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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 : 0494O
Petroneft Resources PLC
30 September 2019
PetroNeft Resources plc
September 29, 2019
PetroNeft Resources plc ("PetroNeft" or the "Company")
2019 Interim Results
PetroNeft (AIM: PTR) an oil & gas exploration and production company operating in the Tomsk Oblast, Russian Federation, and 50% owner and operator of Licences 61 and 67 is pleased to report its results for the 6 months ended 30 June 2019.
Highlights
-- Gross production from Licence 61 in H1 2019 was 1,755bopd (877.5bopd net to Petroneft)
-- Achieved approval from GKZ (Russian State Reserves Board) for 19.26mmbbls of C1 + C2 reserves as a result of the drilling of the C-4 well on the Cheremshanskoye field in 2018. This is a key milestone as it enables the company to start looking at development options for the field.
-- Upgraded the technical/operational function of the company bringing in people from the region who have experience with other operators successfully developing similar assets.
-- Rigorous data collection across our producing assets; this has involved re-interpreting all seismic data, collecting pressure and injectivity measurements at key wells. The company is using this improved understanding to plan a production optimisation program to start this coming winter.
-- Successfully re-negotiated the terms of the Petrogrand loan extending the repayment term by almost a year and increasing the facility to $2.5M.
-- Succeeded in strengthening the company's balance sheet by placing $1.3M in a convertible loan with a combination of new and existing investors.
-- Focus on cost optimisation; we have closed the Houston office, downsized the Dublin office, sold off peripheral assets and reduced staff numbers in the Tomsk office.
-- Appointment of David Sturt as the new CEO from 24(th) March.
David Golder, Chairman of PetroNeft Resources plc, commented:
"The first half of 2019 has been a busy time. The company has continued with the process started in 2018 to test the market whilst at the same time working on a twin track strategy to see how we may improve production and reserves at low cost to increase shareholder value. These approaches are mutually supportive as improvement in production and or reserves, is likely to increase attractiveness and interest in our assets in any sale process.
The appointment of David Sturt has brought a new rigour and energy to the process of reviewing and challenging all elements of our strategies, successfully raised capital to stabilise the financial outlook of the business and set cost effective and value-orientated plans in place for each of our key assets for next winter and beyond. The CEO statement is included in the 2019 First Half and provides in-depth overview of his initiatives and their early results.
Whilst the company faces many challenges, we are working on building a strong platform for growth in value to shareholders.
For further information, contact:
Hot Features
Premium
David Sturt, CEO, PetroNeft Resources plc +971 55 1919 808
John Frain/Brian Garrahy, Davy (NOMAD and Joint Broker) +353 1 679 6363
-----------------
Joe Heron / Douglas Keatinge, Murray Consultants +353 1 498 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.
Forward Looking Statements
This report contains forward-looking statements. These statements relate to the Group's future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as 'believe', 'could', 'envisage', 'potential', 'estimate', 'expect', 'may', 'will' or the negative of those, variations or comparable expressions, including references to assumptions.
The forward-looking statements in this report are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of these financial statement
Glossary
bopd Barrels of oil per day
mmbbls Million barrels
-------------------------------------------
C1 + C2 Russian State Reserves C1 + C2, equivalent
to 2P (Proven and Probable)
-------------------------------------------
Chairman's Statement
Dear Shareholder,
I am pleased to report on the activities of the Group for the six months to 30(th) June 2019 and at the same time provide an update on our plans for the future. The first six months of the year have been a busy time for the company with the following achievements:
-- Achieved approval from GKZ (Russian State Reserves Board) for 19.26Mbbls of C1 + C2 reserves as a result of the drilling of the C-4 well on the Cheremshanskoye field in 2018. This is a key milestone as it enables the company to start looking at development options for the field.
-- Upgraded the technical/operational function of the company bringing in people from the region who have experience with other operators successfully developing similar assets.
-- Rigorous data collection across our producing assets; this has involved re-interpreting all seismic data, collecting pressure and injectivity measurements at key wells. The company is using this improved understanding to plan a production optimisation program to start this coming winter.
-- Successfully re-negotiated the terms of the Petrogrand loan extending the repayment term by almost a year and increasing the facility to $2.5M.
-- Succeeded in strengthening the company's balance sheet by placing $1.3M in a convertible loan with a combination of new and existing investors.
-- Focus on cost optimisation; we have closed the Houston office, downsized the Dublin office, sold off peripheral assets and reduced staff numbers in the Tomsk office.
-- Appointment of David Sturt as the new CEO from 24(th) March.
Achieving value for Shareholders
The Company in conjunction with its 50/50 joint venture partners (Oil India on Licence 61 and Arawak Energy on Licence 67), engaged a financial advisor in 2018 with the aim being to test the market for the possible disposal of either or both of our assets. Whilst we remain encouraged by the interest we are seeing, however we recognize that the process is taking time.
As this process has continued, we have been working on a twin track strategy to see how we may improve both production and reserves at low cost to increase shareholder value. These approaches are mutually supportive as improvement in production and or reserves, is likely to increase attractiveness and interest in our assets in any sale process.
Throughout this process the company has and will continue to keep a tight control on costs to ensure that we are using our limited resources in the optimum way.
As part of our cost cutting measures we have also had to take the difficult decision of ending our relationship with our joint broker Canaccord Genuity Limited. We have worked together for many years and they have always provided a valuable service, particularly within the London market, however in the short term we have to deploy our capital into operations.
Finance
As detailed in the 2018 Annual Report the Company's finances continue to require close attention. The US$2m Petrogrand loan agreed in January 2018 matured on 31 December 2018. The company was able to agree an extension to 15(th) December 2019 and simultaneously negotiate an increase in the facility to $2.5m. This loan was fully drawn at 30(th) June.
In addition to the Petrogrand facility, the company successfully placed a $1.3M convertible loan facility with a small group of existing and new investors. The terms of the facility are an interest rate of 8% above LIBOR with repayment due by 31(st) December 2020. Up to 65% of the loan amount can be converted into shares in the company at an equivalent price of US$0.01547 (1.547 cents). The borrower can elect to convert at any time up to 31(st) December 2020 or on the sale of one or both licences.
Outlook
Since his appointment in March, David Sturt has brought a new rigour and energy to the process of reviewing and challenging all elements of our strategies, successfully raised capital to stabilise the financial outlook of the business and set cost effective and value-orientated plans in place for each of our key assets for next winter and beyond. The CEO statement which follows will provide in-depth overview of his initiatives and their early results.
Whilst the company faces many challenges, we are working on building a strong platform for growth in value to shareholders.
David Golder
Non-Executive Chairman
Chief Executive Officers Report
To support our twin track strategy, we have conducted a thorough technical/operational review of our assets with the aim of identifying potential areas for further development, we are pleased to provide the following update:
-- Production from licence 61 is currently averaging 1,550 bopd and is relatively stable taking into account natural decline combined with an ongoing data collection program required for licence compliance and to improve our understanding of the fields.
-- Extensive review of our producing fields has highlighted the opportunity to optimize water injection and potentially reduce produced water from key wells. This review has so far included seismic re-interpretation, measuring water injectivity on our water injection wells, carrying out tracer surveys, and down hole pressure readings. Based on the results of this work, a well intervention program is being developed.
-- Potential development opportunities have been identified at the Lineynoye field through a horizontal development drilling program targeting the western part of the field where production since 2012 has remained stable.
-- Opportunity to optimize development drilling on the Sibkrayevskoye field by firstly utilizing 3D seismic to target future locations for horizontal wells.
-- De risk the highly attractive Emtorskaya prospect (Ryder Scott estimate 75 mmbls 2P reserves) through combination of well re-entry and 3D seismic programs.
-- Activity on licence 67 has been quiet since the successful drilling of the C-4 well in 2018. We are now looking at ways to initiate production on this licence through a well reentry program on both the Cheremshanskoye and Ledovoye fields.
-- Reducing costs across the company is of major importance. In the field we continue to look for ways to further optimize costs and are currently working on projects such as construction of a mini refinery to significantly reduce the need to purchase fuel for power generation.
Production and Sales for the period
Gross production at Licence 61 in the six months to 30 June 2019 averaged 1,755 bopd, which represents a smaller than anticipated production decline from the same period in 2018 (2,135 bopd). We sold 315,358 (gross) barrels of oil in the six months to 30 June 2019 (H1 2018: 382,656 bbls) and achieved an average Russian Domestic oil price of $42.50 (H1 2018: $44.39). This softer oil price and reduced production led to reduced operating cash flows for the Licence 61 joint venture.
Licence 61 Gross
Production H1-2019 Q2-2019 Q1-2019 H1-2018 FY-2018
Total gross production 317,620 147,186 170,434 386,482 713,603
-------- -------- -------- -------- --------
Gross bopd 1,755 1,617 1,894 2,135 1,955
-------- -------- -------- -------- --------
PetroNeft 50% share
bopd 877 809 947 1,068 978
-------- -------- -------- -------- --------
Review of PetroNeft loss for the period
The loss for the period was US$2.0m (H1 2018: US$1.2m). The loss includes PetroNeft's share of the losses on the joint ventures relating to Licences 61 and 67 of US$2.9m and US$0.35m respectively (H1 2018: US$1.9m and US$0.2m). The loss relating to the Licence 61 joint venture is discussed in more detail below. Finance revenue of US$2.2m (H1 2018: US$2.0m) relates primarily to interest receivable on loans to the joint ventures.
PetroNeft Key Financial Metrics Unaudited Audited
============================ -------------
6 months Year ended
6 months ended ended 30 31 December
30 June 2019 June 2018 2018
US$ US$ US$
Continuing operations
Revenue 831 1,093 1,767
Cost of sales (383) (881) (1,560)
=============== ===========
Gross profit 448 212 207
Administrative expenses (775) (612) (1,390)
Exchange gain on intra-Group
loans 55 (57) (123)
Operating loss (272) (457) (1,306)
Share of joint venture's net
loss - WorldAce Investments Limited (2,873) (1,920) (6,340)
Share of joint venture's net
loss - Russian BD Holdings B.V. (349) (231) (509)
Finance revenue 2,164 1,973 967
Finance costs (139) (48) (117)
Loss for the period for continuing
operations before taxation (1,469) (683) (7,305)
Income tax expense (536) (510) (257)
Loss for the period (2,005) (1,193) (7,562)
=============== =========== =============
Licence 61 joint venture - WorldAce Group
The metrics below are an extraction from the financial statements of the WorldAce Group which demonstrate the performance of Licence 61:
Unaudited Audited
============================== --------------
WorldAce Group WorldAce WorldAce Group
Group
6 months Year ended
6 months ended ended 30 31 December
30 June 2019 June 2018 2018
US$'000 US$'000 US$'000
Continuing operations
Revenue 13,478 17,090 31,370
Cost of sales (13,393) (15,078) (27,773)
=============== ============
Gross profit 85 2,012 3,597
Administrative expenses (1,042) (1,432) (3,122)
Operating loss (957) 580 475
Loss on disposal of oil and gas
properties - - (4,096)
Write-off of exploration and evaluation
assets - - (5)
Finance revenue 32 48 129
Finance costs (4,821) (4,467) (9,183)
=============== ============
Loss for the period for continuing
operations before taxation (5,746) (3,839) (12,680)
Income tax - - -
=============== ============
Loss for the period for continuing
operations before taxation (5,746) (3,839) (12,680)
=============== ============ -----------------
PetroNeft's 50% share (2,873) (1,920) (6,340)
=============== ============ -----------------
WorldAce Group Analysis Unaudited Audited
======================== -------------
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
US$'000 US$'000 US$'000
Revenue
Oil sales 13,402 16,987 31,182
Other sales 76 103 188
Total revenue 13,478 17,090 31,370
=========== =========== -------------
PetroNeft's 50% share 6,739 8,545 15,685
=========== =========== -------------
Cost of Sales
Mineral Extraction Tax 8,247 9,491 17,775
Pipeline tariff 1,353 1,602 3,020
Staff costs 1,020 1,014 1,805
Depreciation and amortisation 805 1,451 2,457
Other cost of sales 1,968 1,520 2,716
Total cost of sales 13,393 15,078 27,773
=========== =========== -------------
PetroNeft's 50% share 6,697 7,539 13,887
=========== =========== -------------
The detailed Income Statement and Balance Sheet of WorldAce Investments Limited is disclosed at note 10 to these condensed financial statements. Lower production and oil prices in H1 2019 have weakened the margin in 2019 as compared to the same period last year. This led to an operating loss in the L-61 joint venture of US$957k compared to an operating profit in the same period last year of US$580k.
David Sturt
Chief Executive Officer
Interim Condensed Consolidated Income Statement
For the 6 months ended 30 June 2019
Unaudited Audited
========================== -------------
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
Continuing operations Note US$ US$ US$
Revenue 5 830,613 1,092,673 1,767,074
Cost of sales (383,296) (880,771) 1,559,982
============ ============ -------------
Gross profit 447,317 211,902 207,092
Administrative expenses (775,302) (612,369) 1,389,582
Exchange gain/(loss) on intra-Group
loans 54,542 (56,726) 123,235
-------------
Operating loss (273,443) (457,193) (1,305,725)
Share of joint venture's net
loss - WorldAce Investments
Limited 10 (2,873,286) (1,919,878) (6,339,613)
Share of joint venture's net
loss - Russian BD Holdings
B.V. 11 (349,384) (230,178) (508,757)
Finance revenue 6 2,164,301 1,972,866 966,039
Finance costs 7 (138,560) (48,256) (116,825)
-------------
Loss for the period for continuing
operations before taxation (1,470,372) (682,639) (7,304,881)
Income tax expense (536,461) (510,381) (256,881)
============ ============ -------------
Loss for the period attributable
to equity holders of the Parent (2,006,833) (1,193,020) (7,561,762)
============ ============ =============
Loss per share attributable
to ordinary equity holders
of the Parent
Basic and diluted - US dollar
cent (0.28) (0.17) (1.07)
Interim Condensed Consolidated Statement of Comprehensive
Income
For the 6 months ended 30 June 2019
Unaudited Audited
========================== -------------
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
US$ US$ US$
Loss for the period attributable
to equity holders of the Parent (2,006,833) (1,193,020) (7,561,762)
Other comprehensive income
to be reclassified to profit
or loss in subsequent periods:
Currency translation adjustments
- subsidiaries (63,916) 46,256 102,440
Share of joint ventures' other
comprehensive income - foreign
exchange translation differences 4,226,227 (4,030,342) (8,456,256)
Total comprehensive loss for
the period attributable to
equity holders of the Parent 2,155,478 (5,177,106) (15,915,578)
============ ============ =============
Interim Condensed Consolidated Balance Sheet
As at 30 June 2019
Unaudited Audited
============= -------------
30 June 31 December
2019 2018
Note US$ US$
Assets
Non-current Assets
Property, plant and equipment 9 31,242 38,296
Equity-accounted investment in joint
ventures - WorldAce Investments Limited 10 - -
Equity-accounted investment in joint
ventures - Russian BD Holdings B.V. 11 - -
Financial assets - loans and receivables 12 39,170,077 35,525,743
39,201,319 35,564,039
=============
Current Assets
Inventories 13 12,924 6,547
Trade and other receivables 14 721,352 249,280
Cash and cash equivalents 15 194,501 801,938
928,777 1,057,765
=============
Total Assets 40,130,096 36,621,804
============= =============
Equity and Liabilities
Capital and Reserves
Called up share capital 16 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 (93,010,086) (91,003,253)
Currency translation reserve (32,796,063) (36,958,374)
Other reserves 336,000 336,000
Equity attributable to equity holders of
the Parent 31,919,065 29,512,993
============= -------------
Non-current Liabilities
Deferred tax liability 3,769,707 3,219,203
3,769,707 3,219,203
=============
Current Liabilities
Interest-bearing loans and borrowings 17 2,755,384 2,116,825
Trade and other payables 18 1,685,940 1,772,783
4,441,324 3,889,608
=============
Total Liabilities 8,211,031 7,108,811
Total Equity and Liabilities 40,130,096 36,621,804
============= =============
Interim Condensed Consolidated Statement of Changes in Equity
For the 6 months ended 30 June 2019
Share-based
Called Share payment Currency
up share premium and other translation
capital account reserves reserve Retained 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 - foreign
exchange
translation
differences - - - (8,456,256) - (8,456,256)
---------- ------------ ------------ ----------------- -------------- -------------
Total
comprehensive
profit for
the year - - - (8,353,816) (7,561,762) (15,915,578)
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
========== ============ ============ ================= ============== =============
Loss for the
period - - - - (2,006,833) (2,006,833)
Currency
translation
adjustments
- subsidiaries - - - (63,916) - (63,916)
Share of joint
ventures' other
comprehensive
income - foreign
exchange
translation
differences - - - 4,226,227 - 4,226,227
========== ============ ============ ================= ============== =============
Total
comprehensive
loss for the
period - - - 4,153,370 (2,006,833) 2,154,478
========== ============ ============ ================= ============== =============
New share capital
subscribed 156,783 93,811 250,594
At 30 June 2019 9,585,965 141,006,709 7,132,540 (32,796,063) (93,010,086) 31,919,065
========== ============ ============ ================= ============== =============
Interim Condensed Consolidated Cash Flow Statement
For the 6 months ended 30 June 2019
Unaudited Audited
========================== -------------
6 months 6 months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2017
US$ US$ US$
Operating activities
Loss before taxation (1,470,372) (682,639) (7,304,881)
Adjustment to reconcile loss
before tax to net cash flows
Non-cash
Depreciation 11,858 25,745 38,936
Share of loss in joint ventures 3,222,670 2,150,056 6,848,370
Finance revenue 6 (2,164,301) (1,972,866) (966,039)
Finance costs 7 138,560 48,256 116,825
Working capital adjustments
(Increase)/decrease in trade and
other receivables (195,657) 103,454 276,593
(Increase)/decrease in inventories (6,376) (78,204) 12,960
Increase/(decrease) in trade and
other payables 132,755 (140,482) 192,955
Income tax paid (13,847) (29,953) (30,034)
Net cash flows used in operating
activities (344,710) (576,633) (814,315)
------------ -------------
Investing activities
Purchase of property, plant and equipment -
Loan facilities advanced to joint venture
undertakings (765,000) (392,000) (392,000)
Interest received 2,022 685 1,481
Net cash (used in)/received
from investing activities (762,978) (391,315) (390,519)
============ ------------ -------------
Financing activities
Proceeds from loan facilities 500,000 1,000,000 2,000,000
Net cash received from financing
activities 500,000 1,000,000 2,000,000
============ ------------ -------------
Net increase/(decrease) in
cash and cash equivalents (607,688) 32,052 795,166
Translation adjustment 251 (1,063) (2,617)
Cash and cash equivalents
at the beginning of the period 801,938 9,389 9,389
Cash and cash equivalents
at the end of the period 15 194,501 40,378 801,938
============ ============ =============
Notes to the Interim Condensed Consolidated Financial Statements
For the 6 months ended 30 June 2019
1. Corporate Information
The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2019 were authorised for issue in accordance with a resolution of the Directors on 27 September 2019.
PetroNeft Resources plc ('PetroNeft, 'the Company', or together with its subsidiaries and joint ventures, 'the Group') is a public limited company incorporated in the Republic of Ireland with a company registration number 408101. The Company is listed on the Alternative Investment Market ('AIM') of the London Stock Exchange and the Enterprise Securities Market ('ESM') of the Irish Stock Exchange. The address of the registered office and the business address in Ireland is 20 Holles Street, Dublin 2. The Company is domiciled in the Republic of Ireland.
The principal activities of the Group are oil and gas exploration, development and production.
2. Going Concern
As described in the 2018 Annual Report PetroNeft agreed a US$2 million loan facility with Swedish Company Petrogrand AB. The loan was initially repayable on 31 December 2018. The Company successfully managed to negotiate an extension to the loan term to 15(th) December 2019 and at the same time the facility was increased to $2.5M. This money has been used to finance ongoing operations including the drilling of the C4 well. The successful C-4 well has broadened the options available to the Company in this regard.
The Group has analysed its cash flow requirements through to 31 December 2019 in detail. The cash flow includes estimates for a number of key variables including, the timing of cash flows of expenditure and management of working capital, including significant deferral and reduction in remuneration of Directors and key management which has been in place since October 2017. The Directors believe that the Group's cash flow forecasts represent the best estimate of the actual cash flows over the forecast period at the date of approval of the financial statements. The cash flow is stress tested to assess the adverse effect arising from reasonable changes in circumstance. The cash flow projections for the period to 31 December 2019 indicate that, provided the Petrogrand loan is re-financed or extended before the maturity date and the deferral and reduction of remuneration of Directors and key management continues the Company will have sufficient cash resources to meet its obligations as they fall due.
The Company's obligation to amend, extend or otherwise re-finance the Petrogrand loan prior to the maturity date on 15(th) December 2019 represents a material uncertainty 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 uncertainty 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. For these reasons, they continue to adopt the going concern basis in preparing these 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 was unable to continue as a going concern.
3. Accounting Policies
3.1 Basis of Preparation
The interim condensed consolidated financial statements for the six months ended 30 June 2019 have been prepared in accordance with IAS 34 Interim Financial Reporting.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 31 December 2018 which are available on the Group's website - www.petroneft.com.
The interim condensed consolidated financial statements are presented in US dollars ("US$").
3.2 Significant Accounting Policies
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2018.
4. Segment information
At present the Group has one reportable operating segment, which is oil exploration and production through its joint venture undertakings. As a result, there are no further disclosures required in respect of the Group's reporting segment.
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 of the Group's sales and capital expenditures are in Russia.
5. Revenue Unaudited Audited
============================================================ -----------------------------
6 months Year ended
6 months ended ended 30 31 December
30 June 2019 June 2018 2018
US$ US$ US$
Revenue
Management
Services 316,001 431,619 846,860
Construction
Services 514,612 661,054 920,214
830,613 1,092,673 1,767,074
=============================== =========================== =============================
6. Finance revenue Unaudited Audited
============================ -------------
6 months Year ended
6 months ended ended 30 31 December
30 June 2019 June 2018 2018
US$ US$ US$
Bank interest receivable 2,022 685 1,481
Interest receivable
on loans to Joint Ventures 2,162,279 1,972,181 964,558
2,164,301 1,972,866 966,039
=============== =========== =============
7. Finance costs Unaudited Audited
============================ -------------
6 months Year ended
6 months ended ended 30 31 December
30 June 2019 June 2018 2018
US$ US$ US$
Interest on loans 138,560 48,256 116,825
138,560 48,256 116,825
=============== =========== =============
8. Income tax
Unaudited Audited
================================ -------------
Year ended
6 months ended 6 months ended 31 December
30 June 2019 30 June 2018 2018
US$ US$ US$
Current income tax
Current income tax
charge (14,043) 15,425 12,523
Total current income
tax (14,043) 15,425 12,523
--------------- -------------
Deferred tax
Relating to origination
and reversal of temporary
differences 550,504 494,956 244,358
Total deferred tax 550,504 494,956 244,358
=============== --------------- -------------
Income tax expense
reported in the Consolidated
Income Statement 536,461 510,381 256,881
=============== =============== =============
9. Property, Plant and Equipment
Plant and
machinery
US$
Cost
At 1 January 2018 992,928
Disposals (324)
Translation adjustment (152,799)
==========
At 1 January 2019 839,805
Additions -
Translation adjustment 77,951
At 30 June 2019 917,756
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 11,858
Translation adjustment 73,147
At 30 June 2019 886,514
Net book values
At 30 June 2019 31,242
==========
At 31 December 2018 38,296
==========
10. Equity-accounted Investment in Joint Venture - WorldAce Investments Limited
PetroNeft Resources plc has a 50% interest in WorldAce Investments Limited, a jointly controlled entity 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)
Share of net loss of joint venture for
the year (6,339,613)
Translation adjustment (7,760,793)
Credited against loans receivable from
WorldAce Investments Limited 14,101,580
============
At 1 January 2019 -
Share of net loss of joint venture for
the period (2,873,286)
Translation adjustment 3,805,212
Debited against loans receivable from
WorldAce Investments Limited (931,926)
At 30 June 2019 -
============
10. Equity-accounted Investment in Joint Venture - WorldAce Investments Limited (continued)
The balance sheet position of WorldAce Investments Limited shows net liabilities of US$56,110,244 following a loss in the period of US$5,746,601 together with a positive currency translation adjustment of US$7,610,436. PetroNeft's 50% share is included above and results in a negative carrying value of US$23,372,709. 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$23,372,709 is deducted from other assets associated with the joint venture on the Balance Sheet which are the loans receivable from WorldAce Investments (see Note 12).
Additional financial information in respect of PetroNeft's 50% interest in the equity-accounted joint venture entity is disclosed below:
50% Share of WorldAce Group
Unaudited Audited
================================ -------------
Year ended
6 months ended 6 months ended 31 December
30 June 2019 30 June 2018 2018
US$ US$ US$
Continuing operations
Revenue 6,738,835 8,545,032 15,684,984
Cost of sales (6,696,307) (7,539,017) (13,886,409)
=============== =============== =============
Gross profit 42,528 1,006,015 1,798,575
Administrative expenses (520,925) (716,069) (1,560,913)
=============== =============== -------------
Operating loss (478,397) 289,946 237,662
Loss on disposal of
oil and gas properties - - (2,048,038)
Write-off of exploration
and evaluation assets - - (2,346)
Finance revenue 15,807 23,921 64,712
Finance costs (2,410,709) (2,233,745) (4,591,603)
=============== =============== =============
Loss for the period
for continuing operations
before taxation (2,873,299) (1,919,878) (6,339,613)
Income tax expense - - -
=============== =============== =============
Loss for the period (2,873,299) (1,919,878) (6,339,613)
=============== =============== =============
Loss for the period (2,873,299) (1,919,878) (6,339,613)
Other comprehensive
income to be reclassified
to profit or loss
in subsequent periods:
Currency translation
adjustments 3,805,218 (3,706,547) (7,760,793)
=============== =============== =============
Total comprehensive
loss for the period 931,919 (5,626,425) (14,100,406)
=============== =============== =============
Finance costs mainly relate to interest on shareholder loans from Oil India International B.V. and PetroNeft.
The currency translation adjustment results from the revaluation of the Russian Rouble during the period. 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 period from RUB69.5:US$1 at 31 December 2018 to RUB63.1:US$1 at 30 June 2019.
10. Equity-accounted Investment in Joint Venture - WorldAce Investments Limited (continued)
50% Share of WorldAce Group
Unaudited Audited
============== --------------
31 December
30 June 2019 2018
US$ US$
Non-current Assets
Oil and gas properties 32,447,658 29,786,687
Property, plant and equipment 108,879 128,111
Exploration and evaluation assets 8,605,042 7,804,586
Assets under construction 627,739 562,307
41,789,318 38,281,691
============== --------------
Current Assets
Inventories 1,505,594 848,776
Trade and other receivables 511,791 380,156
Cash and cash equivalents 26,329 225,846
2,043,714 1,454,778
============== --------------
Total Assets 43,833,032 39,736,469
============== ==============
Non-current Liabilities
Provisions (681,592) (573,540)
Interest-bearing loans and borrowings (67,978,353) (65,682,097)
(68,659,945) (66,255,637)
============== --------------
Current Liabilities
Interest-bearing loans and borrowings (1,041,048) (974,793)
Trade and other payables (2,187,161) (1,493,077)
(3,228,209) (2,467,870)
============== --------------
Total Liabilities (71,888,154) (68,723,507)
============== ==============
Net Liabilities (28,055,122) (28,987,038)
============== ==============
Interest-bearing loans and borrowings are shareholder loans from Oil India International B.V. and PetroNeft.
11. 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 jointly controlled entity 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, through LLC Lineynoye, in Russia.
Share of
net assets
US$
At 1 January 2018 -
(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 BV 1,216,337
============
At 1 January 2019 -
Share of net loss of joint venture for
the period (349,384)
Translation adjustment 421,015
Debited against loans receivable from
Russian BD Holdings BV (71,631)
At 30 June 2019 -
============
The balance sheet position of Russian BD Holdings B.V. shows net liabilities of US$3,711,198 following a loss in the period of US$697,960 together with a positive currency translation adjustment of US$842,030. PetroNeft's 50% share is included above and results in a negative carrying value of US$1,864,711. 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$1,864,711 is deducted from other assets associated with the joint venture on the Balance Sheet which are the loans receivable from Russian BD Holdings B.V. (Note 12).
11. Equity-accounted Investment in Joint Venture - Russian BD Holdings B.V. (continued)
Additional financial information in respect of PetroNeft's 50% interest in the equity-accounted joint venture entity is disclosed below:
50% Share of Russian BD Holdings B.V.
Unaudited Audited
================================ -------------
Year ended
6 months ended 6 months ended 31 December
30 June 2019 30 June 2018 2018
US$ US$ US$
Revenue - - -
Cost of sales - - -
Gross profit - - -
Administrative expenses (101,462) (42,993) (104,256)
Operating loss (101,462) (42,993) (104,256)
Finance revenue 290 360 520
Finance costs (248,010) (187,545) (405,021)
Loss for the period for continuing
operations before taxation (349,182) (230,178) (508,757)
Taxation 203 - -
Loss for the period (348,979) (230,178) (508,757)
=============== =============== =============
Loss for the period (348,979) (230,178) (508,757)
Other comprehensive income
to be reclassified to profit
or loss in subsequent periods:
Currency translation adjustments 421,015 109,246 (695,463)
Total comprehensive loss
for the period 72,036 (120,932) (1,204,220)
=============== =============== =============
Finance costs comprise of interest on shareholder loans from Belgrave Naftogas B.V. and PetroNeft.
Unaudited Audited
============= ------------
31 December
30 June 2019 2018
US$ US$
Non-current assets 5,506,962 4,993,522
Current assets 65,450 238,093
Total assets 5,572,412 5,231,615
============= ------------
Non-current liabilities (6,885,117) (6,393,622)
Current liabilities (542,894) (762,216)
Total liabilities (7,428,011) (7,155,838)
============= ------------
Net Liabilities (1,855,599) (1,924,223)
============= ============
Financial assets - loans
12. and receivables
Unaudited Audited
============= -------------
31 December
30 June 2019 2018
US$ US$
Loans to WorldAce Investments
Limited 61,101,145 59,161,041
Loss allowance (3,109,501) (3,109,501)
Less: share of WorldAce Investments
Limited loss (Note 10) (23,372,709) (24,304,633)
34,618,935 31,746,907
============= -------------
Loans to Russian BD Holdings
B.V. 6,418,862 5,715,176
Less: share of Russian BD Holdings
B.V. loss (Note 11) (1,864,711) (1,936,340)
4,554,151 3,778,836
============= -------------
39,173,086 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 2020 at the earliest. The loan is set to mature on 31 December 2025. As at 30 June 2019 the loan was fully drawn down. The loan from the Company to Russian BD Holdings is repayable on demand. Interest currently accrues on the loan at LIBOR plus 5.0% per annum.
13. Inventories Unaudited Audited
=================================== -------------------------------
31 December
30 June 2019 2018
US$ US$
Materials 12,924 6,547
12,924 6,547
=================================== ===============================
14. Trade and other receivables Unaudited Audited
================================== -------------------------------
30 June 31 December
2019 2018
US$ US$
Other receivables 26,697 60,012
Receivable from jointly controlled
entity 632,509 170,627
Advances to contractors 2,215 758
Prepayments 59,931 17,883
721,352 249,280
================================== ===============================
Other receivables are non-interest-bearing and are normally settled on 60-day terms.
15. Cash and Cash Equivalents
Unaudited Audited
=============================== ---------------------------
31 December
30 June 2019 2018
US$ US$
Cash at bank and in hand 194,501 801,938
194,501 801,938
=============================== ===========================
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.
16. Share Capital - Group and Company
Called up
Allotted, called up and Number of Ordinary share capital
fully paid equity Shares US$
At 1 January 2018 707,245,906 9,429,182
At 1 January 2019 707,245,906 9,429,182
New share capital subscribed 13,884,594 156,783
At 30 June 2019 721,130,500 9,585,965
=================== ===============
In April 2019 the Company issued 13,884,594 Ordinary Shares in settlement of liabilities to David Sturt and Dennis Francis. Details were provided to shareholders in a regulatory news announcement on 16 April 2019.
17. Loans and Borrowings
Unaudited Audited
========== ------------
Group and Company Effective Contractual
interest maturity 30 June 31 December
rate date 2019 2018
% US$ US$
Interest-bearing
Current liabilities
Petrogrand AB 11.56% 15-Dec-19 2,755,384 2,116,825
========== ------------
Total current liabilities 2,755,384 2,116,825
==========
Total loans and borrowings 2,755,384 2,116,825
========== ============
Contractual undiscounted
liability 2,755,384 2,116,825
Changes in financial liabilities arising
from financing activities:
Unaudited Audited
================================================= -------------
6 months Year ended
6 months ended ended 30 31 December
30 June 2018 June 2018 2018
US$ US$ US$
At 1 January 2,116,825 - -
Cash flows - loan drawdowns 500,000 1,000,000 2,000,000
Interest accrued but not
yet paid 138,559 48,256 116,825
At period end 2,755,384 1,048,256 2,116,825
=============================== =========== =============
Petrogrand AB is a related party of the Company because Pavel Tetyakov, VP of Business Development of PetroNeft, is CEO of Petrogrand AB, Swedish company. In addition, Maxim Korobov, a significant shareholder and Non-Executive Director of Petroneft is also a major shareholder of Petrogrand AB.
18. Trade and other payables
Unaudited Audited
================================ -----------------------------
31 December
30 June 2019 2018
US$ US$
Trade payables 403,887 428,734
Trade payables to jointly
controlled entity 143,404 104,115
Corporation tax 55,212 55,016
Other taxes and social welfare
costs 48,663 42,918
Accruals and other payables 1,034,774 1,142,000
1,685,940 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.
19. Important Events after the Balance Sheet Date
There were no important events since the balance sheet date.
20. Board approval
This announcement was approved by the Board of Directors of PetroNeft Resources plc on 27 September 2019.
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 rns@lseg.com or visit www.rns.com.
END
IR LFFLIAFIAFIA
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