Petrel Resources PLC Preliminary Results for the Year Ended 31 Dec 17 (2621S)

TIDMPET

RNS Number : 2621S

Petrel Resources PLC

22 June 2018

22(nd) June 2018

Petrel Resources plc

("Petrel" or "the Company")

Preliminary Results for the Year Ended 31(st) December 2017

Petrel announces its results for the year ended 31(st) December 2017.

A copy of the Company's Annual Report and Accounts for 2017 will be mailed shortly only to those shareholders who have elected to receive it. Otherwise shareholders will be notified that the Annual Report will be available on the website at www.petrelresources.com. Copies of the Annual Report will also be available for collection from the Company's registered office, 162 Clontarf Road, Dublin 3, Ireland.

The Company's Annual General Meeting will be held on 25(th) July 2018 in the Gresham Hotel, 23 O'Connell Street Upper, Dublin 1, D01 C3W7 at 10:30 am.

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

S 

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

Enquiries:

 
            Petrel Resources 
 John Teeling, Chairman                      [phone] 
 David Horgan, Director 
 
 Nominated Adviser and Broker 
 Northland Capital Partners Limited 
 David Hignell / Edward Hutton (Corporate 
  Finance)                                   [phone] 
 John Howes 
 
 Joint Broker 
 Novum Securities Limited 
 Colin Rowbury                               [phone] 
 
 Public Relations 
 Blytheweigh                                 [phone] 
 Tim Blythe                                  [phone] 
 Simon Woods                                 [phone] 
 
 Teneo PSG 
 Luke Hogg                                   [phone] 
 Alan Tyrrell                                [phone] 
 

Statement Accompanying the Preliminary Results

The headline figures of a loss for the year of some EUR4.4 million is likely to be newsworthy, but mostly reflects the EUR4.1 million impairment of our investment in Iraq. The underlying loss is roughly EUR300,000.

Iraq

In August 2013, Petrel did a deal with Amira in Iraq whereby, for US$500,000 in cash plus 18,947,368 initial consideration shares (which were to be locked-in until spudding of the first oil well by our partners), Petrel acquired a 5% full free carry in Amira's activities in the Wasit province in Iraq which was then, and still is, a relatively stable Shia dominated province. The expectation was that provinces in Iraq would offer licences in their own right rather than solely through the central government in Baghdad. This did not happen. In fact, nothing happened. As mentioned above, we have therefore impaired our investment.

Proposed buy back and cancellation of shares

We have also reached agreement to buy back the initial consideration shares for a nominal consideration although, as we reported on 15 December 2017, 2.2 million of the shares had been sold in breach of the lock-in agreement. Permission is being sought at the forthcoming AGM to buy back and cancel the remaining 16,747,368 shares. Cancellation of these shares would reduce the number of shares in issue by approximately 17%.

Iraq remains one of the very best oil provinces in the world. The oil exploration potential is outstanding. The improving political situation in Iraq has resulted in Petrel re-awakening an interest. We have been there since 1999 and like the country. We are discussing with Amira, our partner, how best to declare an interest in certain fields. We are also re-establishing contacts in the administration. It is very early days, but it does look as if Iraq is slowly re-opening for business, and we want to be there.

Offshore Ireland

Our main focus in recent times has been the Atlantic Offshore Ireland, particularly the Porcupine Basin. Results are mixed. We did very well in recent licencing rounds, winning two licences seven years ago and another two in 2016. In 2013, we joint ventured our two 2011 licences with Woodside Energy of Australia, recovering our cash investment and getting a carry. They did extensive work including, in 2016, a multi-million euro 3D seismic campaign. Their ongoing work led them to relinquish FEL 4/14 in 2016. The review of the latest seismic has led them to surrender their FEL 3/14 interest as of end August 2018. FEL 3/14 could revert 100% to Petrel if an extension can be negotiated with the authorities. We believe that the ground has potential not recognised by Woodside, and that we can bring in a partner.

In the meantime, as we reported on 27 February 2018, Woodside have offered and Petrel have accepted a 10% participating interest in licence FEL 11/18, thus satisfactorily resolving the prior issues under arbitration in relation to FEL 4/14. Work on FEL 11/18 has identified targets, which are being tested by the state-of-the-art 3D seismic which has recently been acquired.

The two licence options acquired in 2016 (LO 16/24 and LO 16/25) have been analysed and worked up, and potential opportunities identified. Despite extensive work by Petrel, we found no interest from likely partners in joint venturing the two options.

On a wider industry front, oil prices have recovered and majors are making money. It was expected that the results of the 2017 drilling in the Porcupine would have ignited interest but there is little sign of it to date.

Unfortunately there is growing political uncertainty in Ireland in relation to resources. Oil exploration dollars are nomadic. They will go where they are welcome. Ireland is no longer welcoming. A ban on onshore fracking and a bill to outlaw new offshore oil exploration licences currently in the Dáil sends out bad messages. Combine these with the increases in taxation and royalties introduced in 2015 and you have a toxic cocktail.

Exploration in deep hostile expensive waters with unknown potential is high risk. Add political uncertainty to this and the inevitable consequence is reduced interest. The farm out market for early stage projects, whereby junior explorers do the initial work and de-risk the geology, then bring in majors to do the drilling, has thinned out. We are seeking to convert LO 16/24 into a Frontier Exploration Licence as we believe there is potential on the acreage. LO 16/25 was too limited in acreage and structure size to be worth converting.

Ghana

We have been in Ghana since 2008. We signed an oil exploration agreement in 2010. But to date it has not been ratified by cabinet or parliament. Petrel holds a 30% interest in the agreement (held through its interest in Pan Andean Resources Limited), Clontarf Energy, a sister company holds 60% and local interests hold 10%.

Since 2010, there has been a series of obstacles placed in the way of ratification. We believed a court settlement in 2014 would expedite the decision. It has not. Recent changes in government has returned to power the party who first made the agreement with us. There is now renewed energy to attempt to finalise a deal. While there is goodwill on both sides, actually concluding a deal has been difficult.

Future

Petrel is a small tightly held listed company. Shareholders over many years have not been asked to invest new money. In recent years, we have been investing the proceeds of an Iraqi exit in 2009 into Iraq, Offshore Ireland and Ghana. In Ireland, we recovered most of our investment with the Woodside joint venture. Ghana, where we hold 30%, is not a big drain on resources.

Once again, it is time to reassess our strategy. We will continue to work with Woodside in the Atlantic and with our partners in Ghana. We will once more dip our toe into opportunities in the Middle East.

John Teeling

Chairman

22(nd) June 2018

PETREL RESOURCES PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEARED 31 DECEMBER 2017

 
 
                                                         2017        2016 
                                                          EUR         EUR 
 
 CONTINUING OPERATIONS 
 
 
 Administrative expenses                            (297,381)   (257,675) 
 
 Impairment of investments                        (4,094,804)           - 
 
 OPERATING LOSS                                   (4,392,185)   (257,675) 
 
 Investment revenue                                         -       1,170 
 
 LOSS BEFORE TAXATION                             (4,392,185)   (256,505) 
 
 Income tax expense                                         -           - 
 
 LOSS FOR THE FINANCIAL YEAR: all attributable 
 to equity holders of the parent                  (4,392,185)   (256,505) 
 
 Other comprehensive (expense)/income                       -           - 
 
 Items that are or may be reclassified 
 subsequently to profit or loss                             -           - 
 
 Exchange differences                               (321,858)      66,830 
 
 TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL 
  YEAR                                            (4,714,043)   (189,675) 
 
 
 Loss per share - basic and diluted                   (4.40c)     (0.26c) 
 
 
 
 

PETREL RESOURCES PLC

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2017

 
                                             2017           2016 
                                              EUR            EUR 
 Assets 
 
 Non-Current Assets 
 
 Financial asset                                -      4,211,123 
 Intangible assets                      2,179,283      2,138,159 
 
                                        2,179,283      6,349,282 
 
 
 
 Current Assets 
 
 Trade and other receivables               27,573         23,003 
 Cash and cash equivalents                371,380        745,195 
 
                                          398,953        768,198 
 
 Total Assets                           2,578,236      7,117,480 
 
 Current Liabilities 
 
 Trade and other payables               (584,693)      (409,894) 
 
 Net Current (Liabilities)/Assets       (185,740)        358,304 
 
 NET ASSETS                             1,993,543      6,707,586 
 
 
 
 Equity 
 
 Called-up share capital                1,246,025      1,246,025 
 Capital conversion reserve fund            7,694          7,694 
 Share premium                         21,416,085     21,416,085 
 Share based payment reserve               26,871         26,871 
 Translation reserve                      399,461        721,319 
 Retained deficit                    (21,102,593)   (16,710,408) 
 
 TOTAL EQUITY                           1,993,543      6,707,586 
 
 
 

PETREL RESOURCES PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEARED 31 DECEMBER 2017

 
                                                     Capital      Share 
                                                  Conversion      Based 
                            Share        Share       Reserve    Payment   Translation       Retained 
                          Capital      Premium          fund    Reserve       Reserve        Deficit         Total 
                              EUR          EUR           EUR        EUR           EUR            EUR           EUR 
 
 At 1 January 
  2016                  1,246,025   21,416,085         7,694     26,871       654,489   (16,453,903)     6,897,261 
 Total comprehensive 
  income for 
  the financial 
  year                          -            -             -          -        66,830      (256,505)     (189,675) 
                       ----------  -----------  ------------  ---------  ------------  -------------  ------------ 
 At 31 December 
  2016                  1,246,025   21,416,085         7,694     26,871       721,319   (16,710,408)     6,707,586 
 Total comprehensive 
  income for 
  the financial 
  year                          -            -             -          -     (321,858)    (4,392,185)   (4,714,043) 
                       ----------  -----------  ------------  ---------  ------------  -------------  ------------ 
 At 31 December 
  2017                  1,246,025   21,416,085         7,694     26,871       399,461   (21,102,593)     1,993,543 
                       ==========  ===========  ============  =========  ============  =============  ============ 
 

Share premium

Share premium comprises of the excess of monies received in respect of the issue of share capital over the nominal value of shares issued.

Capital conversion reserve fund

The ordinary shares of the company were renominalised from EUR0.0126774 each to EUR0.0125 each in 2001 and the amount by which the issued share capital of the company was reduced was transferred to the capital conversion reserve fund.

Share based payment reserve

The share based payment reserve represents share options granted which are not yet exercised and issued as shares.

Translation Reserve

The translation reserve comprises of foreign exchange movement on translation from US Dollars (functional currency) to Euro (presentation currency).

Retained deficit

Retained deficit comprises accumulated losses in the current and prior financial years.

PETREL RESOURCES PLC

CONSOLIDATED CASH FLOW STATEMENT

FOR THE FINANCIAL YEARED 31 DECEMBER 2017

 
 
                                                          2017        2016 
                                                           EUR         EUR 
 
 CASH FLOW FROM OPERATING ACTIVITIES 
 
 Loss for the financial year                       (4,392,185)   (256,505) 
 Write off of financial asset                        4,094,804           - 
 Investment revenue recognised in loss                       -     (1,170) 
 
 OPERATING CASHFLOW BEFORE 
 MOVEMENTS IN WORKING CAPITAL                        (297,381)   (257,675) 
 
 Movements in working capital: 
 Increase in trade and other payables                  129,799      49,285 
 Increase in trade and other receivables               (4,570)     (3,800) 
 
 CASH USED IN OPERATIONS                             (172,152)   (212,190) 
                                                             -       1,170 
 Investment revenue 
                                                     (172,152)   (211,020) 
 NET CASH USED IN OPERATING ACTIVITIES 
 
 INVESTING ACTIVITIES 
 
 Payments for exploration and evaluation assets      (259,161)   (160,699) 
 Funds on disposal of financial assets                 116,319           - 
 
 NET CASH USED IN INVESTING ACTIVITIES               (142,842)   (160,699) 
 
 
 NET DECREASE IN CASH AND CASH EQUIVALENTS           (314,994)   (371,719) 
 
 Cash and cash equivalents at beginning of 
  financial year                                       745,195   1,111,257 
 
 Effect of exchange rate changes on cash held 
  in 
 foreign currencies                                   (58,821)       5,657 
 
 Cash and cash equivalents at end of financial 
  year                                                 371,380     745,195 
 
 

NOTES:

   1.    ACCOUNTING POLICIES 

There were no changes in accounting policies from those used to prepare the Group's Annual Report for financial year ended 31 December 2016. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

   2.    LOSS PER SHARE 
 
                                          2017      2016 
                                           EUR       EUR 
 
 Loss per share - basic and diluted    (4.40c)   (0.26c) 
 
 

Basic loss per share

The earnings and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:

 
                                                       2017         2016 
                                                        EUR          EUR 
 
 Loss for the financial year attributable to 
  equity holders                                (4,392,185)    (256,505) 
 
 
                                                       2017         2016 
                                                     Number       Number 
 Weighted average number of ordinary shares 
  for the 
 purpose of basic earnings per share             99,681,992   99,681,992 
 
 

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

   3.    FINANCIAL ASSET 

Investment

 
                                                  2017        2016 
                                                   EUR         EUR 
 
 
 At the beginning of the financial year      4,211,123   4,211,123 
 Additions                                           -           - 
 Disposal                                    (116,319)           - 
 Impairment                                (4,094,804)           - 
 
 At the end of the financial year                    -   4,211,123 
 
 

The Company's investment in its financial asset, held through its wholly owned subsidiary Petrel Resources (TCI) Limited, consisted of a 20 per cent shareholding in Amira Hydrocarbons Wasit B.V.("Amira") which was acquired from Amira Petroleum N.V. on 14 August 2013. Amira is a special purpose vehicle which holds a 25 per cent carried to production interest in an early stage oil opportunity in the large, underexplored and underdeveloped province of Wasit.

The consideration for the acquisition included the issue of 18,947,368 shares in Petrel. The Initial Consideration Shares were agreed to be locked-in until the date of spudding the first conventional oil well in respect of Amira's interest in the Wasit province but that, if the Spudding Date had not occurred by 19 August 2018, Petrel could, amongst other things, elect to re-acquire the Initial Consideration Shares for a nominal amount. As part of the agreement with Amira Petroleum, 2.8 million of the Initial Consideration Shares were, at the direction of Amira Petroleum, issued to its advisers in satisfaction of fees payable by Amira Petroleum and were subject to a lock in agreement as detailed above.

During December 2017, the Directors learnt that 2.2 million of the Adviser Shares had been sold between March and July 2017, notwithstanding the lock-in agreement. The parties reached a settlement and agreed that the vendors of the 2.2 million Adviser Shares make a payment of GBP100,000 to the Company, which has been received per year end (representing approximately 4.5p per Adviser Share sold). The remaining Adviser Shares shall remain subject to the lock-in agreed in 2013.

As of the date of this announcement, the Spudding Date has not occurred. Accordingly, the directors have decided to write off the investment in Amira Hydrocarbons Wasit B.V. and an impairment charge of EUR4,094,804 was recorded. No further shares will be issued to Amira and the 16,747,368 shares already issued will be re-acquired for nominal consideration, subject to shareholder approval at the AGM and the shares will be cancelled.

   4.    INTANGIBLE ASSETS 
 
                                            2017        2016 
                                             EUR         EUR 
 Exploration and evaluation assets: 
 
 Cost: 
 
 Opening balance                       2,138,159   1,871,288 
 Additions                               304,159     205,699 
 Exchange translation adjustment       (263,035)      61,172 
 
 Closing balance                       2,179,283   2,138,159 
 
 
 
 
 Segmental Analysis 
                            2017        2016 
                             EUR         EUR 
 
 
 Ghana                   843,988     962,377 
 Ireland               1,335,295   1,175,782 
 
                       2,179,283   2,138,159 
 
 
 

Exploration and evaluation assets at 31 December 2017 represent exploration and related expenditure in respect of projects in Ireland and Ghana. The directors are aware that by its nature there is an inherent uncertainty in relation to the recoverability of amounts capitalised on the exploration projects.

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.

The Group's exploration activities are subject to a number of significant and potential risks including:

   --     Licence obligations; 
   --     Funding requirements; 
   --     Political and legal risks, including title to licence, profit sharing and taxation; 
   --     Geological and development risks; 
   --     Exchange rate risk; 
   --     Political risk; and 
   --     Financial risk management. 

Directors' remuneration of EUR30,000 (2016: EUR30,000) and salaries of EUR15,000 (2016: EUR15,000) were capitalised as exploration and evaluation expenditure during the financial year.

   5.    SHARE CAPITAL 
 
                                                  2017        2016 
                                                   EUR         EUR 
 Authorised: 
 200,000,000 ordinary shares of EUR0.0125    2,500,000   2,500,000 
 
 
 
 
 Allotted, called-up and fully 
  paid: 
                                      Number       Share        Share 
                                                 Capital      Premium 
                                                     EUR          EUR 
 
 At 1 January 2016                99,681,992   1,246,025   21,416,085 
 Issued during the financial               -           -            - 
  year 
 
 At 31 December 2016              99,681,992   1,246,025   21,416,085 
 
 
 
 At 1 January 2017                99,681,992   1,246,025   21,416,085 
 Issued during the financial               -           -            - 
  year 
 
 At 31 December 2017              99,681,992   1,246,025   21,416,085 
 
 

Movements in share capital

There was no movement in share capital in the current year.

   6.    POST BALANCE SHEET EVENTS 

There were no material post balance sheet events affecting the company or group.

   7.    ANNUAL GENERAL MEETING 

The Company's Annual General Meeting will be held on 25(th) July 2018 in the Gresham Hotel, 23 O'Connell Street Upper, Dublin 1 , D01 C3W7 at 10:30 am.

   8.    GENERAL INFORMATION 

The financial information set out above does not constitute the Company's financial statements for the year ended 31 December 2017. The financial information for 2016 is derived from the financial statements for 2016 which have been delivered to the Companies Registration Office. The auditors have reported on 2016 statements; their report was unqualified with an emphasis of matter in respect of considering the adequacy of the disclosures made in the financial statements concerning the valuation of intangible assets, investment in subsidiaries and amounts due by group undertakings. The financial statements for 2017 will be delivered to the Companies Registration Office.

A copy of the Company's Annual Report and Accounts for 2017 will be mailed shortly only to those shareholders who have elected to receive it. Otherwise shareholders will be notified that the Annual Report will be available on the website at www.petrelresources.com. Copies of the Annual Report will also be available for collection from the Company's registered office, 162 Clontarf Road, Dublin 3, Ireland.

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.

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June 22, 2018 06:37 ET (10:37 GMT)