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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Phoenix Global Resources Plc | LSE:PGR | London | Ordinary Share | GB00B7LHJ340 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 6.50 | 5.00 | 8.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2021 to Apr 2024
TIDMPGR
RNS Number : 6179L
Phoenix Global Resources PLC
14 September 2021
14 September 2021
Phoenix Global Resources plc
('Phoenix' or 'the Company')
UNAUDITED INTERIM RESULTS FOR THE SIX-MONTH PERIOD TO 30 JUNE 2021
Phoenix Global Resources (AIM: PGR; BCBA: PGR) announces its unaudited interim results for the six-month period ended 30 June 2021.
Operational highlights
-- 35 year unconventional exploitation concession over 43,372 acres in Mata Mora granted -- Exploration rights over 11,918 acres in Mata Mora extended for 5 years -- Average daily production of 4,863 boepd (H1 2020: 4,369 boepd) -- Site preparation for the two horizontal wells in Corralera completed -- Drilling rig for first Corralera horizontal well mobilised -- Successful pulling interventions at Tupungato and Atamisqui
2021 interim results summary
-- Revenues of US$36.1 million (H1 2020: US$24.9 million) -- Realised oil price of US$ 47.03/bbl (H1 2020: US$39.19/bbl) -- Operating loss of US$ 16.04 million (H1 2020: loss of US$ 50.8 million) -- EBITDA gain of US$ 7.23 million (H1 2020: US$34.5 million loss) -- Adjusted EBITDA gain of US$ 7.06 million (H1 2020: US$11.6 million loss)
Overview and outlook
Whilst Covid-19 continues to make the environment extremely challenging, the benefits of the impact of the cost reductions and corporate restructure that we implemented last year are reflected in the results for the six-month period to 30 June 2021.
The Company's major shareholder, Mercuria, continues to be supportive and the Board believes the Company is now on a sounder financial footing to enable it to focus on the development of its unconventional assets.
During the period the Neuquen P rovince issued a Decree granting the Company a 35-year unconventional exploitation concession over approximately 43,372 acres in the northern part of Mata Mora and extending for 5 years to April 2026 the exploration rights over approximately 11,918 acres in the southern part of Mata Mora. Furthermore, the Province has issued a Decree approving a one-year extension of the Company's exploration rights for the Corralera Noreste and Corralera Sur blocks to April 2022.
The Mata Mora concession involves a pilot phase with certain works to be completed by March 2026, which includes a capex commitment of US$110 million, consisting of four pads of three horizontal wells each, with an average lateral length of 2,150 metres. The Corralera exploration commitment includes obligations to execute two horizontal wells by April 2022.
The work programs for 2021 and 2022 include the drilling and completion of the two horizontal wells in Corralera and the drilling and completion of two pads each of three wells in Mata Mora. We have completed the site preparation at both locations in Corralera and the drilling rig for the drilling of the first well has been mobilised.
The Board will continue to provide updates on these drilling programs as they progress and hopes this will provide a platform for the further development of these assets, whilst recognising that significant investment will be required to fully exploit these assets and acknowledges that funding from third parties, other than Mercuria, may be required to achieve this.
Phoenix Global Resources Nigel Duxbury T: +44 20 3912 2800 plc Shore Capital Toby Gibbs T: +44 20 7408 4090 Joint broker and nominated David Coaten adviser Panmure Gordon John Prior T: +44 20 7886 2500 Joint broker Atholl Tweedie
About Phoenix
Phoenix Global Resources is an independent oil and gas exploration and production company focused on Argentina and listed on both the London Stock Exchange (AIM: PGR) and the Buenos Aires Stock Exchange (BCBA: PGR) and offers its investors an opportunity to invest directly into Argentina's Vaca Muerta shale formation and other unconventional resources . The Company has over 0.9 million licenced working interest acres in Argentina (of which approximately 0.7 million are operated), 18.8 million boe of working interest 2P reserves and average working interest production of 4,549 boepd in 2020. Phoenix has signi cant exposure to the unconventional opportunity in Argentina through its approximately 0.6 million working interest acres with Vaca Muerta and other unconventional potential.
The Company's website is www.phoenixglobalresources.com
Operations Review
OPERATED AREAS
Mata Mora
Our two Mata Mora wells, MMox-1001 and MMox-1002, continue to produce at our predicted post 2020 shut-in type curve rates. If needed, interventions are planned for Q4 to run velocity strings and given normal expected reservoir pressure decline, we are anticipating installing artificial lift on the wells sometime later this year.
Field development plans are also continuing and site preparation for pads 2 and 3 began in Q3. After completing drilling activity at Corralera, the drilling rig will be moved to Mata Mora where we plan to drill a total of 6 wells (3 wells per pad) with an average lateral lengths of 2,150 metres and between 29 and 33 frac stages. A vertical well is also planned to obtain geological data. We expect to complete the first pad by May 2022 and the second pad by July 2022.
Plans for the building of facilities are being developed to avoid gas flaring and avoid the delivery of production by truck through the use of midstream facilities.
Corralera
The Company has progressed its plans to drill two wells in the Corralera area and site preparation at both locations (Corralera North East ("CONE") and Corralera South ("COSU")) has been completed. Conductor wells have been drilled and a H&P-230 drilling rig has been moved to the CONE site location and drilling operations on well CoNe.x-1 have started with the drilling of the vertical well to a target depth of 2,960 metres. After the collection and logging of geological information, the vertical well will be abandoned and a sidetrack will be performed to drill a 2,000 metre lateral length horizontal well, with 29 frac stages. We expect the initial results from this well to be available by the end of November. After CONE we plan to drill the well in COSU and expect to start drilling activities at COSU in mid-October and again plan to drill a horizontal section with 29 frac stages. We expect initial production results to be available by late January 2022. The geological information from the vertical wells will enable us to define the petrophysical parameters of the rock to enable us to determine the best navigation horizons for the lateral sections. We plan to rent facilities to optimise the deployment of allocated capital expenditure and the technical team is working on plans to reduce the flaring and the venting of natural gas in line with the Company's zero flaring targets.
Tupungato-Refugio and Atamisqui
In the first half of the year 13 pulling interventions were completed with outstanding results. The production during Q1 was below budget but since April oil production has been above budget. General maintenance work and some minor jobs were also carried out at the Tupungato water injection plant.
A well risk analysis was performed on well T-48 and the conclusion reached that the well should be abandoned. Due to the condition of the wellhead a specialised team was hired to perform remediation jobs. The well is now in a secure condition and the abandonment is planned for Q1 2022. A critical tanks inspection and reparation campaign was started in May and a well swabbing campaign is planned to start in September. Subsurface modelling was started in June 2021, as no comprehensive modelling has been carried out for over 40 years. A static model has been completed and some opportunities for implementing secondary recovery have been identified and the possibility of tertiary recovery is under analysis. A dynamic model is now being developed with the support of an external consultant.
Puesto Rojas
The drop in production primarily relates to a higher rate of decline from the wells producing from the Agrio and Vaca Muerta, with only 5 wells currently producing from the 12 wells drilled in the last campaign. Based on the variable results from these Agrio and Vaca Muerta vertical wells, management continues to evaluate unconventional prospectivity in this area, which it expects to complete by the end of the year.
A five well pulling campaign was conducted during the first half of 2021. Three wells produced very good results but the other two wells require jobs that were not originally planned and for this reason further work on these wells has been postponed. Some issues relating to fluids compatibility were detected in wells producing from the Vaca Muerta formation and an analysis of this situation is being carried out. A comprehensive review of over 100 shut-in wells is being carried out and to date, two wells have been put back into production.
Rio Atuel
In November 2021, we expect to drill an exploratory well, Picunches.x-1, in the Rio Atuel licence in the Mendoza Province, which we expect to complete by the end of the year. Pampa Energia has a minority non-operating interest of 33% in this licence. The main target is the Huitrin formation, but the Agrio and Vaca morta formations will also be analysed. This well will fulfill our commitments under the licence with the Mendoza Province. Five further possible targets have also been identified.
La Paloma
In 2019, two wells, LP-9 and LP-7, were drilled in the La Paloma/Cerro Alquitran area targeting the Grupo Neuquén formation. After analyzing the reservoir conditions, the Company has decided not to complete these wells due to lack of petrophysical conditions and current local regulatory restraints, which prohibit fracking in the area.
NON-OPERATED AREAS
Chachahuen
In the Chachahuen Sur area, the focus in 2021 has been to improve the water flooding projects and start a polymer pilot project. A plan to reduce production losses has also been prepared, which will require the building of a gas and oil pipeline from Chachahuen to the Puesto Hernandez field. Injection water quality issues have been identified and the operator is currently preparing a plan that will be implemented before the tertiary recovery pilot project begins.
At Cerro Morado Este, we have focused on the reduction of production losses. This will require an alternative route for fluid evacuation due to flooding of current routes when it rains. A remediation of "Bateria 1" at the Chachahuen field is also being carried out and a tertiary recovery pilot project is planned for 2022.
The Chachahuen licence is operated by YPF.
Tierra del Fuego
The San Martin wells continue to produce with the water cut rate in line with expectations. The operator has proposed the drilling of an extra well in an independent reservoir compartment. Alternatives for production evacuation are also being analysed in the event delivery through the YPF buoy is disrupted and Total's facilities have been identified as a possible option.
H1 2021 production
Total production (net WI)
Average total daily working interest production volumes in H1, Q1 and Q2 2021 compared to full year 2020 and Q4 2020:
Hot Features
Premium
WI H1 2021 Q2 2021 Q1 2021 Q4 2020 FY 2020
% Boe/d Boe/d Boe/d Boe/d Boe/d
OPERATED
Puesto Rojas Area 100% 563 535 591 805 765
Atamisqui 100% 239 254 223 258 203
Tupungato 100% 838 887 788 894 644
Mata Mora 90% 484 423 546 317 253
----------------------- -------- -------- -------- -------- -------- --------
TOTAL OPERATED 2,124 2,099 2,148 2,274 1,865
----------------------- -------- -------- -------- -------- -------- --------
NON-OPERATED
Chachahuen Area 20% 1,806 1,747 1,865 1,898 1,717
Rio Cullen 17% 811 795 826 895 739
Cajon de los Caballos 38% 97 93 101 115 72
Other 40%/78% 25 23 28 36 156
----------------------- -------- -------- -------- -------- -------- --------
TOTAL NON-OPERATED 2,739 2,658 2,820 2,944 2,684
----------------------- -------- -------- -------- -------- -------- --------
GRAND TOTAL 4,863 4,757 4,968 5,218 4,549
----------------------- -------- -------- -------- -------- -------- --------
Financial review
H1 2021 H1 2020 FY 2020
US$MM US$MM US$MM
------------------------------------------ -------- -------- ---------
Revenue 36.14 24.90 54.00
Gross loss (5.63) (13.60) (27.40)
Operating loss (16.04) (50.75) (219.66)
Adjusted EBITDA (gain/(loss)) 7.06 (11.56) (7.18)
Loss for the period (13.68) (55.42) (197.02)
Net assets 12.50 167.60 26.09
Net cash inflow/(outflow) from operating
activities 28.66 (10.48) (6.39)
Capital expenditures 9.71 3.34 8.15
------------------------------------------ -------- -------- ---------
Income Statement
Revenue and gross loss
Revenue for the period was US$36.14 million (H1 2020: US$24.9 million), comprising revenue from oil sales of US$35.1 million (H1 2020: US$23.9 million) and revenue from gas sales of US$1.1 million (H1 2020: US$1.0 million).
The increase in oil revenue between periods resulted primarily from the shut-in of production due to Covid-19 in H1 2020 and an increase in the realised price per barrel in the period.
The average realised oil sales price in H1 2021 was US$47.03/bbl, a 20% increase on the average price of US$39.19/bbl in H1 2020. Realised prices achieved by the Company are indirectly linked to Brent.
The emergence of Covid-19 as a global pandemic and the resulting fall in the demand for oil had a significant impact on the operations of the Company during H1 2020. The over-supply of crude in the market resulted in YPF, the state-controlled Argentine energy company, giving notice to its customers of the suspension of the purchase of oil until further notice. This resulted in refineries stopping the acceptance of deliveries, leaving the Company with no option but to shut-down production in April 2020.
The increase in average daily oil production in H1 2021 to 4,258 bopd from 3,546 bopd in H1 2020 reflects the impact of pulling and other activities and also the impact of the 2020 shut-down.
Gas revenue in the period was US$1.1 million compared to US$1.0 million in the comparative period last year. Realised gas prices increased from an average of US$2.13/MMcf in H1 2020 to an average of US$2.99 /MMcf in H1 2021 due to under supply in the gas market.
Operating costs in H1 2021 decreased to US$15.01/boe compared to US$26.3/boe in H1 2020, primarily due to increased production levels resulting in the fixed element of production costs being allocated over larger volumes.
Depreciation increased US$7.1 million in the period from US$16.2 million in H1 2020 to US$23.3 million in H1 2021. This increase is due, primarily to larger production volumes.
Other operating costs
No significant exploration expense was recognised in the period. An exploration expense of US$2.7 million was recognised in H1 2020, which related primarily to the write-off of the US$2.5 million cost of the Rio Atuel exploratory well.
Finance income and costs
Net finance income in H1 2021 was US$12.2 million compared to net finance costs of US$11.3 million in H1 2020. This gain was driven by the benefit on transfers of US$ into Argentina under the 'contado con liquidacion' mechanism, a reduction in the foreign exchange losses on Peso denominated balances held by the Company and a reduction in other finance costs.
Taxation
A US$9.8 million tax expense was recognised in H1 2021, compared to a US$6.7 million tax benefit in H1 2020. This resulted from an increase in the deferred tax liability in the period primarily arising from a reduction in the book values of fixed assets when compared to the tax-deductible values and an increase in the tax rates to 35% (2020: 25%).
Balance Sheet
At 30 June 2021 the Group had net assets of US$ 12.5 million, a decrease of US$13.6 million compared to 31 December 2020. During the period, intangible assets and property, plant and equipment decreased by US$13.6 million primarily due to DD&A of US$23.3 million, offset by US$9.7 million of additions.
Variances were also observed in the working capital balances when compared to 31 December 2020. Trade and other receivables decreased by US$0.9 million to US$24.5 million at 30 June 2021. Inventories increased by US$0.9 million to US$19.2 million at 30 June 2021. Deferred tax assets increased by US$ 7.3 million to US$27.4 million at 30 June 2021 primarily due to an increase in tax rates from 25% to 35%. Trade and other payables declined by US$4.1 million to US$22.1 million at 30 June 2021 due to a reduction in costs.
Funding status and going concern
At 30 June 2021 the Group had cash on hand of US$50.0 million (31 December 2020: US$5.4 million). Total borrowings in the period increased by US$36.4 million from US$332.2 million at 31 December 2020 to US$368.6 million at 30 June 2021. The increase resulted primarily from the drawdown of an additional US$29.6 million of funds from the bridging facility in place with Mercuria and the capitalisation of US$7.1 million of accrued interest. Funds advanced under the credit facilities have been used to satisfy working capital needs and work programs.
The Group principally generates cash from its existing conventional oil and gas production operations. Nevertheless, it was formed with the stated intention of undertaking a significant exploration, evaluation and development programme focused on the Group's unconventional oil and gas assets in Argentina, including the Vaca Muerta formation.
Our major shareholder, Mercuria, continues to be supportive and has provided the Company with a letter stating its intention to continue providing financial support to the Company in order that it may continue to operate and service its liabilities as they fall due in the next 12 months and fund the planned work programs. Mercuria has also specifically agreed to not demand repayment of the existing loans (principal and interest) within the next 12 months whilst discussions with the Company to restructure these loan agreements continue.
The directors believe they will be able to agree the restructure of the existing debt with Mercuria and formalise an agreement for new funding and that the Group and Company can continue as a going concern for the foreseeable future. The application of the going concern basis of preparation of this interim condensed consolidated financial information is based on the letter that has been received from Mercuria and the ongoing discussions with the Mercuria principals. Accordingly, the directors continue to adopt the going concern basis for accounting in preparing these financial statements. However, the directors recognise that if financial support over the next 12 months from Mercuria were not to be available and the Company is unable to restructure the existing loan agreements with Mercuria or obtain funding from alternative sources, this gives rise to a material uncertainty that may cast significant doubt on the Group's and Company's ability to continue as a going concern.
The condensed consolidated financial information contained in this interim report does not include any adjustments that would be required if the Group and Company were unable to continue as a going concern.
At 30 June 2021 the Group had cash and cash equivalents of US$50.0 million (2020: US$5.4 million).
On behalf of the Board
Sir Michael Rake
Chairman
14 September 2021
Unaudited consolidated income statement
For the period ended
Six months to 30 June 2021 Six months to 30 June 2020 Year to
31 December 2020
Note US$'000 US$'000 US$'000
-------------------------------- ----- --------------------------- --------------------------- -------------------
Revenue 2,3 36,139 24,896 54,001
Cost of sales 4 (41,769) (38,498) (81,401)
-------------------------------- ----- --------------------------- --------------------------- -------------------
Gross loss (5,630) (13,602) (27,400)
Selling and distribution
expenses (1,499) (934) (1,958)
Exploration expenses (70) (2,689) (2,746)
Gain/(loss) on termination of
licences and other impairment
charges and recoverables 5,6 40 (22,980) (171,129)
Gain/(loss) on sale of
non-current assets 138 - (6)
Administrative expenses (6,986) (9,096) (14,892)
Other operating expenses (2,037) (1,450) (1,527)
-------------------------------- ----- --------------------------- --------------------------- -------------------
Operating loss (16,044) (50,751) (219,658)
Finance income 22,659 1,333 6,905
Finance costs (10,476) (12,667) (22,276)
-------------------------------- ----- --------------------------- --------------------------- -------------------
Loss before taxation (3,861) (62,085) (235,029)
Taxation 8 (9,817) 6,665 38,005
-------------------------------- ----- --------------------------- --------------------------- -------------------
Loss for the period (13,678) (55,420) (197,024)
-------------------------------- ----- --------------------------- --------------------------- -------------------
Loss per ordinary share
-------------------------------- ----- --------------------------- --------------------------- -------------------
Basic and diluted loss per
share (0.00) (0.20) (0.07)
-------------------------------- ----- --------------------------- --------------------------- -------------------
The above unaudited consolidated income statement should be read in conjunction with the accompanying notes.
Unaudited consolidated statement of comprehensive income
For the period ended
Six months Six months Year
to 30 June to 30 June to 31 December
2021 2020 2020
US$'000 US$'000 US$'000
---------------------------------- ------------ ------------ ----------------------
Loss for the period (13,678) (55,420) (197,024)
Translation differences - - -
---------------------------------- ------------ ------------ ----------------------
Total comprehensive loss for the
period (13,678) (55,420) (197,024)
---------------------------------- ------------ ------------ ----------------------
The above items will not be subsequently reclassified to profit and loss. There are no impairment losses on revalued assets recognised directly in equity.
The above unaudited consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Unaudited consolidated statement of financial position
At
Note 30 June 30 June 31 December 2020
2021 2020
US$'000 US$'000 US$'000
------------------- ----- ---------------------------- ----------------------------- -----------------------------
Non-current assets
Property, plant
and equipment 5 145,369 303,125 158,357
Intangible assets
and goodwill 6 211,316 229,161 211,974
Other receivables 2,780 1,726 4,124
Deferred tax
assets 9 27,395 22,759 20,116
------------------- ----- ---------------------------- ----------------------------- -----------------------------
Total non-current
assets 386,860 556,771 394,571
------------------- ----- ---------------------------- ----------------------------- -----------------------------
Current assets
Assets held for
sale 12,361 18,400 11,965
Inventories 19,244 20,229 18,349
Trade and other
receivables 24,459 23,628 25,399
Cash and cash
equivalents 49,991 1,439 5,386
------------------- ----- ---------------------------- ----------------------------- -----------------------------
Total current
assets 106,055 63,696 61,099
------------------- ----- ---------------------------- ----------------------------- -----------------------------
Total assets 492,915 620,467 455,670
------------------- ----- ---------------------------- ----------------------------- -----------------------------
Non-current
liabilities
Trade and other
payables 290 4,372 299
Borrowings 7 3,294 154,122 6,641
Deferred tax
liabilities 9 70,608 85,307 53,682
Provisions 17,640 16,081 15,965
------------------- ----- ---------------------------- ----------------------------- -----------------------------
Total non-current
liabilities 91,832 259,882 76,587
------------------- ----- ---------------------------- ----------------------------- -----------------------------
Current
liabilities
Liabilities held
for sale 447 447 447
Trade and other
payables 21,858 28,313 25,909
Income tax
liability 959 649 920 Borrowings 7 365,261 163,577 325,592 Provisions 56 - 121 ------------------- ----- ---------------------------- ----------------------------- ----------------------------- Total current liabilities 388,581 192,986 352,989 ------------------- ----- ---------------------------- ----------------------------- ----------------------------- Total liabilities 480,413 452,868 429,576 ------------------- ----- ---------------------------- ----------------------------- ----------------------------- Net assets 12,502 167,599 26,094 ------------------- ----- ---------------------------- ----------------------------- ----------------------------- Equity Share capital and share premium 457,183 456,734 457,183 Other reserves (112,150) (112,150) (112,150) Retained deficit (332,531) (176,985) (318,939) ------------------- ----- ---------------------------- ----------------------------- ----------------------------- Total equity 12,502 167,599 26,094 ------------------- ----- ---------------------------- ----------------------------- -----------------------------
The above unaudited consolidated statement of financial position should be read in conjunction with the accompanying notes.
Unaudited consolidated statement of changes in equity
For the period ended
Called up share Share premium Treasury shares Retained Other reserves Total
Capital and capital (deficit) equity
reserves /earnings
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ------------------ ------------------ -------------------- --------------- ------------------ -----------
At 1 January
2020 364,175 93,023 (464) (121,867) (112,150) 222,717
Loss for the
period - - - (55,420) - (55,420)
---------------- ------------------ ------------------ -------------------- --------------- ------------------ -----------
Total
comprehensive
loss for the
period - - - (55,420) - (55,420)
---------------- ------------------ ------------------ -------------------- --------------- ------------------ -----------
Fair value of
share
based payments - - - 302 - 302
---------------- ------------------ ------------------ -------------------- --------------- ------------------ -----------
At 30 June 2020 364,175 93,023 (464) (176,985) (112,150) 167,599
---------------- ------------------ ------------------ -------------------- --------------- ------------------ -----------
At 1 January
2021 364,175 93,023 (15) (318,939) (112,150) 26,094
---------------- ------------------ ------------------ -------------------- --------------- ------------------ -----------
Loss for the
period - - - (13,678) - (13,678)
---------------- ------------------ ------------------ -------------------- --------------- ------------------ -----------
Total
comprehensive
loss for the
period - - - (13,678) - (13,678)
---------------- ------------------ ------------------ -------------------- --------------- ------------------ -----------
Fair value of
share
based payments - - - 86 - 86
---------------- ------------------ ------------------ -------------------- --------------- ------------------ -----------
At 30 June 2021 364,175 93,023 (15) (332,531) (112,150) 12,502
---------------- ------------------ ------------------ -------------------- --------------- ------------------ -----------
Other reserves Merger Warrant Translation Total other
reserve reserve reserve reserves
-------------------
US$'000 US$'000 US$'000 US$'000
------------------- ------------------ --------------- ------------- -------------
At 1 January 2020 (112,000) 2,105 (2,255) (112,150)
------------------- ------------------ --------------- ------------- -------------
At 30 June 2020 (112,000) 2,105 (2,255) (112,150)
------------------- ------------------ --------------- ------------- -------------
At 1 January 2021 (112,000) 2,105 (2,255) (112,150)
------------------- ------------------ --------------- ------------- -------------
At 30 June 2021 (112,000) 2,105 (2,255) (112,150)
------------------- ------------------ --------------- ------------- -------------
The above statement of consolidated changes in equity should be read in conjunction with the accompanying notes.
Unaudited consolidated statement of cash flows
For the period ended
Note Six months Six months Year
to 30 June to 30 June to 31 December 2020
2021 2020
US$'000 US$'000 US$'000
------------------------------------------ ----- -------------------- ---------------------- ---------------------
Cash flows from operating activities
Cash generated from/(used in) operations 10 28,697 (10,475) (6,318)
Income taxes paid (40) (1) (73)
------------------------------------------ ----- -------------------- ---------------------- ---------------------
Net cash inflow/(outflow) from operating
activities 28,657 (10,476) (6,391)
------------------------------------------ ----- -------------------- ---------------------- ---------------------
Cash flows from investing activities
Payments for property, plant and
equipment (2,735) (1,985) (4,099)
Payments for intangibles (7,023) (914) (998)
Payments for held for sale assets (396) (192) (371)
------------------------------------------ ----- -------------------- ---------------------- ---------------------
Net cash outflow from investing
activities (10,154) (3,091) (5,468)
------------------------------------------ ----- -------------------- ---------------------- ---------------------
Cash flows from financing activities
Proceeds from borrowings 29,590 6,280 14,260
Repayment of borrowings - (800) (801)
Interest paid (871) (427) (709)
Principal lease payments (62) (216) (5,327)
------------------------------------------ ----- -------------------- ---------------------- ---------------------
Net cash inflow from financing activities 28,657 4,837 7,423
------------------------------------------ ----- -------------------- ---------------------- ---------------------
Net increase/(decrease) in cash and cash
equivalents 47,160 (8,730) (4,436)
Cash and cash equivalents at the
beginning of the period 5,386 11,002 11,002
Effects of exchange rates on cash and
cash equivalents (2,555) (833) (1,180)
------------------------------------------ ----- -------------------- ---------------------- --------------------- Cash and cash equivalents at end of the period 49,991 1,439 5,386 ------------------------------------------ ----- -------------------- ---------------------- ---------------------
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Unaudited notes to the unaudited consolidated financial information
1. Basis of preparation
General information
The Company is a Public Limited Company incorporated in England and Wales and is domiciled in the United Kingdom. The Registered Office address is 1(st) Floor, 62 Buckingham Gate, London SW1E 6AJ. The Company is quoted on the AIM market of the London Stock Exchange and maintains a secondary listing on the Buenos Aires Stock Exchange.
The principal activities of the Company and its subsidiaries (together the "Group") are the exploration for and the development and production of oil and gas in Argentina.
Basis of preparation
The unaudited condensed consolidated interim financial information for the six-months ended 30 June 2021 contained in this interim report has been prepared in accordance with UK-adopted International Accounting Standard 34 'Interim Financial Reporting' and the AIM Rules for Companies. This unaudited condensed consolidated financial information should be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2020, which were prepared in accordance with international financial reporting standards in conformity with the requirements of the Companies Act 2006. In preparing those annual consolidated financial statements, the directors also elected to comply with international financial reporting standards issued by the International Accounting Standards Board (IFRSs as issued by the IASB).
In the year to 31 December 2021 the annual financial statements will be prepared in accordance with IFRS as adopted by the UK Endorsement Board and that this change in basis of preparation is required by UK company law for the purposes of financial reporting as a result of the UK's exit from the EU on 31 January 2020 and the cessation of the transition period on 31 December 2020.
This change does not constitute a change in accounting policy but rather a change in framework which is required to ground the use of IFRS in company law. There is no impact on recognition, measurement or disclosure between the two frameworks in the period reported.
The financial information for the period ended 30 June 2021 contained within this unaudited condensed consolidated financial interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The information for 2020 within was derived from the statutory accounts for the year ended 31 December 2020, a copy of which has been delivered to the Registrar of Companies. The auditors' report on these accounts was unqualified but did include a reference to the adequacy of the disclosures made concerning the Group's and Company's ability to continue as a going concern. The Group had not completed the renegotiation of its current debt repayments to Mercuria, who is a majority shareholder of the Group, and the funding plans for FY2021 and FY2022 had not yet been agreed. The ultimate form of the funding could be significantly different to what is currently being discussed with Mercuria. This situation could lead to a lack of future funding for capital and operating expenditures. The auditors' report did not contain a statement under sections 498 (2) or (3) of the Companies Act 2006.The annual financial statements for the year ended 31 December 2020 are available on the Company's website at www.phoenixglobalresources.com.
The Group's business activities, together with factors likely to affect its future development, performance and position are set out in the operations and financial review sections of this report.
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial review section.
Going concern
The Group generates cash from its existing conventional oil and gas production operations. However, it was formed with the stated intention of undertaking a significant exploration, evaluation and development programme focused on the Group's unconventional oil and gas assets in Argentina, including the Vaca Muerta formation, which requires significant investments. To date, the funding required to support the activities of the Group has been provided by Mercuria Energy Group.
Our major shareholder, Mercuria continues to be supportive and has provided the Company with a letter stating its intention to continue to provide financial support to the Company in order that it may continue to operate and service its liabilities as they fall due in the next 12 months and fund the planned work programs. Mercuria has also specifically agreed to not demand repayment of the existing loans (principal and interest) within the next 12 months whilst discussions with the Company to restructure these loan agreements continue.
The directors believe they will be able to agree the restructure of the existing debt with Mercuria and formalise an agreement for new funding and that the Group and Company can continue as a going concern for the foreseeable future. The application of the going concern basis of preparation of this interim condensed consolidated financial information is based on the letter that has been received from Mercuria and the ongoing discussions with the Mercuria principals. Accordingly, the directors continue to adopt the going concern basis for accounting in preparing these financial statements. However, the directors recognise that if financial support over the next 12 months from Mercuria were not to be available and the Company is unable to restructure the existing loan agreements with Mercuria or obtain funding from alternative sources, this gives rise to a material uncertainty that may cast significant doubt on the Group's and Company's ability to continue as a going concern.
The condensed consolidated financial information contained in this interim report does not include any adjustments that would be required if the Group and Company were unable to continue as a going concern.
Estimates and judgements
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing the condensed consolidated financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2020.
Principal risks and uncertainties
In preparing the condensed consolidated financial information management is required to consider the principal risks and uncertainties facing the Group. In management's opinion the principal risks and uncertainties facing the Group are unchanged since the preparation of the consolidated financial statements for the year ended 31 December 2020. Those risks and uncertainties, together with management's response to them are described in the Risk Review section of the Annual Report and Accounts 2020.
Accounting policies
The accounting policies applied in this condensed consolidated financial interim report are consistent with those applied in preparing the financial statements for the year ended 31 December 2020.
2. Segment information
The information reported to the Group's executive management team for the purposes of resource allocation and assessment of segment performance is split between those assets which are operated by the Group and those which are not. The strategy of the Group is focused on the development of its unconventional operated assets in the Vaca Muerta and other unconventional opportunities in Argentina, while optimising its operated conventional production assets. The Group also participates in joint arrangements as a non-operated partner. Operated and non-operated assets of the Group have therefore been determined to represent the reportable segments of the business. The third segment, "Corporate", primarily relates to administrative costs, financing costs and taxation incurred in running the business which are not directly attributable to one of the identified segments.
The Group's executive management primarily uses a measure of earnings before interest, tax, depreciation, loss on termination of licences and other impairment charge and loss on sale of non-current assets ('Adjusted EBITDA') to assess the performance of the operating segments. However, the executive management team also receives information about segment revenue and capital expenditure on a monthly basis.
First half 2021 Operated Non-operated Corporate Total
US$'000 US$'000 US$'000 US$'000
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Revenue 16,941 19,198 - 36,139
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Loss for the
period (12,571) 4,481 (5,588) (13,678)
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Add: Depreciation,
depletion
and amortisation 16,567 6,099 612 23,278
Less: Finance
income - - (22,659) (22,659)
Add: Finance costs 235 (163) 10,404 10,476
Add: Taxation - - 9,817 9,817
---------------------------
EBITDA 4,231 10,417 (7,414) 7,234
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Non-recurring
expenses
Less: (Gain)/loss
on termination
of licences and
other impairment
charge 11 (51) - (40)
Less: Gain on sale
of non-current
assets - - (138) (138)
Adjusted EBITDA 4,242 10,366 (7,552) 7,056
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Oil revenues 16,941 18,139 - 35,080
bbls sold 356,627 389,345 - 745,972
Realised price
(US$/bbl) 47.50 46.59 - 47.03
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Gas revenues - 1,059 - 1,059
MMcf Sold - 353.63 - 353.63
Realised price
(US$/MMcf) - 2.99 - 2.99
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Capital
expenditure
Property, plant
and equipment 827 1,553 310 2,690
Intangible
exploration and
evaluation
assets 6,983 40 - 7,023
Total capital
expenditure 7,810 1,593 310 9,713
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Total assets 312,764 52,348 127,803 492,915
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Total liabilities (7,239) (12,349) (460,825) (480,413)
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
First half 2020 Operated Non-operated Corporate Total
US$'000 US$'000 US$'000 US$'000
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Revenue 11,242 13,654 - 24,896
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Loss for the
period (35,550) (4,678) (15,192) (55,420)
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Add: Depreciation,
depletion
and amortisation 8,116 7,214 884 16,214
Less: Finance
income - - (1,333) (1,333)
Add: Finance costs 227 158 12,282 12,667
Less: Taxation - - (6,665) (6,665)
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
EBITDA (27,207) 2,694 (10,024) (34,537)
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Non-recurring
expenses
Add: Loss on
termination of
licences and
other impairment
charge 22,980 - - 22,980
Add: Loss on sale - - - -
of non-current
assets
Adjusted EBITDA (4,227) 2,694 (10,024) (11,557)
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Oil revenues 11,240 12,634 - 23,874
bbls sold 270,519 338,651 - 609,170
-------------------
Realised price
(US$/bbl) 41.55 37.31 - 39.19
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Gas revenues 2 1,020 - 1,022
MMcf Sold 0.90 479.06 - 479.96
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Realised price
(US$/MMcf) 2.22 2.13 - 2.13
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Capital
expenditure
Property, plant
and equipment 1,409 561 88 2,058
Intangible
exploration and
evaluation
assets 1,282 - - 1,282
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Total capital
expenditure 2,691 561 88 3,340
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Total assets 456,119 99,518 64,830 620,467
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
Total liabilities (6,917) (5,622) (440,329) (452,868)
------------------- --------------------------- ---------------------------- ---------------------- ---------------------
There are no intersegment revenues in either period presented. The majority of oil and gas sales are made to the Argentina state-owned oil company, YPF.
3. Total revenue
Six months Six months Year to
to 30 June to 30 June 31 December
2021 2020 2020
US$'000 US$'000 US$'000
------------------ --------------- ------------------ ---------------
Crude oil revenue 35,080 23,874 52,159
Gas revenue 1,059 1,022 1,842
------------------ --------------- ------------------ ---------------
Total revenue 36,139 24,896 54,001
------------------ --------------- ------------------ ---------------
4. Cost of sales
Six months to 30 June 2021 Six months to 30 June 2020 Year to 31 December 2020
US$'000 US$'000 US$'000
----------------------------------- -------------------------- -------------------------- ------------------------
Production costs 19,037 22,981 39,404
Depreciation of oil and gas assets 23,278 16,214 41,346
Movements in crude inventory (546) (697) 651
----------------------------------- -------------------------- -------------------------- ------------------------
Total cost of sales 41,769 38,498 81,401
----------------------------------- -------------------------- -------------------------- ------------------------
5. Property, plant and equipment
Other fixed assets Development and Assets under Total
production assets construction
Non-current assets US$'000 US$'000 US$'000 US$'000
------------------------- ------------------- ------------------------- ------------------------- ----------------
At 1 January 2021
Cost 13,091 541,489 8,966 563,546
Accumulated depreciation
and impairment (8,796) (396,393) - (405,189)
------------------------- ------------------- ------------------------- ------------------------- ----------------
Net book amount 4,295 145,096 8,966 158,357
------------------------- ------------------- ------------------------- ------------------------- ----------------
Six months to 30 June
2021
Opening net book amount 4,295 145,096 8,966 158,357
Additions 277 1,129 1,284 2,690
Disposal of assets - (51) - (51)
Impairment charge and
recoverables - 40 - 40
Transfers - 8,717 (1,076) 7,641
Exploration costs
written off - (30) - (30)
Depreciation charge (610) (22,668) - (23,278)
Closing net book amount 3,962 132,233 9,174 145,369
------------------------- ------------------- ------------------------- ------------------------- ----------------
At 30 June 2021
Cost 13,368 551,305 9,174 573,847
Accumulated depreciation
and impairment (9,406) (419,072) - (428,478)
------------------------- ------------------- ------------------------- ------------------------- ----------------
Net book amount 3,962 132,233 9,174 145,369
------------------------- ------------------- ------------------------- ------------------------- ----------------
Additions to property, plant and equipment in the period ended 30 June 2021 include US$ nil of interest capitalised in respect of qualifying assets (H1 2020: US$nil). The total amount of interest capitalised within property, plant and equipment at 30 June 2021 is US$3.1 million (2020: US$3.1 million).
Other fixed assets Development and Assets under
production assets construction Total
Non-current assets US$'000 US$'000 US$'000 US$'000
------------------------- ------------------- ------------------------ ------------------------ ------------------
At 1 January 2020
Cost 13,072 539,100 7,290 559,462
Accumulated depreciation
and impairment (7,159) (228,054) - (235,213)
------------------------- ------------------- ------------------------ ------------------------ ------------------
Net book amount 5,913 311,046 7,290 324,249
------------------------- ------------------- ------------------------ ------------------------ ------------------
Six months to 30 June
2020
Opening net book amount 5,913 311,046 7,290 324,249
Additions 56 481 1,521 2,058
Transfers - 355 (355) -
Exploration costs
written off - (116) - (116)
Depreciation charge (895) (15,319) - (16,214)
Impairment charge - (6,852) - (6,852)
------------------------- ------------------- ------------------------ ------------------------ ------------------
Closing net book amount 5,074 289,595 8,456 303,125
------------------------- ------------------- ------------------------ ------------------------ ------------------
At 30 June 2020
Cost 13,128 539,820 8,456 561,404
Accumulated depreciation
and impairment (8,054) (250,225) - (258,279)
------------------------- ------------------- ------------------------ ------------------------ ------------------
Net book amount 5,074 289,595 8,456 303,125
------------------------- ------------------- ------------------------ ------------------------ ------------------
The company defines the key indicators of impairment in relation to its oil and gas assets within its accounting policies. When a specific impairment trigger is identified during a period, the company will complete an impairment review of the associated CGU. Since the review carried out at the end of 2020, no further specific impairment triggers have been identified.
At the end of H1 2020 our assessment review identified an impairment trigger and indicated that our Chachahuen interest was potentially impaired, as a result primarily of the lower oil price environment and a provision for impairment of US$6.9 million was recognised in H1 2020.
6. Intangible assets
Exploration and evaluation assets are primarily the Group's licence interests in exploration and evaluation assets located in Argentina. The exploration and evaluation assets consist of both conventional and unconventional oil and gas properties.
Exploration
and evaluation
Goodwill assets Total
Non-current assets US$'000 US$'000 US$'000
----------------------------------------- --------------- ---------------- ---------------
At 1 January 2021
Cost 260,007 217,078 477,085
Accumulated amortisation and impairment (239,392) (25,719) (265,111)
----------------------------------------- --------------- ---------------- ---------------
Net book amount 20,615 191,359 211,974
----------------------------------------- --------------- ---------------- ---------------
Six months to 30 June 2021
Opening net book amount 20,615 191,359 211,974
Additions - 7,023 7,023
Transfer from property, plant and
equipment (7,641) (7,641)
Exploration cost written off - (40) (40)
----------------------------------------- --------------- ---------------- ---------------
Closing net book amount 20,615 190,701 211,316
----------------------------------------- --------------- ---------------- ---------------
At 30 June 2021
Cost 260,007 216,420 476,427
Accumulated amortisation and impairment
charges (239,392) (25,719) (265,111)
----------------------------------------- --------------- ---------------- ---------------
Net book amount 20,615 190,701 211,316 ----------------------------------------- --------------- ---------------- ---------------
Additions to intangible assets during the period relate primarily to the Mata Mora licence.
Goodwill Exploration and evaluation assets Total
Non-current assets US$'000 US$'000 US$'000
----------------------------------------- --------------------- ---------------------------------- ----------------
At 1 January 2020
Cost 260,007 215,759 475,766
Accumulated amortization and impairment
charges (224,169) (5,057) (229,226)
----------------------------------------- --------------------- ---------------------------------- ----------------
Net book amount 35,838 210,702 246,540
----------------------------------------- --------------------- ---------------------------------- ----------------
Six months to 30 June 2020
Opening net book amount 35,838 210,702 246,540
Additions - 1,282 1,282
Exploration cost written off - (2,533) (2,533)
Impairment charge (15,223) (905) (16,128)
----------------------------------------- --------------------- ---------------------------------- ----------------
Closing net book amount 20,615 208,546 229,161
----------------------------------------- --------------------- ---------------------------------- ----------------
At 30 June 2020
Cost 260,007 217,041 477,048
Accumulated amortisation and impairment
charges (239,392) (8,495) (247,887)
----------------------------------------- --------------------- ---------------------------------- ----------------
Net book amount 20,615 208,546 229,161
----------------------------------------- --------------------- ---------------------------------- ----------------
Additions to intangible assets during the period relate primarily to Corralera.
Impairment tests for exploration and evaluation assets
Exploration and evaluation assets are subject to impairment testing prior to reclassification as tangible fixed assets where commercially viable reserves are confirmed. Where commercially viable reserves are not encountered at the end of the exploration phase for an area the accumulated exploration costs are written off in the income statement. No significant exploration expense was recognised in the period. Exploration costs written off in H1 2020 include US$2.5 million, which related primarily to the write-off of an unsuccessful exploration well at Rio Atuel.
Impairment tests for goodwill
Goodwill is monitored by management at the level of the operating segments identified in note 2. At the end of H1 2020, our impairment assessment review resulted in an impairment charge of US$15.2 million. Since this review and the review carried out at the end of 2020, no further specific impairment triggers have been identified.
A segment level summary of the goodwill allocation is presented below.
Operated Non-operated Corporate Total
At acquisition US$'000 US$'000 US$'000 US$'000
--------------- -------- ------------ --------- --------
Corralera 16,780 - - 16,780
Mata Mora 3,835 - - 3,835
--------------- -------- ------------ --------- --------
Total 20,615 - - 20,615
--------------- -------- ------------ --------- --------
No goodwill was recognised prior to 2017. All goodwill presented relates to the allocation of technical goodwill arising as a result of accounting for deferred tax on the business combination that completed on 10 August 2017.
7. Borrowings
30 June 2021 31 December 2020
------------- ---------------------------------------------------- -------------------------------------------------
Current Non-current Total Current Non-current Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------- ---------------- ------------------ -------------- --------------- ----------------- -------------
Secured
Bank loans 5,587 3,294 8,881 2,598 6,641 9,239
------------- ---------------- ------------------ -------------- --------------- ----------------- -------------
Total secured
borrowings 5,587 3,294 8,881 2,598 6,641 9,239
------------- ---------------- ------------------ -------------- --------------- ----------------- -------------
Unsecured
Loans from
related
parties 359,655 - 359,655 322,973 - 322,973
Other loans 19 - 19 21 - 21
Total
unsecured
borrowings 359,674 - 359,674 322,994 - 322,994
------------- ---------------- ------------------ -------------- --------------- ----------------- -------------
Total
borrowings 365,261 3,294 368,555 325,592 6,641 332,233
------------- ---------------- ------------------ -------------- --------------- ----------------- -------------
Secured liabilities and assets pledged as security
Secured liabilities relate to US Dollar and Peso denominated loans at an interest rate of Libor + 700 points for Dollar loans and Badlar + 700 points for Peso loans. At 30 June 2021 the Group held US$ 2.4 million loans in Argentine Peso (2020: US$2.7 million).
Loans from related parties
The related party loan at 30 June 2021 relates to a convertible rolling credit facility ('RCF') and non-convertible bridging facility ('BF') provided to the Group by Mercuria Energy Netherlands B.V., a subsidiary of the Mercuria Energy Group Limited ('Mercuria').
As part of the business combination in 2017, Mercuria advanced a bridging and working capital facility to the Group for the amount of US$160.0 million. In February 2018, US$100.0 million of the original Mercuria facility was converted to equity of the Company at a price of GBP0.37 per share. At the same time the facility was restructured as a new convertible RCF in the amount of US$160.0 million with an additional US$100.0 million of new funds made available to the Company.
In December 2018, Mercuria advanced an additional US$25.0 million as a Facility B element to the RCF. In February 2019, a further US$50.0 million was made available under this Facility B element of the RCF. The original loan of US$160.0 million became Facility A.
In May 2019, the amended convertible RCF was further extended to add a Facility C commitment of US$40 million. Facility C was extended in November 2019 by an additional US$10.0 million and in March 2020 by an additional US$6.0.
At 30 June 2021, US$281.0 million was drawn down under the RCF with the undrawn balance of US$10 million made available through the BF, which was subsequently increased to US$42.5 million, of which US$40.8 million was drawn down at the period end.
All funds drawn down under the RCF and BF bear interest at US$ LIBOR+4%. The RCF provides for a grace period for repayments (interest and principal) from 1 January 2019 to 30 September 2021 with a maturity date of 31 December 2021 amortised in equal quarterly repayment instalments from and including 30 September 2021 until maturity. The BF, principal and interest, is repayable by 30 September 2021. At the period-end US$37.8 million of interest had been capitalised under the RCF and BF loans.
Under the RCF, Mercuria has the right to convert all or part of the outstanding principal of Facility A into additional new ordinary shares of the Company at a price of GBP0.45 per share. This conversion right can be exercised at any time from 30 June 2018 until 10 business days prior to the maturity of Facility A. A similar conversion feature exists in relation to Facility B at a price of GBP0.28 per share exercisable from 30 June 2019 until 10 business days prior to the maturity date and in relation to Facility C at a price of GBP0.23 per share exercisable from 30 June 2020 until 10 business days prior to the maturity date.
8. Income tax expense
Six months Six months Year to
to 30 June to 30 June 31 December
2021 2020 2020
Income tax expense US$'000 US$'000 US$'000
---------------------------------------- ----------------------- ------------------ -----------------
Current tax
Current tax credit/(expense) on profits
for the period (170) 111 2,469
---------------------------------------- ----------------------- ------------------ -----------------
Total current tax expense (170) 111 2,469
---------------------------------------- ----------------------- ------------------ -----------------
Deferred income tax
---------------------------------------- ----------------------- ------------------ -----------------
(Decrease)/increase in deferred tax (9,647) 6,554 35,536
---------------------------------------- ----------------------- ------------------ -----------------
Total deferred tax (expense)/credit (9,647) 6,554 35,536
---------------------------------------- ----------------------- ------------------ -----------------
Income tax (expense)/credit (9,817) 6,665 38,005
---------------------------------------- ----------------------- ------------------ -----------------
Reconciliation of income tax expense to notional tax charge calculated using corporate tax rate :
Six months Six months Year to
to 30 June to 30 June 31 December
2021 2020 2020
US$'000 US$'000 US$'000
--------------------------------------- -------------------- --------------------- ------------------
Loss from continuing operations before
income tax expense (3,861) (62,085) (235,029)
Tax at the Argentina tax rate of 30%
(2020: 30%) 1,158 18,626 70,509
Tax effect of amounts which are not
deductible (taxable) in calculating
taxable income:
Effect of currency translation on tax
values 1,228 (3,615) (6,071)
Effect of change in tax rate (12,533) (1,943) (10,649)
Disposals of assets - - (1,315)
Expenses not deductible for taxation 5,680 1,159 (1,960)
Deferred tax assets not recognised (1,383) (6,972) (6,784)
Inflation adjustment (7,373) (825) (4,883)
Other 3,406 235 (842)
--------------------------------------- -------------------- --------------------- ------------------
Total income tax (expense)/credit (9,817) 6,665 38,005
--------------------------------------- -------------------- --------------------- ------------------
The corporate income tax rate in Argentina in 2021 is 30% (2020: 30%) and applies to profits earned and losses suffered in the period to 30 June 2021.
Under the December 2017 tax reform plan implemented by the Argentina tax authorities, (the Administration Federal de Ingresos Publicos or "AFIP"), the corporate income tax rate was to be further reduced to 25% for years ending 31 December 2020 and forward. In December 2019 however, new tax reforms were implemented by the incoming government under Law 27,541. Under the new legislation, it was established that the reduced corporate rate of 25% would not be applicable until the year ending 31 December 2021 and forward.
An additional tax rate of 7% is applied to dividends when the corporate income tax rate is 30%. This additional dividend tax will be increased to 13% when the corporate tax rate is reduced to 25% in 2021.
On June 16, 2021, the Law 27,630 makes some amendments of the income tax rates applicable as from fiscal year 2021. The main relevant change is the introduction of progressive tax rates based on the accumulated net profit, according the following: i) on accumulated net profits up to AR$5 million, a rate of 25%; (ii) for accumulated net profits between AR$5 million and AR$50 million, a fixed amount of AR$1.2 million plus a rate 30% on the excess over AR$5 million; (iii) on net profits in excess of AR$50 million, a fixed amount of AR$14 million plus a rate of 35% the excess over AR$ 50 million. The amounts set forth above will be adjusted annually, with effect from 1 January 2022, by reference to the annual movement in the Consumer Price Index. Dividends will be taxed in all cases at 7%.
Deferred tax balance estimations have been calculated based on these amended tax rates.
9. Deferred tax balances
Argentina tax law does not contain the concept of tax groups and therefore deferred tax assets and liabilities cannot be offset between and among companies registered in Argentina and falling under the control of the same shareholder. Outside of Argentina, the Group does not have sufficient concentration of subsidiaries in a single tax jurisdiction to warrant seeking tax group status to allow the offset of assets and liabilities.
Deferred tax assets and liabilities are calculated at the rate of 35% (2020: 25% or 30%) taking into consideration the expected time of recovery and net tax profits.
Deferred tax assets
30 June 31 December
2021 30 June 2020
US$'000 2020 US$'000 US$'000
-------------------------- ----------------- ---------------- -----------------
Tax losses 27,005 18,837 19,757
Provisions 2,148 1,607 1,898
Other 7,734 7,995 3,900
-------------------------- ----------------- ---------------- -----------------
Total deferred tax assets 36,887 28,439 25,555
-------------------------- ----------------- ---------------- -----------------
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
The Company did not recognise deferred income tax assets of US$1,3 million (2020: US$6.8 million) in respect of tax losses amounting to US$4.6 million (2020: US$22.6 million) as there is insufficient evidence that the potential assets will be recovered.
Assessed tax losses amounting to US$27.0 million (2020: US$19.8 million) will expire between 2023 to 2026 (2020: 2023 to 2025).
Tax losses Provisions Other Total
Movements US$'000 US$'000 US$'000 US$'000
-------------------------------------- ------------------ ----------------- ------------------ ----------------
At 1 January 2020 14,468 1,723 7,063 23,254
Credited/(charged) to profit and loss 4,369 (116) 932 5,185
At 30 June 2020 18,837 1,607 7,995 28,439
-------------------------------------- ------------------ ----------------- ------------------ ----------------
Tax losses Provisions Other Total
Movements US$'000 US$'000 US$'000 US$'000
---------------------------- ----------------- ------------------- ------------------ ----------------
At 1 January 2021 19,757 1,898 3,900 25,555
Credited to profit and loss 7,248 250 3,834 11,332
At 30 June 2021 27,005 2,148 7,734 36,887
---------------------------- ----------------- ------------------- ------------------ ----------------
The timeframe for expected recovery or settlement of deferred tax assets is as follows:
30 June 30 June 31 December
2021 2020 2020
US$'000 US$'000 US$'000
------------------------------------------- ----------------- ----------------- -----------------
No more than 12 months after the reporting
period 9,882 9,602 5,798
More than 12 months after the reporting
period 27,005 18,837 19,757
------------------------------------------- ----------------- ----------------- -----------------
36,887 28,439 25,555
------------------------------------------- ----------------- ----------------- -----------------
Deferred tax liabilities
The balance comprises temporary differences attributable to:
30 June 30 June 31 December
2021 2020 2020
US$'000 US$'000 US$'000
------------------------------------- ----------------- ----------------- -----------------
Property, plant and equipment and
intangible assets (62,313) (83,201) (48,401)
Inventories (2,108) (1,551) (1,322)
Inflation adjustments (15,679) (6,235) (9,398)
Total deferred tax liabilities (80,100) (90,987) (59,121)
------------------------------------- ----------------- ----------------- -----------------
Property,
plant
and
equipment
and intangible Inflation
assets Inventories adjustments Other Total
Movements US$'000 US$'000 US$'000 US$'000 US$'000
-------------------- --------------- ----------------- ----------------- ----------------- --------------
At 1 January 2020 (84,462) (1,861) (6,033) - (92,356)
(Charged)/ credited
to
profit and loss 1,261 310 (202) 1,369
At 30 June 2020 (83,201) (1,551) (6,235) - (90,987)
-------------------- --------------- ----------------- ----------------- ----------------- --------------
Property,
plant and
equipment
and intangible
assets Inventories Inflation adjustments Other Total
Movements US$'000 US$'000 US$'000 US$'000 US$'000
--------------------------- --------------- -------------- --------------------- ------------------ -----------
At 1 January 2021 (48,401) (1,322) (9,398) - (59,121)
Charged to profit and loss (13,912) (786) (6,281) - (20,979)
At 30 June 2021 (62,313) (2,108) (15,679) - (80,100)
--------------------------- --------------- -------------- --------------------- ------------------ -----------
Argentine tax law has introduced provisions for inflationary adjustments to be made for tax purposes in the event that the increases in the 36-month cumulative CPI index for the preceding closing year exceed 100%, considering for the first three periods assessed a increase in excess of 55% in 2018, 30% in 2019 or 15% in 2020. Where an inflationary adjustment for tax is triggered, the law requires an adjustment to taxes in the period with one sixth of the calculated value booked to current income taxes in the period and the remaining five sixths included within deferred tax and recognised through current tax in equal parts in the following five years.
During the period an amount of US$1.1 million (FY20: US$ 1.5 million) has been included in current taxes, with an additional US$6.3 million (FY20: US$ 9.4 million) included within other deferred tax assets in relation to this adjustment.
The above presentation of deferred tax assets and liabilities is prepared showing the aggregate of the gross asset and liability position on a company-by-company basis.
30 June 30 June 31 December
2021 2020 2020
US$'000 US$'000 US$'000
---------------------------------- -------------- --------------- ---------------
Deferred income tax assets 36,887 28,439 25,555
Deferred tax liabilities (80,100) (90,987) (59,121)
---------------------------------- -------------- --------------- ---------------
Net deferred income tax liability (43,213) (62,548) (33,566)
---------------------------------- -------------- --------------- ---------------
Deferred tax assets and liabilities presented in the balance sheet reflect the offset of deferred tax assets and liabilities where permissible. The deferred tax assets and liabilities, after legal offset, are shown in the table below.
30 June 30 June 31 December
2021 2020 2020
US$'000 US$'000 US$'000
---------------------------------- -------------- --------------- ---------------
Deferred income tax assets 27,395 22,759 20,116
Deferred tax liabilities (70,608) (85,307) (53,682)
---------------------------------- -------------- --------------- ---------------
Net deferred income tax liability (43,213) (62,548) (33,566)
---------------------------------- -------------- --------------- ---------------
10. Cash generated from/(used in) operations
Six months Six months Year to
to 30 June to 30 June 31 December
2021 2020 2020
US$'000 US$'000 US$'000
-------------------------------------------- ------------------- ------------------ ---------------------
Loss for the period before taxation (3,861) (62,085) (235,029)
Adjusted for:
Finance costs 8,127 9,885 16,916
Finance income (16,030) (861) (5,796)
Accretion of discount on asset retirement
obligation 72 385 764
Accretion of discount on lease obligation 14 14 152
Net unrealised exchange gains 2,161 (114) 1,386
Interest received on short term investments (3,281) (236) (462)
Exploration cost written-off 70 2,649 2,746
Impairment charge (40) 22,980 171,129
Increase in provisions 1,710 - -
Loss of disposal of non-current assets - 284 -
Share based payments 86 - 401
Depreciation and amortisation 23,278 16,214 41,346
Change in operating assets and liabilities:
Increase in inventories (895) (2,027) (147)
Decrease in trade and other receivables 20,586 10,939 12,341
(Decrease) in trade and other payables (3,248) (8,569) (12,120)
(Decrease) / increase in provisions (52) 67 55
-------------------------------------------- ------------------- ------------------ ---------------------
Cash generated from/(used in) operations 28,697 (10,475) (6,318)
-------------------------------------------- ------------------- ------------------ ---------------------
11. Adjusted EBITDA
The adjusted EBITDA is calculated as follows:
Six months Six months
to 30 June to 30 June
2021 2020 Year to 31 December 2020
---------------------------------------------------------
US$'000 US$'000 US$'000
--------------------------------------------------------- ------------ ------------------ -------------------------
Loss for the period from continuing operations (13,678) (55,420) (197,024)
Add: Depreciation, depletion and amortization 23,278 16,214 41,346
Less: Finance Income (22,659) (1,333) (6,905)
Add: Finance cost 10,476 12,667 22,276
Add/(less): Taxation 9,817 (6,665) (38,005)
--------------------------------------------------------- ------------ ------------------ -------------------------
EBITDA 7,234 (34,537) (178,312)
--------------------------------------------------------- ------------ ------------------ -------------------------
Non-recurring expenses:
Add: (Gain)/loss on termination of licences and other
impairment charge (40) 22,980 171,129
Add: (Gain)/loss on sale of non-current assets (138) - 6
--------------------------------------------------------- ------------ ------------------ -------------------------
Adjusted EBITDA 7,056 (11,557) (7,177)
--------------------------------------------------------- ------------ ------------------ -------------------------
12. Events occurring after the reporting period
No events occurred after the reporting period requiring disclosure.
Translation
This document is the English original in the event of any discrepancy between the original English document and the Spanish translation, the English original shall prevail.
- ENDS -
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END
IR FLFSEATIVLIL
(END) Dow Jones Newswires
September 14, 2021 02:00 ET (06:00 GMT)
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