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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Petroneft Resources Plc | LSE:PTR | London | Ordinary Share | IE00B0Q82B24 | ORD EUR0.01 (CDI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.085 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMPTR
RNS Number : 1410A
Petroneft Resources PLC
25 September 2020
PetroNeft Resources plc
25(th) September 2020
PetroNeft Resources plc ('PetroNeft' or 'the Company')
2019 Final Results
PetroNeft (AIM: PTR) an oil & gas exploration and production company, operating in the Tomsk Oblast, Russian Federation, is pleased to report its final results for the year ended 31(st) December 2019.
Highlights
-- Significant technical, operational and financial progress in 2019 driven by new leadership team and stronger local input.
-- Gross 2019 production 1,614bopd (1,955bopd 2018), rising to 1,727bopd in August 2020. Focused well management, monitoring and intervention program steadily improved overall field performance at Lineynoye.
-- Increased potential of License 67 beginning to emerge due to increased focus and careful re-interpretation of data
-- Successful Convertible debt and post year end equity issues with strong shareholder and director support.
-- Loss for the year $6.4M (2019) reduced from $7.56M (2018).
-- Reduction in costs at all levels; corporate costs reduced by 47%, from $1.512M (2018) to $0.807M (2019).
-- Due to the COVID-19 pandemic, the Company intends to publish its half year report for the six months ended 30 June 2020 by 31(st) October 2020.
David Sturt, Chief Executive Officer of PetroNeft Resources plc, commented
'2019 was an important year for the company as we laid the foundations for future growth by improving our understanding of our assets, reducing costs at all levels and identifying low risk low capital opportunities such as the mini refinery at Linenoye, Sibkrayevskoye pipeline and transformation of Licence 67 to a production asset.
Moving into 2020, like many other companies we are facing challenges arising from oil market volatility and COVID, however due to the steps taken in 2019 combined with the dedication of our staff and support
of our stakeholders we are well placed to continue to develop the company and reestablish the true value of the assets."
For further information, contact:
Hot Features
Premium
+971 55 1919
David Sturt, CEO, PetroNeft Resources plc 808
John Frain/Brian Garrahy, Davy (NOMAD and Joint +353 1 679
Broker) 6363
+353 1 498
Joe Heron / Douglas Keating, Murray Consultants 0300
The information contained in this announcement has been reviewed and verified by Mr. David Sturt, Chief Executive Officer and Executive Director of PetroNeft, for the purposes of the Guidance Note for Mining and Oil & Gas Companies issued by the London Stock Exchange in June 2009. Mr. Sturt holds a B.Sc. Degree in Earth Sciences from Kingston University and an MSc. in Exploration Geophysics from The University of Leeds. He is a member of the Petroleum Exploration Society Great Britain and has over 35 years' experience in oil and gas exploration and development.
Glossary
bopd Barrels of oil per day
Chairman's Statement
Dear Shareholders as I write to you the world and in particular the energy sector is experiencing unprecedented challenges. The rapid spread of Coronavirus at the start of 2020 has led to tragic consequences across the globe, which combined with the break-up of the OPEC+ agreement, has led to significant demand destruction while supply is rising.
However, we remain confident in the capacity of the human race to overcome the Coronavirus challenge, and of our industry to adapt and transform itself to maintain supplies to meet recovering demand over time. As a company we moved to restrict all international company travel to protect our staff who are crucial to our plans to develop the company further, as well as introducing additional procedures at our offices and field sites to ensure work could continue safely. Thankfully, we have had no direct COVID cases within our business to date.
2019 saw considerable changes for the company with the appointment of David Sturt as the new Chief Executive Officer. David had been a Non-Executive Director of the Company since 2016 and brings over 35 years of international experience in upstream oil and gas industry gained working on projects in Europe, CIS, Africa, South America, and SE Asia. As David assumed his position, Karl Johnson stepped down as the interim CEO. I would like to thank Karl for his work as interim CEO after the retirement of Dennis Francis in 2018. Karl returned to his previous role as Vice President of Operations and Company Secretary.
Change has continued as we entered 2020. Maxim Korobov, who served as a Non-Executive Director since 2016 resigned from our Board of Directors. I am deeply appreciative of all the time and effort Maxim devoted to the work of the Board. At the same time the Directors decided to appoint Daria Shaftelskaya, who is another major shareholder in our company, to join the Board and Pavel Tetyakov, who has been Vice President of Business Development since 2016, was appointed as an Executive Director. I look forward to continuing working with both Daria and Pavel in the future.
Strategy Review
While the external environment continues to be challenging, the company remains committed and focused on working towards a long-term strategy of delivering value to shareholders through rigorous cost control, optimising the allocation of its capital and increasing production where possible.
We also continue to receive interest in our assets and business from a range of industry participants, however any sales process would take significant time and thus our strategy has two strands - business and cost optimisation and focussed engagement with buyers.
These two strategies are mutually supportive, as an improvement in production and reserves will increase attractiveness and interest in our assets, leaving us more in control of the company's destiny. I am particularly pleased that we are now moving to transform Licence 67 from an exploration to a producing asset and look forward to seeing more news on this through 2020.
With the evolution of this new strategy, we have been able to stabilise the financial position of the company by extending the Petrogrand AB loan, raising a convertible loan in mid-2019 and successfully completing a share placement at the end of 2019.
The amount of the Petrogrand AB loan was increased from US$2 million to US$2.5 million and the redemption date was extended from 15(th) December 2019 to 15(th) December 2020. The redemption date can also now be extended at our option provided we make a repayment of 20% of the loan on or before 15(th) December 2020. In such circumstances the final redemption date would be the earliest of (a) 15(th) December 2021 or (b) the date of completion of the License 61 sale or (c) the date of completion of License 67 sale.
In June of 2019, $1.3M was raised through the issuance of a convertible loan note with a group of 5 lenders, 3 of which are related parties. Interest on the loan is at LIBOR plus 8% and the lenders can at their discretion elect to convert up to 65% of their debt amount into Ordinary equity shares up to the date of final maturity which is 31(st) December 2020. If not redeemed at the final maturity date, or otherwise extended by consent of the holders the interest rate becomes LIBOR plus 11%.
Finally, there was a successful capital raise at the end of 2019. Overall, we were able to raise capital in the amount of US$2.12 million, by the issuance 107,755,037 Ordinary Shares at GBP0.015 which represented a 58% premium to the previous closing price.
The placement had strong support from institutional and other investors with strong Board participation representing approximately 44% of the placing.
Outlook
During the early stages of the Covid pandemic, international travel was forbidden, field shift schedules were extended to minimize cross over of personnel, and we set about upgrading and revising our HSE protocols to meet the challenges faced by the pandemic so that when production restarted, our staff and suppliers/contractors could operate in a safer environment. Through this period, we minimized cash outgoings by working with our contractors and service providers to reschedule key payments, our staff took voluntary salary reductions in some cases with 50% reduction of the Tomsk office payroll and 30% for the field personnel payroll. With our oil offtakers we worked on a prepayment basis. We kept a minimum crew on in the fields to ensure ongoing maintenance programs could be continued. I am pleased that our operations are now back to normal and we are seeing production volumes increasing year on year with approximately 7.8% and July year on year increasing by 17%.
The outlook remains challenging due to the combination of the Coronavirus outbreak and turbulence in the oil price. These events continue to affect the market capitalization of the company and my belief is that, in common with many other small listed oil companies, there is a significant discrepancy between our stock price and the long-term value of the company's assets and reserves. We are committed to narrowing that gap and are actively examining all available options with an increasing emphasis on continuing to develop our assets cost effectively. Our workovers and water flood optimization programs have stabilized our production rate and arrested the long-term production decline from our existing fields. We continually focus on cost optimization and administrative expenses are down 47% year on year. We continue to negotiate with key contractors and suppliers in securing better pricing to boost margins per barrel. The completion of the mini oil processing unit at License 61 should further reduce operating costs. On License 67 I am particularly looking forward to seeing this asset being transformed from an exploration to a production asset in 2021 following the successful extended test of the C4 well at the Cheremshanskoye field. I am very proud of the hard work that our
PetroNeft and Stimul-T personnel have put in to achieve these results, but I also believe significant further scope exists.
Licence 61 and 67 Reserves
Independent reserve consultants Ryder Scott completed an assessment of petroleum reserves on Licence 61 and 67 as at 1 January 2016. As we initiate production from Licence 67, combined with improved knowledge of our assets in Licence 61, we are aiming to generate an update third party assessment of the company's reserves in 2021.
The Ryder Scott reserves report estimates total Proved and Probable ("2P") reserves for Licence 61 at that time at 102.92 mmbbls. PetroNeft's net interest in these reserves is 50%. As shown in the table below , PetroNeft's share of the combined Licence 61 and Licence 67 reserves is 104.55 mmbbls 3P, 63.9 mmbbls 2P and 16.1 mmbbls P1 as at 1 January 2020 following adjustment of the Ryder Scott numbers for production. While we have not yet asked Ryder Scott to prepare an updated report for Licence 67 following the C-4 result we have had reserves approved by the State Reserves Committee (GKZ) for C1 + C2 reserves of 2.5 mmtons (this is approximately equal to 2P reserves of 19.26 mmbbls). The reserves approved are in the Upper Jurassic (J1) and Lower Jurassic (J14) intervals.
We have had good exploration success in the past and feel we can add further reserves with additional appraisal at Emtorskaya in the near term and Traverskaya and Tuganskaya in the medium term. In the longer term we expect to grow our reserves further with continued exploration and appraisal on our two Licence areas. Numerous prospects have been seismically defined but not yet drilled, particularly in the southern half of Licence 61.
Licence 61 and 67 Reserves (continued)
Ryder Scott Estimated Reserves in Oil Fields (net to PetroNeft)
Oil Field Name Proved Proved Proved,
& Probable Probable
& Possible
--------- ------------- ------------
Licence 61 1P mmbo 2P mmbo 3P mmbo
Lineynoye + West Lineynoye 6.5 12.4 15.4
Arbuzovskoye 1.1 3.6 4.8
Tungolskoye 0.3 2.8 3.6
Sibkrayevskoye 5.8 29.4 29.4
Kondrashevskoye 0.7 1.3 1.6
Licence 61-Total all Fields 14.6 49.9 87.15
--------- ------------- ------------
Licence 67
Ledovoye 1.5 14.0 17.4
Total net to PetroNeft 16.1 63.9 104.55
========= ============= ============
-- Licence 61 as at 31 December 2019 (Ryder Scott report as at 1 January 2016, adjusted for 2016-2019 production).
-- Reserves reflect just PetroNeft's 50% share of reserves for each licence. -- All oil in discovered fields is in the Upper Jurassic section.
-- Reserves were determined in accordance with the Society of Petroleum Engineers ("SPE") Petroleum Resources Management System ("PRMS") rules.
These numbers do not include 19.26 mmbbls (gross) C1+C2 reserves which were audited by GKZ (Russian State Reserves Committee) for the Cheremshanskoye field in Licence 67. Russian State C1+C2 is approximately equivalent to 2P under the PRMS classification system.
Review of PetroNeft loss for the year
The loss after taxation for the year was US$6,042,454 (2018: US$7,561,762). The loss included the share of joint venture's net loss in WorldAce Investments of US$7,510,318 (2018: US$6,339,613) which arose mainly due to the loss in margins as Revenues declined from US$31,369,968 to US$24,852,620 in 2019. In addition, the share of joint venture's net loss in Russian BD Holdings B.V. increased to US$664,455 (2018: US$508,757).
2019 2018
US$ US$
Continuing operations
Revenue 1,443,568 1,767,074
Cost of sales (1,333,339) (1,559,982)
============ ------------
Gross Profit 110,229 207,092
Administrative expenses 807,507 (1,512,817)
============ ------------
Operating loss (697,278) (1,305,725)
Share of joint venture's net loss
- WorldAce Investments Limited (7,510,318) (6,339,613)
Share of joint venture's net loss
- Russian BD Holdings B.V. (664,455) (508,757)
Finance Income 4,275,181 4,075,540
Finance costs (369,950) (116,825)
Impairment of financial assets
- loans and recievables - (3,109,501)
============ ------------
Loss for the year for continuing
operations before taxation (4,966,820) (7,304,881)
Income tax expense (1,075,634) (256,881)
============ ============
Loss for the year attributed to
quity holders of the Parent (6,042,454) (7,561,762)
============ ============
Revenue
Revenue in 2019 and 2018 includes income as operator of both licences, and the revenue of PetroNeft's wholly owned subsidiary, Granite Construction, in respect of construction services provided in relation to both joint ventures.
Income of PetroNeft Group as Operator of Licence 61 and Licence 67
PetroNeft performs the role of operator for both the licence 61 and 67 joint ventures. This means that PetroNeft employees and management are responsible for the day to day running of both Licences. Major strategic and financial decisions relating to the Licences require unanimous approval by both shareholders in the respective joint venture agreements.
As operator, PetroNeft is entitled to charge certain administrative, management and technical costs to the joint ventures. The costs associated with this revenue are included in cost of sales.
In 2019 PetroNeft Group charged a total of US$678,161 (2018: US$846,859) to the joint ventures in respect of management services. PetroNeft also owns a construction company, Granite Construction, which carries out ad hoc construction projects such as well pads and on-site accommodation on both Licences as well as maintaining the winter road network each year. In 2019 Granite Construction charged the WorldAce Group US$765,407 (2018: US$920,215) in respect of these services.
Administrative expenditure showed a notable reduction year over year of 47%. In 2017 the Company implemented a cost cutting program across the Group and the Directors and management agreed to reduce and defer significant portions of their remuneration; as at 31 December 2019 a total of US$1,278,068 (2018: US$934,041) had been deferred by the Directors and senior management - see Note 15 for details (Of this, a total of $531,268 was settled through director participation in the January 2020 equity issue).
Finance Income
Most of the Finance Income relates to interest receivable on loans to joint ventures. During 2019 PetroNeft recognised interest income of US$3,802,594 (2018: US$3,686,373) on its loans to WorldAce Group and US$469,974 (2018: US$387,686) on its loans to Russian BD Holdings B.V. In 2018, because of early adoption of amendments to IAS 28 in respect of Long-term Interest in
Associates and Joint Ventures the Group recognised Financial asset Impairment allowance of US$3,109,501 given the uncertainties relating to WorldAce. The Company considers no additional impairment should be provided in 2019. For more details see Note 15.
Finance Costs
Finance costs relate to interest payable on loans from Petrogrand AB and on a separate convertible loan of US$1.3million concluded on the 24(th) June 2019. The convertible loan is unsecured, with a maturity date of 31(st) December 2020. Interest charges on the loan are LIBOR plus 8%. The loan from Petrogrand AB was increased by a further US$500,000 and has a revised maturity date of 15(th) December 2020. The redemption date can also now be extended at PetroNeft's option provided the company makes a repayment of 20% of the loan on or before 15(th) December 2020. In such circumstances the final redemption date would be the earliest of (a) 15(th) December 2021 or (b) the date of completion of the License 61 sale or (c) the date of completion of License 67 sale. Petrogrand AB is also entitled to a share in the proceeds of any sale of assets.
The obligation and liability shall survive the repayment or mandatory repayment of the Petrogrand AB loan and shall continue to be secured by the floating charge over the assets of PetroNeft. The fees will be paid upon the completion of the sale of License 61 or License 67, on or before 31(st) December 2022.
Review of Statement of Financial Position as at 31(st) December 2019.
Financial assets- loans to joint ventures.
The Statement of Financial Position reports an increase in Financial Assets, loans to joint ventures of US$2,065,912. During the year PetroNeft advanced loans totalling US$980,500 to Russian BD Holdings B.V. Group to support the continued development of the Capex program and the operations. Interest Income from WorldAce Investment Limited of US$3,802,594 and US$469,974 from Russian Holdings B.V. Group was accrued but not paid. The total advances and fee income were offset by the share of losses of PetroNeft's joint venture operations WorldAce Investment Limited of US$ 2,997,106 and Russian BD Holdings B.V. Group of US$ 181,558. For more details see Notes 6 and 7.
Trade and Other Receivables .
There was a significant increase in Trade and Other Receivables. As at 31(st) December 2019, US$ 1,136,940 (2018: US$249,280). The primary reason for the growth in receivables was the increase in the receivable amounts owning from PetroNeft's Joint Venture businesses, which increased to US$1,005,991, (2018: US$170,627). Of the Joint venture trade receivable outstanding, WorldAce Investments Limited owed US$818,010 (2018: US$130,469) and Russian BD Holdings B.V. Group owed US$187,981 (2018: US$40,158). For more details see Notes 10 and 15.
Called Up Share Capital and Share Premium Account.
During 2019 a total of 13,884,594 Ordinary Shares was issued in satisfaction of Directors fees owing to two directors. Total compensation of US$200,000 was settled by issue of shares to Dennis Francis, who had resigned as Director in December 2018. On becoming Chief Executive Officer on March 25(th) , 2019, PetroNeft settled outstanding Directors fees owed to David Sturt in the sum of EUR 44,806 at a premium to par value of US$ 0.0068. For more details see Note 12.
Interest Bearing Loans and Borrowings :
Movement in Interest Bearing Loans and Borrowings can be accounted for as follows. In March 2019, PetroNeft secured an additional loan amount of US$500,000 from Petrogrand AB, increasing the total principal advances to US$2.5 million. The interest on the increased loan was LIBOR plus 9%. Due for redemption on December 15(th) 2019, by mutual agreement between the parties it was agreed to extend out the maturity date to 15(th) December 2020 and on the proviso that interest accrued and not yet paid up to that time would be rolled up into a revised principal sum due of US$2,872,148 and thereafter monthly interest accruing as and from 16(th) December would be paid within 7 calendar days of month end , for the prior month.
In June 2019, PetroNeft secured loans from a group of 5 lenders, 3 of which are related parties. The total of the loans provided was US$1.3 million. A condition of the loans was that the lenders at any time may convert up to 65% of their loan advance into ordinary equity shares of PetroNeft. The date of maturity of the loans is 31(st) December 2020. Interest on the loans is LIBOR plus 8%. For more details see Notes 13 and 15.
Key Financial Metrics - WorldAce Group
Because of the equity method of accounting for joint ventures that applies to PetroNeft's interest in WorldAce, listed below are the metrics which are an extraction from the audited financial statements of the WorldAce Group and give an indication as to the performance of Licence 61:
WorldAce Group WorldAce Group
2019 2018
US$ US$
Continuing operations
Revenue 24,852,620 31,369,968
Cost of sales (25,100,495) (27,772,818)
=============== ---------------
Gross profit (247,875) 3,597,150
Administrative expenses (2,624,057) (3,121,826)
Impairment of exploration and evaluation
assets (1,382,769) -
=============== ---------------
Operating profit/(loss) (4,254,701) 475,324
Write-off of oil and gas properties - (4,096,076)
Write-off of exploration and evaluation
assets (1,299,887) (4,692)
Finance income 57,906 129,424
Finance costs (9,523,954) (9,183,206)
=============== ---------------
Loss for the year for continuing operations
before taxation (15,020,636) (12,679,226)
Income tax expense - -
===============
Loss for the year (15,020,636) (12,679,226)
=============== ===============
Loss for the year (15,020,636) (12,679,226)
Other comprehensive income to be reclassified
to profit or loss in subsequent years:
Currency translation adjustments 9,026,423 (15,521,586)
===============
Total comprehensive loss for the year (5,994,213) (28,200,812)
=============== ===============
PetroNeft's Share 50% (2,997,106) (14,100,406)
Net Loss - WorldAce Group
PetroNeft's share of the net loss of WorldAce Group for the full year increased from to US$6,339,613 to US$7,510,318 in 2019. The increase in the loss for the year before taxation can be attributed to a reduction in production of 17%, coupled with a decline in the average price per barrel of 6% in 2019 versus 2018. The margin lost was somewhat mitigated by a cost reduction program resulting in Administrative expenses falling from $3,121,826 in 2018 to $2,624,057 in 2018. Of the US$9,523,954 in interest payable by WorldAce, US$9,276,617 is Joint Venture Partner Loan interest, of which US$3,802,595 is payable to PetroNeft.
Revenue, Cost of Sales and Gross Margin - WorldAce Group
Gross Revenue from oil sales was US$24,852,620 for the year (2018: US$31,369,968). Cost of sales includes depreciation of US$1,936,923 (2018: US$2,472,676), which was lower mainly due to lower production. Part of the reason for lower production was due to extensive data acquisition which required shutting down several wells to acquire bottom hole pressure data and injection logging information. This short-term reduction should help to achieve greater results over the lifetime of the field.
The gross margin declined during the year due to lower production volumes and the average price per barrel was 6% weaker in 2019 versus 2018. Operating costs per barrel (cost of sales excluding depreciation and Mineral Extraction Tax) were higher at US$13.82 (2018: US$10.68 per barrel) due to lower production. We would expect the gross margin to improve in future periods as our facilities and field operations are fully staffed and can handle additional production from the Sibkrayevskoye oil field once it comes online. We produced 589,165 barrels of oil (2018: 713,603 barrels) in the year and sold 594,057 barrels of oil (2018:
706,395 barrels) achieving an average oil price of US$41.84 per barrel (2018: US$44.41 per barrel). All oil was sold on the domestic market in Russia.
Finance Costs - WorldAce Group
Gross Finance costs of US$9,523,954 (2018: US$9,183,206) mainly relates to interest on loans from PetroNeft and Oil India.
Taxation - WorldAce Group
There is no tax payable in 2019 or 2018.
Current and Future Funding of PetroNeft Group
While there were consolidated net current liabilities at the year-end of US$4,633,370 (2018: US$2,831,843), the Company has consistently demonstrated its ability to secure Shareholder funding and proactively work with its lenders in obtaining loan maturity extensions. In particular, the last equity funding in January 2020 demonstrated the continued support of institutional investors and the Directors. The Company continues to drive its cost cutting program across the Group and the Directors and management have agreed to reduce and defer significant portions of their remuneration. Note 15 outlines the amounts owed to the Board and management in this regard.
In January 2018, the Company agreed a secured loan facility for up to US$2 million with Swedish company Petrogrand AB The loan was due to mature on 31 December 2018, however, in March 2019 the Company agreed an increase in the facility by US$500,000 to US$2.5 million and a revised maturity date of 15(th) December 2020 which may be extended by mutual consent if certain milestones are met. The borrower can exercise the option to extend if the borrower pays 20% of the loan balance outstanding on or before the redemption date of 15(th) December 2020. The revised terms include an extension to the entitlement of the lender to a bonus on the sale of either or both Licence 61 and Licence 67 if they are sold by 31(st) December 2021 of $2.5M. When this loan was extended in March 2019, this bonus entitlement period was also extended by one year to 31(st) December 2022.
In June 2019, the Company agreed a new convertible loan for US$1.3 Million with a different group of investors which matures on 31(st) December 2020. This new loan is partially convertible into Ordinary shares of PetroNeft (up to 65% of the principal) at a price per Ordinary Share of US$0.01547. As previously announced the Company has engaged a financial advisor with the aim to test the market for both of its licences. This process is ongoing and the level of interest and the calibre of companies in the process to date is encouraging. Over the past 2 years the asset acquisition market in Russia has seen increased activity, especially for the larger domestic companies, albeit that activity has diminished due to the onset of the Covid 19 pandemic. In the event of a possible sale, it is expected that both loan facilities would be repaid from the proceeds of sale of one of the Licences.
Summary
2019 saw the successful re-negotiation of the Petrogrand AB loan and the raising of additional capital at a 58% premium, with support from many of the board members. These events provided the company with financial stability, enabling us to engage in a program of data acquisition, interpretation, and review of all our assets combined with the continual review of our cost base across the company. We are now embarking on an exciting low CAPEX investment program which can deliver significant value particularly on Licence 67 where we are now hopeful of transforming this from an exploration to a production asset towards the end of 2020.
We will continue to test the market to see if greater value can be delivered to our shareholders through a full or partial sale. While this process has attracted interest from a range of companies and is ongoing, we will concentrate our efforts on areas where 2019's performance demonstrates the potential of the business notably, improving the performance of our assets through increased production and cash flow.
Our industry is continuing to experience unstable times, but we have valuable future development targets in both our licences with West Lineynoye, Sibkrayevskoye and Emtorskaya in Licence 61 and Cheremshanskoye and Ledovoye in Licence 67; these assets can be profitable at a wide range of oil prices.
Annual Report and AGM
The Annual Report will be mailed to shareholders and published on the Company's website ( www.petroneft.com ) on 29th September 2020. Dating and location of the AGM will be notified shortly.
Finally, I know that I speak for all the Directors, management, and staff of the Group in giving sincere thanks to our shareholders for your continued support throughout the past year.
David Golder
Non-Executive Chairman
Consolidated Income Statement
For the year ended 31 December 2019
2019 2018
Note US$ US$
Continuing operations
Revenue 1,443,568 1,767,074
Cost of sales (1,333,339) (1,559,982)
=============
Gross profit 110,229 207,092
Administrative expenses (807,507) (1,512,817)
Operating loss (697,278) (1,305,725)
Share of joint venture's net loss
- WorldAce Investments Limited (7,510,318) (6,339,613)
Share of joint venture's net loss
- Russian BD Holdings B.V. (664,455) (508,757)
Finance Income 4,275,181 4,075,540
Finance costs (369,950) (116,825)
Impairment of financial assets -
loans and receivables - (3,109,501)
Loss for the year for continuing
operations before taxation (4,966,820) (7,304,881)
Income tax expense (1,075,634) (256,881)
Loss for the year attributable to
equity holders of the Parent (6,042,454) (7,561,762)
============= ===============
Loss per share attributable to ordinary
equity holders of the Parent
Basic - US dollar cent 4 (0.84) (1.07)
Diluted - US dollar cent 4 (0.77) -
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
2019 2018
US$ US$
Loss for the year attributable to
equity holders of the Parent (6,042,454) (7,561,762)
Other comprehensive income maybe
reclassified to profit or loss in
subsequent years:
Currency translation adjustments
- subsidiaries (77,816) 102,440
Share of joint ventures' other comprehensive
income - foreign exchange translation
differences 4,996,109 (8,456,256)
Total comprehensive loss for the
year attributable to equity holders
of the Parent (1,124,161) (15,915,578)
============= ===============
Consolidated Statement of Financial Position
As at 31 December 2019
2019 2018
Note US$ US$
Assets
Non-current Assets
Property, plant, and equipment 5 28,843 38,296
Equity-accounted investment in joint
ventures - WorldAce Investments Limited 6 - -
Equity-accounted investment in joint
ventures - Russian BD Holdings B.V. 7 - -
Financial assets - loans to joint ventures 8 37,591,655 35,525,743
37,620,498 35,564,039
=============
Current Assets
Inventories 9 18,965 6,547
Trade and other receivables 10 1,136,940 249,280
Cash and cash equivalents 11 345,532 801,938
1,501,437 1,057,765
=============
Total Assets 39,121,935 36,621,804
============= =============
Equity and Liabilities
Capital and Reserves
Called up share capital 12 9,585,965 9,429,182
Share premium account 141,006,709 140,912,898
Share-based payments reserve 6,796,540 6,796,540
Retained loss (97,045,707) (91,003,253)
Currency translation reserve (32,040,081) (36,958,374)
Other reserves 379,923 336,000
28,683,349 29,512,993
============= -------------
Non-current Liabilities
Interest-bearing loans and borrowings - -
Deferred tax liability 4,303,779 3,219,203
4,303,779 3,219,203
=============
Current Liabilities
Interest-bearing loans and borrowings 13 4,242,849 2,116,825
Trade and other payables 14 1,891,958 1,772,783
6,134,807 3,889,608
=============
Total Liabilities 10,438,586 7,108,811
Total Equity and Liabilities 39,121,935 36,621,804
============= =============
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Share-based
Called up Share payment and Currency
share premium other translation Retained
capital account reserves reserve loss Total
US$ US$ US$ US$ US$ US$
At 1 January
2018 9,429,182 140,912,898 7,132,540 (28,604,558) (83,441,491) 45,428,571
----------- ------------ ------------- ------------- ------------- ------------
Loss for the
year - - - - (7,561,762) (7,561,762)
Currency
translation
adjustments
-
subsidiaries - - - 102,440 - 102,440
Share of joint
ventures'
other
comprehensive
income- - - - (8,456,256) - (8,456,256)
----------- ------------ ------------- ------------- ------------- ------------
Total
comprehensive
loss for
the year - - - (8,353,816) (7,561,762)
----------- ------------ ------------- ------------- ------------- ------------
At 31 December
2018 9,429,182 140,912,898 7,132,540 (36,958,374) (91,003,253) 29,512,993
=========== ============ ============= ============= ============= ============
At 1 January
2019 9,429,182 140,912,898 7,132,540 (36,958,374) (91,003,253) 29,512,993
Issue of Share
Capital *1 156,783 93,811 - - - 250,594
Convertible
debt option
reserve
*2 - - 43,923 - - 43,923
Loss for the
year - - - - (6,042,454) (6,042,454)
Currency
translation
adjustments
-
subsidiaries - - - (77,816) - (77,816)
Share of joint
ventures'
other
comprehensive
income- - - - 4,996,109 - 4,996,109
=========== ============ ============= ============= ============= ============
Total
comprehensive
loss for
the year - - - 4,918,293 (6,042,454) (1,124,161)
=========== ============ ============= ============= ============= ============
At 31 December
2019 9,585,965 141,006,709 7,176,463 (32,040,081) (97,045,707) 28,683,349
=========== ============ ============= ============= ============= ============
*1-During 2019, a total of 13,884,594 ordinary shares were issued to Directors ,
Dennis Francis
and David Sturt in satisfaction of director's fees
outstanding. A total of 10,471,204 ordinary shares was issued to Dennis Francis in
satisfaction
of $200,000 Director's fees owing, and a total of
3,413,390 ordinary shares was issued to David Sturt in satisfaction of Director's fees
owing
of EUR44,806. Shares were issued at a premium to par
value.
*2-During 2019 a sum of $1.3 million was raised from a group of 5
investors. An
amount of $43,923 relates to the equity component of the
convertible
debt
proceeds.
Consolidated Cash Flow Statement
For the year ended 31 December
2019
2019 2018
US$ US$
Operating activities
Loss before taxation (4,966,820) (7,304,881)
Adjustment to reconcile loss
before tax to net cash flows
Non-cash
Depreciation 23,884 38,936
Share of loss in joint ventures 8,174,773 6,848,370
Foreign Exchange Gains (28,528) -
Finance Income (4,275,181) (966,039)
Finance costs 369,950 116,825
Income tax expense (7,493) (30,034)
Working capital adjustments
Decrease/(Increase) in trade
and other receivables (875,067) 276,593
Decrease/(Increase) in inventories (11,115) 12,960
Increase in trade and other
payables 73,598 192,955
Net cash flows used in operating
activities (1,521,999) (814,315)
------------
Investing activities
Loan facilities advanced to joint
venture undertakings (980,500) (392,000)
Purchase of Property, Plant
and Equipment (9,720)
Interest received 2,613 1,481
Net cash used in investing activities (987,607) (390,519)
============ ------------
Financing activities
Proceeds from the issue of Share
Capital 250,594 -
Proceeds from issue of Convertible
debt option 43,923 -
Proceeds from loan facilities 1,756,074 2,000,000
Net cash received from financing
activities 2,050,591 2,000,000
============ ------------
Net increase/(decrease) in cash and
cash equivalents (459,015) 795,166
Translation adjustment 2,609 -2,617
Cash and cash equivalents at the beginning
of the year 801,938 9,389
Cash and cash equivalents at
the end of the year 11 345,532 801,938
============ ============
Notes to the Financial Statements
For the year ended 31 December 2019
1. Basis of Accounting and Presentation of Financial Information.
While the financial information included in this announcement has been prepared in accordance with the Group's accounting policies under International Financial Reporting Standards ("IFRS") as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The Company is distributing the full financial statements that comply with IFRS on 29th September 2020.
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2019 or 2018 but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the Company's annual general meeting. The auditors have made reports under Section 391 of the Irish Companies Act, 2014 in respect of 2018 . Their report was unmodified but did draw attention to the material uncertainty relating to going concern. The 2019 audited financial statements will be distributed to shareholders on 29th September 2020.
Adoption of IFRS and International Financial Reporting Interpretations Committee (IFRIC) interpretations
A number of amendments and interpretations to IFRS principally the introduction of IFRS 16 "Leases" and IFRIC 23
"Uncertainty over Income Tax Treatments" became effective for, and have been applied in preparing, these Financial Statements. The introduction of these amendments on 1 January 2019 did not result in material changes to the results or financial position of the Group. Full details of the approach taken to the introduction of the new amendments and the impact of adoption will be provided in the full financial statements that comply with IFRS which will be distributed to shareholders on 29th September 2020.
2. Going Concern
As described in the Chairman's Statement, PetroNeft agreed an extension of the loan facility, which was due to mature on 15(th) December 2019 and an increase of US$500,000 up to US$2.5 million with Swedish company Petrogrand AB, a related party. The revised loan maturity date is 15 December 2020, and maybe extended for a further year if certain milestones are met, at the option of PetroNeft. The loan is secured by way of a floating charge on the assets of PetroNeft. The original loan facility was used for general corporate purposes and to finance the drilling programme in 2018. The increase is being used for general corporate purposes. This loan facility has provided time and space for a more long-term financing solution to be put in place.
In June 2019, the Company agreed another loan facility with a group of five investors for US$1.3 million. This loan matures on 31 December 2020, or such later date as may be agreed, and a portion (up to 65% of the principal) may be repaid via conversion to Ordinary shares of the Company at the option of the lenders at a conversion price of US$0.015477 per share. Three of the five investors are related parties. See Note 14 for details of related party transactions.
In January 2020, the Company completed a successful share issue with both Institutional and other investors. Gross proceeds of US$2.12 million was raised at GBP0.015 per share at a premium of approximately 58%. The money raised will primarily be used to fund the 2020 capital investment program and demonstrated significant commitment from institutional investors and directors who supported 44% of the placing.
In early 2020, the emergence of the Covid-19 pandemic required the company to make several adjustments to operating procedures, investment decisions and staff HSE protocols to protect its employees, joint venture partners and contractors. Production continued with a reduced level of essential field staff, home working was instituted where practicable, staff voluntarily took pay cuts and the Group actively worked with its suppliers and service providers in rescheduling payments to retain maximum financial flexibility. When the restrictions were partially lifted, the Group resumed full scale production in May, and in the months of June through August saw encouraging production volume increases. Year on year increases from August to July was 7.8% and July 2020 production versus the same period in 2019 increased by 17%. With a rebound in oil prices, the ongoing cost saving program and the Mineral Extraction Tax percentage per barrel produced trending lower in 2019 than 2018, the Group's cashflow improved, enabling it to address payables that had been rescheduled, reverse the temporary salary reduction and engage constructively with joint venture partners, current and potential future lenders and investors to support its ongoing investment plans. The Group continuously monitors the ongoing progress and status of the pandemic to ensure it reacts quickly where required; as part of this process the frequency of Board meetings has increased
2. Going concern (continued)
and Board members are closely involved in material cost and investment decisions as well as regular review of the Group's forecast cashflows, short term liquidity and expenditure plans
The Group has analysed its cash flow requirements through to 30th September 2021 in detail The cash flows are highly dependent on the successful extension or re-financing of the Petrogrand AB loan, Convertible Loan and on future production rates and oil prices achieved in its joint-venture undertaking, WorldAce Investments Limited and future cash flows from LLC LIneynoye (Licence 67) once Cheremshanskoye is producing. In addition, the Group, together with its Joint Venture partner OIL India B.V is actively investigating the opportunity to secure debt in the local Russian market for Stimul-T. Currently the Group is engaging with the convertible loan holders with a view to amending the terms of the convertible and extend the redemptions date. Should the Petrogrand AB loan not be extended or re-financed the Group will need additional funding to continue as a going concern.
The Group has put in place cost saving measures and the Board and management have agreed to reduce and defer significant portions of their remuneration. Note 15 outlines the amounts owed to the Board and management in this regard
In 2018 the Company, in conjunction with its joint venture partners engaged financial advisers to evaluate the disposal of License 61 and/or License 67. While there remains significant uncertainty that any transaction will be completed, the Company has seen interest from a range of well-financed industry players. Company has signed non-disclosure agreements and opened data rooms in relation to the potential sale or farmout of both Licence 61 and 67. However the timeframe to close such a transaction could be at least six months following binding agreement between the parties. The Board is confident that one of these options will ultimately bring a solution.
The above circumstances represent material uncertainties that may cast significant doubt upon the Group and the Company's ability to continue as a going concern. Nevertheless, after making enquiries, and considering the uncertainties described above, the Directors are confident that the Group and the Company will have adequate resources to continue in operational existence for the foreseeable future. The judgement is supported by;
-- the strong reserve inventory and improvements in operational performance -- the existing infrastructure in place that can support production volumes up to 14,700 bopd -- a very strong investment case -- the continued support of our Joint Venture and oil marketing partners
-- the continuous support of our principal shareholders, as evidenced by their support for both debt and equity issues
-- the continuous support of our lenders, both convertible and conventional debt
For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts.
Accordingly, these financial statements do not include any adjustments to the carrying amount or classification of assets and liabilities that would result if the Group or Company were unable to continue as a going concern.
3. Segment information
The Group has several reporting segments which are shown below. They include segment information on allocation of assets and segment information on revenues by both location and customer.
The risk and returns of the Group's operations are primarily determined by the nature of the activities that the Group engages in, rather than the geographical location of these operations. This is reflected by the Group's organisational structure and the Group's internal financial reporting systems.
Management monitors and evaluates the operating results for the purpose of making decisions consistently with how it determines operating profit or loss in the consolidated financial statements.
Geographical segments
Although the joint venture undertakings WorldAce Investments Limited and Russian BD Holdings B.V. are domiciled in Cyprus and the Netherlands, the underlying businesses and assets are in Russia. Substantially all the Group's sales and capital expenditures are in Russia.
Segment Information
Assets are allocated based on where
the assets are located:
2019 2018
Non-current assets US$ US$
Russia 37,620,498 35,563,553
Ireland - 486
-----------------------
37,620,498 35,564,039
============================= =======================
Revenues are allocated on where the
underlying business
and assets are located.
2019 2018
US$ US$
Revenue- Location
Russia 1,443,568 1,767,074
1,443,568 1,767,074
============================= =======================
2019 2018
US$ US$
Revenue- Customer
WorldAce Investments Limited-38%
(2018- 41%) 547,617 718,930
Russian BD Holdings B.V- 9%
(2018-7%) 130,544 127,929
LLC Stimul T- 53% (2018-52%) 765,407 920,215
1,443,568 1,767,074
============================= =======================
4. Loss per Ordinary Share
Basic loss per Ordinary Share amounts are calculated by dividing net loss for the year attributable to ordinary equity holders of the Parent by the weighted average number of Ordinary Shares outstanding during the year.
2019 2018
Numerator US$ US$
Loss attributable to equity
shareholders of the Parent for
basic loss (6,042,454) (7,561,762)
(6,042,454) (7,561,762)
============================= ============
Loss attributable to equity
shareholders of the Parent for
diluted loss (5,953,640) -
============================= ============
Denominator
Weighted average number of Ordinary
Shares for basic (Note 20) 716,793,942 707,245,906
Diluted number of Ordinary shares
for basic 771,415,791 -
============================= ============
Loss per share:
Basic - US dollar cent (0.84) (1.07)
Diluted - US dollar cent (0.77) -
The Company has convertible debt instruments in issue that could potentially dilute basic earnings per Ordinary Share in the future as per Notes 13. The Employee Share Options Program are not included as there are no Employee Share Options as of 31(st) December 2019.
.
5. Property, Plant and Equipment
Plant and
machinery
US$
Cost
At 1 January 2018 992,928
Additions -
Disposals (324)
Translation adjustment (152,799)
==============
At 1 January 2019 839,805
Additions 9,720
Disposals (213,181)
Translation adjustment 83,857
At 31 December 2019 720,201
Depreciation
At 1 January 2018 904,726
Charge for the year 38,936
Disposals (324)
Translation adjustment (141,829)
--------------
At 1 January 2019 801,509
Charge for the year 23,884
Disposals (222,541)
Translation adjustment 88,506
At 31 December 2019 691,358
Net book values
At 31 December 2019 28,843
==============
At 31 December 2018 38,296
==============
Ø Petrogrand AB has a floating charge over the assets of the Company.
Ø At 31st December 2019 and 2018, there was no Property, Plant and Equipment Capital Commitments.
6. Equity-accounted Investment in Joint Venture - WorldAce Investments Limited
PetroNeft has a 50% interest in WorldAce Investments Limited ("WorldAce"), a joint venture which holds 100% of LLC Stimul-T, an entity involved in oil and gas exploration and the registered holder of Licence 61. The interest in this joint venture is accounted for using the equity accounting method. WorldAce Investments Limited is incorporated in Cyprus and carries out its activities, through LLC Stimul-T, in Russia.
Share of net
assets
US$
At 1 January 2018 -
Elimination of unrealised profit on intra-Group
transactions (1,174)
Retained loss (6,339,613)
Translation adjustment (7,760,793)
Credited against loans receivable from WorldAce
Investments Limited (Note 8) 14,101,580
=============
At 1 January 2019 -
Elimination of unrealised profit on intra-Group
transactions -
Retained loss (7,510,318)
Translation adjustment 4,513,212
Credited against loans receivable from WorldAce
Investments Limited (Note 8) 2,997,106
At 31 December 2019 -
=============
The balance sheet position of WorldAce shows net liabilities of US$63,968,289 (2018: US$57,974,076) following a loss in the year of US$15,020,636 (2018: US$12,679,226) together with a positive currency translation adjustment of US$9,026,423 (2018: negative US$15,521,586). PetroNeft's 50% share is included above and results in a negative carrying value of US$27,301,740 (2018: US$24,304,633). Therefore, the share of net assets is reduced to Nil and, in accordance with IAS 28 Investments in Associates and Joint Ventures, the amount of US$27,301,740 (2018: US$24,304,633) is deducted from other assets associated with the joint venture on the Balance Sheet which are the loans receivable from WorldAce Investments (see Note 8).
6. Equity-accounted Investment in Joint Venture - WorldAce Investments Limited (continued)
Additional financial information in respect of PetroNeft's 50% interest in the equity-accounted joint venture entity is disclosed below.
Summarised Financial statements of equity-accounted joint venture
2019 2018
US$ US$
Continuing operations
Revenue 24,852,620 31,369,968
Cost of sales (25,100,495) (27,772,818)
============= -------------
Gross profit (247,875) 3,597,150
Administrative expenses (2,624,057) (3,121,826)
Impairment of exploration and evaluation
assets (1,382,769) -
============= -------------
Operating profit/(loss) (4,254,701) 475,324
Write-off of oil and gas properties - (4,096,076)
Write-off of exploration and evaluation
assets (1,299,887) (4,692)
Finance Income 57,906 129,424
Finance costs (9,523,954) (9,183,206)
============= -------------
Loss for the year for continuing operations
before taxation (15,020,636) (12,679,226)
Income tax expense - -
=============
Loss for the year (15,020,636) (12,679,226)
============= =============
Loss for the year (15,020,636) (12,679,226)
Other comprehensive income to be reclassified
to profit or loss in subsequent years:
Currency translation adjustments 9,026,423 (15,521,586)
=============
Total comprehensive loss for the year (5,994,213) (28,200,812)
============= =============
Included in the above numbers are charges
for
Depreciation and Amortisation 1,936,923 2,472,676
============= =============
Finance costs mainly relate to interest on shareholder loans from Oil India International B.V. and PetroNeft. The details of gross interest accrued on loans to PetroNeft are disclosed in Note 15 Related party disclosures.
The currency translation adjustment results from the movement of the Russian Rouble during the year. All Russian Rouble carrying values in Stimul-T, the 100% subsidiary of WorldAce are converted to US Dollars at each period end. The resulting gain or loss is recognised through other comprehensive income and transferred to the currency translation reserve. The Russian Rouble strengthened against the US Dollar during the year from RUB69.47:US$1 as at 31 December 2018 to RUB61.905: US$1 as at 31 December 2019.
6. Equity-accounted Investment in Joint Venture - WorldAce Investments Limited (continued)
2019 2018
US$ US$
Non-current Assets
Oil and gas properties 78,147,884 59,573,374
Property, plant, and equipment 374,632 256,222
Exploration and evaluation assets - 15,609,172
Assets under construction 1,468,233 1,124,614
Intangible Assets 2,178,884
82,169,633 76,563,382
============ ------------
Current Assets
Inventories 2,390,999 1,697,552
Trade and other receivables 996,439 760,312
Cash and cash equivalents 30,895 451,692
3,418,333 2,909,556
============ ------------
Total Assets 85,587,966 79,472,938
============ ============
Non-current Liabilities
Provisions 1,833,969 1,147,080
Obligations under finance lease 172,969 -
Interest-bearing loans and borrowings 140,244,130 131,364,194
142,251,068 132,511,274
============ ------------
Current Liabilities
Interest-bearing loans and borrowings 2,346,265 1,949,586
Obligations under finance lease 41,318 -
Trade and other payables 4,917,604 2,986,154
7,305,187 4,935,740
============ ------------
Total Liabilities 149,556,255 137,447,014
============ ============
Net Liabilities 63,968,289 57,974,076
============ ============
Non -Current Financial Liabilities 140,417,099 131,364,194
============ ============
Current Financial Liabilities 2,387,583 1,949,586
============ ============
Interest-bearing loans and borrowings are shareholder loans from Oil India International B.V. and PetroNeft. The details of loans due to PetroNeft are disclosed in Note 8 Financial assets- loans and receivables.
Capital commitments
2019 2018
US$ US$
Details of capital commitments at the balance sheet date are as follows:
Contracted for but not provided in the financial
statements Nil 60,710
======== ========
7. Equity-accounted Investment in Joint Venture - Russian BD Holdings B.V.
PetroNeft Resources plc has a 50% interest in Russian BD Holdings B.V., a joint venture which holds 100% of LLC Lineynoye, an entity involved in oil and gas exploration and the registered holder of Licence 67. The interest in this joint venture is accounted for using the equity accounting method. Russian BD Holdings B.V. is incorporated in the Netherlands and carries out its activities in Russia.
Share of net
assets
US$
At 1 January 2018 -
Elimination of unrealised profit on intra-Group
transactions (12,117)
Share of net loss of joint venture for
the year (508,757)
Translation adjustment (695,463)
Credited against loans receivable from
Russian BD Holdings B.V. (Note 8) 1,216,337
=============
At 1 January 2019 -
Elimination of unrealised profit on intra-Group
transactions -
Retained loss (664,455)
Translation adjustment 482,897
Credited against loans receivable from
Russian BD Holdings B.V. (Note 8) 181,558
At 31 December 2019 -
=============
The balance sheet position of Russian BD Holdings B.V. shows net liabilities of US$4,235,793 (2018: US$3,872,680) following a loss in the year of US$1,328,910 (2018: US$1,017,514) together with a positive currency translation of US$965,794 (2018: negative US$1,390,926). PetroNeft's 50% share is included above and results in a negative carrying value of US$2,117,897 (2018: US$1,936,340). Therefore, the share of net assets is reduced to Nil and, in accordance with IAS 28 Investments in Associates and Joint Ventures, the amount of US$2,117,897 (2018: US$1,936,340) is deducted from other assets associated with the joint venture on the Balance Sheet which are the loans receivable from Russian BD Holdings B.V. (Note 8).
7. Equity-accounted Investment in Joint Venture - Russian BD Holdings B.V. (continued)
Additional financial information in respect of PetroNeft's 50% interest in the equity-accounted joint venture entity is disclosed below
Summarised Financial statements of equity-accounted joint venture
2019 2018
US$ US$
Revenue - -
Cost of sales - -
Gross profit - -
Administrative expenses (332,635) (208,512)
Operating loss (332,635) (208,512)
Finance Income 1,280 1,040
Finance costs (997,548) (810,042)
Loss for the year for continuing operations
before taxation (1,328,903) (1,017,514)
Taxation (7) -
Loss for the year (1,328,910) (1,017,514)
============ ============
Loss for the year (1,328,910) (1,017,514)
Other comprehensive income to be reclassified
to profit or loss in subsequent years:
Currency translation adjustments 965,794 (1,390,926)
Total comprehensive loss for the year (363,116) (2,408,440)
============ ============
Included in the above numbers are charges
for
Depreciation and Amortisation 6,676 -
============ ============
Finance costs comprise of interest on shareholder loans from Belgrave Naftogas B.V. and PetroNeft. The details of gross interest accrued on loans to PetroNeft are disclosed in Note 8 Financial assets- loans and receivables.
7. Equity-accounted Investment in Joint Venture - Russian BD Holdings B.V. (continued)
2019 2018
US$ US$
Non-current assets 11,252,892 9,970,961
Current assets 118,311 476,186
Total assets 11,371,203 10,447,147
============= -------------
Non-current liabilities 14,758,627 12,787,243
Current liabilities 848,369 1,532,584
Total liabilities 15,606,996 14,319,827
============= -------------
Net Liabilities 4,235,793 3,872,680
============= =============
Non -Current Financial Liabilities 14,745,795 12,769,162
============= =============
Current Financial Liabilities 131,337 96,730
============= =============
Capital commitments
2019 2018
US$ US$
Details of capital commitments at the balance
sheet date are as follows:
Contracted for but not provided in
the financial statements Nil 78,406
============= =============
Financial assets - loans and
8. receivables
Group 2019 2018
US$ US$
Loans to WorldAce Investments
Limited (Note 15) 62,963,635 59,161,041
Loss Allowance (Note 8) (3,109,501) (3,109,501)
Less: share of WorldAce Investments
Limited loss (Note 6) (27,301,740) (24,304,633)
32,552,394 31,746,907
================= -----------------
Loans to Russian BD Holdings
B.V. (Note 15) 7,157,158 5,715,176
Less: share of Russian BD Holdings
B.V. loss (Note 7) (2,117,897) (1,936,340)
5,039,261 3,778,836
================= -----------------
37,591,655 35,525,743
================= =================
The Company has granted a loan facility to its joint venture undertaking WorldAce Investments Limited of up to US$45 million. This loan facility is US$ denominated and unsecured. Interest currently accrues on the loan at USD LIBOR plus 6.0% but the Company has agreed not to seek payment of interest until 2021 at the earliest. The loan is set to mature on 31 December 2025. As at 31 December 2019 the loan was fully drawn down. The realisation of financial assets of $32.5m in respect of WorldAce is dependent on the continued successful development of economic reserves which is subject to a number of uncertainties including the ability to raise finance, future rates of oil production and future international oil prices to continue to successfully generate revenue from the assets or the monetisation of the asset through a sale or farmout.
Financial assets - loans and
8. receivables (continued)
The loan from the Company to Russian BD Holdings B.V. is repayable on demand. Interest currently accrues on the loan at USD LIBOR plus 5.0% per annum. The group drilled the Cheremshanskoye No. 4 well in 2018 which tested oil at 450 bopd and demonstrated the potential of License 67.
The realisation of financial assets of US$5 m in respect of Russian BD Holdings B.V. is ultimately dependent on the successful development of reserves as outlined above in relation to Cheremshanskoye, which is subject to a number of uncertainties including the ability to finance the well development and bringing the assets to economic maturity and profitability or the monetisation of the asset through a sale or farmout.
As previously advised to shareholders, the Company has been examining development options for Licence 67. The Company previously announce that they will be re-entering the C4 and C3 wells on the Cheremshanskoye field during 2020 with the combined aim of bringing the field into production and at the same time providing crucial reservoir performance data. This will enable the Company to optimise forward development of the field which benefits from a favourable infrastructure location, allowing low cost operations. There is a road running along the eastern edge of the field, plus powerlines running close to the western margin of the field, which should allow the Company to reduce OPEX over the longer term.
In addition, the Company is also working on plans to re-enter two wells on the Ledovoye field, also in Licence 67, during the periods 2020 and 2021. Should this be successful the Company will be looking to both book additional reserves and promptly start production from the Ledovoye field. Like the Cheremshanskoye field, Ledovoye is ideally located close to existing infrastructure, being only 60m away from a major all-weather road.
Due to the difference in carrying value caused by the application of the equity method of accounting to the Group financial statements the Company thought it was deemed prudent in 2018, to provide for an allowance for doubtful debts against the carrying value of these loans on the Company Balance Sheet in order to align the balances on the Group and Company balance sheets. It is not expected that any repayment will be received within 12 months of the balance sheet date.
9. Inventories
2019 2018
US$ US$
Materials 18,965 6,547
18,965 6,547
============================== ============================
10. Trade and other receivables
2019 2018
US$ US$
Receivable from joint ventures
(Note 15) 1,005,991 170,627
Prepayments 127,815 17,883
Advances to contractors 1,353 758
Other receivables 1,781 60,012
1,136,940 249,280
================================ ==============================
Trade and other receivables
10. (continued)
Other receivables are non-interest-bearing and are normally settled on 60-day terms. Amounts owed by subsidiary undertakings are interest-bearing. Interest is charged at 10%.
11. Cash and Cash Equivalents
Group 2019 2018
US$ US$
Cash at bank 345,532 801,938
345,532 801,938
============================= ==========================
Bank deposits earn interest at floating rates based on daily deposit rates. Short-term deposits are made for varying periods of between one day and one month depending on the immediate cash requirements of the Group and earn interest at the respective short-term deposit rates.
12. Share Capital 2019 2018
EUR EUR
Authorised Share Capital
1,000,000,000 (2018: 1,000,000,000)
Ordinary Shares of EUR0.01 each 10,000,000 10,000,000
10,000,000 10,000,000
================= =======================
Called up
Allotted, called up and fully Number of share capital
paid equity Ordinary Shares US$
At 1 January 2018 707,245,906 9,429,182
================= =======================
At 1 January 2019 707,245,906 9,429,182
Issued during the year 13,884,594 156,783
At 31 December 2019 721,130,500 9,585,965
================= =======================
13. Loans and Borrowings
Group and Company Effective Contractual
interest maturity
rate date 2019 2018
% US$ US$
Interest-bearing
Current liabilities
Petrogrand AB 10.59% 15-Dec-20 2,897,958 2,116,825
Natlata Partner Limited 10.14% 31-Dec-20 577,347 -
ADM Consulting 10.16% 31-Dec-20 417,051 -
Daria Shaftelskaya 10.13% 31-Dec-20 246,341 -
Michael Murphy 10.14% 31-Dec-20 52,076 -
David Sturt 10.14% 31-Dec-20 52,076 -
================ ----------
Total current liabilities 4,242,849 2,116,825
================
Total loans and borrowings 4,242,849 2,116,825
================ ==========
Contractual undiscounted
liability 4,242,849 2,116,825
Changes in financial liabilities arising
from financing activities 2019 2018
US$ US$
At 1 January 2,116,825 -
Cash flows 1,799,997 2,000,000
Accrued interest 369,950 116,825
Convertible debt option reserve (43,923) -
At 31 December 4,242,849 2,116,825
================ ==========
Loan facilities.
PetroNeft has entered a convertible loan facility of US$1.3 million with a group of five lenders. The convertible loan, which remains unsecured, matures on 31(st) December 2020 or on the sale of either Licence 61 or Licence 67. The loan facility will be used for general corporate and ongoing operational purposes and carries an interest rate of USD LIBOR plus 8%. Lenders can elect at any time to convert up to 65% of the outstanding loan to shares at a conversion price of US$0.01547 (1.547 cent).
In 2018 the Company obtained a US$2m secured loan facility from Petrogrand AB. The security attaches to any of the assets of PetroNeft Resources plc. An asset being defined as any present or future assets, revenues, and rights of every description. The security is for any obligation for the repayment of monies owed to Petrogrand AB, be it present, or future, actual or contingent. This loan facility was fully drawn down in 2018 and carries an interest rate of US$ LIBOR plus 9%. In March 2019, the parties agreed a further increase in the facility by US$500,000 and it was agreed that the maturity date would be extended for one year until 15(th) December 2020, which can be further extended if PetroNeft on or before 15(th) December 2020, makes a payment of 20% of the loan balance outstanding at that time.
Petrogrand AB is a related party by virtue of Maxim Korobov, until 17(th) January 2020 a director of PetroNeft, being a significant shareholder of Petrogrand AB. For details of transactions between PetroNeft and Petrogrand AB see Note 15 Related party disclosures.
14. Trade and other payables
2019 2018
US$ US$
Trade payables 403,835 428,734
Trade and other payables to
joint ventures (Note 15) 113,532 104,115
Corporation tax 55,232 55,016
Other taxes and social insurance
costs 28,457 42,918
Accruals and other payables 1,290,902 1,142,000
1,891,958 1,772,783
============================== ===========================
The Directors consider that the carrying amount of trade and other payables approximates their fair value.
Trade and other payables are non-interest-bearing and are normally settled on 60-day terms.
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
15. Related party disclosures
PetroNeft Resources had the following transactions with its Joint Venture Partners in 2019 and 2018.
Related parties - PTR Group with JVs
Russian BD
Holdings BV WorldAce Investments
Group Group Limited Group
US$ US$
Receivable by PetroNeft Group at 1
January 2018 4,218,916 45,511,671
Advanced during the year 439,600 -
Transactions during the year 315,053 1,551,260
Interest accrued in the year 387,686 3,686,373
Payments for services made during the
year (309,505) (1,758,280)
Share of joint venture's translation
adjustment (1,216,337) (14,101,580)
Impairment Provision - (3,109,501)
Translation adjustment (16,419) (6,682)
--------------------------- -------------------------
At 1 January 2019 3,818,994 31,773,261
Advanced during the year 980,500 -
Transactions during the year 154,521 1,642,624
Interest accrued in the year 469,974 3,802,594
Payments for services made during the
year 29,564 (947,209)
Share of joint venture's translation
adjustment (181,558) (2,997,106)
Translation adjustment (44,753) (17,293)
At 31 December 2019 5,227,243 33,256,871
=========================== =========================
Balance at 31 December 2018 comprised
of:
Loans receivable (Note 8) 3,778,836 31,746,907
Trade and other receivables (Note 10) 40,158 130,469
Trade and other Payables (Note 14) - (104,115)
3,818,994 31,773,261
=========================== =========================
Balance at 31 December 2019 comprised
of:
Loans receivable (Note 8) 5,039,261 32,552,394
Trade and other receivables (Note 10) 187,981 818,010
Trade and other payables (Note 14) - (113,532)
5,227,242 33,256,871
=========================== =========================
15. Related party disclosures (continued)
Remuneration of key management
Key management comprise the Directors, the Vice Presidents of Business Development and Operations of the Company and the consulting fees paid to HGR Consulting Limited for the services of the former CFO.
Remuneration of key management 2019 2018
US$ US$
Compensation of key management 898,501 1,064,724
Contributions to defined contribution
pension plan 45,564 48,947
Consulting fees (HGR Consulting -
see below) - 324,115
944,065 1,437,786
======== ==========
The following amounts were owed to key management, former CEO Dennis Francis, former CFO Paul Dowling as at 31(st) December 2019 and 2018:
fees and expenses due to Directors
who were in office during the year
Remuneration, fees, and expenses
due to Directors who were in office
during the year 932,344 607,468
Remuneration due to other key management 233,108 133,354
Consulting fees (HGR Consulting -
see below) 112,616 193,219
==========
1,278,068 934,041
========== ========
Details of transactions between the Group and other related parties are disclosed below.
Transactions with HGR Consulting Limited
Paul Dowling was retained as fulltime Secretary and Chief Financial Officer of PetroNeft until 31 January 2019. Thereafter it was agreed he would provide these services on a part time basis. These services continued to be provided through HGR Consulting Limited ("HGR"). Services provided by HGR during 2019 amounted to US$70,576 (2018: US$ 324,115 ). An amount of US$112,616 was owed to HGR at 31 December 2019 (2018: US$193,219).
Transactions with Petrogrand AB
Petrogrand AB is a related party by virtue of Maxim Korobov, a director of PetroNeft who resigned as PetroNeft's Company Director on 17(th) January 2020. In 2018 the Company agreed a loan facility for up to US$2m with Petrogrand AB. The loan facility is secured by way of a floating charge on the assets of the Company, carries an interest of US$ LIBOR plus 9% and had an original maturity date of 31 December 2018. This loan facility was fully drawn down in 2018. In March 2019, the parties had agreed an increase in the facility by US$500,000 and a revised maturity date of 15 December 2020. It was further agreed the revised maturity date could be extended for one year until 15(th) December 2021 if certain milestones are reached.
The following is the history of this transaction in:
Petrogrand AB
2019
US$
2018- Loan facility amount 2,000,000
2019- Loan drawdowns during the year 500,000
Interest accrued but not yet paid 397,958
Amount due to Petrogrand AB at 31 December 2019 2,897,958
===============================
15. Related party disclosures (continued)
New Loan agreed in June 2019
As detailed in the Chairman's Statement the Group entered into a convertible loan facility of US$1.3 million with a group of five investors in June 2019. Three of the five investors are related parties as follows:
at time of
transaction
Amount provided Interest accrued Amount due
and not yet 31 December
paid 2019
Lender (US$) (US$) (US$) Relationship at
time of transaction
Ultimate Beneficial
Natlata owner is Maxim
Partners Korobov, former
LLP. 560,000 17,347 577,347 PetroNeft director
------------------------ ------------------------------ ------------------------------ ---------------------
Substantial
shareholder
of PetroNeft and
Daria director from 17(th)
Shaftelskaya 240,000 6,341 246,341 January 2020.
------------------------ ------------------------------ ------------------------------ ---------------------
David Sturt 50,000 2,076 52,076 PetroNeft director
------------------------ ------------------------------ ------------------------------ ---------------------
16. Important Events after the Balance Sheet Date
At an extraordinary general meeting held in Dublin on 7 January 2020 it was approved the Placing announced on 12 December 2019 and the issue of 107,755,037 Placing Shares at a price of GBP0.015 each . Gross proceeds of US$2.12 million was raised at a premium of approximately 58% with both Institutional and other investors. The placement demonstrated significant commitment from directors, supporting 44% of the placing.
The Covid pandemic is a global crisis, and the Company was not immune from its economic impact. These Financial Statements report how all the Company's stakeholders supported the operations during these very difficult economic times.
17. Approval of financial statements
The financial statements were approved, and authorised for issue, by the Board of Directors on 25(th) September 2020
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END
FR FZGZLRKNGGZG
(END) Dow Jones Newswires
September 25, 2020 04:58 ET (08:58 GMT)
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