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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Nautilus Marine Services Plc | LSE:NAUT | London | Ordinary Share | GB0031461949 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.75 | 0.50 | 1.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMNAUT
RNS Number : 9332Y
Nautilus Marine Services PLC
09 March 2017
Immediate Release 9 March 2017
NAUTILUS MARINE SERVICES PLC
(FORMERLY GLOBAL ENERGY DEVELOPMENT PLC)
(the "Group" or "Nautilus")
AUDITED FINAL RESULTS FOR THE YEARED 31 DECEMBER 2016
Nautilus (AIM: NAUT), the Group that is focused on investing in and providing marine offshore services to the energy sector, today announces its audited final results for the year ended 31 December 2016 (the "Period").
Highlights:
- Fundamental change of the business has been completed with its first acquisition of offshore service vessels
- The Group's new strategy is to acquire or invest in offshore energy assets and commercialised niche technologies in the currently distressed market in order to position itself as specialised service provider
- The Group has moved its business focus away from the exploration and production of oil reserves in Colombia
Anna Williams, Director of Strategy and Business Development of Nautilus, commented: "2017 turns the page for the Group to a new strategy and a new name. We have sufficient strength and working capital to survive the downturn in the offshore services market in 2017 while we execute our strategy of acquiring assets and commercialized niche technologies in order to position ourselves as a specialised service provider with a competitive advantage. In addition, we will continue to build the team of qualified offshore operations personnel. We have accumulated a database of possible targets which are currently being prioritised for action this year to create long term value for shareholders."
Enquiries:
Nautilus Marine Services PLC Anna Williams, Director of Strategy +1 817 424 2424, and Business Development ext 110 awilliams@nmsplc.com www.nautilusmarineplc.com finnCap Ltd Christopher Raggett/Scott Mathieson/Kate Bannatyne (Corporate Finance) 020 7220 0500 Emily Morris (Corporate Broking) Abchurch Tim Thompson/Rebecca Clube 020 7398 7700 nautilus@abchurch-group.com
Notes to Editors:
Nautilus Marine Services PLC (AIM: NAUT) is an AIM-listed company. Nautilus is focused on the energy services sector with particular interest in offshore services and assets. Nautilus makes investments in offshore service assets and related technology, which may be placed into service when market conditions allow for profitable contracts. Currently the Company is taking advantage of distressed market conditions to accelerate investments in offshore service vessels and applied technology, and subsequently integrate, assess, enhance and operate these assets to realise value in the future.
Forward-looking statements
This release may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this release and include, but are not limited to, statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial position, liquidity, prospects, growth, strategies and expectations of the industry. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the development of the markets and the industry in which the Group operates may differ materially from those described in, or suggested by, any forward-looking statements contained in this release. In addition, even if the development of the markets and the industry in which the Group operates are consistent with the forward-looking statements contained in this release, those developments may not be indicative of developments in subsequent periods. A number of factors could cause developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in law or regulation, currency fluctuations (including the US dollar), the Group's ability to recover its reserves or develop new reserves, changes in its business strategy, political and economic uncertainty. Save as required by law, the Company is under no obligation to update the information contained in this release.
Past performance cannot be relied on as a guide to future performance.
Chairman's Statement and Review of Operations
Change in Strategy
2017 is a year of change. In February 2017, the Group completed its fundamental change of business with the closing of the transactions to acquire subsea service vessels and changed its name to Nautilus Marine Services PLC. These acquisitions were effected through the purchase of the entire issued share capital of certain vessel-owning companies. All vessels are located at the Group's docking facility in Louisiana, USA with access to the Gulf of Mexico. The purchase of these vessels was the first step in the Group's new strategy to acquire and invest in assets and technology in the currently-distressed offshore services sector.
The offshore sector services multiple industries including telecom and renewables, but primarily the focus has been on the transportation of equipment, technology or divers to offshore facilities, wells and pipelines for the energy industry. Like the energy industry, over the past few years the subsea sector has seen a dramatic decline in demand for its services for both operational as well as capital activities. Much of this work, such as inspection, repair and maintenance of existing offshore assets as well as the development of new production, has not disappeared so much as it has been delayed by offshore energy companies until a sustained recovery in oil prices and demand occurs. Current industry specialists predict that utilisation and demand for offshore services could continue to remain low or further decline throughout 2017. With this past decline in demand for offshore services and with the predictions for continued short term decline, the Group believes a window of time exists for buying opportunities. The Group intends to use this time for viable investment, consolidation and technology opportunities to take advantage of distressed market conditions.
With this new strategy, the Group has shifted its business focus away from the exploration, development and production of oil reserves in Colombia, South America. The Group continues to hold its two Association Contracts in Colombia but is actively seeking possible alternatives for this investment. In the meanwhile, the Group is continuing to preserve its contract acreage in Colombia by maintaining its ongoing environmental, social and safety requirements.
Acquisitions
During 2016 as the Group was vetting energy-based strategic opportunities, we were presented with the opportunity to gain access into the global offshore services sector through an initial entry into the Gulf of Mexico with the purchase of offshore service vessels and equipment. After completing due diligence, a leading global maritime firm was engaged by the Group to independently appraise the fair market value of the vessels and equipment. In addition, the fair market value of the convertible notes was independently appraised by an international accounting firm. Subsequently, the Group pursued the negotiation and compilation of the share purchase agreements along with the required regulatory documents and advisor review during late 2016.
In February 2017 following approval from our shareholders at the general meeting, the Group closed the two transactions to cumulatively receive:
-- New capital cash of $10.5 million; and -- Vessels and equipment with a fair market value of $13.6 million
in exchange for:
-- Deeply discounted convertible notes with a fair market value of $16.1 million; and
-- Forgiveness of $8 million of the outstanding principal amount of an existing note receivable.
The three series of convertible notes (Series A, B and C) have ten, twelve and fifteen year terms, respectively, and are convertible into shares of the Group. Only the Series A notes are payable in cash upon maturity, if not converted. The Series B and C notes are payable in cash or shares at maturity at the option of the Group, if not already converted. Interest is payable only upon maturity or conversion and does not compound. All three series of convertible notes contain the right for the Group to force conversion if the Group's average share price equals or exceeds 110 per cent. of the conversion price for a period of ten consecutive business days.
Two of the sellers in the transactions, Everest Hill Group Inc. ("Everest") and Mr. Alan Quasha, represent related-parties to the Group, but the remaining parties to the transactions, McLarty Capital Partners and Caleura Limited, are non-related parties. These transactions represented an opportunity for the Group to acquire offshore service assets at reduced prices, to raise new capital for future acquisitions and to diversify the existing shareholder base with non-related parties if the notes are converted into shares of the Group in the future.
The Group has built a database of offshore service prospects and is advancing efforts on the assessment of these opportunities. In addition, the Group intends to integrate, assess and possibly enhance the current vessels and equipment from these transactions alongside other current market opportunities as part of its overall global offshore investment strategy. Through the recent leasing of top-level docking facilities, the Group has adequate space to maintain its assets with access to the Gulf Coast.
Management is currently evaluating the accounting treatment to be applied to these two post reporting date transactions.
2016 Financials
During 2016, the Group increased its holdings in the note receivable from Everest ("Everest Loan Note") by loaning an additional $2 million principal amount to Everest and acquiring HKN Inc.'s rights to their outstanding principal amount of $2 million of the Everest Loan Note. As a result, the Group became the sole lender of the amended Everest Loan Note which had a principal balance of $12 million at 31 December 2016. Also during the year, the Group ultimately extended the maturity date of the Everest Loan Note to 15 January 2017 and granted forbearance in respect of any non-payment default in expectation of the closing of the transactions as discussed above. Upon completion of these transactions in February 2017, the Group amended the terms of the Everest Loan Note (of which a principal balance of $4 million currently remains outstanding). The new terms of the amended Everest Loan Note include a reduced interest charge of 8 per cent. per annum, payable quarterly in arrears, and an extended maturity date of 15 September 2018 (subject to acceleration).
The Group increased its decommissioning provision estimates during 2016 related to its Colombian Association Contracts for both current and long-term remediation projects. These increases to decommissioning liabilities were partially offset by payments made for environmental and social projects during the year.
Accounts receivable for the Group (related to discontinued operations) decreased during the year due to the write-off of disallowed tax credits on a tax refund due from the tax authorities in Peru. The anticipated tax refund was related to VAT charged on invoices for oil and gas activities related to the Group's Block 95 contract in Peru which was sold during 2012. Upon the Group's request for a refund, the taxing authority in Peru commenced an audit of the refund claim which was completed during 2016. A partial VAT refund was issued to the Group's wholly-owned Peruvian subsidiary, and the remainder of the receivable was written-off during the year.
Turnover from the Company's sole producing well in Colombia decreased to $178 thousand (2015: $365 thousand) yielding lifted volumes of 7,287 barrels of oil ("bbls") (2015: 11,240 bbls) and an average realised sales price of $24.42/bbl (2015: $32.46/bbl) during 2016. Costs of sales decreased to $602 thousand during the year (2015: $978 thousand) as a result of lower production volumes and decreased maintenance activities. Gross loss decreased to $424 thousand compared to $613 thousand for the prior year.
Administrative expenses increased to $6.1 million during 2016 compared to $4.5 million for the prior year. Approximately $1.2 million of this increase related to non-recurring, third-party advisor, legal and appraisal costs associated with work performed for the transactions described above. The remaining increase in administrative costs was primarily related to consulting and research costs for the Group's evaluation of other acquisition opportunities along with executive search fees for the Group's new Director of Operations.
Finance income increased significantly to $1.2 million during 2016 compared to $440 thousand for the prior year as a result of the monthly interest income earned from the Everest Loan Note outstanding during all of 2016.
During 2016, the Group recorded an impairment charge of $703 thousand related to its Colombian properties as a result of increased decommissioning and remediation estimates along with the decision to perform some of these projects earlier than originally anticipated.
Tax expense for 2016 was $197 thousand as compared to an overall tax benefit of $2.1 million for the prior year. Tax expense for 2016 was comprised of the CREE and wealth taxes related to our Colombian subsidiaries. The prior year tax benefit was primarily due to a net decrease in Colombian deferred tax liabilities.
Lastly, the Group recognised a $147 thousand loss from discontinued operations during 2016 from the disallowed tax credits on a tax refund due from the tax authorities in Peru related to the Group's Block 95 contract in Peru which was sold during 2012. The income from discontinued operations of $1.0 million during the prior year was related to tax and purchase price adjustments on the Group's sale of certain of its Colombian properties through the sale of its wholly-owned subsidiary which was finalised during 2015.
Conclusion
2017 turns the page for the Group to a new strategy along with a new name. Nautilus has sufficient financial strength and working capital to survive a continued downturn in the offshore services market in 2017 while we execute our strategy to acquire additional opportunities to take advantage of distressed market conditions. In addition, we are seeking to enhance our offshore operations personnel and expertise in the Group from the available personnel currently in the market. We have accumulated a database of possible targets which are currently being prioritised for action this year in order to create long-term value for our shareholders.
Mikel Faulkner
Chairman
8 March 2017
PRIMARY FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Hot Features
Premium
2016 2015
$'000 $'000
---------------------------------------------- -------- ---------
Continuing Operations
Revenue 178 365
Cost of sales (602) (978)
---------------------------------------------- -------- ---------
Gross loss (424) (613)
---------------------------------------------- -------- ---------
Other income - 8
Administrative expenses (6,102) (4,478)
Share-based expense (10) (14)
Exchange rate expense (113) (59)
Impairment loss (703) (21,813)
Operating loss from continuing operations (7,352) (26,969)
---------------------------------------------- -------- ---------
Finance income 1,242 440
Finance and other expense (173) (196)
---------------------------------------------- -------- ---------
Loss before taxation from continuing
operations (6,283) (26,725)
---------------------------------------------- -------- ---------
Tax (expense) / benefit (197) 2,114
---------------------------------------------- -------- ---------
Loss from continuing operations, net
of tax (6,480) (24,611)
---------------------------------------------- -------- ---------
(Loss) / income from discontinued operations,
net of tax (147) 1,047
---------------------------------------------- -------- ---------
Total comprehensive loss for the year
attributable to the equity owners of
the parent (6,627) (23,564)
---------------------------------------------- -------- ---------
Loss per share for continuing operations
attributable to the equity owners of
the parent
- Basic $(0.18) $(0.68)
- Diluted $(0.18) $(0.68)
---------------------------------------------- -------- ---------
(Loss) / earnings per share for discontinued
operations attributable to the equity
owners of the parent
- Basic $(0.00) $0.03
- Diluted $(0.00) $0.03
---------------------------------------------- -------- ---------
Total loss per share attributable to
the equity owners of the parent
---------------------------------------------- -------- ---------
- Basic $(0.18) $(0.65)
---------------------------------------------- -------- ---------
- Diluted $(0.18) $(0.65)
---------------------------------------------- -------- ---------
Figures in thousands except for per share information.
Consolidated Statement of Financial Position
As at 31 December 2016
2015
2016 $'000
$'000 (Restated)
------------------------------------- -------- ---------------
Assets
Non-current assets
Intangible assets 144 93
Other non-current assets 888 862
Property, plant and equipment 21 145
Total non-current assets 1,053 1,100
------------------------------------- -------- ---------------
Current assets
Inventories 259 246
Note receivable 12,060 8,040
Trade and other receivables 66 339
Prepayments and other assets 283 169
Cash and cash equivalents 16,446 25,608
------------------------------------- -------- ---------------
Total current assets 29,114 34,402
------------------------------------- -------- ---------------
Total assets 30,167 35,502
------------------------------------- -------- ---------------
Liabilities
Non-current liabilities
Deferred tax liabilities (net) - (6)
Long-term provisions (2,161) (2,005)
Total non-current liabilities (2,161) (2,011)
------------------------------------- -------- ---------------
Current liabilities
Trade and other payables (1,306) (932)
Short-term provisions (948) (184)
Corporate and equity tax liability (116) (122)
Total current liabilities (2,370) (1,238)
------------------------------------- -------- ---------------
Total liabilities (4,531) (3,249)
------------------------------------- -------- ---------------
Net assets 25,636 32,253
------------------------------------- -------- ---------------
Capital and reserves attributable to
equity holders of the parent
Share capital 608 608
Share premium account 27,139 27,139
Capital reserve 51,855 51,855
Retained deficit (53,966) (47,349)
------------------------------------- -------- ---------------
Total equity 25,636 32,253
------------------------------------- -------- ---------------
Consolidated Statement of Cash Flows
For the year ended 31 December 2016
2016 2015
$'000 $'000
---------------------------------------------------------------- ------- --------
Cash flows from operating activities
Cash used by operations (6,137) (5,108)
Tax paid (continuing and discontinued operations) (201) (586)
Net cash used in operating activities (6,338) (5,694)
---------------------------------------------------------------- ------- --------
Cash flows from investing activities
Interest income from note receivable 1,182 240
Commission income from note receivable 40 160
Placement of note receivable (4,000) (8,000)
Proceeds from sale of asset 39 _
Purchase price adjustments for sale of subsidiary - (1,161)
Cost paid for sale of subsidiary - (1,000)
Interest received - 8
Purchase of intangible assets and property, plant and equipment (85) (98)
Net cash used in investing activities (2,824) (9,851)
---------------------------------------------------------------- ------- --------
Decrease in cash and cash equivalents for the year (9,162) (15,545)
Cash and cash equivalents at beginning of year 25,608 41,153
---------------------------------------------------------------- ------- --------
Cash and cash equivalents at the end of year 16,446 25,608
---------------------------------------------------------------- ------- --------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Share Share Capital Retained Total
capital premium reserve losses equity
$'000 $'000 $'000 $'000 $'000
------------------------------ -------- -------- -------- --------- --------
At 1 January 2015 608 27,139 51,855 (23,802) 55,800
Total comprehensive loss
for the year attributable
to equity owners of the
parent - - - (23,564) (23,564)
Share-based payment - options
equity settled - - - 17 17
At 1 January 2016 608 27,139 51,855 (47,349) 32,253
Total comprehensive loss
for the year attributable
to equity owners of the
parent - - - (6,627) (6,627)
Share-based payment - options
equity settled - - - 10 10
------------------------------ -------- -------- -------- --------- --------
At 31 December 2016 608 27,139 51,855 (53,966) 25,636
------------------------------ -------- -------- -------- --------- --------
ABRIDGED NOTES TO THE PRIMARY FINANCIAL STATEMENTS
For the twelve months ended 31 December 2016
1. Accounting Policies
Basis of preparation
The financial statements of the Group for the twelve months ended 31 December 2016 and 2015 have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by European Union.
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015 as defined by section 435 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the registrar of companies, and those for 2016 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, and (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.
Certain prior year amounts in the statement of financial position have be reclassified to conform with current year presentation for purposes of comparability. Short-term provisions of $184 thousand previously included within trade and other payables at 31 December 2015 have been presented separately in the current period due to the materiality of the provision at 31 December 2016. In addition, prepaid taxes of $5 thousand previously recorded within trade and other receivables as of 31 December 2015 have been reclassified to prepayments and other assets in order to be presented with items of similar nature. Lastly, prepaid taxes of $862 thousand previously recorded within prepaid and other assets and corporate and equity tax liability as of 31 December 2015 have been reclassified to other non-current assets for comparability as a result of their non-current nature.
2. Reconciliation of loss before taxation to net cash flow from operations
2016 2015
$'000 $'000
----------------------------------------- --------------------- --------------------
Continuing operations
Loss before tax (6,283) (26,725)
Adjustments for:
Depreciation of property, plant
& equipment 113 78
Amortisation of intangible assets - 4
Other income - (8)
Loss on sale of assets 1 -
Impairment charge 703 21,813
Share based expense 10 14
Provision for uncollectible accounts 4 -
Finance income (1,222) (440)
Finance cost 172 196
Operating cash flow before movements
in working capital (6,502) (5,068)
----------------------------------------- --------------------- --------------------
Decrease in inventories (13) 44
Increase in trade and other receivables (44) (569)
Increase / (decrease) in trade
and other payables 438 (159)
Cash used from continuing operations (6,121) (5,752) ----------------------------------------- --------------------- -------------------- Discontinued operations Loss before tax (147) - Adjustments for: Provision for uncollectible accounts 131 - Income (loss) on sale of subsidiary - 1,047 Operating cash flow before movements in working capital (16) 1,047 ----------------------------------------- --------------------- -------------------- Increase in trade and other receivables (5) - Increase / (decrease) in trade and other payables 5 (403) Cash (used in) generated from discontinued operations (16) 644 ----------------------------------------- --------------------- -------------------- Cash used in operations (6,137) (5,108) ----------------------------------------- --------------------- --------------------
The Statement of Cash Flows contains the following elements related to discontinued operations:
2016 2015
$'000 $'000
--------------------------------------- ------------------ -----------------
Net cash generated from operating
activities - 108
Net cash used in investing activities - (87)
Net cash used in financing activities - -
--------------------------------------- ------------------ -----------------
Total - 21
--------------------------------------- ------------------ -----------------
3. (Loss) / earnings per share (EPS)
Basic earnings per share amounts are calculated by dividing the (loss) / profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted (loss) / earnings per share are calculated by dividing the (loss) / profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding at the end of the year, plus the weighted average number of shares that would be issued on the conversion of dilutive potential ordinary shares into ordinary shares. The calculation of the dilutive potential ordinary shares related to employee and Director Share option plans includes only those options with exercise prices below the average share trading price for each period.
2016 2015
$'000 $'000
--------------------------------- ----------- -----------
Loss from continuing operations
after taxation (6,480) (24,611)
(Loss)/ profit from discontinued
operations after taxation (147) 1,047
--------------------------------- ----------- -----------
Net loss attributable to equity
holders (6,627) (23,564)
--------------------------------- ----------- -----------
Loss per share for continuing
operations
- Basic $(0.18) $(0.68)
- Diluted $(0.18) $(0.68)
(Loss) / earnings per share
for discontinued operations
- Basic $(0.00) $0.03
- Diluted $(0.00) $0.03
Total loss per share
- Basic $(0.18) $(0.65)
- Diluted $(0.18) $(0.65)
--------------------------------- ----------- -----------
Basic weighted average number
of shares 36,112,187 36,112,187
Dilutive potential ordinary
shares
Employee and Director share
option plans - -
--------------------------------- ----------- -----------
Diluted weighted average number
of shares 36,112,187 36,112,187
--------------------------------- ----------- -----------
The calculation of the diluted EPS assumes all criteria giving rise to the dilution of the EPS are achieved and all outstanding share options with exercise prices lower than the average period share price are exercised.
4. Operating loss from continuing operations
Loss from continuing operations is stated after charging / (crediting):
2016 2015
$'000 $'000
----------------------------------------------- ------ ------
Depletion, depreciation and amortisation
(included in cost of sales):
Other property plant and equipment 113 82
Other cost of sales 489 896
Employee costs 2,819 2,892
Share-based payment - options - equity-settled 10 17
Share-based payment - cash-settled - (3)
Net foreign currency losses 113 59
Auditors' remuneration 297 172
Other administrative costs(1) 2,986 1,414
----------------------------------------------- ------ ------
Total cost of sales, administrative
and other operating costs 6,827 5,529
----------------------------------------------- ------ ------
(1) Other administrative costs in 2016 include $1.04 million related to due diligence and advisory costs related to the transaction (see note 11).
During the year, the Group obtained the following services from the Group's auditors at costs as detailed below:
Analysis of auditors' remuneration
2016 2015
$'000 $'000
------------------------------------------------- ------ ------
Principal Auditors
Audit Services
Statutory audit 71 37
Review of interim report 13 12
Non-audit Services
Transaction-related due diligence services(1)
Other services (tax) 129 -
Other Auditors 5 6
Audit of subsidiaries pursuant to
legislation 12 24
Other services (tax) 67 93
------------------------------------------------- ------ ------
Total auditors' remuneration 297 172
------------------------------------------------- ------ ------
(1) See note 11 for additional information regarding the transaction.
5. Employee costs
Group employee costs (including Executive Directors) during the year amounted to:
2016 2015
$'000 $'000
------------------------------------------------ ------ ------
Wages and salaries 2,382 2,614
Social security costs and other payroll
taxes 199 145
Insurances and other benefits 179 133
Company contributions to defined contribution
plan 59 -
Share-based payment - cash-settled - (3)
Share-based payments - options - equity-settled 10 17
Total employee costs 2,829 2,906
------------------------------------------------ ------ ------
The average number of Group employees (including Executive Directors) was:
2016 2015
------------------------------ ---- ----
Technical and operations 7 7
Management and administrative 13 9
------------------------------ ---- ----
Total Group employees 20 16
------------------------------ ---- ----
The employee costs and number of employees above do not include contract and casual labour in field operations which are charged directly to operating expense as incurred. These employees are not on the Group's payroll and are contracted through third parties.
Directors' remuneration
Total Total
Salary Benefits Bonus Fees 2016 2015
$'000 $'000 $'000 $'000 $'000 $'000
------------------ ------ -------- ------ ------ ------ ------
Executives
Mikel Faulkner 245 - 1(2) - 246 764(3)
Non-executives(1)
Alan Henderson - - - 74 74 74
David Quint - - - 74 74 74
Zac Phillips - - - 74 74 74
------------------ ------ -------- ------ ------ ------ ------
Total 245 - 1(2) 222 468 986
------------------ ------ -------- ------ ------ ------ ------
(1) The non-executive fees were paid in Pounds Sterling of the amount GBP47.5 thousand each (2015: GBP47.5 thousand).
(2) This consists of a bonus amount of $1 thousand paid in 2016.
(3) This included bonus amounts of $350 thousand paid following the 2014 sale of the discontinued subsidiary (CEDCO) and a performance bonus of $150 thousand for 2015.
Compensation paid to key management personnel including Directors and Executive Directors:
2016 2015
$'000 $'000
--------------------------------------------------------- ------ ------
Non-executive Director fees 222 222
Compensation and benefits paid to key
management personnel:
Compensation paid 837 696
Performance bonuses 13 730(1)
Health and life insurances 30 43
Company contributions to defined contribution
plan - 11
Company contributions to payroll taxation 48 46
Share-based payment - cash-settled - (3)
Share-based payments - options - equity-settled 9 17
Total 1,159 1,762
--------------------------------------------------------- ------ ------
In accordance with IAS 24, at 31 December 2016, there were no amounts due to or from key management personnel (2015: nil).
(1) This included bonus amounts paid following the 2014 sale of the discontinued subsidiary (CEDCO).
6. Finance income
2016 2015
$'000 $'000
------------------------------------- ------ ------
Income on note receivable and others 1,242 440
------------------------------------- ------ ------
7. Finance and other expense
2016 2015
$'000 $'000
----------------------------------------- ------ ------
Unwinding of discount on decommissioning
provision 172 196
Loss on sale of assets 1 -
Total finance and other expenses 173 196
----------------------------------------- ------ ------
8. Note receivable
2016 2015
$'000 $'000
------------------------------------------- --- ------- ------
Note receivable 12,000 8,000
Accrued interest receivable 60 40
------------------------------------------------ ------- ------
Total note receivable and accrued interest
receivable as at 31 December 12,060 8,040
------------------------------------------------ ------- ------
Cash received for interest income 1,182 240
Cash received for commission 40 160
------------------------------------------------ ------- ------
On 15 September 2015, the Group and HKN, Inc. ("HKN") (collectively as "Co-Lenders") entered into a secured, short-term financing note agreement ("Note Receivable") with Everest Hill Energy Group Ltd. ("Everest") for the principal amount of $10 million. Everest is an affiliated company of the Quasha family trusts which also have an interest in Lyford Investments, Inc., an existing shareholder of the Group. HKN Inc, ("HKN"), the Group's principal shareholder, Lyford Investments, Inc. and its parties acting in concert with it are interested in 22,567,016 shares of the Group, representing 62.49 per cent of the issued share capital of the Company. By virtue of these holdings, entry into this Note Receivable constituted a related party transaction.
Under the Note Receivable, the Group participated as a Co-Lender by loaning $8.0 million and HKN participated by loaning $2.0 million of the principal amount to Everest. The Note Receivable is secured by all of Everest's and its subsidiaries' holdings of the Group and HKN. The Group serves as the collateral agent for the Co-Lenders. The Note Receivable is subject to an interest charge of 12 per cent per annum, payable monthly in arrears, with the principal amount being repayable in full on 15 March 2016. Everest paid to the Group a 2 per cent transaction fee of $160 thousand in September 2015 upon the closing of the Note Receivable.
On 29 February 2016, the Co-Lenders amended the Note Receivable (the "Amendment") with Everest. Under the Amendment, the Group loaned an additional $2.0 million principal amount to Everest and extended the maturity date six months to 15 September 2016. In addition, the Group was granted right of first refusal to purchase certain offshore oil service vessels owned by Everest and its affiliates. Everest paid to the Group a 2 per cent transaction fee of $40 thousand upon the closing of the Amendment.
On 9 September 2016, the Co-Lenders extended the maturity date of the amended Note Receivable by thirty days to 15 October 2016. On 14 October 2016, the Co-Lenders extended the maturity date thirty days from 15 October 2016 to 15 November 2016. On 28 October 2016, the Group acquired HKN's rights of their outstanding principal amount of $2.0 million in respect of the Note Receivable and as a result the Group is now the sole lender of the Note Receivable with collateral remaining in place and securing the obligation. On 14 November 2016, the Group extended the maturity date to 15 January 2017. The Note Receivable continues to be subject to an interest charge of 12 per cent per annum, payable monthly in arrears.
The Note Receivable was further amended on 8 February 2017 as a result of the completion of Transaction A (as defined and detailed in note 11), which extended the maturity date to 15 September 2018.
9. Decommissioning and environmental provisions
2016 2015
Long-term provisions $'000 $'000
--------------------------------------------- ------ ------
Decommissioning liability at start of
year, non-current(1) 2,005 2,092
Unwinding of discount 172 193
Reclassification to short-term provisions(2) (555) -
Increase (decrease) in provision(3) 539 (280)
--------------------------------------------- ------ ------
Decommissioning liability at end of
year, non-current 2,161 2,005
--------------------------------------------- ------ ------
Environmental provision at start of
year, non-curent(4) - 35
Reclassification to trade and other
payables - current - (35)
--------------------------------------------- ------ ------
Environmental provision at end of year,
non-current - -
--------------------------------------------- ------ ------
Total long-term provision 2,161 2,005
--------------------------------------------- ------ ------
2015
2016 $'000
Short-term provisions $'000 (Restated)
---------------------------------------------- --------------- -----------
Decommissioning liability at start of
year, current(1) - -
Reclassification from long-term provisions(2) 555 -
Increase in provision(3) 255 -
---------------------------------------------- --------------- -----------
Decommissioning liability at end of
year, current 810 -
---------------------------------------------- --------------- -----------
Environmental provision- current, at
start of year(4) 184 -
Increase (decrease) in provision (46) 184
---------------------------------------------- --------------- -----------
Environmental provision-current, at
end of year 138 184
---------------------------------------------- --------------- -----------
Total short-term provision 948 184
---------------------------------------------- --------------- -----------
(1) The decommissioning provision represents the present value of decommissioning costs for existing assets in the Group's oil operations, which are expected to be incurred between 2017 and 2024. These provisions have been generated based on the Group's internal estimates, and where available, studies and analyses from external sources. Assumptions, based on the current economic environment, have been made which management believes are a reasonable basis upon which to estimate the future liability. These estimates are included within short-term and long-term provisions within the statement of financial position and are reviewed periodically to take into account any material changes to those assumptions.
(2) During 2016, the Group made the decision to perform a portion of its remediation obligations related to the Bocachico and Bolivar Contract Areas in Colombia during the upcoming year rather than upon expiration of the contracts. This decision was made in order to take advantage of lower oilfield service pricing during depressed industry conditions in Colombia and to also reduce future environmental obligations. This decision resulted in the reclassification from long-term to short-term provisions of $555 thousand during 2016.
(3) Decommissioning cost estimates increased during 2016 as a result of performing long-term obligations earlier than expected and bringing them to present value and identifying additional requirements for the final decommissioning for both Contract Areas. Overall cost estimates for the decommissioning of the Group's wells in Colombia declined during 2015, based on the overall decline in the oil industry in Colombia and assessment of the scope of work at the time. However, actual decommissioning costs will ultimately depend upon future market prices for the necessary decommissioning work required at the time assets are decommissioned and abandoned. Furthermore, the timing of decommissioning is likely to depend on when the fields cease to produce at economically viable rates, which in turn is dependent upon future oil and gas prices that are inherently uncertain.
(4) The environmental provision represents the creation of an environmental investment reserve to reflect a liability under Colombian law for certain exploration and producing contracts requiring the Group to perform additional reinvestment in the amount of 1 per cent of specified investment activity to provide for the recovery, conservation, preservation, and monitoring of the hydrographic basin of the exploration areas and obligations to perform social contract requirements. For the 1 per cent reinvestment obligation, a provision is provided and an amount equal to the provision is recognised within the cost of the respective asset and amortised on a unit of production basis. Changes in estimates are recognised prospectively, with corresponding adjustments to the provisions and the associated fixed asset. Changes in estimate of other environmental and social obligations are recognised in cost of sales.
10. Related party disclosures
HKN and its parties in concert are major shareholders of the Group. During 2016, the Group and HKN (collectively as "Co-Lenders") continued to hold a Note Receivable with Everest. During 2016, the Group extended an addition $2 million to Everest and acquired HKN's rights of their outstanding principal amount of $2 million in respect of the Note Receivable. As a result, the Group is now the sole lender of the Note Receivable with collateral remaining in place and securing the obligation. On 14 November 2016, the Group extended the maturity date to 15 January 2017. The Note Receivable was further amended on 8 February 2017 as a result of the completion of Transaction A (as detailed in note 11). Please see note 8 for information on the Note Receivable.
During 2016, the Group purchased $22 thousand in furniture and computer equipment from HKN. In addition, the Group sold $39 thousand in furniture and computer equipment to HKN, resulting in a loss on the sale of $1 thousand.
Also during 2015, the Group entered into a Shared Services Agreement with HKN to allow employees to provide or cause to be provided certain contract services, if and when as needed. The Group paid $32 thousand and $49 thousand to HKN for contract services for due diligence purposes during the year ended 31 December 2016 and 2015, respectively.
During 2017, the Group also completed the acquisition of offshore subsea vessel-owning companies through two separate transactions from Everest and other related parties. See note 11 for additional information.
11. Post reporting date event
On 16 January 2017, the Group announced the proposed acquisition of offshore subsea vessel-owning companies through two separate transactions. Shareholders approved the resolution to complete these transactions on 8 February 2017, and the Group's shares were re-admitted to the AIM, a market operated by the London Stock Exchange, as Nautilus Marine Services PLC (LSE-AIM: "NAUT"). Previously, the Company's shares had been traded on the AIM since March 2002 as Global Energy Development PLC (LSE-AIM: "GED"). The Group's principal activity is now the acquisition of offshore service vessels and technology and the provision of offshore oil services. As such, the Group will have an additional operating segment in 2017, which will comprise of offshore service investments and operations.
Included within administrative expenses for the year ended 31 December 2016 are $1.2 million in non-recurring transaction related expenses, of which $82 thousand are directly attributable to the vessels. Management is currently evaluating the accounting treatment to be applied to these two post reporting date transactions, which are described below:
Transaction A: The Group acquired three offshore service vessels through the acquisition of vessel-owning companies from Everest, a related party, in exchange for: (i) forgiveness of $8 million of the outstanding principal amount of the Note Receivable; (ii) the amendment of the terms of the Note Receivable to reduce the interest rate from 12 per cent to 8 per cent and to extend the maturity date from 15 January 2017 to 15 September 2018; and (iii) contingent additional consideration equal to the lower of $5 million or 75 per cent of the net cash inflows attributable to the three vessels for the period of eighteen months following completion of their acquisition by the Group. Part of the existing collateral under the Note Receivable, comprising Everest's and its affiliates' shareholdings in HKN, which is a substantial shareholder in the Company, will remain in place. Please see note 8 for further information on the Note Receivable.
Transaction B: The Group acquired i) a barge vessel through the acquisition of Everest Vessel Holdings, LLC from a related-party, Alan Quasha, HKN's Chairman of the Board, and ii) eight offshore service vessels along with related subsea dive equipment through the acquisition of a vessel-owning company, Maritime Finance, LLC, owned by McLarty Capital Partners ("MCP") and Caleura Limited. As consideration, the Group issued three series of convertible loan notes: Series A Convertible Loan Notes, Series B Convertible Loan Notes and Series C Convertible Loan Notes. In addition to the acquired vessels and equipment, the Group will receive $10.5 million in cash from MCP, Caleura Limited and Everest from the convertible note issuances. A schedule of the cash subscription and issuances of the three series of convertible loan notes is as follows:
Date Cash Subscription Total Note Issuances
-------------------- ------------------ ---------------------
At Completion $3 million Series A: $3.0
(9 February 2017) million
Series B: $1.38
million
Series C: $3.12
million
-------------------- ------------------ ---------------------
31 March 2017 $7 million Series A: $7.0
million
Series B: $3.22
million
Series C: $7.28
million
-------------------- ------------------ ---------------------
15 April 2017 $500 thousand Series A: $500
thousand
Series B: $1.5
million
Series C: $4.6
million
-------------------- ------------------ ---------------------
In February 2017, the Group received cash of $3 million in exchange for the subscription of the first tranche of notes in accordance with the schedule above.
A summary of the terms of the convertible loan notes are as follows:
Convertible Loan Note
-----------------------------------------------------------
Term: A B C
---------------- ----------------- ------------------- -------------------
Principal
Amount: $10.5 million $6.1 million $15.0 million
---------------- ----------------- ------------------- -------------------
Maturity Date: 1 January 1 January 1 January
2027 (unless 2029 (unless 2032 (unless
converted converted converted
to Ordinary to Ordinary to Ordinary
Shares before Share before Shares before
then). Payments then). Payments then). Payments
on maturity on maturity on maturity
are to be are to be to be settled
settled in settled in in cash or
cash. cash or satisfied satisfied
in whole or in whole or
in part by in part by
the issue the issue
of Ordinary of Ordinary
Shares at Shares at
the option the option
of the Company. of the Company.
---------------- ----------------- ------------------- -------------------
Interest: Non-compounding Non-compounding Non-compounding
interest will interest will interest will
be payable be payable be payable
upon maturity upon maturity upon maturity
or conversion or conversion or conversion
(calculated (calculated (calculated
on a 360-day on a 360-day on a 360-day
calendar year) calendar year) calendar year)
at 8 per cent. at 6 per cent., at 6 per cent.,
payable in payable in
cash or satisfied cash or satisfied
by the issue by the issue
of Ordinary of Ordinary
Shares at Shares at
the option the option
of the Company. of the Company.
---------------- ----------------- ------------------- -------------------
Conversion The outstanding The outstanding The outstanding
Price: principal principal principal
amount will amount will amount will
be convertible be convertible be convertible
into Ordinary into Ordinary into Ordinary
Shares at Shares at Shares at
50 pence per 160 pence 225 pence
share, subject per share, per share,
to adjustment subject to subject to
in certain adjustment adjustment
circumstances. in certain in certain
circumstances. circumstances.
---------------- ----------------- ------------------- -------------------
A holder of convertible loan notes may convert any amount of the outstanding principal amount and (in the case of the Convertible B Loan Notes and Convertible C Loan Notes only) any unpaid and accrued interest of the Convertible Loan Notes into Ordinary Shares at the Applicable Conversion Price at any time following thirty days from the issue of the relevant Convertible Loan Notes with a 20-day notice to the Group. All three series of convertible loan notes contain the right for the Group to force conversion if the Group's average share price equals or exceeds 110 per cent. of the conversion price for a period of ten consecutive business days. Furthermore, the Group may redeem each issue of convertible loan notes any time after issuance at their nominal value with a 10-day notice to the note holder.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSUEEAFWSEID
(END) Dow Jones Newswires
March 09, 2017 02:01 ET (07:01 GMT)
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