======= 
 

Well operating costs include US$1,531,000 (2017: US$2,566,000) in Argentine non-recurring workover costs expensed in the period.

 
                                                 2018     2017 
  3   Administrative expenses                  US$000   US$000 
 
  Directors and staff costs (including 
   non-executive Directors)                     3,673    4,048 
  Share-based payments                            241      256 
  Depreciation                                     46      (4) 
  Other                                         2,099      995 
                                                6,059    5,295 
                                              =======  ======= 
 

To allow for meaningful comparison, staff costs, share based payments and depreciation expenses are reflected gross before the effect of allocations to operating costs or balance sheet assets. Other expenses are shown net of the effect of allocations US$1.7 million (2017: US$1.8 million). Administrative expenses in 2018 include US$0.7 million in legal expenses arising on the settlement of the DP1002 dispute in Argentina that are non-recurring.

 
  4   Other non-operating gains/(losses)           2018     2017 
                                                US$000    US$000 
 
      Reverse of provision for recoverable 
       taxes                                         84        - 
  Other gains/(losses) arising on asset 
   disposals                                      (113)        1 
                                                   (29)        1 
                                               ========  ======= 
 
                                                   2018     2017 
  5   Impairment (credit) / charge              US$000    US$000 
 
      DP1002 well in Argentina                  (2,610)        - 
  East White Lake USA (PP&E)                          -    1,337 
                                                (2,610)    1,337 
                                               ========  ======= 
 

Settlement was reached in 2018 in the dispute with contractors on the DP1002 well which was impaired in 2016. Consequently, outstanding cost accruals included in the US$10.9 million impairment have been reversed in 2018 resulting in a gain in the period.

 
 6 Earnings / (Loss) per share                           2018       2017 
                                                       US$000     US$000 
 Net profit / (loss) for the period attributable 
  to 
 the equity holders of the Parent Company                 120    (8,798) 
                                                   ==========  ========= 
 
                                                       Number     Number 
                                                         '000       '000 
 Weighted average number of shares in issue         1,072,106    971,173 
                                                   ==========  ========= 
 
                                                     US cents   US cents 
 Earnings /(loss) per share 
 Basic earnings / (loss) per share from 
  continuing operations                                  0.01     (0.91) 
                                                   ==========  ========= 
 Diluted earnings / (loss) per share from 
  continuing operations                                  0.01     (0.91) 
                                                   ==========  ========= 
 

At 31 December 2018, 64,962,628 (2017: 115,176,490) weighted potential ordinary shares in the Company which underlie the Company's share option and share warrant awards and may dilute earnings per share in the future, have been included in the calculation of diluted earnings per share. No dilution per share was calculated for 2017 as with the reported loss they are anti-dilutive.

 
 7 Notes to the consolidated statement 
  cash flows                                         2018       2017 
                                                   US$000     US$000 
 
 Profit / (loss) from operations before 
  taxation                                          6,080   (13,242) 
 Interest on bank deposits                          (394)      (251) 
 Interest payable and loan fees                     3,089      2,326 
 Depreciation of property, plant and equipment      7,291      4,491 
 Impairment (credit) / charge                     (2,610)      1,337 
 Release of abandonment provision                 (1,817)          - 
 (Gain) / loss on non-operating transaction            29        (1) 
 Share-based payments                                 241        256 
 Foreign exchange difference                        2,476      1,079 
                                                 --------  --------- 
 Operating cash flows before movements 
  in working capital                               14,385    (4,005) 
 Decrease / (increase) in receivables             (4,483)    (3,677) 
 Movement in stock                                    (7)          - 
 Increase / (decrease) in payables                  4,828        244 
 Net cash generated by operating activities        14,723    (7,438) 
                                                 ========  ========= 
 
   8   Segment reporting 
 
                            Argentina       Paraguay      USA        UK     Total 
                                 2018           2018     2018      2018      2018 
                               US$000         US$000   US$000    US$000    US$000 
 Revenue                       41,902              -    5,279         -    47,181 
 Cost of sales 
 Depreciation                   6,908              -      337         -     7,245 
 Release of abandonment 
  provision                   (1,817)                                     (1,817) 
 Royalties & production 
  taxes                         6,558                   1,707               8,265 
 Well operating costs          17,904              -      855         -    18,759 
 Administrative expenses        2,874             63      441     2,681     6,059 
 Segment costs                 32,427             63    3,340     2,681    38,511 
                           ----------  -------------  -------  --------  -------- 
 
 Segment operating 
  profit/(loss)                 9,475           (63)    1,939   (2,681)     8,670 
                           ==========  =============  =======  ========  ======== 
 
 
                            Argentina       Paraguay      USA        UK     Total 
                                 2017           2017     2017      2017      2017 
                               US$000         US$000   US$000    US$000    US$000 
 Revenue                       14,391              -    3,554         -    17,945 
 Cost of sales 
 Depreciation                   3,725              -      770         -     4,495 
 Royalties & production 
  taxes                         2,073                     373               2,446 
 Well operating costs          13,038              -    1,423         -    14,461 
 Administrative expenses        1,703             91      494     3,007     5,295 
 Segment costs                 20,539             91    3,060     3,007    26,697 
                           ----------  -------------  -------  --------  -------- 
 
 Segment operating 
  profit/(loss)               (6,148)           (91)      494   (3,007)   (8,752) 
                           ==========  =============  =======  ========  ======== 
 
 
   Segment assets           Argentina       Paraguay      USA        UK       Total 
                                 2018           2018     2018      2018        2018 
                               US$000         US$000   US$000    US$000      US$000 
 
 Intangible assets              1,781        102,075       94         -     103,950 
 Goodwill                         705              -        -         -         705 
 Property, plant and 
  equipment                    90,163             73    1,881         -      92,117 
                           ----------  -------------  -------  --------  ---------- 
                               92,649        102,148    1,975         -     196,772 
 Asset held for resale              -              -        -         -           - 
 Other assets                   9,534             18    3,040       301      12,893 
                                                                         ---------- 
                              102,183        102,166    5,015       301     209,665 
                           ==========  =============  =======  ========  ========== 
 
                            Argentina       Paraguay      USA        UK       Total 
                                 2017           2017     2017      2017        2017 
                               US$000         US$000   US$000    US$000      US$000 
 
 Intangible assets              1,578        101,721        -         -     103,299 
 Goodwill                         705              -        -         -         705 
 Property, plant and 
  equipment                    69,754            103    2,159         -      72,016 
                           ----------  -------------  -------  --------  ---------- 
                               72,037        101,824    2,159         -     176,020 
 Asset held for resale              -              -    1,313         -       1,313 
 Other assets                   7,852             17    1,767       293       9,929 
                                                                         ---------- 
                               79,889        101,841    5,239       293     187,262 
                           ==========  =============  =======  ========  ========== 
 
 
 
 
 Segment assets can be reconciled to 
  the Group as follows 
                                               2018      2017 
                                             US$000    US$000 
 Segment assets                             209,665   187,262 
 Group cash                                   1,970     4,026 
 Group assets                               211,635   191,288 
                                           ========  ======== 
 
 
 Segment liabilities    Argentina   Paraguay      USA       UK    Total 
                             2018       2018     2018     2018     2018 
                           US$000     US$000   US$000   US$000   US$000 
 
 Total liabilities         40,408        248    2,241   22,306   65,203 
                       ==========  =========  =======  =======  ======= 
 
                        Argentina   Paraguay      USA       UK    Total 
                             2017       2017     2017     2017     2017 
                           US$000     US$000   US$000   US$000   US$000 
 
 Total liabilities         27,438        274    2,451   15,148   45,311 
                       ==========  =========  =======  =======  ======= 
 

Glossary

Boe - barrels of oil equivalent

Bopd - barrels of oil per day

Boepd - barrels of oil equivalent per day

MMscf/d - million of standard cubic feet of gas production per day

1P - proven hydrocarbon reserves

2P - proven and probable hydrocarbon reserves

NPV10 - net present value over the life of the concessions/licences discounted by 10%

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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