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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Igas Energy Plc | LSE:IGAS | London | Ordinary Share | GB00BZ042C28 | ORD 0.002P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 14.89 | 14.80 | 14.98 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMIGAS
RNS Number : 2234R
Igas Energy PLC
20 September 2017
20 September 2017
IGas Energy plc (AIM: IGAS)
Unaudited results for the six months ended 30 June 2017
IGas Energy plc ("IGas" or "the Company" or "the Group"), one of the leading producers of hydrocarbons onshore in Britain, announces its unaudited half year results for the six months to 30 June 2017.
Results Summary
Hot Features
Premium
Six months
Six months to
to 30 30 June
June 2017 2016
GBPm GBPm
----------------------------------- ---------- ----------
Revenues 16.8 12.1
----------------------------------- ---------- ----------
Adjusted EBITDA 2.5 5.1
----------------------------------- ---------- ----------
Profit/(loss) after tax 8.0 (25.2)
----------------------------------- ---------- ----------
Net cash from operating activities 0.4 9.1
----------------------------------- ---------- ----------
Net debt 7.2 83.5
Cash and cash equivalents 16.3 27.1
----------------------------------- ---------- ----------
Operational Summary
-- Average production 1H 2017 was 2,326 boepd (1H: 2016 2,299 boepd) with operating costs of $28.5/boe (FY 2016: $27.5/boe)
-- Anticipated average production for 12 months to 31 December 2017 is c.2,250 boepd, due to maintenance. We expect to exit 2017 at c.2,500 boepd
-- Investment in conventional portfolio to underpin production of 2,500 boepd and operating costs of $25/bbl in the medium term
o Multiple incremental projects with attractive return potential identified and progressing
-- Good progress on our East Midlands shale acreage
o Tinker Lane Planning Application for exploration well approved in March 2017
o Site construction to commence for Springs Road and Tinker Lane post Nottingham County Council approval of discharge of planning conditions
o Drilling activity - spudding of first well anticipated in early 2018
-- Planning application submitted in North West to test Pentre Chert formation at Ellesmere Port
-- Planning applications to follow for appraisal drilling including flow testing in both the North West and East Midlands, with one application expected before the end of 2017
Corporate & Financial Summary
-- Successful completion of capital restructuring and fundraising in April 2017
o Experienced industry investor, Kerogen Capital, now a 28% shareholder following its $35 (GBP29) million equity investment
o Further $22 (GBP18) million raised in placing and open offer
o Net debt reduced from $122 (GBP100) million at 31 December 2016 to c.$9 (GBP7) million as at 30 June 2017
-- Significant cash balances as at 30 June 2017 of GBP16 million
-- Carried work programme of up to GBP183 million ($238 million at June 2017 exchange rates) as at 30 June 2017;
-- 300,000 barrels hedged for the second half of 2017 with a floor price of $40/bbl - $45/bbl. 450,000 bbls hedged for 2018 with a floor price of $41/bbl - $46/bbl.
Commenting today Stephen Bowler, Chief Executive Officer, said:
"We are well funded for the future and continue to be cashflow generative at current oil prices. We now have capital to deploy in growth projects across our conventional assets, in addition to the c.US$240m carried work programme on our shale acreage.
Since the capital restructuring, we have been able to bring forward an active programme of maintenance. We have also identified incremental projects that will further underpin our conventional portfolio with resultant production levels of c.2,500 boepd and operating costs of c.US$25/bbl in the medium term.
We will shortly commence site construction at our two sites in North Nottinghamshire, ahead of drilling. In the North West, we have submitted an application to conduct further tests on our site at Ellesmere Port and we are developing further applications for appraisal and flow testing across our acreage in both the North West and the East Midlands.
Momentum in UK shale activity continues to increase with Cuadrilla now drilling its first well at Preston New Road, Third Energy expecting to start hydraulic fracturing at its KM8 well in North Yorkshire in the next few months and INEOS having submitted further applications for shale appraisal alongside its 3D seismic acquisition programme.
Alongside this activity, given the proximity to our Weald Basin acreage, we also await with interest the results from drilling and flow tests in this area.
Encouragingly, there is a significant level of activity onshore UK, and over the next 12 months, the industry is expected to have over half a dozen operators either drilling or flowing wells, including a number from IGas. We look forward to the future with excitement not only for IGas, but for the wider UK onshore industry as security of energy supply and diversification of the UK energy mix becomes ever more critical."
A results presentation will be available at www.igasplc.com/investors/presentations.
John Blaymires, Chief Operating Officer of IGas Energy plc, and a qualified person as defined in the Guidance Note for Mining, Oil and Gas Companies, March 2006, of the London Stock Exchange, has reviewed and approved the technical information contained in this announcement. Mr. Blaymires has more than 30 years' oil and gas exploration and production experience.
For further information please contact:
IGas Energy plc
Tel: +44 (0)20 7993 9899
Stephen Bowler, Chief Executive Officer
Julian Tedder, Chief Financial Officer
Ann-marie Wilkinson, Director of Corporate Affairs
Investec Bank plc (NOMAD and Joint Corporate Broker)
Tel: +44 (0)20 7597 4000
Sara Hale/Jeremy Ellis/George Price
Canaccord Genuity (Joint Corporate Broker)
Tel: +44 (0)20 7523 8000
Henry Fitzgerald-O'Connor
Vigo Communications
Tel: +44 (0)20 7830 9700
Patrick d'Ancona/Chris McMahon
Introduction
During the first half of the year we concluded a successful capital restructuring, significantly reducing debt and giving the company an improved capital structure which is sustainable in the current oil price environment, as well as introducing a significant and knowledgeable sector investor in Kerogen. This, coupled with the significant carried shale work programme, means we are well positioned to pursue our strategy, maximising the potential of our existing assets and developing our shale gas business.
The capital restructuring, including the raising of new equity capital, required significant time from the Board and senior management. Since its completion, in April, we have been advancing operational matters across our production and shale development assets.
With capital now available to deploy we are taking further steps to improve operating and production efficiency that will underpin our conventional production into 2018 and beyond. We have taken a number of projects to FID since the period end which will start to increase production levels in 2018. There are a significant number of incremental projects that we continue to identify and progress with attractive internal rates of return and payback periods at the current oil price. These give the Board confidence that c.GBP5m of incremental capital expenditure per annum will result in production of levels of c.2,500 boepd and operating costs of c.US$25/bbl in the medium term.
There were a number of Board changes in the period including the appointment of Philip Jackson and Tushar Kumar, two directors from Kerogen, as non-Executive Directors. Following the AGM in June 2017, Chairman and Founder, Francis Gugen and Independent non-executive Director, John Bryant retired and Mike McTighe took over the role of Chairman. In addition, John Blaymires and Julian Tedder resigned from the PLC board but remain directors of the operating companies and continue to hold their executive roles.
The Company is now approaching a period of increased operational activity across its acreage. Having received formal planning approval for three wells in North Nottinghamshire we will commence site construction post the discharge of relevant planning conditions and, once completed, expect to commence drilling in early 2018.
As well as our own shale work programme, the coming months should see important news flow as momentum is building across the wider UK shale industry. Cuadrilla has begun drilling at its Preston New Road site in Lancashire and Third Energy is expected to commence hydraulic fracturing later this year at its site in Kirby Misperton, Yorkshire. INEOS has submitted a number of planning applications for exploration wells in Derbyshire and South Yorkshire, acreage adjacent to a number of our licences, and is acquiring seismic data across its licensed acreage in the East Midlands and Yorkshire. All of this data will help the industry better understand the geology in these basins.
Indigenous gas is an increasingly important part of the energy mix. At the peak of North Sea production we were net exporters of gas, but we now face future import dependency levels of up to 80% by 2035 if we are unable to address our supply challenges. As we move away from coal, UK sourced gas is increasingly important as part of the energy mix for security of supply whilst also providing environmental benefits compared to imported gas. In 2016, coal's share of electricity generation fell steeply being replaced solely by gas generation (up 44%), with renewables remaining at 25% compared to 2015. The increased contribution from gas resulted in carbon dioxide emissions falling by 7%, the largest of all the European states. The UK's Committee on climate Change says gas will play a key role through to 2050 and that extraction of shale gas could be compatible with our carbon targets. Lifecycle greenhouse gas emissions from UK-produced shale are 10% lower than for gas imported by tankers.
The UK needs a secure supply of gas as a bridging fuel until renewable sources can provide sufficient quantum and stability of energy for society's needs. Today, eight out of ten homes use gas for heating, 61% for cooking and up to 50% of our electricity is derived from gas. Half a million jobs are secured in this country by using gas as a raw material - making products as diverse as toothpaste, painkillers and wind turbines. For the foreseeable future our homes, businesses and industries will need gas.
As we look to the future, the world is moving to the electrification of transport with many European countries including the UK having announced plans to ban the sale of new diesel and petrol cars in the future. The extra electricity needed in the UK alone will be the equivalent of almost 10 times the total power output of the new Hinckley Point C nuclear power station being built. Gas already generates over 40% of our electricity generation in the UK, of which 50 % is imported, so to move to this brighter future, gas will remain an important element of the energy mix.
Operating review
Production assets
The average net production in the six months to 30 June 2017 was 2,326 boepd (six months ended 30 June 2016: 2,299 boepd). Production was slightly below budget for the period due to necessary maintenance on a number of wells for which we took remedial action, including engagement of an additional workover rig to accelerate reinstatement of these wells. Since the capital restructuring earlier in the year we have been investing in our conventional assets and have decided to take the opportunity to conduct additional preventative maintenance, predominantly in the East Midlands, including some "shut-ins". This will impact production in the second half of 2017 and we anticipate net production for the year of c.2,250 boepd. Due to the further expenditure associated with this additional maintenance activity and the reduction in production, we now anticipate full year operating expenses of $30/boe. However, once these maintenance projects have been completed we expect to exit 2017 at c. 2,500 boepd.
We anticipate conventional capital expenditure for the year of c. GBP4.0 million across a number of projects, which includes preparatory expenditure in advance of the Albury and Gainsborough gas projects, pump enhancement and waterflood activity and plant and maintenance projects.
We have sanctioned an extension of the Welton water injection project and we would expect to see the benefits beginning to flow through in late 2018. We have experienced encouraging results with this technique already at Welton where there is an ongoing uplift in production of some 50-100 bopd. Technical work is continuing to expand this waterflood project with new target/additional wells under review across the portfolio.
We have also recently sanctioned a workover campaign as well as the sidetrack of a well in the Stockbridge area to optimise reservoir voidage, protect production and enable increased offtake of some 50-80 bopd from these fields. We should complete this work in May 2018.
We have also identified a significant number of incremental projects in addition to Welton and Stockbridge with attractive returns. Detailed technical and economic evaluations are progressing to advance these opportunities which will further underpin our conventional portfolio. These include the installation of beam pump gas compressors to boost pumping capacity and hence offtake, deepening of existing pumps, perforating additional zones and identifying infill well locations.
Following the earlier approval of planning consents at Albury and Bletchingley for gas production the associated commercial discussions are progressing and we currently anticipate first gas from Albury in the third quarter of 2018.
It is also worth noting that areas of our licensed acreage in the Weald Basin are adjacent to licences owned and operated by onshore operator UK Oil and Gas Investments PLC ("UKOG"). UKOG has been testing multiple zones in the Kimmeridge which appears to be oil bearing across a substantial section and has recently been granted consent to continue to test those horizons over an extended period. We do not currently carry any booked resources for the Kimmeridge/Micrite play in our licences. However, we continue to closely monitor the progress of the UKOG drilling and testing campaign as well as other operators that are expected to commence work later this year.
Appraisal assets
We continue to operate one of the largest prospective shale acreage positions in the UK, of over 1 million acres (gross) with a gross carried shale work programme with our joint venture partners of up to GBP183 million as at 30 June 2017.
In March 2017, INEOS Upstream Limited ("INEOS") completed its acquisition of ENGIE E&P UK Limited's ("ENGIE") interests in certain UK onshore licences held jointly with IGas. ENGIE's obligations to carry IGas in respect of all the licences (other than PEDL 293 and PEDL 295) have now been taken over by INEOS.
East Midlands and Yorkshire
In March 2017, we were granted planning permission for one exploratory well at our Tinker Lane site in North Nottinghamshire. In May 2017, we signed Section 106 legal agreements for the exploratory well sites at both Springs Road and Tinker Lane with Nottinghamshire County Council ("NCC"), in effect the legal agreement for the planning consent.
Since then we have been busy discharging the conditions set as part of the planning permission. These have all been completed and we now await the formal approval of our conditions by NCC. Once approved, we can then move to the construction phase for these two sites which we expect to take between two to three months, dependent on weather. Accordingly, we anticipate the drilling of the first well to commence in early 2018.
We are currently in the process of securing new sites and progressing further planning applications to follow for appraisal and flow testing in the East Midlands area.
North West
Since the interpretation of the 3D seismic acquisition programme on the North West we have been evaluating our options in respect of the next steps in our appraisal programme.
As part of that work programme, we submitted a planning application at our existing site at Ellesmere Port in July 2017. Evaluation of wire-line logs acquired across the various formations encountered during the drilling of the well in 2014 indicated hydrocarbons being present in the Pentre Chert Formation.
The Pentre Chert Formation is a fractured reservoir rock composed of interbedded layers of cherts and cherty mudstones, with subordinate thin layers of siltstones, limestones and sandstones.
The proposed project includes carrying out further tests on the Pentre Chert, including a Drill Stem Test ("DST") to provide an initial analysis of the hydrocarbon composition and its flow characteristics within the formation. The initial information obtained during the DST will be used to determine whether commercially viable quantities of hydrocarbons exist and if successful we will then carry out an Extended Well Test to better understand the volumes of gas it contains.
In addition, we have been working on securing appropriate sites for development in the area and will now be bringing forward further applications for appraisal/flow testing including hydraulic fracturing, with at least one being submitted before the end of the year.
Financial review
The Group generated revenue of GBP16.8m in the first six months of 2017 from sales of 444,023 barrels of oil including sales of third party oil, and 4,100 mwh of electricity (1H 2016: revenue GBP12.1m, sales 438,665 barrels of oil and 4,200 mwh of electricity). Brent prices increased compared to the first half of 2016, averaging $51.8/bbl during 1H 2017 compared to $39.7/bbl in 1H 2016. Revenue was also increased by the positive impact of a weakening GBP:USD exchange rate with sterling weakening against the US dollar from an average of $1.43/GBP1 in 1H 2016 to an average of $1.27/GBP1 in 1H 2017.
Adjusted EBITDA for 1H 2017 was GBP2.5m (1H 2016: GBP5.1 m) and the profit after tax from continuing activities was GBP8.0m (1H 2016: loss of GBP23.9m). The main factors explaining the movements between 1H 2017 and 1H 2016 were as follows:
-- Increased revenues of GBP16.8m (1H 2016: GBP12.1m) principally due to higher oil prices (pre hedge);
-- Operating costs increased to GBP10.9m (1H 2016: GBP8.9m) mainly due to higher costs of purchasing and transporting third party barrels, a rates refund in 2016 and higher maintenance activity during 2017. The increase in costs for third party barrels is offset by higher third party revenue;
-- Administrative expenses decreased to GBP3.9m (2016: GBP4.3m) mainly due to a cost reduction programme;
-- Exploration and evaluation assets written off GBPnil (1H 2016: GBP4.5m written off relating to licences relinquished during the period);
-- Derivative gain of GBP1.0m (1H 2016: GBP2.1m loss) due to the movement in the forward oil price curve;
-- Decreased finance costs of GBP5.1m (1H 2016: GBP13.8m) principally due to a foreign exchange loss of GBP7.8m in 1H 2016; and
-- A tax credit of GBP8.8m (1H 2015: GBP1.2m) principally due to the recognition of a deferred tax asset following a revision of the estimate of future profits that will be offset against ring fence tax losses.
Income statement
The Group recognised revenues of GBP16.8m in the period (1H 2016: GBP12.1m). Group production in the period was 2,326 boe/d (1H 2016: 2,299 boe/d). Oil sales were 403,223 barrels (excluding third party sales), with ca. 4,100 mwh of electricity sold (1H 2016: 398,988 barrels; 4,200 mwh of electricty). Revenues for the period also included GBP1.6m (1H 2016: GBP0.9m) relating to the sale of third party oil, the bulk of which is processed through our gathering centre at Holybourne in the Weald Basin.
The average realised price for the period pre hedge was $46.8/bbl (1H 2016: $40.0/bbl) and post hedge $46.8/bbl (1H 2016: $54.5). The average exchange rate for the period was GBP1: $1.27 (1H 2016: GBP1: $1.43) which positively impacted revenues during the period.
Cost of sales for the period were GBP14.8m (1H 2016: GBP13.0m) including depreciation, depletion and amortisation (DD&A) of GBP3.8m (1H 2016: GBP4.1m), and operating costs of GBP10.9m (1H 2016: GBP8.9m). Operating costs include GBP1.5m (1H 2016: GBP0.7m) in relation to processing third party oil. The contribution received from processing third party oil was GBP0.1m (1H 2016: GBP0.2m). Excluding the costs of processing third party oil, operating costs increased by GBP1.2m on the prior period principally due to higher maintenance activity in 1H 2017 and a rates refund in 1H 2016. Operating costs per barrel of oil equivalent were GBP22.4 ($28.5), excluding the third party costs (1H 2016: GBP19.2 ($27.5) per barrel).
Adjusted EBITDA in the period was GBP2.5m (1H 2016: GBP5.1m). Gross profit of GBP2.0m was recognised in the period (1H 2016: GBP1.0m loss). Administrative costs decreased by GBP0.4m to GBP3.9m (1H 2016: GBP4.3m) principally due to a continuing focus on cost reduction.
Exploration costs written off were GBPnil (1H 2016: GBP4.5m (GBP2.2m net of tax)).
Net finance costs were GBP5.0m in the period (1H 2016: GBP13.7m), including interest on borrowings of GBP4.3m (1H 2016: GBP5.7m), gain on fair value of warrants GBPnil (1H 2016: GBP0.1m), a net foreign exchange loss of GBP0.2m (1H 2016: GBP7.8m) and unwinding of decommissioning discount GBP0.5m (2016: GBP0.3m). The decrease in interest cost is due to the equitisation and repayment of bonds during the period.
The Group recognised a tax credit of GBP8.8m during the period primarily relating to the recognition of a deferred tax asset following the revision of the future profits that will be offset against ring fence tax losses.
Cash flow
Net cash generated from operating activities in the period amounted to GBP0.4m (1H 2016: GBP9.1m). The Group invested GBP1.7m across its asset base in the period (1H 2016: GBP5.1m), of which GBP0.8m was invested in the conventional assets, where investments continue to maintain our production at current levels, and GBP0.9m was invested in shale assets.
Cash decreased by GBP3.2m in the period due to a reduction in trade and other payables primarily due to the timing of payment of operational costs and fees relating to the refinancing, together with a reduction in interest accruals.
IGas carried out a capital restructuring during the period resulting in a cash inflow of GBP46.8m from the issue of shares and cash outflows of GBP39.3m and GBP3.9m, respectively, from the repayment of secured bonds and payment of fees. IGas also repaid GBP3.0m ($3.8m) of principal on borrowings to bondholders in the period in accordance with the terms of the bonds (1H 2016: GBP3.0m ($4.1m)), which represents a repayment of 2.5% of the original principal amount of the secured bonds, and purchased GBP1.8m ($2.2m) of bonds in accordance with the terms of the bond covenants (1H 2016: nil). Future annual interest costs have decreased to approximately $2.4m following the capital restructuring.
IGas paid GBP5.0m ($6.1m) in interest (1H 2016: GBP5.1m ($7.2m)).
Cash and cash equivalents were GBP16.3m at the end of the period (31 December 2016: GBP24.9m).
Balance sheet
Net assets were GBP173.3m at 30 June 2016 (31 December 2016: GBP70.5m) with the increase resulting primarily from the capital restructuring.
Following the capital restructuring, net debt, being borrowings less cash, decreased to GBP7.2m at 30 June 2017 (31 December 2016: GBP99.7m; 30 June 2016: GBP83.5m).
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016
------------------ ----------- ----------- -------------
GBPm GBPm GBPm
------------------ ----------- ----------- -------------
Debt (nominal
value excluding
capitalised
expenses) (23.4) (110.9) (124.6)
------------------ ----------- ----------- -------------
Cash and cash
equivalents 16.2 27.1 25.0
------------------ ----------- ----------- -------------
Restricted cash - 0.3 -
------------------ ----------- ----------- -------------
Net Debt 7.2 83.5 99.6
------------------ ----------- ----------- -------------
Shareholder's equity increased by GBP93.2m to GBP173.3m as a result of the capital restructuring (note 12).
Adjusted EBITDA
Adjusted EBITDA is considered by the Company to be a useful additional measure to help understand underlying performance.
Adjusted EBITDA
------------------------------- ----------- ----------- -------------
Six months Six months Year ended
ended ended 31 December
30 June 30 June 2016
2017 2016
------------------------------- ----------- ----------- -------------
GBPm GBPm GBPm
------------------------------- ----------- ----------- -------------
Loss before tax (0.7) (25.0) (44.8)
------------------------------- ----------- ----------- -------------
Net finance costs 5.0 13.7 28.8
------------------------------- ----------- ----------- -------------
Depletion, depreciation
& amortisation 3.9 4.2 6.5
------------------------------- ----------- ----------- -------------
Impairments/write
offs - 4.5 4.5
------------------------------- ----------- ----------- -------------
EBITDA 8.2 (2.6) (5.0)
------------------------------- ----------- ----------- -------------
Share based payment
charges 0.4 1.6 2.6
------------------------------- ----------- ----------- -------------
Redundancy costs 0.2 - 0.6
------------------------------- ----------- ----------- -------------
Gain on capital restructuring (5.3) - -
------------------------------- ----------- ----------- -------------
Unrealised loss/(gain)
on hedges (1.0) 6.1 12.0
------------------------------- ----------- ----------- -------------
Adjusted EBITDA 2.5 5.1 10.2
------------------------------- ----------- ----------- -------------
Principal risks and uncertainties
The Group constantly monitors the Group's risk exposures and reports to the Audit Committee and the Board on a regular basis. The Audit Committee receives and reviews these reports and focuses on ensuring that the effective systems of internal financial and non-financial controls including the management of risk are maintained. The results of this work are reported to the Board which in turn performs its own review and assessment.
The principal risks for the Group remain as previously detailed on page 34 and 35 of the 2016 Annual Report and Accounts and can be summarised as:
-- Planning, environmental, licensing and other permitting risks associated with its operations and, in particular, with drilling and production operations;
-- oil or gas is not produced in the anticipated quantities from any or all of the Group's assets or that oil or gas can be delivered economically;
-- Successful development of shale gas resources is not achieved;
-- Exposure to market price risk through variations in the wholesale price of oil in the context of the production from oil fields it owns and operates;
-- Market price risk through variations in the wholesale price of gas and electricity in the context of its future unconventional production volumes;
-- Exchange rate risk through both its major source of revenue and its major borrowings being priced in US$ while most of the Group's operating and G&A costs are denominated in UK pounds sterling;
-- Exposure, through its operations, to liquidity risk;
-- Exposure to capital risk resulting from its capital structure, including operating within the covenants of its existing bond agreements;
-- Exposure to political risk. This can include changes in Government or the effect of any local or national referendum. These political risks can result in changes to the regulatory or fiscal environment (including taxation) which could affect the Group's ability to deliver its strategy;
-- Strategy fails to meet shareholder expectations; and
-- Loss of key staff.
Going concern
The strength of the Group's balance sheet was improved significantly by the capital restructuring which completed in April 2017.
The Group continues to closely monitor and manage its liquidity risks. Cash forecasts for the Group are regularly produced based on, inter alia, the Group's production and expenditure forecasts, management's best estimate of future oil prices (based on current forward curves, adjusted for the Group's hedging programme) and the Group's borrowings. Sensitivities are run to reflect different scenarios including, but not limited to, possible further reductions in commodity prices below the current forward curve and reductions in forecast oil and gas production rates.
The Group's working capital forecasts show that the Group will have sufficient financial headroom for the 12 months from the date of approval of the half year results. Therefore, the Directors have a reasonable expectation that the Group has adequate resources to continue in existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in the preparation of the half year results.
Responsibility statement
The Directors confirm that to the best of their knowledge:
a) The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';
b) The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the six months and description of principal risks and uncertainties for the remaining six months of the year); and
c) The interim finance review includes a fair review of the business and of any required related party disclosures.
By order of the Board,
Stephen Bowler Julian Tedder Chief Executive Chief Financial Officer Officer
Independent review report to IGas Energy plc
Report on the Interim condensed consolidated financial statements
Our conclusion
We have reviewed IGas Energy plc's interim condensed consolidated financial statements for the 6 month period ended 30 June 2017 (the "interim financial statements"). Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Consolidated Balance Sheet as at 30 June 2017;
-- the Condensed Consolidated Income Statement and Condensed Consolidated Statement of Comprehensive Income for the period then ended;
-- the Condensed Consolidated Statement of Changes in Equity for the period then ended; -- the Condensed Consolidated Cash Flow Statement for the period then ended; and -- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim condensed consolidated financial statements, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim condensed consolidated financial statements in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the interim condensed consolidated financial statements based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim condensed consolidated financial statements and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
19 September 2017
a) The maintenance and integrity of the IGas Energy plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Condensed Consolidated Income Statement
Audited
Unaudited Unaudited year ended
6 months ended 6 months ended 31 December
30 June 2017 30 June 2016 2016
Notes GBP000 GBP000 GBP000
--------------------------------------------------------------- ----- --------------- --------------- ------------
Revenue 4 16,754 12,083 30,471
Cost of sales:
Depletion, depreciation and amortisation (3,837) (4,128) (6,323)
Other costs of sales (10,942) (8,919) (20,857)
--------------------------------------------------------------- ----- --------------- --------------- ------------
Total cost of sales (14,779) (13,047) (27,180)
Gross profit/(loss) 1,975 (964) 3,291
Administrative expenses (3,901) (4,284) (11,406)
Redundancy costs (173) - (557)
Exploration and evaluation assets written off 8 (45) (4,476) (4,485)
Gain/(loss) on oil price derivatives 997 (2,112) (3,496)
Other income 119 516 660
Operating loss (1,028) (11,320) (15,993)
Finance income 5 24 116 277
Finance costs 5 (5,073) (13,836) (29,057)
Gain on capital restructuring (net of transaction costs) 5,333 - -
--------------------------------------------------------------- ----- --------------- --------------- ------------
Loss from continuing activities before tax (744) (25,040) (44,773)
Income tax credit 6 8,768 1,158 13,006
--------------------------------------------------------------- ----- --------------- --------------- ------------
Profit/(loss) after tax from continuing operations attributable
to equity
shareholders of the Group 8,024 (23,882) (31,767)
Gain/(loss) after tax from discontinued operations 13 43 (1,332) (1,144)
--------------------------------------------------------------- ----- --------------- --------------- ------------
Net profit/(loss) attributable to equity shareholders of the Group 8,067 (25,214) (32,911) --------------------------------------------------------------- ----- --------------- --------------- ------------ Profit/(loss) attributable to equity shareholders: Basic gain per share (pence/share) 7 12.11p (169.0p) (219.74p) Diluted gain per share (pence/share) 7 11.90p (169.0p) (219.74p)
Condensed Consolidated Statement of Comprehensive Income
Audited
Unaudited Unaudited year ended
6 months ended 6 months ended 31 December
30 June 2017 30 June 2016 2016
GBP000 GBP000 GBP000
---------------------------------------------------------------------- --------------- --------------- ------------
Profit/(loss) for the period/year 8,067 (25,214) (32,911)
Other comprehensive income for the period/year:
Currency translation adjustments recycled to the income statement - 105 105
Other comprehensive income/(loss) to be classified to profit or loss
in subsequent periods:
Currency translation adjustments 803 (442) (1,231)
---------------------------------------------------------------------- --------------- --------------- ------------
Total comprehensive income/(loss) for the period/year 8,870 (25,551) (34,037)
---------------------------------------------------------------------- --------------- --------------- ------------
Condensed Consolidated Balance Sheet
Audited at
Unaudited at Unaudited at 31 December
30 June 2017 30 June 2016 2016
Notes GBP000 GBP000 GBP000
--------------------------------------------- ----- ------------- -------------- ------------
Assets
Non-current assets
Intangible exploration and evaluation assets 8 113,521 111,082 112,448
Property, plant and equipment 9 94,611 81,822 97,709
Goodwill 4,801 4,801 4,801
Deferred tax asset 6,562 - -
219,495 197,705 214,958
--------------------------------------------- ----- ------------- -------------- ------------
Current assets
Inventories 1,256 1,211 1,270
Trade and other receivables 5,607 8,169 7,015
Cash and cash equivalents 11 16,276 27,071 24,946
Other financial assets - restricted cash 11 - 354 -
Derivative financial instruments 10 120 521 -
23,259 37,326 33,231
--------------------------------------------- ----- ------------- -------------- ------------
Total assets 242,754 235,031 248,189
--------------------------------------------- ----- ------------- -------------- ------------
Liabilities
Current liabilities
Trade and other payables (4,910) (6,740) (8,170)
Current tax liabilities (346) (1,585) (1,318)
Borrowings 11 (1,171) (5,288) (6,084)
Other liabilities 10 - (65) (11)
Derivative financial instruments 10 - - (876)
(6,427) (13,678) (16,459)
--------------------------------------------- ----- ------------- -------------- ------------
Non-current liabilities
Borrowings 11 (21,418) (105,636) (118,495)
Deferred tax liabilities - (13,437) (1,779)
Provisions (41,585) (25,216) (40,924)
(63,003) (144,289) (161,198)
Total liabilities (69,430) (157,967) (177,657)
--------------------------------------------- ----- ------------- -------------- ------------
Net assets 173,324 77,064 70,532
--------------------------------------------- ----- ------------- -------------- ------------
EQUITY
Capital and reserves
Called up share capital 12 30,333 26,936 30,282
Share premium account 12 102,250 117,885 32
Capital redemption reserve - 41,239 -
Foreign currency translation reserve (7,187) (7,201) (7,990)
Other reserves 29,418 4,712 28,757
Accumulated surplus/(deficit) 18,510 (106,507) 19,451
--------------------------------------------- ----- ------------- -------------- ------------
Total equity 173,324 77,064 70,532
--------------------------------------------- ----- ------------- -------------- ------------
Condensed Consolidated Statement of Changes in Equity
Foreign
Called up Share Capital currency
share premium redemption translation Other Accumulated surplus/
capital account reserve reserve* reserves** (deficit) Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ --------- --------- ----------- ------------ ----------- -------------------- --------
At 31 December 2015
(audited) 26,636 117,731 41,239 (6,864) 1,322 (81,293) 98,771
Adjustment *** 3,246 3,892 23,643 - 22,222 (53,003) -
------------------------ --------- --------- ----------- ------------ ----------- -------------------- --------
Adjusted balance at 31
December 2015 29,882 121,623 64,882 (6,864) 23,544 (134,296) 98,771
Loss for the period - - - - - (25,214) (25,214)
Employee share plans - - - - 3,390 - 3,390
Issue of shares 300 154 - - - - 454
Currency translation
adjustments - - - (337) - - (337)
------------------------ --------- --------- ----------- ------------ ----------- -------------------- --------
Adjusted balance at 30
June 2016 (unaudited) 30,182 121,777 64,882 (7,201) 26,934 (159,510) 77,064
Loss for the period - - - - - (7,697) (7,697)
Capital reduction - (121,776) (64,882) - - 186,658 -
Employee share plans - - - - 1,954 - 1,954
Forfeiture of LTIPs
under the employee
share plan - - - - (131) - (131)
Issue of shares 100 31 - - - - 131
Currency translation
adjustments - - - (789) - - (789)
------------------------ --------- --------- ----------- ------------ ----------- -------------------- --------
At 31 December 2016
(audited) 30,282 32 - (7,990) 28,757 19,451 70,532
Profit for the period - - - - - 8,067 8,067
Employee share plans - - - - 667 - 667
Forfeiture of LTIPs
under the employee
share plan - - - - (6) - (6)
Issue of shares and conversion of debt (note 11) 51 93,210 - - - - 93,263 Reserves transfer on equitisation of unsecured bond**** - 9,008 - - - (9,008) - Currency translation adjustments - - - 803 - - 803 ------------------------ --------- --------- ----------- ------------ ----------- -------------------- -------- At 30 June 2017 (unaudited) 30,333 102,250 - (7,187) 29,418 18,510 173,324 ------------------------ --------- --------- ----------- ------------ ----------- -------------------- --------
* The foreign currency translation reserve represents exchange gains and losses arising on translation of foreign currency subsidiaries' net assets and results and on translation of those subsidiaries' intercompany balances which form part of the net investment of the Group.
** Other reserves include: 1) LTIP/VCP/EDRP/MRP/EIP reserves which represent the cost of share options issued under the long term incentive plans; 2) share investment plan reserve which represents the cost of the partnership and matching shares; 3) treasury shares reserve which represents the cost of shares in IGas Energy plc purchased in the market and held by the IGas Employee Benefit Trust to satisfy awards held under the Group incentive plans; and 4) capital contribution reserve which arose following the acquisition of IGas Exploration UK Limited.
*** Reclassification of the Group's share capital, share premium, capital redemption reserve and other reserves to align with those of the parent company. This adjusts the classification adopted on the reverse acquisition in December 2007.
**** The transfer on equitisation of unsecured bonds has arisen due to the unsecured bonds being equitized at 60% of par.
Condensed Consolidated Cash Flow Statement
Notes Unaudited Unaudited Audited
6 Months ended 6 Months ended year
30 June 30 June ended
2017 2016 31 December
GBP000 GBP000 2016
GBP000
Cash flows from operating activities:
Loss before tax for the period/year (744) (25,040) (44,773)
Write off deferred consideration - (420) (420)
Net gain on capital restructuring (5,333) - -
Depletion, depreciation and amortisation 3,894 4,209 6,474
Decommissioning costs incurred - (419) (418)
Share based payment charge 488 2,165 3,499
Exploration and evaluation assets written off 8 45 4,476 4,485
Unrealised (loss)/gain on oil price derivatives (997) 6,133 11,969
Finance income 5 (24) (116) (277)
Finance costs 5 5,073 13,836 29,057
Other non-cash adjustments (119) 40 (13)
Operating cash flow before working capital movements 2,283 4,864 9,583
Decrease/(increase) in trade and other receivables and
other financial assets 1,229 6,367 (3,366)
(Decrease)/increase in trade and other payables (3,205) (887) 698
Decrease/(Increase) in inventories 14 (117) (176)
Cash generated from continuing operating activities 321 10,227 13,471
----------------------------------------------------------- ------ ---------------- ---------------- -------------
Cash generated from/(used in) discontinued operating
activities 33 (614) (489)
----------------------------------------------------------- ------ ---------------- ---------------- -------------
Taxation refunded/(paid) - continuing operating activities 33 (552) (559)
Net cash generated from operating activities 387 9,061 12,423
----------------------------------------------------------- ------ ---------------- ---------------- -------------
Cash flows from investing activities
Purchase of intangible exploration and evaluation assets (880) (851) (2,304)
Purchase of property, plant and equipment (795) (4,215) (6,509)
Cash outflow from disposal of subsidiary - (171) (171)
Proceeds from disposal of oil and gas assets - 20 22
Interest received 34 124 34
----------------------------------------------------------- ------ ---------------- ---------------- -------------
Cash (used in) continuing investing activities (1,641) (5,093) (8,928)
Cash (used in) discontinued investing activities - (177) (177)
Net cash (used in) investing activities (1,641) (5,270) (9,105)
----------------------------------------------------------- ------ ---------------- ---------------- -------------
Cash flows from financing activities
Cash proceeds from issue of ordinary share capital 12 48 71 136
Cash proceeds from issue of shares in capital
restructuring 14 46,789 - -
Cash paid in settlement of secured bonds 14 (39,337)
Fees related to capital restructure 14 (3,913) - -
Repayment and repurchase of bonds (4,833) (2,960) (4,916)
Sale of bonds - - 4,914
Interest paid (5,040) (5,104) (11,570)
Cash used in continuing financing activities (6,286) (7,993) (11,436)
Net cash used in financing activities (6,286) (7,993) (11,436)
----------------------------------------------------------- ------ ---------------- ---------------- -------------
Net (decrease) in cash and cash equivalents during the
period/year (7,540) (4,202) (8,118)
Net foreign exchange difference (1,130) 2,659 4,450
Cash and cash equivalents at the beginning of the
period/year 24,946 28,614 28,614
-----------------------------------------------------------
Cash and cash equivalents at the end of the period/year 11 16,276 27,071 24,946
----------------------------------------------------------- ------ ---------------- ---------------- -------------
1 Corporate information
The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2017, which are unaudited, were authorised for issue in accordance with a resolution of the Directors on 19 September 2017.
IGas Energy plc is a public limited company incorporated and domiciled in England whose shares are publicly traded. The Group's principal activity is exploring for, appraising, developing and producing oil and gas resources in Great Britain.
2 Accounting policies
Basis of preparation
These condensed consolidated financial statements for the six months ended 30 June 2017 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard ('IAS') 34 - 'Interim Financial Reporting' as adopted by the European Union. The condensed interim financial statements should be read in conjunction with the consolidated financial statements for the year ended 31 December 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.
The financial information contained in this document does not constitute statutory accounts as defined by Section 435 of the Companies Act 2006 (England & Wales). The financial information as at 31 December 2016 is based on the statutory accounts for the year ended 31 December 2016. A copy of the statutory accounts for that year, which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union up to 31 December 2016, has been delivered to the Register of Companies and is available on the Company's website at www.igasplc.com. The auditor's report in accordance with Chapter 3 Part 16 of the Companies Act 2006 in relation to those accounts was unqualified and did not contain any matters on which the auditors are required to report an exception in accordance with section 498 (2) and (3) of the Companies Act 2006.
Going concern
The strength of the Group's and Company's balance sheet has been improved significantly by the capital restructuring as disclosed in note 14. Based on their strategic plans and working capital forecasts, the Directors have a reasonable expectation that the Group has adequate resources to continue in existence for the foreseeable future. Therefore, they continue to adopt the going concern basis in the preparation of the condensed financial statements.
Accounting policies
The accounting policies applied in these condensed financial statements are consistent with those followed in the preparation of the Group's financial statements for the year ended 31 December 2016.
New and amended standards and interpretations
During the period, the Group adopted the following new and amended IFRSs which were applicable to the Group's activities as of 1 January 2017 but not yet endorsed by the EU.
Amendments to IAS 7, 'Cash flow statements', regarding the Disclosure initiative (Not yet EU endorsed as of 1 May 2017) Amendments to IAS 12 'Income taxes', regarding recognition of deferred tax assets for unrealised losses. (Not yet EU endorsed as of 1 May 2017) Annual improvements 2014-2016 IFRS 12, 'Disclosure of interest in other entities' (Not yet EU endorsed as of 1 May 2017)
Certain new standards, interpretations and amendments to existing standards have been published which are mandatory only for the Group's accounting periods beginning on or after 1 January 2018 and which the Group has not adopted early. Those that may be applicable to the Group in future are as follows:
IFRS 2 Classification and measurement 1 January
of share-based payment transactions 2018*
- Amendment to IFRS 2
IFRS 15 Revenue from Contracts with Customers 1 January
2018*
IFRS 9 Financial Instruments 1 January
2018*
IFRS 16 Leases 1 January
2019*
IFRS 10 Sale or Contribution of Assets Postponed
and IAS between an Investor and its Associate indefinitely*
28 or Joint Venture - Amendments
to IFRS 10 and IAS 28.
* The effective dates stated above are those given in the original IASB/IFRIC standards and interpretations. As the Group prepares its financial statements in accordance with IFRS as adopted by the European Union (EU), the application of new standards and interpretations will be subject to their having been endorsed for use in the EU via the EU endorsement mechanism. In the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation but the need for endorsement restricts the Group's discretion to early adopt standards.
The Group is currently assessing the impact that these amendments will have on its financial position. The Group does not anticipate adopting these standards and interpretations ahead of their effective dates.
Estimates
The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 December 2016.
Financial risk management
The Group's activities expose it to a variety of financial risks; market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2016.
There have been no changes in the risk management department or in any risk management policies since the year end.
3 Basis of consolidation
The condensed consolidated financial statements present the results of IGas Energy plc and its subsidiaries as if they formed a single entity. The financial statements of subsidiaries used in the preparation of consolidated financial statements are based on consistent accounting policies to those of the parent. All intercompany transactions and balances between Group companies, including unrealised profits/losses arising from them, are eliminated in full. Where shares are issued to an Employee Benefit Trust, and the Company is the sponsoring entity, it is treated as an extension of the entity.
4 Revenue and segment information
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker ("CODM") to make decisions about resources to be allocated to the segments and assess their performance, and for which financial information is available. In the case of the Group, the CODM are the Chief Executive Officer and the Board of Directors and all information reported to the CODM is based on the consolidated results of the Group representing core (UK) and non-core (Rest of the World) operating segments. Therefore the Group has two operating and reportable segments as reflected in the Group's annual report and accounts for the year ended 31 December 2016.
All revenue, which represents turnover, arises solely within the United Kingdom and relates to external parties. The majority of the Group's non-current assets are in the United Kingdom.
6 months ended
30 June 2017
UK Rest of the World Group
GBP000 GBP000 GBP000
Oil sales to external customers 16,510 - 16,510
Electricity sales to external customers 244 - 244
--------------- ------------------- ---------------
16,754 - 16,754
--------------- ------------------- ---------------
Segment operating loss (957) (71) (1,028)
Net finance expense (note 5) (5,049) - (5,049)
Gain on conversion/repayment of debt 5,333 - 5,333
Loss before tax and discontinued operations (673) (71) (744)
--------------- ------------------- ---------------
6 months ended
Rest of the World 30 June 2016
UK GBP000 Group
GBP000 GBP000
Oil sales to external customers 11,883 - 11,883
Electricity sales to external customers 200 - 200
--------------- ------------------- ---------------
12,083 - 12,083
--------------- ------------------- ---------------
Segment operating loss (11,292) (28) (11,320)
Net finance expense (note 5) (13,714) (6) (13,720)
Loss before tax and discontinued operations (25,006) (34) (25,040)
--------------- ------------------- ---------------
Year ended
31 December
Rest of the 2016
UK World Group
GBP000 GBP000 GBP000
Oil sales to external customers 30,009 - 30,009
Electricity sales to external customers 462 - 462
--------------- ------------------- ---------------
30,471 - 30,471
--------------- ------------------- ---------------
Segment operating loss (15,926) (67) (15,993)
Net finance expense (note 5) (28,778) - (28,778)
Loss before tax and discontinued operations (44,706) (67) (44,773)
--------------- ------------------- ---------------
5 Finance income and costs
Unaudited Unaudited Audited
6 months ended 6 months ended year
30 June 2017 30 June 2016 ended
31 December 2016
GBP000 GBP000 GBP000
------------------------------------- ----------------- ----------------- -------------------
Finance income
Interest on short-term deposits 14 34 63
Other interest - - 78
Gain on fair value of warrants 10 82 136
Total for the period/year 24 116 277
------------------------------------- ----------------- ----------------- -------------------
Finance expense
Loss on sale of bonds 88 - 1,540
Interest on borrowings 4,251 5,676 11,930
------------------------------------- ----------------- ----------------- -------------------
Interest expense 4,339 5,676 8,731
Foreign exchange loss 196 7,849 14,841
Unwinding of discount on provisions 538 311 746
Total for the period/year 5,073 13,836 29,057
------------------------------------- ----------------- ----------------- -------------------
6 Tax on profit on ordinary activities
The Group calculates the period income tax expense using the tax rate that would be applicable to expected total annual earnings. The major components of income tax expense in the interim condensed statement of profit or loss are:
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 2017 30 June 2016 31 December 2016
GBP000 GBP000 GBP000
---------------------------------------------------------------- ---------------- --------------- -----------------
UK corporation tax
Current tax on income for the period - 42 -
Credit in relation to prior period (426) - (149)
Total current tax charge (426) 42 (149)
---------------------------------------------------------------- ---------------- --------------- -----------------
Deferred tax
Current year credit relating to the origination or reversal of
temporary differences (8,343) (1,200) (6,009)
Current year credit relating to the movement due to the tax rate
changes - - (6,270)
Credit in relation to prior year 1 - (578)
Total deferred tax credit (8,342) (1,200) (12,857)
---------------------------------------------------------------- ---------------- --------------- -----------------
Tax credit on profit on ordinary activities (8,768) (1,158) (13,006)
---------------------------------------------------------------- ---------------- --------------- -----------------
New rules restricting the use of carried forward non-ring fence losses are expected to be enacted later in the year with retrospective effect from 1 April 2017. As this change to the current legislation had not been enacted at the balance sheet date of 30 June 2017 the potential impact of the new rules has not been reflected in the above figures; it is however expected that any impact will be insignificant.
7 Earnings per share (EPS)
The calculation of the basic and diluted profit/loss per share is based on the following data:
Basic EPS amounts are based on the profit for the period after taxation attributable to ordinary equity holders of the parent of GBP8.0 million (six months ended 30 June 2016: a loss after tax of GBP25.2 million, year ended 31 December 2016: a loss after tax of GBP32.9 million) and the weighted average number of ordinary shares outstanding during the period of 66.6 million (six months ended 30 June 2016: 14.9 million, year ended 31 December 2016: 15.0 million).
Diluted EPS amounts are based on the profit/loss after taxation attributable to the ordinary equity holders of the parent and the weighted average number of shares outstanding during the period plus the weighted average number of ordinary shares (1.2 million) that would be issued on the conversion of all the potentially dilutive ordinary shares into ordinary shares, except where these are anti-dilutive. For both the six month period ended 30 June 2016 and year ended 31 December 2016, there were 1.6 million (restated based on the subdivided and consolidated shares - see note 12) potentially dilutive employee share options, LTIPs and warrants, which are not included in the calculation of diluted earnings per share because they were anti-dilutive as their conversion to ordinary shares would decrease the loss per share.
8 Intangible exploration and evaluation assets
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 2017 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
--------------------------- --------------- --------------- -----------------
At 1 January 112,448 113,394 113,394
Additions 1,118 2,164 3,616
Changes in decommissioning - - (77)
Amounts written off* (45) (4,476) (4,485)
At 30 June/31 December 113,521 111,082 112,448
--------------------------- --------------- --------------- -----------------
*Amounts written off during the prior period relate to previously capitalised expenditure of GBP4.5 million primarily in respect of licence PEDLs 174 and 207 which were written off during the period following the decision to relinquish these licenses.
Under the terms of the Secured Bond agreement, the Bondholders have a fixed and floating charge over these assets.
9 Property, plant and equipment
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 2017 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
------------------------------ ------------------------------ -------------------------------
Oil and Other Oil and Other Oil and Other
gas fixed gas fixed gas fixed
assets assets Total assets assets Total assets assets Total
----------------- --------- --------- -------- --------- --------- -------- --------- ---------- --------
Cost
At 1 January 168,329 3,767 172,096 147,434 3,731 151,165 147,434 3,731 151,165
Additions 877 4 881 2,844 306 3,150 5,622 342 5,964
Disposals - - - (77) (244) (321) (77) (306) (383) Changes in decommissioning - - - - - - 15,350 - 15,350 At 30 June/31 December 169,206 3,771 172,977 150,201 3,793 153,994 168,329 3,767 172,096 ----------------- --------- --------- -------- --------- --------- -------- --------- ---------- -------- Depreciation and Impairment At 1 January 72,894 1,493 74,387 66,815 1,439 68,254 66,815 1,439 68,254 Charge for the period/year 3,820 159 3,979 4,026 191 4,217 6,156 338 6,494 Disposals - - - (77) (222) (299) (77) (284) (361) At 30 June/31 December 76,714 1,652 78,366 70,764 1,408 72,172 72,894 1,493 74,387 ----------------- --------- --------- -------- --------- --------- -------- --------- ---------- -------- Net book value at 30 June/31 December 92,492 2,119 94,611 79,437 2,385 81,822 95,435 2,274 97,709 ----------------- --------- --------- -------- --------- --------- -------- --------- ---------- --------
Under the terms of the Secured Bond agreement, the Bondholders have a fixed and floating charge over these assets.
10 Financial Instruments - fair value disclosure
The Group uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
-- Level 2: other valuation techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
-- Level 3: valuation techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
For financial instruments there are no non-recurring fair value measurements nor have there been any transfers between levels of the fair value hierarchy.
The financial assets and liabilities measured at fair value are categorised into the fair value hierarchy as at the reporting dates as follows:
Financial assets and liabilities measured at fair value
Level Level Level Total
1 2 3
---------------------------------- -------- ------- ------- -------
GBP000 GBP000 GBP000 GBP000
---------------------------------- -------- ------- ------- -------
At 30 June 2017
Financial assets
Derivative financial instruments - 120 - 120
Total - 120 - 120
---------------------------------- -------- ------- ------- -------
Financial liabilities
Warrants - - - -
Total - - - -
---------------------------------- -------- ------- ------- -------
Level Level Level Total
1 2 3 GBP000
GBP000 GBP000 GBP000
---------------------------------- --------- -------- -------- --------
At 30 June 2016
Financial assets
Derivative financial instruments - 521 - 521
Total - 521 - 521
---------------------------------- --------- -------- -------- --------
Financial liabilities
Warrants - 65 - 65
Total - 65 - 65
---------------------------------- --------- -------- -------- --------
Level Level Level Total
1 2 3
---------------------------------- -------- ------- ------- -------
GBP000 GBP000 GBP000 GBP000
---------------------------------- -------- ------- ------- -------
At 31 December 2016
Financial liabilities
Warrants - 11 - 11
Derivative financial instruments - 876 - 876
---------------------------------- -------- ------- ------- -------
Total - 887 - 887
---------------------------------- -------- ------- ------- -------
Fair value of derivative financial instruments
The fair values of the commodity price options were provided by counterparties with whom the trades have been entered into. These consist of Asian style put and call options to sell/buy oil. The options are valued using a Black-Scholes methodology; however, certain adjustments are made to the spot-price volatility of oil prices due to the nature of the options. These adjustments are made either through Monte Carlo simulations or through statistical formulae. The inputs to these valuations include the price of oil, its volatility, and risk free interest rates.
Fair value of warrants
The warrants are valued using a Black-Scholes methodology. The inputs to these valuations include the Groups share price, its volatility, and risk free interest rates.
Fair value of financial assets and financial liabilities
The carrying values of the financial assets and financial liabilities are considered to be materially equivalent to their fair values.
11 Net debt
Borrowings - secured and unsecured bonds
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 2017 30 June 2016 31 December 2016
GBP'000 GBP'000 GBP'000
----------------------- --------------- --------------- -----------------
Bonds - secured 22,589 91,074 102,784
Bonds - unsecured - 19,850 21,795
At 30 June/31 December 22,589 110,924 124,579
----------------------- --------------- --------------- -----------------
Current liability (1,171)
Non-current liability (21,418)
---------
(22,589)
----------------------- ---------
In 2013, the Company and Norsk Tillitsmann ("Bond Trustee") entered into a Bond Agreement for the Company to issue up to US$165.0 million secured bonds and up to US$30.0 million unsecured bonds (issued at 96% of par). These bonds were subsequently listed on Oslo Bors and the Alternative bond market in Oslo. Both secured and unsecured bonds carried a coupon of 10% per annum (where interest was payable semi-annually in arrears). The secured bonds were amortised semi-annually at 2.5% of the initial loan amount. Final maturity on the secured notes was on 22 March 2018 and on the unsecured notes was 11 December 2018.
In April 2017, the Company restructured its debt resulting in the equitisation of the unsecured bonds and a repayment/equitisation of a portion of the secured bonds. The restructuring reduced the total aggregate face value of the secured bonds to $30.0 million. The interest rate was reduced to 8%, the repayment term was extended to 30 June 2021, and the amortisation rate was increased to 5% of the initial loan amount from 23 March 2018. The restructuring also resulted in changes to the covenants and the maintenance of financial ratios including the removal of the requirement for a Debt Service Retention Account ("DSRA").
Further details of the restructuring transaction are provided in note 14.
Unaudited
6 months ended
30 June 2017
------------------------------------ ---------------
At 1 January (124,579)
Equitisation and redemption of debt 93,496
Bond redemption 4,833
Finance charge net of interest paid 1,644
Costs capitalised on modified debt 920
Revaluation gain 1,097
At 30 June (22,589)
------------------------------------ ---------------
Cash and cash equivalents
At 30 June 2016, cash and cash equivalents included GBP8.5 million held in a DSRA account which at the Company's discretion was designated for the buy-back of bonds or for repayment of bonds at the maturity date.
12 Share capital
On 3 April 2017, the shareholders approved the subdivision of each of the 303,305,534 ordinary shares of 10p each of the Company into one new ordinary share of 0.0001p each and one deferred share of 9.9999p each. At the Annual General Meeting of the Company on 14 June 2017, the shareholders approved a consolidation and subdivision of the Company's share capital in order to reduce the number of shares in issue to that more appropriate for the size of the Company. Following the consolidation, every 200 ordinary shares of 0.0001 pence each were consolidated into one new ordinary share of 0.02 pence each and immediately sub-divided into 10 ordinary shares of 0.002 pence. The consolidation and subdivision reduced the number of shares in issue from 2.4 billion to 121 million.
Total Share
Ordinary Deferred share premium
shares shares capital
------------------------- -------------------- -------- --------
No. Nominal No. Nominal Nominal Value
value value value GBP000
GBP000 GBP000 GBP000
------------------------------ --------------- -------- ----------- ------- -------- --------
Issued and fully paid
------------------------------ --------------- -------- ----------- ------- -------- --------
Opening balance as at
31 December 2016, ordinary
shares of
10p each 302,820,578 30,282 30,282 32
January 2017 SIP share
issue 484,956 49 - - 49 2
--------------- -------- ----------- ------- -------- --------
Balance prior to the
restructuring 303,305,534 30,331 - - 30,331 34
Subdivision of 10p ordinary
shares into 0.001p ordinary
shares and 9.999p deferred
shares - (30,331) 303,305,534 30,331 - -
Issued through Kerogen
Subscription Agreement 679,282,165 1 1 28,766
Issued through the Placing
and Open and Ancillary
Offers 400,069,644 - - - - 18,003
Equitisation of secured
and unsecured bonds 1,043,350,391 1 - - 1 46,949
Transaction costs - - - - - (554)
Reserves transfer on
equitisation of unsecured
bonds - - - - 9,008
--------------- -------- ----------- ------- -------- --------
May 2017 SIP share issue 956,464 - - - - 44
--------------- -------- ----------- ------- -------- --------
Total ordinary shares
before subdivision and
consolidation 2,426,964,198
------------------------------ --------------- -------- ----------- ------- -------- --------
Subdivision and consolidation (2,305,615,988)
------------------------------ --------------- -------- ----------- ------- -------- --------
Subdivision and consolidation 121,348,210 2 303,305,534 30,331 30,333 102,250
------------------------------ --------------- -------- ----------- ------- -------- --------
13 Assets classified as held for sale and discontinued operations
The divestment of assets acquired as part of the Dart Acquisition, namely the Rest of the World segment, was completed in 2016. The Group still has presence in a number of countries and continues its plan to wind up and exit all legal jurisdictions in the near future.
The total loss after tax in respect of discontinued operations was GBP0.04million, primarily relating to administration costs (six months ended 30 June 2016: GBP1.3million). There was no tax charge/(credit) in either period.
14 Capital restructure
During the year ended 31 December 2016, the Company disclosed that it expected to be non-compliant with its leverage covenants under its secured bond agreement and that it also expected to breach its daily liquidity covenant in late March 2017. The Company therefore engaged in discussions with its bondholders, a strategic investor and other potential investors and stakeholders with regard to possible restructuring options in order to provide a remedy to the expected breach and achieve a capital structure that would be sustainable in the current oil price environment. In March 2017, the Company announced final terms of the restructuring and fundraising package which were subsequently approved at the meetings of the Company's secured and unsecured bondholders and at the general meeting of shareholders on 3 April 2017. In addition, the shareholders approved the subdivision of each of the 303,305,534 ordinary shares of 10p each of the Company into one new ordinary share of 0.0001p each and one deferred share of 9.9999p each.
On 4 April 2017, the Company announced that all new ordinary shares issued in accordance with the terms of the fundraising were admitted to trading and, as a result, the restructuring of the Company's secured bonds and unsecured bonds and the fundraising had become effective in accordance with their respective terms. The principal terms are set out below:
-- 679,282,165 new ordinary shares were issued to Unconventional Energy Limited, an affiliate of Kerogen Capital, pursuant to a subscription agreement (including 40,030,273 new ordinary shares at nominal value pursuant to a top-up mechanism) raising GBP28.77 million and giving Unconventional Energy Limited an interest of 28% in the Company.
-- 400,069,644 new ordinary shares were issued pursuant to a placing, open offer and ancillary subscription raising GBP18.04 million.
-- 528,175,031 new ordinary shares were issued to holders of secured bonds who accepted voluntary equity exchange of secured bonds extinguishing $28.92 million (GBP23.78 million) in face value of the secured bonds.
-- 202,398,542 new ordinary shares were issued to holders of secured bonds pursuant to a conditional secured debt for equity swap extinguishing a further $11.08 million (GBP9.11 million) in face value of the secured bonds.
-- c.$49.2 million (GBP40.4million) in face value of secured bonds were cancelled in consideration for c.$49.2 million (GBP40.4 million) cash pursuant to a voluntary cash offer.
-- 312,776,818 new ordinary shares were issued to holders of unsecured bonds on the conversion of all unsecured bonds into equity extinguishing $27.4 million (GBP22.5 million) in face value, being all of, the unsecured bonds not held by the Company.
-- The Company cancelled $13.09 million (GBP10.7 million) in face value of the secured bonds and unsecured bonds held by the Company, being all of the unsecured bonds and secured bonds held by the Company.
-- The renegotiated terms and conditions and covenants for the remaining secured bonds (total aggregate face value of c.$30.08 million) came into effect upon admission.
-- The new ordinary shares were issued at a price of 4.5p per share.
The Group expensed fees of GBP2.4 million relating to the restructuring.
Glossary GBP The lawful currency of the United Kingdom $ The lawful currency of the United States of America 1P Low estimate of commercially recoverable reserves 2P Best estimate of commercially recoverable reserves 3P High estimate of commercially recoverable reserves 1C Low estimate or low case of Contingent Recoverable Resource quantity 2C Best estimate or mid case of Contingent Recoverable Resource quantity 3C High estimate or high case of Contingent Recoverable Resource quantity AIM AIM market of the London Stock Exchange boepd Barrels of oil equivalent per day bopd Barrels of oil per day Contingent Recoverable Resource - Contingent Recoverable Resource estimates are prepared in accordance with the Petroleum Resources Management System (PRMS), an industry recognised standard. A Contingent Recoverable Resource is defined as discovered potentially recoverable quantities of hydrocarbons where there is no current certainty that it will be commercially viable to produce any portion of the contingent resources evaluated. Contingent Recoverable Resources are further divided into three status groups: marginal, sub--marginal, and undetermined. IGas' Contingent Recoverable Resources all fall into the undetermined group. Undetermined is the status group where it is considered premature to clearly define the ultimate chance of commerciality. Drill or drop - A drill or drop well carries no commitment to drill. The decision whether or not to drill the well rests entirely with the Licensee being driven by the results of geotechnical analysis. The Licence will, however, still expire at the end of the Initial Term if the well has not been drilled. Firm well - A firm well is classified as a firm commitment to drill a well. It is not contingent on any further geotechnical evaluation (i.e. it is a fully evaluated Prospect). GIIP Gas initially in place m Million MMboe Millions of barrels of oil equivalent MMscfd Millions of standard cubic feet per day PEDL United Kingdom petroleum exploration and development licence PL Production licence Tcf Trillions of standard cubic feet of gas UK United Kingdom DIRECTORS AND ADVISERS
Directors M McTighe - Non-Executive Chairman
S Bowler - Chief Executive Officer
C McDowell - Non-Executive Director
P Jackson - Non-Executive Director
T Kumar - Non-Executive Director
Company Secretary Cooley Services Limited
Dashwood
69 Old Broad Street
London EC2M 1QS
Nominated Adviser NOMAD and Joint Broker
and Broker
Investec Bank plc
2 Gresham Street
London, EC2V 7QP
Joint Broker Canaccord Genuity
88 Wood Street
London EC2V 7QR
Registrars Computershare Investors Services
plc
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Auditor PricewaterhouseCoopers LLP
1 Embankment Place
London WC2V 7QR
Banker Barclays Bank Plc
1 Churchill Place
London E14 5HP
Registered office 7 Down Street
London W1J 7AJ
Company's registered
number 4981279
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLMBTMBJBTRR
(END) Dow Jones Newswires
September 20, 2017 02:00 ET (06:00 GMT)
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