Petrel Resources PLC Interim Statement (6896A)

TIDMPET

RNS Number : 6896A

Petrel Resources PLC

27 September 2022

27 September 2022

Petrel Resources plc

("Petrel" or "the Company")

Unaudited Interim Statement for the six months ended 30 June 2022

Petrel Resources plc (AIM: PET) today announces unaudited financial results for the six months ended 30(th) June 2022.

Petrel is a hydrocarbon explorer with interests in Iraq, and Ghana.

Highlights

-- Petrel's Iraqi business is being re-built although as explained below our Iraqi Director, Riadh Ani has had to resign - but requires formation of a Government for the Company to progress new funding.

-- An updated Merjan oil field development proposal has been submitted to the Ministry.

-- Iraqi oil output recovered to 4.65 million barrels daily in August 2022.

-- Ratification discussions on Tano 2A block underway with Ghanaian authorities - though acreage adjustments likely.

-- Board considers there are new expansion opportunities presented by oil price and demand recovery.

Prior to the recent elections, the Iraqi authorities had suggested that Petrel initially target "exploration of blocks in the western desert of Iraq, and present past studies done on the Merjan-Kifl-West Kifl discoveries, and Petrel's work on the Mesozoic and Paleozoic plays in the Western Desert". Our updated development proposal requires an operating Iraqi Government in order to proceed.

Following the C-19 pandemic, Petrel Resources plc restored contacts with the Ghanaian authorities to update the acreage to be explored, and resuscitate the ratification of our signed Petroleum Agreement on Tano 2A Block. Slowness in ratification of signed contracts had constrained the development of Ghana's oil and gas industry. The current Ghanaian government has indicated its determination to recover momentum. Ghanaian fiscal terms are competitive, while West African infrastructure steadily improves.

Financial markets and farm-out interest in petroleum had been depressed since the oil price war starting in 2014, and continuing periodically until 2022. This had constrained our options for early seismic or wells in Ghana. But recent oil & price surges show that major new investment is required to service global demand. Petrel Resources hopes to participate in the coming boom.

Despite challenges, Iraq offers the best petroleum commercial opportunity. Iraqi geology is unsurpassed. Oil demand reaches new records - despite high prices constraining demand - especially in gas. But barriers to rapid expansion are above-the-ground issues of logistics and contractual weaknesses, rather than lack of geological potential. The solution is to align interests, so that capital, technology contracts must be updated for effective exploration and development.

Many Iraqi decision-makers have reached similar conclusions: they want to increase output to rival Saudi capacity of circa 13mmbod. Unfortunately, the success of patriotic candidates in the 2021 elections has not yet led to an effective Government - without which there cannot be democratically-supported policy reforms.

But Iraqi oil output has recovered to pre C-19 pandemic levels. The Baghdad authorities are restoring control over the regions, vindicating Petrel's longstanding stance of respecting the sovereignty of the elected Government. Recovering oil & gas demand and prices have opened room to update fiscal terms and development plans. Some western majors, ignorant of prevailing circumstances, had bid over-optimistically on service contracts from 2009, and then found it hard to operate effectively. Many of these have departed during the recent oil price war and pandemic.

TotalEnergies has withdrawn from Kurdistan, but continues elsewhere in Iraq. Chinese NOCs continue to expand. Iraq is not for the faint of heart, but there is considerable upside to be realised provided the elected government implements necessary reforms.

For several years after the 2003 Iraqi invasion, there was a perception that contractors close to western governments, and later super-majors, would dominate Iraqi oil exploration and development. Iraqis had other ideas, however: they want partners, rather than bosses.

Iraq is sovereign, but so is finance. The investment dollar is an orphan. It seeks out return, and works to minimise risk - though resolute investors will carry risk if fairly compensated.

Any investment can be considered to be worth the discounted Present Value of all cash flows (in and out). Calculations are sensitive to timing and the discount rate. Foreigners always see higher risks than locals do.

The more uncertainty (political, tax, operational) the higher the discount rate, & the lower the Present Value.

For capitalism to work, it must reward all the key players, whose interests should be aligned - rather than in conflict.

The biggest challenge facing Petrel in this new era is not operating conditions, access to technology or community relations. The biggest challenge facing agile industry players is outdated contracts and fiscal terms. The strong resurgence in demand and price will smoothen necessary reforms.

Our Iraqi Director, Riadh Ani has helped maintain strong relationships with Ministry of Oil officials, even during the darkest hours of sanctions, invasion, conflict, and Covid-19. He has now regretfully decided to resign with immediate effect as a Non-Executive Director in order to enter public service. Our loss will be society's gain, and we wish him the very best success in this next challenge. Riadh's insights and introductions will help Petrel in Iraq for years to come.

Petrel Resources plc Interests (as of May 2022):

Ghana

Tano 2A Petroleum Agreement: 30% Petrel Working Interest. Awaiting ratification, then exploration periods of 3 years initial term + 2 extension periods of 3.5 years.

Iraq

Western Desert Block 6: 100% Petrel Interest. Awaiting ratification since 2002. 30 year term, or until early pay-out.

Prior Technical Cooperation Agreement (TCA studies, with 50% Itochu interest) on the Merjan oil-field.

What should Iraq's oil policy be now?

Unfortunately, the combination of suspicion of foreign oil companies, sanctions, and wars (including internal sectarian conflict and resistance since 2003) have held back Iraq's development, including the building of necessary oil and other infrastructure. Iraq's government earnings and economy remains dependent on oil.

Have Service Contracts achieved their objectives for companies and Iraq? No: even at its pre-C-19 peak of c.4.7 million barrels of oil daily (mmbod) output, Iraq fell short of its 6 to 9 mmbod 1989 plan, and the high hopes of rivalling Saudi Arabia. There is insufficient incentive for contractors to boost production, and recoveries - while the Ministry of Oil has been hollowed out by sanctions and wars, and now unable to fill the gap.

Should the Federal Ministry of Oil negotiate Production Sharing Agreements?

Yes: this would better align the interests of the parties, and create more wealth, value-added in downstream industries like refined products and petrochemicals, infrastructure and employment for Iraq.

The success of Qatar in LNG - or even the Emirates and Oman show what can be done with more pragmatism.

Future

Petrel is confident that necessary funding will be available for medium term ongoing activities.

David Horgan

Chairman

26 September 2022

   For further information please visit http://www.petrelresources.com/   or contact: 

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement. In addition, market soundings (as defined in MAR) were taken in respect of the matters contained in this announcement, with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the company and its securities.

S 

   For further information please visit http://www.petrelresources.com/   or contact: 
 
            Petrel Resources 
 David Horgan, Chairman                  [phone] 
 John Teeling, Director 
 
 Nominated Adviser and Broker 
 Beaumont Cornish - Nominated Adviser 
  Roland Cornish 
  Felicity Geidt                          [phone] 
 Novum Securities Limited - Broker 
  Colin Rowbury                            [phone] 
 
 BlytheRay - PR                          [phone] 
  Megan Ray                               [phone] 
  Madeleine Gordon-Foxwell                [phone] 
 
 Teneo 
  Luke Hogg                                [phone] 
  Alan Tyrrell                             [phone] 
 
 
                                               Petrel Resources plc 
                                         Financial Information (Unaudited) 
 
 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 
                                                       Six Months Ended                                 Year Ended 
                                                    30 June 22                30 June 21                 31 Dec 21 
                                                     unaudited                 unaudited                   audited 
                                                       EUR'000                   EUR'000                   EUR'000 
 
 Administrative expenses                                 (140)                     (162)                     (322) 
                                                             -                         -                         - 
                                      ------------------------  ------------------------  ------------------------ 

 OPERATING LOSS                                          (140)                     (162)                     (322) 
 
 LOSS BEFORE TAXATION                                    (140)                     (162)                     (322) 
 
 Income tax expense                                        -                         -                         - 
                                      ------------------------  ------------------------  ------------------------ 
 LOSS FOR THE PERIOD                                     (140)                     (162)                     (322) 
 
 Other comprehensive income]                                 -                         -                         - 
 
 TOTAL COMPREHENSIVE PROFIT FOR THE 
  PERIOD                                                 (140)                     (162)                     (322) 
                                      ========================  ========================  ======================== 
 
 LOSS PER SHARE - basic and diluted                    (0.09c)                   (0.10c)                   (0.21c) 
                                      ========================  ========================  ======================== 
 
 
 
 CONDENSED STATEMENT OF FINANCIAL POSITION    30 June 22   30 June 21   31 Dec 21 
                                               unaudited    unaudited     audited 
                                                 EUR'000      EUR'000     EUR'000 
 ASSETS: 
 NON-CURRENT ASSETS 
 Intangible assets                                   933          932         933 
                                             -----------  -----------  ---------- 
                                                     933          932         933 
                                             -----------  -----------  ---------- 
 
 CURRENT ASSETS 
 Trade and other receivables                          12           18          25 
 Cash and cash equivalents                            30          255         102 
                                             -----------  -----------  ---------- 
                                                      42          273         127 
 TOTAL ASSETS                                        975        1,205       1,060 
                                             -----------  -----------  ---------- 
 
 CURRENT LIABILITIES 
 Trade and other payables                          (847)        (777)       (792) 
                                             -----------  -----------  ---------- 
                                                   (847)        (777)       (792) 
                                             -----------  -----------  ---------- 
 
 NET CURRENT LIABILITIES                           (805)        (504)       (665) 
 NET ASSETS                                          128          428         268 
                                             ===========  ===========  ========== 
 
 EQUITY 
 Share capital                                     1,963        1,963       1,963 
 Capital conversion reserve fund                       8            8           8 
 Capital redemption reserve                          209          209         209 
 Share premium                                    21,786       21,786      21,786 
 Share based payment reserve                          27           27          27 
 Retained deficit                               (23,865)     (23,565)    (23,725) 
                                             -----------  -----------  ---------- 
 TOTAL EQUITY                                        128          428         268 
                                             ===========  ===========  ========== 
 
 
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
 
                                                     Capital      Capital             Share based 
                                Share     Share   Redemption   Conversion                 Payment   Retained     Total 
                              Capital   Premium     Reserves     Reserves                Reserves     Losses    Equity 
                              EUR'000   EUR'000      EUR'000      EUR'000                 EUR'000    EUR'000   EUR'000 
 
 As at 1 January 2021           1,963    21,786          209            8                      27   (23,403)       590 
 Total comprehensive income                                                                     -      (162)     (162) 
                             --------  --------  -----------  -----------  ----------------------  ---------  -------- 
 As at 30 June 2021             1,963    21,786          209            8                      27   (23,565)       428 
 
 Total comprehensive income                                                                     -      (160)     (160) 
                             --------  --------  -----------  -----------  ----------------------  ---------  -------- 
 As at 31 December 2021         1,963    21,786          209            8                      27   (23,725)       268 
 
 Total comprehensive income                                                                     -      (140)     (140) 
                                                 -----------  -----------  ---------------------- 
 As at 30 June 2022             1,963    21,786          209            8                      27   (23,865)       128 
                             ========  ========  ===========  ===========  ======================  =========  ======== 
 
 
 CONDENSED CONSOLIDATED CASH FLOW                                  Six Months Ended       Year Ended 
                                                                30 June 22   30 June 21    31 Dec 21 
                                                                 unaudited    unaudited      audited 
                                                                   EUR'000      EUR'000      EUR'000 
 CASH FLOW FROM OPERATING ACTIVITIES 
 Loss for the period                                                 (140)        (162)        (322) 
 Foreign exchange                                                        2          (8)         (10) 
                                                               -----------  -----------  ----------- 
                                                                     (138)        (170)        (332) 
 
 Movements in Working Capital                                           68           83           91 
                                                               -----------  -----------  ----------- 
 CASH USED IN OPERATIONS                                              (70)         (87)        (241) 
 
 NET CASH USED IN OPERATING ACTIVITIES                                (70)         (87)        (241) 
                                                               -----------  -----------  ----------- 
 
 INVESTING ACTIVITIES 
 Payments for exploration and evaluation assets                          0            0          (1) 
                                                               -----------  -----------  ----------- 
 NET CASH USED IN INVESTING ACTIVITIES                                   0            0          (1) 
                                                               -----------  -----------  ----------- 
 
 NET DECREASE IN CASH AND CASH EQUIVALENTS                            (70)         (87)        (242) 
 
 Cash and cash equivalents at beginning of the period                  102          334          334 
 
 Exchange gains/(losses) changes on cash and cash equivalent           (2)            8           10 
 CASH AND CASH EQUIVALENT AT THE OF THE PERIOD                      30          255          102 
                                                               ===========  ===========  =========== 
 

Notes:

   1.    INFORMATION 

The financial information for the six months ended 30 June 2022 and the comparative amounts for the six months ended 30 June 2021 are unaudited.

The interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. The interim financial statements have been prepared applying the accounting policies and methods of computation used in the preparation of the published consolidated financial statements for the year ended 31 December 2021.

The interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the audited consolidated financial statements of the Group for the year ended 31 December 2021, which are available on the Company's website www.petrelresources.com

The interim financial statements have not been audited or reviewed by the auditors of the Group pursuant to the Auditing Practices board guidance on Review of Interim Financial Information.

   2.    No dividend is proposed in respect of the period. 
   3.    GOING CONCERN 

The Group incurred a loss for the period of EUR140,055 (2021: loss of EUR322,077) and had net current liabilities of EUR804,979 (2021: EUR664,924) at the statement of financial position date. These conditions as well as those noted below, represent a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern.

Included in current liabilities is an amount of EUR812,531 (2021: EUR767,531) owed to key management personnel in respect of remuneration due at the statement of financial position date. Key management have confirmed that they will not seek settlement of these amounts in cash for a period of at least one year after the date of approval of the financial statements or until the Group has generated sufficient funds from its operations after paying its third party creditors.

The Group and Company had a cash balance of EUR29,806 (2021: EUR101,843) at the statement of financial position date. The directors have prepared cashflow projections for a period of at least twelve months from the date of approval of these financial statements which indicate that additional finance may be required to fund working capital requirements and develop existing projects. As the Group is not revenue or cash generating it relies on raising capital from the public market.

These conditions as well as those noted below, represent a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern.

As in previous years the Directors have given careful consideration to the appropriateness of the going concern basis in the preparation of the financial statements and believe the going concern basis is appropriate for these financial statements. The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.

   4.    LOSS PER SHARE 

Basic loss per share is computed by dividing the loss after taxation for the year attributable to ordinary shareholders by the weighted average number of ordinary shares in issue and ranking for dividend during the year. Diluted earnings per share is computed by dividing the loss after taxation for the year by the weighted average number of ordinary shares in issue, adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the year.

The following table sets out the computation for basic and diluted earnings per share (EPS):

 
                                                         30 June 22      30 June 21       31 Dec 21 
                                                             EUR             EUR             EUR 
 Loss per share - Basic and Diluted                           (0.09c)         (0.10c)         (0.21c) 
 
 
 Basic and diluted loss per share 
  The earnings and weighted average number of ordinary shares used in the calculation of basic 
  loss per share are as follows: 
                                                              EUR'000         EUR'000         EUR'000 
 Loss for the period attributable to equity holders             (140)           (162)           (322) 
 
 
 Denominator                                                   Number          Number          Number 
 
   for basic and diluted EPS                              157,038,467     157,038,467     157,038,467 
 
 
 

Basic and diluted loss per share are the same as the effect of the outstanding share options is anti-dilutive.

   5.    INTANGIBLE ASSETS 
 
                                       30 June 22   30 June 21   31 Dec 21 
 Exploration and evaluation assets:       EUR'000      EUR'000     EUR'000 
 Opening balance                              933          932         932 
 Additions                                      -            -           1 
 Impairment                                     -            -           - 
                                         ________     ________    ________ 
 Closing balance                              933          932         933 
 
 

Exploration and evaluation assets relate to expenditure incurred in exploration in Ghana. The directors are aware that by its nature there is an inherent uncertainty in Exploration and evaluation assets and therefore inherent uncertainty in relation to the carrying value of capitalized exploration and evaluation assets.

During 2018 the Group resolved the outstanding issues with the Ghana National Petroleum Company (GNPC) regarding a contract for the development of the Tano 2A Block. The Group has signed a Petroleum Agreement in relation to the block and this agreement awaits ratification by the Ghanaian government.

Relating to the remaining exploration and evaluation assets at the financial year end, the directors believe there were no facts or circumstances indicating that the carrying value of the intangible assets may exceed their recoverable amount and thus no impairment review was deemed necessary by the directors. The realisation of these intangible assets is dependent on the successful discovery and development of economic reserves and is subject to a number of significant potential risks, as set out below:

-- Licence obligations;

-- Exchange rate risks;

-- Uncertainty over development and operational costs;

-- Political and legal risks, including arrangements with Governments for licences, profit sharing and taxation;

-- Foreign investment risks including increases in taxes, royalties and renegotiation of contracts;

-- Financial risk management;

-- Going concern and

-- Ability to raise finance.

 
 Regional Analysis    30 Jun 22   30 Jun 21   31 Dec 21 
                        EUR'000     EUR'000     EUR'000 
 Ghana                      933         932         933 
 
 
   6.    SHARE CAPITAL 
 
                                                2022      2021 
                                             EUR'000   EUR'000 
 Authorised: 
 800,000,000 ordinary shares of EUR0.0125     10,000    10,000 
 
 

Issued and fully paid

 
                                          2022                                             2021 
                          Number      Share Capital   Share Premium        Number      Share Capital   Share Premium 
                                            EUR'000         EUR'000                          EUR'000         EUR'000 
 At 1 January        157,038,467              1,963          21,786   157,038,467              1,963          21,786 
 Share issue                   -                  -               -             -                  -               - 
 
 At end of period    157,038,467              1,963          21,786   157,038,467              1,963          21,786 
 
 

Movements in issued share capital

There was no movement in the issued share capital of the company in the current or prior year.

   7.    POST BALANCE SHEET EVENTS 

There are no material post balance sheets events affecting the Group.

8. The Interim Report for the six months to 30(th) June 2022 was approved by the Directors on 26 September 2022.

   9.    The Interim Report will be available on the Company's website at www.petrelresources.com . 

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

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

IR PPUQPBUPPGAQ

(END) Dow Jones Newswires

September 27, 2022 02:00 ET (06:00 GMT)