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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Wentworth Resources Plc | LSE:WEN | London | Ordinary Share | JE00BGT34J81 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 32.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMWEN
PRESS RELEASE 25 April 2019
WENTWORTH RESOURCES PLC
("Wentworth" or the "Company")
Final Results for the year ended 31 December 2018
Wentworth (AIM: WEN), the AIM listed independent, East Africa-focused
oil & gas company, is pleased to announce its audited results for year
ended 31 December 2018.
HIGHLIGHTS
Corporate
-- Mnazi Bay, core producing gas asset in Tanzania, produced at an average
2018 rate of 4,425 boepd net W.I.
-- 2P Reserves of 99.7 Bscf (16.6 MMboe), valued at $106 million (after-tax
NPV15)
-- Completed corporate transition to the UK - completed Oslo Børs
delisting, resulting in a simpler transactional platform, driving
efficiencies into the business model
-- UK based management team in place from June 2018 following relocation of
corporate headquarters from Canada, with Calgary office closed at the end
of 2018 and Maputo office closed in March 2019
-- Refreshed UK based Board as of November 2018
-- Strong and supportive institutional shareholder register
Financial
-- Milestone Mnazi Bay gas sales revenue of $16.2 million (2017: $13.4
million)
-- Adjusted earnings ("EBITDAX") of $8.3 million (2017: $5.3 million)
excluding non-recurring expenses of $76.6 million. Non-recurring
expenditures include: Mozambican exploration impairment provision $41.6
million; one-off re-structuring and redomicile costs of $2.3 million
comprising recruitment, severance, travel, legal and professional
charges; Tanzanian tax assessments of $1.0 million for the years 2013 to
2016, provision against Tanzania Government receivables $5.0 million; and
deferred tax write-downs of $26.7 million
-- Net loss of $75.2 million (2017: $0.7 million)
-- Net cash at year-end of $0.8 million, compared to net debt of $13.9
million at 31 December 2017
-- Cash and cash equivalents on hand at year-end of $11.9 million (2017:
$3.75 million)
-- Reduced outstanding long-term loans by $7.3 million to $8.6 million
(2017: $15.3 million)
Operational
-- Average gross daily gas production for the period increased 70% to 83.2
MMscf/d from 49.1 MMscf/d in 2017; above annual 2018 guidance of 65-75
MMscf/d
-- Exited 2018 with an average daily production rate 92.5 MMscf/d in
December, a new Company record
-- Continued operating cost reduction to $0.44 / Mscf (2017: $0.84 / Mscf),
leveraging increased production volumes
-- Total cash receipts of $36.2 million from gas sales and recovery of
long-term government receivables during 2018
-- On track to relinquish Tembo block in Northern Mozambique ahead of the
end of the current appraisal term on 15 June 2019
Eskil Jersing, CEO, commented:
"2018 saw us make material progress in simplifying our business and
portfolio. On our core Mnazi Bay asset, we achieved record average
production levels of 4,425 boepd and associated gas revenue of US$16.2mm,
ending the year with a 56.8% improvement in our EBITDAX of US$8.3mm and
cash of US$11.9mm.
We continue to work diligently with all our Tanzanian stakeholders in
unlocking the latent value of the Mnazi Bay. Wentworth will continue to
improve its fundamentals through 2019; and the Board of Wentworth
remains focused on its stated strategy of revenue stream diversification
and maximising returns for shareholders."
Enquiries: Eskil Jersing, eskil.jersing@wentplc.com
Wentworth Chief Executive Officer +44 (0)118 2065427
Katherine Roe, katherine.roe@wentplc.com
Chief Financial Officer +44 (0)118 2065428
Stifel Nicolaus Europe Limited AIM Nominated Adviser and Joint Broker +44 (0) 20 7710 7600
Callum Stewart
Ashton Clanfield
Simon Mensley
Peel Hunt LLP Joint Broker +44 (0) 20 7418 8900
Richard Crichton
James Bavister
Vigo Investor Relations Adviser +44 (0) 20 7390 0230
Patrick d'Ancona
Chris McMahon
CHAIRMAN'S STATEMENT
2018 saw the successful completion of the strategic restructuring
initiative which began in 2017. The Company has now been legally
redomiciled from the Province of Alberta in Canada to the Isle of Jersey,
incorporated as Wentworth Resources plc and is trading under the new
ticker, WEN, on the AIM Market of the London Stock Exchange (AIM). The
Company's Head Office in Calgary, Alberta has been closed and is now
headquartered in Reading, Berkshire in the UK. In addition, Wentworth
successfully delisted from the Oslo Børs with an effective date of
13 February 2019. These substantive changes to the corporate structure
have resulted in an enhanced and more efficient management platform,
allowing the Company to evaluate and ultimately transact on, growth
opportunities.
This restructuring also resulted in a complete change in the Senior
Executive Management and in the structure of the Board of Directors. In
line with UK Corporate Governance norms and in keeping with the QCA
Corporate Governance Code, which the Company has now adopted, the
make-up of the Board now constitutes an appropriate balance between
Executive Directors and Non-executive Directors. We have made changes to
the Non-executive Director composition to ensure continued effectiveness
of the Board appropriate for the Company after its move from Canadian
domicile to Jersey domicile and with a sole listing in London. The Board
appointed two new Non-executive Directors, Tim Bushell and Iain McLaren,
bringing new and relevant skills to replace Canadian resident directors,
Neil Kelly and Cameron Barton, who agreed to step down from the Board.
Neil and Cameron provided the Board with strong contributions which have
helped take the Company to where it is today: a refreshed and simpler
corporate platform, poised for growth. I wish to thank all the previous
Wentworth management and directors for the professionalism and diligence
they have demonstrated over the past year in ensuring that these changes
took place. I wish them all the good fortune that they deserve in the
future.
Wentworth today is financially sound and even healthier than this time
last year with an increasingly positive outlook: we expect 2019 to be a
year of increasing balance sheet strength. Mnazi Bay production has
grown materially in the last several years and is more predictable
thanks to growing demand in Tanzania. Tanzanian Petroleum Development
Company ("TPDC") and Tanzania Electric Supply Company ("TANESCO"), the
Company's two primary off takers of Mnazi Bay gas, continue to fulfil
their respective payment obligations whilst significantly improving on
previous payment arrears. With future demand for domestic gas in
Tanzania taking off and pipeline infrastructure in place with
substantial spare capacity available, Wentworth and its partners can
expand and meet this growing demand over the next few years.
Wentworth is now perfectly poised for growth, both by adding to its
current Tanzanian production base and by seeking accretive growth
opportunities outside of Tanzania. The Company's strong, loyal
institutional shareholder base, combined with its strengthening balance
sheet and simplified corporate structure, is creating many new
opportunities for management to pursue.
I would like to thank all shareholders for their continued support, and
I would also like to thank the entire Wentworth team for their hard work
and loyalty that they have demonstrated through the past year.
Robert McBean
Chairman
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December
2018 2017
Note $000 $000
Total revenue 5 16,224 13,440
Production and operating costs (2,290) (3,484)
Depletion 13 (7,803) (4,079)
Total cost of sales (10,093) (7,563)
Gross profit 6,131 5,877
Recurring administrative costs 6 (6,289) (6,196)
Amounts capitalised to E&E assets 664 1,582
Impairment loss on E&E assets 12 (41,598) -
Provision for Tanzania Government receivables 11 (4,959) -
Management restructuring costs 7 (940) -
Redomicile costs (1,393) -
Share-based payment charges 21 (98) (215)
Depreciation and depletion 13 (12) (12)
Loss on sale of PPE (3) -
Tanzanian withholding tax costs 24 (993) -
Total costs (55,621) (4,841)
(Loss)/profit from operations (49,490) 1,036
Finance income 8 2,659 2,386
Finance costs 8 (1,616) (3,737)
Loss before tax (48,447) (315)
Current tax expense 24 (63) -
Deferred tax expense 24 (26,714) (394)
(26,777) (394)
Net loss and comprehensive loss (75,224) (709)
Net loss per ordinary share
Basic and diluted (US$/share) 23 (0.40) -
(1) Adjusted earnings before interest, taxation, depreciation, depletion
and amortisation, impairment, management restructuring costs, redomicile
costs, share-based payments provisions and pre-licence expenditures
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 31 December
2018 2017
Note $000 $000
ASSETS
Current assets
Cash and cash equivalents 11,903 3,750
Trade and other receivables 9 7,553 13,513
TPDC receivables 10 5,238 15,550
24,694 32,813
Non-current assets
Tanzania Government receivables 11 - 4,959
Exploration and evaluation assets 12 8,129 47,921
Property, plant and equipment 13 83,777 90,336
Deferred tax asset 24 4,036 30,751
95,942 173,967
Total assets 120,636 206,780
LIABILITIES
Current liabilities
Trade and other payables 15 3,207 5,726
Overdraft credit facility 16 2,500 2,500
Current portion of long-term loans 17 6,946 7,260
Contingent PTTEP liability 18 848 2,189
13,501 17,675
Non-current liabilities
Long-term loans 17 1,688 8,636
Decommissioning provision 19 969 865
2,657 9,501
Equity
Share capital 22 416,426 416,426
Equity reserve 26,588 26,490
Accumulated deficit (338,536) (263,312)
104,478 179,604
Total liabilities and equity 120,636 206,780
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Accumulated Total
Note Number of shares Share capital Equity reserve deficit equity
$000 $000 $000 $000
Balance at 31 December 2016 169,534,969 411,493 26,275 (261,857) 175,911
Net loss and comprehensive loss - - - (709) (709)
Share based compensation 21 - - 215 - 215
Issued of share capital 16,953,496 5,527 - - 5,527
Share issue costs, net of tax - (594) - - (594)
Balance at 31 December 2017 as
previously reported 186,488,465 416,426 26,490 (262,566) 180,350
IFRS 9 transitional adjustment 2 - - - (746) (746)
Restated balance at 31 December
2017 186,488,465 416,426 26,490 (263,312) 179,604
Net loss and comprehensive loss - - - (75,224) (75,224)
Share based compensation 21 - - 98 - 98
Balance at 31 December 2018 186,488,465 416,426 26,588 (338,536) 104,478
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 December
2018 2017
Note $000 $000
Operating activities
Net loss for the year (75,224) (709)
Adjustments for:
Depreciation and depletion 13 7,815 4,091
Impairment loss on E&E assets 12 41,598 -
Provision for Tanzania Government
receivables 11 4,959 -
Finance (income)/costs, net (1,043) 1,351
Deferred tax expense 24 26,714 394
Share based compensation 21 98 215
Loss on sale of PPE 3 -
4,920 5,342
Change in non-cash working capital 27 1,576 (5,363)
Net cash generated from/(utilized in)
operating activities 6,496 (21)
Investing activities
Additions to exploration and evaluation
assets 27 (1,806) (2,383)
Additions to property, plant and
equipment 27 (1,968) (1,728)
Reduction of long-term receivable 27 15,377 7,030
Proceeds from sale of office assets 13 3 -
Net cash from investing activities 11,606 2,919
Financing activities
Issue of share capital, net of issue
costs - 4,933
Principal term-loan repayments 17 (6,996) (5,346)
Debt restructuring fee 17 - (83)
Drawn on overdraft credit facility - 2,500
Interest paid 16/17 (1,612) (1,809)
Payment of contingent PTTEP liability 18 (1,341) (322)
Net cash used in financing activities (9,949) (127)
Net change in cash and cash equivalents 8,153 2,771
Cash and cash equivalents, beginning of
the period 3,750 979
Cash and cash equivalents, end of the
period 11,903 3,750
1. Incorporation and basis of preparation
Wentworth Resources Plc ("Wentworth" or the "Company") is an East
Africa-focused upstream oil and natural gas company. These audited
consolidated financial statements include the accounts of the Company
and its subsidiaries (collectively referred to as "Wentworth Group of
Companies" or the "Group"). The Company is actively involved in oil and
gas exploration, development and production operations. Wentworth is
incorporated in Jersey, having completed its re-domicile from Canada
effective 26 October 2018. Shares of the Company as at 31 December 2018
were widely held and listed on the AIM part of the London Stock Exchange
(ticker: WEN). Full details of both the re-domicile and the Oslo
Børs de-listing which became effective on 13 February 2019 are
available in the Directors' Report.
The Company's principal place of business is located at Thames Tower,
2(nd) Floor, Station Road, Reading RG1 1LX after being relocated from
3210, 715 - 5 Avenue, SW Calgary, Canada.
The Company maintain offices in Dar es Salaam, Tanzania and Reading, UK.
Basis of presentation and statement of compliance
These consolidated financial statements have been prepared on a
historical cost basis and have been prepared using the accrual basis of
accounting. The consolidated financial statements are prepared in
accordance with International Financial Reporting Standard ("IFRS") as
issued by the International Accounting Standards Board ("IASB").
The consolidated financial statements were approved by the Board of
Directors on 24 April 2019.
Functional and presentation currency
These consolidated financial statements are presented in US dollars
which is the functional currency the majority of its subsidiaries.
Basis of consolidation
These consolidated financial statements include the accounts of the
Company and its subsidiaries. Subsidiaries are entities that the
Company controls. An investor controls an investee when it is exposed,
or has rights, to variable returns from its involvement with the
investee and can affect those returns through its authority over the
investee. The existence and effect of potential voting rights are
considered when assessing whether a company controls another entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Company. They are deconsolidated from the date that
control ceases. The following legal entities are within the Wentworth
Group of Companies:
Legal entity Registered Holdings at December Functional currency
31, 2018
Wentworth Resources Jersey Ultimate Parent US dollar
plc
Wentworth Resources United Kingdom 100% GBP
(UK) Limited
Wentworth Holdings Jersey 100% US dollar
(Jersey) Limited
Wentworth Tanzania Jersey 100% US dollar
(Jersey) Limited
Wentworth Gas Jersey 100% US dollar
(Jersey) Limited
Wentworth Gas Tanzania 100% US dollar
Limited
Cyprus Mnazi Bay Cyprus 39.925% US dollar
Limited
Wentworth Mauritius 100% US dollar
Mozambique
(Mauritius)
Limited
Wentworth Mozambique 100% US dollar
Mocambique
Petroleos,
Limitada
All inter-company transactions, balances and unrealized gains on
transactions between the parent and subsidiary companies are eliminated
on consolidation.
Future accounting pronouncements
The following amended standards and interpretation are effective for
financial years commencing on or after 1 January 2019. The Group does
not intend to adopt the standards below before their mandatory
application date.
New and amended standards
Standard Description Effective date EU Endorsement
Status
IFRS 16 Leases 1 January 2019 Endorsed
IFRS 13 (amendments) Business 1 January 2019 Endorsed
combinations
IAS 12 (amendments) Income taxes 1 January 2019 Endorsed
IFRIC 23 Uncertainties over 1 January 2019 Endorsed
income tax
treatments
The Company intends to adopt above listed standards and interpretation
in its financial statements for the annual period beginning on 1 January
2019. The Company does not expect the interpretation to have a material
impact on the financial statements.
2. Summary of accounting policies
The principal accounting policies applied in the preparation of these
Company and Group consolidate financial statements are set below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
Joint arrangements
The analysis of joint arrangements requires management to analyse
numerous agreements and the requirements of IFRS 10 and IFRS 11. Several
judgements and estimates are made by management including whether joint
control exists and the extent of exposure to the underlying assets and
liabilities of the joint arrangement. The Company has a joint
arrangement through its 39.925% ownership in Cyprus Mnazi Bay Limited,
which is classified as a joint operation.
Financial instruments
Financial assets and liabilities are recognized when the Company becomes
a party to the contractual provisions of the instrument. Financial
assets are derecognized when the rights to receive cash flows from the
assets have expired or have been transferred to an independent third
party and the Company has transferred substantially all risks and
rewards of ownership. Financial assets and liabilities are offset and
the net amount is reported on the consolidated statement of financial
position when there is a legally enforceable right to offset the
recognized amounts and there is an intent to settle on a net basis or
realize the asset and settle the liability simultaneously.
All financial instruments are initially recognized at fair value on the
consolidated statement of financial position depending on the purpose
for which the instruments were acquired. The Company has classified
each financial instrument into one of the following categories: i) fair
value through profit and loss, ii) loans and receivables, and iii) other
financial liabilities.
Subsequent measurement of financial instruments is based on their
classification.
(i) Financial assets and liabilities at fair value through profit and
loss
A financial asset or liability classified in this category is recognized
at each period at fair value with gains and losses from revaluation
being recognized in profit or loss. Additionally, a financial asset or
liability is classified in this category if acquired principally for the
purpose of selling or repurchasing in the short-term. Derivatives are
included in this category unless they are designated as hedges.
(ii) Loans and receivables
Loans and receivables are initially measured at fair value plus directly
attributable transaction costs and are subsequently recorded at
amortized cost using the effective interest method.
Long-term receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Long-term
receivables are initially recognized at fair value based on the
discounted cash flows. The discount rate is based on the credit quality
and term of the financial instrument. The financial instrument is
subsequently valued at amortized costs by accreting the instrument over
the expected life of the assets. The accretion associated with
instruments valued at amortized cost is reported in profit/(loss) each
reporting period. The fair value of the Company's trade and other
receivables approximates their carrying values due to the short-term
nature of these instruments.
(iii) Other financial liabilities
Other financial liabilities are initially measured at fair value less
directly attributable transaction costs and are subsequently recorded at
amortized cost using the effective interest method.
Long-term loans and other long-term liabilities are non-derivative
financial assets with either fixed or determinable payments or no
payment terms and which are not quoted in an active market.
Long-term loans are initially recognized at fair value based on the
amounts received.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, term deposits and
short-term highly liquid investments with the original term to maturity
of three months or less, which are convertible to known amounts of cash
and which, in the opinion of management, are subject to an insignificant
risk of changes in value.
Long-term receivables
Long-term receivables plus applicable accrued interest are initially
recognized at their fair value based on the discounted cash flows. The
discounted cash flows are reviewed at least every year to adjust for
variations in the estimated future cash flows with the change in
estimate reported in profit or loss. The discount rate is based on the
credit quality and term of the financial instrument. The financial
instrument is subsequently valued at amortized costs by accreting the
instrument over the life of the asset. The accretion is reported in
profit or loss.
E&E exploration assets
E&E costs, including costs of licence acquisition, technical services
and studies, exploratory drilling, whether successful or unsuccessful,
and testing and directly attributable overhead, are capitalized as E&E
assets according to the nature of the assets acquired. These costs are
accumulated in cost centres by well, field or exploration area pending
determination of technical feasibility and commercial viability.
E&E assets are assessed for impairment if (i) sufficient data exists to
determine technical feasibility and commercial viability, and (ii) facts
and circumstances suggest that the carrying amount exceeds the
recoverable amount.
The technical feasibility and commercial viability of extracting a
resource is generally considered to be determinable when proven and/or
probable reserves are determined to exist. A review of each exploration
licence or field is carried out, at least annually, to ascertain whether
it is technically feasible and commercially viable. Upon determination
of technical feasibility and commercial viability, intangible E&E assets
attributable to those reserves are first tested for impairment with the
unimpaired amounts reclassified from E&E assets to a separate category
within tangible assets within PP&E referred to as oil and gas interests.
Costs incurred prior to the legal awarding of petroleum and natural gas
licences, concessions and other exploration rights are recognized in
profit or loss as incurred.
PP&E - oil and natural gas properties
Items of PP&E, which include oil and gas development and production
assets, are measured at cost less accumulated depletion and depreciation
and accumulated impairment losses. PP&E assets include costs incurred in
developing commercial reserves and bringing them into production, such
as drilling of development wells, tangible costs of facilities and
infrastructure construction, together with the E&E expenditures incurred
in finding the commercial reserves that have been reclassified from E&E
assets as outlined above, the projected cost of retiring the assets and
any directly attributable general and administrative expenses.
Expenditures on developed oil and natural gas properties are capitalized
to PP&E when it is probable that a future economic benefit will flow to
the Company as a result of the expenditure and the cost can be reliably
measured. The initial cost of an asset is comprised of its purchase
price or construction cost, any costs directly attributable to bringing
the asset into operation, the initial estimate of any decommissioning
obligations associated with the asset and borrowing costs on qualifying
assets. When significant parts of an asset with PP&E, including oil and
gas interests, have different useful lives, they are accounted for as
separate items (major components). Costs incurred subsequent to the
determination of technical feasibility and commercial viability and the
costs of replacing parts of PP&E are recognized as capitalized oil and gas interests only when they increase the future economic benefits embodied in the specific asset to which they relate. Subsequent changes in estimated decommissioning obligation due to changes in timing, amounts and discount rates are included in the cost of the asset. Such capitalized oil and gas interests generally represent costs incurred in developing proved and/or probable reserves and bringing in or enhancing production from such reserves and are accumulated on a field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognized. The costs of the day-to-day operating of PP&E are recognized in profit or loss as incurred. Depletion The net carrying amount of PP&E is depleted on a field by field unit of production method by reference to the ratio of production in the year to the related proven and probable reserves. If the useful life of the asset is less than the reserve life, the asset is depreciated over its estimated useful life using the straight-line method. Future development costs are estimated considering the level of development required to produce the proven and probable reserves. These estimates are reviewed by third party independent reserves engineers. Changes in factors such as estimates of reserves that affect unit-of-production calculations are dealt with on a prospective basis. Capital costs for assets under construction included in development and production assets are excluded from depletion until the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Disposals Oil and natural gas properties are derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss on derecognition of the asset, including farm out transactions or asset sales or asset swaps, is calculated as the difference between the proceeds on disposal, if any, and the carrying value of the asset, is recognized in profit or loss in the period of derecognition. PP&E - office and other equipment Office and other equipment are carried at cost less accumulated depreciation and impairment losses. Depreciation of the cost of these assets less residual value is charged to profit and loss on a straight-line basis over their estimated useful economic lives of between three and five years. Decommissioning obligation Decommissioning obligations are recognized for legal obligations related to the decommissioning of long-lived tangible assets that arise from the acquisition, construction, development or normal operation of such assets. A liability for decommissioning is recognized in the period in which it is incurred and when a reasonable estimate of the liability can be made with the corresponding decommissioning provision recognized by increasing the carrying amount of the related long-lived asset. The recognized decommissioning provision is subsequently allocated in a rational and systematic method over the underlying asset's useful life. The initial amount of the liability is accreted by charges to the profit or loss to its estimated future value. Impairment Non-financial assets The carrying amounts of the Company's non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount exceeds the recoverable amount and when they are reclassified to PP&E. For the purpose of impairment testing, E&E assets are grouped by concession or field with other E&E and PP&E belonging to the same CGU. The impairment loss will be calculated as the excess of the carrying value over recoverable amount of the E&E impairment grouping and any resulting impairment loss is recognized in profit or loss. The recoverable amount of a CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In assessing fair value less costs to sell, the estimated future cash flows are discounted to their present value using an after-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the asset. Fair value less costs to sell is generally computed by reference to the present value of the future cash flows expected to be derived from production of proved and probable reserves. PP&E will be tested for impairment whenever events and circumstances arising during the development and production phase indicate that the carrying amount of a PP&E may exceed its recoverable amount. For the purpose of impairment testing, PP&E will be grouped into the smallest group of assets that generate cash inflows that are largely independent of cash inflows from other assets or groups of assets; the CGU. The aggregate carrying value will be compared against the expected recoverable amount of the CGU. The recoverable amount of a CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In assessing fair value less costs to sell, the estimated future cash flows are discounted to their present value using an after-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the asset. Fair value less costs to sell is generally computed by reference to the present value of the future cash flows expected to be derived from production of proved and probable reserves. CGU's are generally defined by field except where a number of field interests can be grouped because the cash inflows generated by the fields are interdependent. Impairment losses recognized in respect of CGU's are allocated first to reduce the carrying amount of goodwill, if any, allocated to the units and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro-rata basis. Impairment losses recognized in prior years are assessed at each reporting date for any indication that the loss has decreased or no longer exists. Impairments are reversed when events or circumstances give rise to changes in the estimate of the recoverable amount since the period the impairment was recorded. An impairment loss is reversed only to the extent that the CGU's carrying amount does not exceed the carrying amount that would have been determined, net of depletion, if no impairment loss had been recognized. An impairment loss in respect of goodwill is not reversed. Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognized in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost the reversal is recognized in profit or loss. Share capital The proceeds from the exercise of share options and the issuance of shares from treasury are recorded as share capital in the amount for which the option, warrant, or treasury share enables the holder to purchase a share in the Company. Share capital issued for non-monetary consideration is recorded at an amount based on fair market value of the shares issued. Share issuance costs Commissions paid to underwriters, and other related share issue costs, such as legal, auditing and advisory, on the issue of the Company's shares are charged directly to share capital, net of tax. Share based payments The fair value of the options at the date of the grant is determined using the Black-Scholes option pricing model and share based compensation is accrued and charged to profit or loss, with an offsetting credit to equity reserve over the vesting periods. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest. Capitalization of interest The Company capitalizes interest expense incurred during the construction phase of the projects, except E&E assets which were funded by the related financing. Revenue recognition Natural gas revenues are recognized upon the transfer of control over its gas to its customers, TPDC and TANESCO, which is when delivery is made to them through the offtake network. Investment income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying value. Income taxes
Tax expense comprises current and deferred tax. Tax is recognized in the
profit or loss except to the extent it relates to items recognized in
other comprehensive income ("OCI") or directly in equity.
Current income tax
Current tax expense is based on the results for the period as adjusted
for items that are not taxable or not deductible. Current tax is
calculated using tax rates and laws that were enacted or substantively
enacted at the end of the reporting period. Management periodically
evaluates positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation. Provisions
are established where appropriate on the basis of amounts expected to be
paid to the tax authorities.
Deferred income tax
Deferred taxes are the taxes expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in
the consolidated statement of financial position and their corresponding
tax basis. Deferred tax liabilities are generally recognized for all
taxable temporary differences. Deferred tax assets are recognized to the
extent that it is probable that future taxable profits are expected to
be available against which deductible temporary differences to the tax
basis can be utilized. Deferred income tax assets and liabilities are
not recognized if the temporary difference arises from the initial
recognition of goodwill, if any, or from the initial recognition (other
than in a business combination) of other assets in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognized for taxable temporary
differences arising on investments in subsidiaries and joint
arrangements except where the reversal of the temporary difference can
be controlled, and it is probable that the difference will not reverse
in the foreseeable future.
Deferred tax assets are reviewed at each reporting period and reduced to
the extent that it is no longer probable that sufficient future taxable
profits are expected to be available to allow all or part of the asset
to be recovered. Deferred tax assets are recognized for taxable
temporary differences arising on investments in subsidiaries to the
extent that it is probable that the temporary difference will reverse in
the foreseeable future and future taxable profits are expected to be
available against which the temporary difference can be utilized.
Foreign currency translation
Items included in the financial statements of the Company and its
subsidiaries are measured using the currency of the primary economic
environment in which the legal entity operates (the "functional
currency"). Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at the dates of
the transaction. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation of monetary
assets and liabilities not denominated in the functional currency of an
entity are recognized in profit or loss.
The functional currency of all Wentworth subsidiaries is US dollars
except for Wentworth Resources (UK) Limited which is Pound Sterling.
The assets and liabilities of this Company are translated into US
dollars at the period-end exchange rate. The income and expenses of the
Company are translated to US dollars at the average exchange rate for
the period.
Translation gains and losses are included in other comprehensive income;
however, this subsidiary has limited operations so there is no
significant amount of foreign exchange gains and losses to include in
other comprehensive income. All other foreign exchange gains and losses
are recognized in profit or loss.
Changes in accounting policies
On 1 January 2018, the Company adopted new standards with respect to
IFRS 9 - Financial Instruments and IFRS - 15 Revenue from Contracts with
Customers.
IFRS 9 - Effective 1 January 2018, the Company has adopted IFRS 9
"Financial Instruments" ("IFRS 9"). IFRS 9 sets out requirements for
recognizing and measuring financial assets, financial liabilities and
some contracts to buy or sell non-financial items. This standard
replaces IAS 39 Financial Instruments: Recognition and Measurement ("IAS
39").
On 1 January 2018, the Company:
-- Identified the business model used to manage its financial assets and
classified its financial instruments into the appropriate IFRS 9
category;
-- Applied the 'expected credit loss' ("ECL") model to financial assets
classified as measured at amortized cost.
The following table shows the original measurement categories under IAS
39 and the new measurement categories under IFRS 9 as at 1 January 2018
for each class of the Company's financial assets and financial
liabilities.
Measurement category
Financial Instrument IAS 39 IFRS 9
Cash and cash equivalents Loans and receivables Amortized cost
Trade and other receivables Loans and receivables Amortized cost
Trade and other payables Loans and receivables Amortized cost
Long-term loans(1) Loans and receivables Amortized cost
1. Carrying value was adjusted by $0.75 million on adoption of IFRS 9.
The classification and measurement of financial instruments under IFRS 9
did not result in any adjustments to the Company's opening retained
earnings as at 1 January 2018 except for an adjustment for debt
modifications as the Company renegotiated the repayment terms on its
long-term loan, effective 31 January 2017. Under IFRS 9, the amortized
cost of the financial liability must be recalculated as the present
value of the estimated future contractual cash flows that are discounted
at the original effective interest rate. The difference in the carrying
amount and the calculated amount is recognized in profit and loss
The Company calculated a modification loss of $0.75 million on the $20
million TIB Loan. The impact on the condensed consolidated interim
statement of financial position is shown below:
31 December 1 January
2017 Adjustments 2018
As at: $000 $000 $000
Long-term loans 15,150 746 15,896
Accumulated deficit (262,566) (746) (263,312)
The new standard also introduces ECL model for evaluating impairment of
financial assets. On 1 January 2018, the Company applied the ECL model
to financial assets classified as measured at amortized cost. The new
model will result in more timely recognition of expected credit losses.
The ECL model applies to the Company's receivables. As at 31 December
2018, the Company's trade accounts receivable included gas sales to TPDC
and TANESCO, and 51 percent were outstanding for less than 90 days. The
average ECL on the Company's trade accounts receivable was nil percent.
To effect the changes under IFRS 9, the following revised policy has
been applied to current period balances effective 1 January 2018. The
Company applied IFRS 9 retrospectively but elected not to restate
comparative information. As such the comparative information provided
continues to be accounted for in accordance with the Company's previous
accounting policy as disclosed in the annual consolidated financial
statements for the year ended 31 December 2017.
IFRS 15 - The Company adopted IFRS 15, Revenue from Contracts ("IFRS
15") on 1 January 2018 using the modified retrospective approach. The
Company has completed the process of reviewing sales contracts with its
two customers (TPDC and TANESCO) using the IFRS 15 principles based five
step model and concluded that there is no impact on opening retained
earnings as of 1 January 2018 and on revenue recognition for 2018.
Earnings or loss per share ("EPS")
Basic earnings or loss per share is calculated by dividing profit or
loss attributable to owners of the Company (the numerator) by the
weighted average number of ordinary shares outstanding (the denominator)
during the period. The denominator is calculated by adjusting the shares
outstanding at the beginning of the period by the number of shares
bought back or issued during the period, multiplied by a time-weighting
factor.
Diluted EPS is calculated by adjusting the earnings and number of shares
for the effects of all dilutive potential ordinary shares deemed to have
been converted at the beginning of the period or if later, the date of
issuance. The effects of anti-dilutive potential ordinary shares are
ignored in calculating diluted EPS.
3. Critical accounting judgements and key sources of estimation
uncertainty
In applying the Company's accounting policies, the preparation of
consolidated financial statements requires management to make estimates,
judgments and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as at
the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
amounts may differ materially from these estimates due to changes in
general economic conditions, changes in laws and regulations, changes in
future operating plans and the inherent imprecision associated with
estimates. Significant estimates and judgments used in the preparation
of these consolidated financial statements include the assessment of
impairment triggers related to E&E and PP&E, estimation of
decommissioning obligations, collectability of trade and other
receivables and of long-term receivables, and recognition of a deferred
tax asset.
Accounting treatment of CMBL
The Group holds a 31.94% participation interest in the Mnazi Bay
Concession through two subsidiaries. Wentworth Gas Limited ("WGL"),
which is a wholly owned subsidiary, owns a 25.40% participation interest
and Cyprus Mnazi Bay Limited ("CMBL") owns a 16.38% participation
interest of which the Group's proportionate share is 6.54% (i.e.
Wentworth's interest of 39.925% interest in CMBL multiplied by 16.38%
participation interest). CMBL is considered a jointly controlled entity
and accounted for as a joint operation rather than a joint venture. The
Group proportionately consolidates CMBL as related contractual
agreements establish that the parties to the joint arrangement have
rights to the assets and obligations for the liabilities of ownership in
proportion to their interest in the arrangement.
Recoverable value of Tembo E&E and Mnazi Bay PP&E costs
E&E are inherently judgemental to value. The amounts for E&E represent
active exploration projects and investments. These amounts are expensed
to profit or loss as exploration costs unless the determination process
is not completed and there are no indications of impairment at the
reporting date or commercial reserves are established. The outcome of
ongoing exploration and evaluation activities and whether the carrying
value of E&E will ultimately be recovered is inherently uncertain and
requires significant judgement and estimates.
Management performs impairment tests on the Company's PP&E when
indicators of impairment are present. The assessment of impairment
indicators is subjective and considers the various internal and external
factors such as the financial performance of individual CGUs, market
capitalization and industry trends. In addition, the impairment
assessment is impacted by how management determines the composition of
CGUs.
Reserve estimates
Oil and natural gas reserves, prepared by an external independent
reserve evaluator as at December 31, 2018, are used in the calculation
of depletion, impairment and impairment reversal determinations and
recognition of deferred tax asset. Reserve estimates are based on
engineering data, estimated future prices and costs, expected future
rates of production and the timing of future capital expenditures; all
of which are subject to many uncertainties and estimations. The Company
expects that, over time, its reserve estimates will be revised upward or
downward based on updated information such as the results of future
drilling, oil and gas production levels and reservoir performance and
may also be affected by changes in commodity prices.
Supply of Gas from Mnazi Bay
The gas sales price and cost base of production operations are largely
fixed in nature. The associated sensitivities ensure that field
production and supply volumes are critical to the commerciality of the
project. Whilst the benefits of increased production volumes are clear,
the opposite is equally true during operational downtime, prolonged or
permanent gas supply outages which may in turn impact upon the
commerciality of the project. Mnazi Bay currently has 5 producing wells
and is committed to supplying a minimum quota of gas to TPDC and TANESCO
of 82.5 MMscf/d, the daily committed quotient ("DCQ"). Any significant
adverse change to daily production operations may trigger an impairment
review under IFRS 6 and IAS 36 and a subsequent write down in the book
value of the Mnazi Bay asset which currently totals $84.7 million.
Demand for gas from Mnazi Bay
Gas sales in Tanzania are not only constrained by the ability of the
joint-venture to supply gas to TPDC and TANESCO but are also contingent
upon their ability to offtake gas from the Mnazi Bay field. There are
other domestic gas producers in Tanzania that sell to both TPDC and
TANESCO in addition to there being alterative sources of supply such as
year-round solar and seasonal hydro-electric generation. The continued
commerciality of the project is contingent upon the continued demand for
Mnazi Bay gas.
Foreign currency exposure
Foreign exchange rate risk is the risk that the Company suffers
financial loss as a result of changes in the value of an asset or
liability or in the value of future cash flows due to movements in
foreign currency exchange rates. Wentworth operates internationally and
is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the Tanzanian Shilling and Pound
Sterling against the presentation currency of US dollars. All group
revenue is generated from gas sales in Tanzania in which the Production
Sharing Agreement is currently in the Gas Testing and Commissioning
phase. Upon declaration of COD, which is contingent upon the
establishment of certain administrative and financial milestones by the
Government of Tanzania, the Production Sharing Agreement will enter the
Commercial Development phase under which both TPDC and TANESCO may elect
to pay the operator in either US Dollars or Tanzanian Shillings for the
gas that is produced and sold. Additionally, while some costs are
denominated in Tanzanian Shillings most of the operating expenditures
are denominated in US Dollars which would lead to an increased currency
exposure. The Company does not currently undertake any currency hedges.
Payment for Mnazi Gas
Payment terms for Mnazi Bay gas have improved during 2018, however there
remains an arrears of approximately three months gas sales for Mnazi Bay
gas. The continued receipt and settlement of gas sales invoices to TPDC
and TANESCO is critical to the cash-flows of the group to enable it to
meet its liabilities as they fall due.
Abandonment provision
Decommissioning and Abandonment obligations have been estimated using
technology at current prices inflated and discounted using discount
rates that reflect current market assessments of the time value of money
and the risks specific to each liability. These assessments are
subjective by nature and may be significantly more or less than
management's current discounted cost estimations.
Taxes
The Group operates in countries where the legal and tax systems are less
developed, which increases the requirement for management to make
estimates and assumptions as to whether certain payments will be
required related to matters such as income taxes, value added taxes, and
other indirect taxes. A provision is recognized in the financial
statements for such matters if it is considered probable that a future
outflow of cash resources will be required. The provision, if any, is
subject to management estimates and judgments with respect to the
outcome of the event, the costs to defend, the quantum of the exposure
and past practice in the country.
The commencement of commercial production and gas sales under the Gas
Sales Agreement, currently in the Gas Testing and Commissioning phase,
allowed for the recognition of a deferred tax asset within the financial
statements. The amount that the company recognizes is subject to the
following judgements and uncertainties:
-- The timing and discounting of the utilization of tax losses from the
current tax pools which are based on management assessments and forecasts
of future performance;
-- The effective tax rate at which the losses will be utilized at throughout
the Group which is currently the prevailing tax rate of the ultimate
parent company;
-- The status of any current tax assessments and disputes and their impact
on the deferred tax pool on a probabilistic basis;
-- Any material changes in legislation that may impact upon the fiscal
regime on which the deferred tax asset is computed.
Recoverability of trade and other receivables
Recoverability of the long-term receivable from TPDC and the Tanzanian
Government receivable involves estimating the volume and timing of
future gas production from the Mnazi Bay Concession and estimating a
discount rate in addition to assessing credit risk. Timing of collection
of the long-term receivables is impacted by the rate of production and
the timing of the increase of production volumes. The assessment of
collectability of amounts owed fromTANESCO and TPDC for past gas sales
is subject to significant estimates. Payment cycles from TANESCO and
TPDC vary and are not generally consistent with traditional industry
terms of payment of between 30 and 90 days. Management is required to
estimate the bad debt provision for this balance based on current and
historical payment patterns. Prolonged periods of non-payment will be
provided against in the balance sheet with a corresponding expense being
recognised in the income statement.
Umoja receivable
The Company has an agreement with TANESCO, TPDC and the Ministry of
Energy and Mines ("MEM") in Tanzania to be reimbursed, at cost, for past
project development costs associated with transmission and distribution
("T&D") expenditures. The undiscounted face value of the receivable is
$6.51 million, however there remain ongoing discussions and
uncertainties with respect to final audited amount to be recovered and
the timing of the ultimate recovery of this debt and it is for this
reason that the Directors have taken the decision to provide in-full
against the recovery of this debt in the 2018 accounts without prejudice
to the ongoing commercial discussions with the Government.
Dissenting shareholders equity buyback
On 26 October 2018 the Company completed its redomicile from Canada to
Jersey, full details of which are disclosed within the Directors'
Report. As part of the redomicile process and under Canadian law,
certain shareholders exercised their rights to dissent to the
Continuance thereby exercising their rights to sell their shares back to
the company at the fair market value on 26 October 2018. The Company has
received notifications over approximately 2.3 million shares and
estimates the contingent liability to be GBP0.7 million. Some
uncertainty remains over the final share price valuation and ultimate
timing of the share buy-back, albeit this is not considered to be
material to these financial statements.
4. Segment information
The Company conducts its business through two major operating business
segments. Gas operations include the exploration, development, and
production of natural gas and other hydrocarbons. These activities are
carried out in two operating segments - Tanzania ("Mnazi Bay
Concession") and Mozambique ("Rovuma Onshore Block"). The Company is on
track to relinquish the Tembo block in Northern Mozambique ahead of the
end of the current appraisal term on 15 June 2019. The Corporate segment
activities include investment income, interest expense, financing
related expenses, share based compensation relating to corporate
activities and general corporate expenditures. Inter-segment transfers
of products, which are accounted for at market value, are eliminated on
consolidation.
Net income/(loss) for the year ended 31 December 2018
Tanzania Operations Mozambique Operations Corporate Consolidated
$000 $000 $000 $000
Total revenue 16,224 - - 16,224
Production and operating costs (2,290) - - (2,290)
Depletion (7,803) - - (7,803)
Total cost of sales (10,093) - - (10,093)
Gross profit 6,131 - - 6,131
Recurring administrative costs (3,151) (19) (3,119) (6,289)
Amounts capitalized as E&E assets 449 - 215 664
Impairment loss on E&E assets - (41,598) - (41,598)
Provision for Tanzania Government
receivables (4,959) - - (4,959)
Management re-structuring costs - - (940) (940)
Redomicile costs - - (1,393) (1,393)
Share-based payment charges (5) - (93) (98)
Depreciation and depletion - - (12) (12)
Loss of sale of PPE (3) - - (3)
Tanzanian withholding tax costs (993) - - (993)
Total costs (8,662) (41,617) (5,342) (55,621)
Loss from operations (2,531) (41,617) (5,342) (49,490)
Finance income 2,659 - - 2,659
Finance costs (1,592) - (24) (1,616)
Loss before tax (1,464) (41,617) (5,366) (48,447)
Current tax expense (33) - (30) (63)
Deferred tax expense (26,714) - - (26,714)
(26,747) - (30) (26,777)
Net loss and comprehensive loss (28,211) (41,617) (5,396) (75,224)
Selected balances at 31 December 2018
Current assets 23,891 392 411 24,694
Exploration and evaluation assets 8,129 - - 8,129
Property, plant and equipment 83,773 - 4 83,777
Deferred tax asset 4,036 - - 4,036
Total assets 119,829 392 415 120,636
Current liabilities 12,370 428 703 13,501
Non-current liabilities 2,657 - - 2,657
Total Liabilities 15,027 428 703 16,158
Capital additions for the year ended 31 December 2018
Additions to exploration and
evaluation assets - 1,806 -1,806
Additions to property, plant
and equipment 1,256 - 61,262
Net income/(loss) for the year ended 31 December 2017
Tanzania Operations Mozambique Operations Corporate Consolidated
$000 $000 $000 $000
Total revenue 13,440 - - 13,440
Production and operating costs (3,484) - - (3,484)
Depletion (4,079) - - (4,079)
Total cost of sales (7,563) - - (7,563)
Gross profit 5,877 - - 5,877
Recurring administrative costs (2,717) (27) (3,452) (6,196)
Amounts capitalized as E&E assets 590 - 992 1,582
Share-based payment charges (191) - (24) (215)
Depreciation and depletion - - (12) (12)
Total costs (2,318) (27) (2,496) (4,841)
Profit/(loss)/from operations 3,559 (27) (2,496) 1,036
Finance income 2,386 - - 2,386
Finance costs (3,622) - (115) (3,737)
Profit/(loss) before tax 2,323 (27) (2,611) (315)
Deferred tax expense (394) - - (394)
(394) - - (394)
Net profit/(loss) and comprehensive profit/(loss) 1,927 (27) (2,609) (709)
Selected balances at 31 December 2017
Current assets 30,994 169 1,650 32,813
Tanzania Government receivables 4,959 - - 4,959
Exploration and evaluation assets 8,129 39,792 - 47,921
Property, plant and equipment 90,327 - 9 90,336
Deferred tax assets 30,751 - - 30,751
Total assets 165,160 39,961 1,659 206,780
Current liabilities 17,009 84 582 17,675
Non-current liabilities 9,501 - - 9,501
Total Liabilities 26,510 84 582 27,176
Capital additions for year ended 31 December 2017
Additions to exploration and
evaluation assets - 2,383 -2,383
Additions to property, plant
and equipment 1,057 - 41,061
5. Revenue
2018 2017
$000 $000
Revenue from gas sales 16,169 13,440
Revenue from condensate sales 55 -
16,224 13,440
6. General and administrative costs
2018 2017
$000 $000
Employee salaries and benefits 2,685 2,723
Contractors and consultants 775 686
Travel and accommodation 347 443
Professional, legal and advisory 1,257 958
Office and administration 696 730
Corporate and public company costs 529 656
Total general and administrative costs 6,289 6,196
7. Management re-structuring costs
Management re-structuring costs total $940k (2017: $nil) and comprise
Calgary employee severance and travel expenses related to the
re-structuring of the senior management team, which is now based in
Reading, United Kingdom in alignment with the redomicile of Wentworth
Resources Plc (see Directors' Report).
8. Finance income and finance costs
2018 2017
$000 $000
Finance income
Accretion - TPDC receivable (Note 10) 2,188 2,080
Accretion - Tanzanian Government receivable (Note
11) 471 306
2,659 2,386
Finance costs
Accretion - decommissioning provision (104) (92)
Accretion - other liability - (142)
Change in estimates - TPDC receivable (Note 10) - (872)
Change in estimates - Tanzanian Government receivable
(Note 11) (471) (828)
Change in estimates - other liability (Note 18) - (9)
Interest expense and other finance costs (980) (1,656)
Foreign exchange loss (61) (138)
(1,616) (3,737)
9. Trade and other receivables
2018 2017
$000 $000
Trade receivable from TPDC 5,760 12,008
Other receivable from TPDC 513 -
Trade receivable from TANESCO 491 1,140
Other receivables 789 365
7,553 13,513
Other receivables from TPDC represent income tax $513k (2017 - $nil)
paid by Wentworth Gas Limited, a wholly owned subsidiary of the Company.
The income tax will be recovered from TPDC profit gas (security
revenue).
10. TPDC receivables
On 30 June 2009, the Company and TPDC entered into a Joint Operating
Agreement ("JOA") related to the Mnazi Bay Concession in Tanzania.
Under the terms of the JOA, TPDC has a 20% participating interest share
in the Mnazi Bay Development Area production and will pay the Company
for 20% of past costs incurred in respect of the Mnazi Bay Concession
from TPDC's share of future production. This receivable from TPDC is
considered a financial instrument and initially recorded at fair value
based on discounted cash flows and up to 30 June 2019 its carrying
amount has been adjusted for accretion and changes in the estimated
timing of cash flows.
As at 31 December 2018, the undiscounted receivable from TPDC is $5.2
million ($17.3 million at 31 December 2017).
$000
Balance at 31 December 2016 24,836
Accretion 2,080
Change in estimated timing of receipt (872)
Retained gas revenue to offset receivable (11,629)
Share of TPDC Mnazi Bay Concession costs paid by the
Company 1,135
Balance at 31 December 2017 15,550
Accretion 2,188
Retained gas revenue to offset receivable (13,585)
Share of TPDC Mnazi Bay Concession costs paid by the
Company 1,085
Balance at 31 December 2018 5,238
11. Tanzania Government receivables
As at 31 December 2018, the undiscounted Tanzanian Government receivable
is $6.5 million (2017 - $6.5 million).
$000
Balance at 31 December 2016 5,481
Accretion 306
Change in estimated timing of receipt (828)
Balance of amortized cost at 31 December 2017 4,959
Accretion 471
Change in estimated timing of receipt (471)
Provision against amortized balance (4,959)
Balance of amortized cost at 31 December 2018 -
The fair value of the Tanzanian Government receivable at 31 December
2018, calculated using 10.01% discount rate (2017 - 8.25%) was $5.0
million (31 December 2017 - $5.0 million). The discount rate is variable
and is pegged to the $20.0 million credit facility interest rate.
The Company has an agreement with the Government of Tanzania (TANESCO,
TPDC and the MEM) to be reimbursed for all the project development costs
associated with T&D expenditures at cost. An audit of the Mtwara Energy
Project ("MEP") development expenditures was completed in November 2012
and costs of approximately $8.1 million were verified to be
reimbursable. After deducting costs associated with the Tariff
Equalization Fund and VAT input credits associated with the MEP totaling
$1.6 million, the amount agreed to be reimbursed was $6.5 million.
During 2017, the Government initiated its first review of the costs to
verify the balance owing by it. On February 8, 2018 the Government
issued the results of which differed from the previously audited and
approved gross receivable of $6.5 million, which the company maintains
was accurate and correct.
The Government is currently conducting a second review and due to age
and uncertainty surrounding the receivable and its recoverability the
Company has made a provision in-full within the 2018 accounts against
the carrying amount without prejudice to the ongoing commercial
discussions with the Government.
12. Exploration and evaluation assets
Tanzania Mozambique Total
$000 $000 $000
Cost
Balance at 31 December 2016 8,129 37,409 45,538
Additions - 2,383 2,383
Balance at 31 December 2017 8,129 39,792 47,921
Additions - 1,806 1,806
Impairment loss - (41,598) (41,598)
Balance at 31 December 2018 8,129 - 8,129
The Company performed a technical and commercial review of the
Mozambique E&E asset portfolio and determined that Tembo licence did
not provide the Company with suitable monetisation solutions in keeping
with Company material growth mandate. At 31 December 2017, all
Mozambique E&E assets of $41.6 million were impaired.
Tanzania E&E assets were $8.1 million (31 December 2017 - $8.1 million).
The Mnazi Bay Concession agreement expires in 2031. The Mnazi Bay joint
venture partners have identified several prospects within the concession
area but outside of the area covering discovered gas reserves and
therefore has concluded that an impairment test is not required for the
Tanzanian asset.
13. Property, plant and equipment
Office and other
Natural gas properties equipment
Total
$000 $000 $000
Cost
Balance at 31 December
2016 101,797 596 102,393
Additions 1,057 4 1,061
Balance at 31 December
2017 102,854 600 103,454
Additions 1,256 6 1,262
Disposal of assets (82) - (82)
Balance at 31 December
2018 104,028 606 104,634
Accumulated depreciation and depletion
Balance at 31 December 2016 (8,448) (579) (9,027)
Depreciation and depletion (4,079) (12) (4,091)
Balance at 31 December 2017 (12,527) (591) (13,118)
Depreciation and depletion (7,803) (12) (7,815)
Disposal of assets 76 - 76
Balance at 31 December 2018 (20,254) (603) (20,857)
Carrying amounts
31 December 2017 90,327 990,336
31 December 2018 83,774 383,777
The Company assessed triggers for impairment on the natural gas
properties and determined that there were no triggers and accordingly an
impairment test was not required. Most of the Company's natural gas is
sold under long-term, fixed price gas sales and purchase agreements,
eliminating the current volatility in the commodity market. In addition,
the independent valuation of the Company's reserves of $106 million is
in excess of the net book value of the Company's PP&E.
14. Subsidiary undertakings
The subsidiary undertakings at 31 December 2018 are:
Name of Company Country of Class of Types of Percentage Nature of
incorporation shares ownership holding business
held
Wentworth United Ordinary Direct 100% Investment
Resources (UK) Kingdom holding
Limited company
Wentworth Jersey Ordinary Direct 100% Investment
Holding holding
(Jersey) company
Limited
Wentworth Jersey Ordinary Indirect 100% Investment
Tanzania holding
(Jersey) company
Limited
Wentworth Gas Jersey Ordinary Indirect 100% Investment
(Jersey) holding
Limited company
Wentworth Gas Tanzania Ordinary Indirect 100% Exploration
Limited production
company
Cyprus Mnazi Cyprus Ordinary Indirect 39.925% Exploration
Bay Limited production
company
Wentworth Mauritius Ordinary Indirect 100% Investment
Mozambique holding
(Mauritius) company
Limited
Wentworth Mozambique Ordinary Indirect 100% Exploration
Moçambique company
Petroleos,
Limitada
15. Trade and other payables
2018 2017
$000 $000
Payable to Maurel & Prom (Operator) 1,710 4,344
Trade payables 413 223
Interest 145 511
Other payables and accrued expenses 939 648
3,207 5,726
Interest represents accrued interest $145k (2017 - $502k) for the $20.0
million credit facility and nil (2017 - $9k) for the $6 million credit
facility.
16. Overdraft credit facility
The Company has a one-year, $2.5 million overdraft credit facility with
a Tanzanian Government owned bank which is due and repayable on 5 April
2019. The facility can be extended for a further one year at the mutual
agreement of the bank and the Company. The overdraft facility has an
interest rate of the lender's base lending rate, minus 1% per annum to
be paid monthly. At 31 December 2018, the lender's base lending rate
was 9% and the overdraft credit facility was fully drawn.
Security provided to the lender includes a debenture over the fixed and
floating assets of the Company's Tanzanian assets and a deed of
assignment of 20% of the revenue and cash flow from sales of natural gas
from the Tanzanian assets.
During the year ended 31 December 2018, the Company paid interest
expense $68k (2017 - $75k) on the overdraft credit facility.
17. Long-term loans
Credit facilities from Tanzania based banks
On 8 December 2014, Wentworth Gas Limited, a wholly owned subsidiary of
the Company, entered into two long-term credit facilities: i) a $20.0
million loan to finance field infrastructure development within the
Mnazi Bay Concession in Tanzania and ii) a $6.0 million loan to repay a
medium-term loan.
The term of each loan was initially forty-eight months in duration
commencing on the first draw-down date and each loan bears interest at
six-month LIBOR rate plus 750 basis points subject to a minimum (floor)
of 8% p.a. and a maximum (ceiling) of 9.5% p.a. Security is in the form
of a debenture creating first ranking charge over all the assets of the
WGL (assets of WGL include a 25.4% participation interest in the Mnazi
Bay Concession), assignment over the TPDC long-term receivable and
assignment of revenues generated from the Mnazi Bay Concession.
During the year ended 31 December 2018, the Company incurred interest
expense on long-term loans, inclusive of accretion of financing costs,
of $0.91 million (2017 - $1.6 million). A total of $1.5 million was
settled in cash during 2018 (2017 - $1.7 million).
The carrying amount of the long-term loans include
transaction costs of $310k (net of accretion). At
December 31, 2018, the carrying amount of the credit
facilities approximates its fair value as the loan's
effective interest rate approximates market rates. $000
Credit facilities balance
Principal balance as at 31 December 2016 20,667
Loan repayments during the year (5,346)
Principal balance as at 31 December 2017 15,321
Loan repayments during the year (6,996)
Principal balance as at 31 December 2018 8,325
Net financing costs at 31 December 2017 (171)
Transitional adjustment (None - 2) 746
Net financing costs at 01 January 2018 575
Accretion during the year (266)
Net financing costs at 31 December 2018 309
Carrying amount of long-term loans at 31 December
2018 8,634
Current 6,946
Non-current 1,688
8,634
The $20 million credit facility
During 2017, the Company executed amendments to the credit facility
agreement, which included the restructuring of principal loan payments
and added new provisions. The new provisions were not finalized at the
time of the execution of the amendment to the credit facility agreement.
On 06 June 2018, the Company formalised the new provisions, which became
effective 6 June 2018.
The new provisions contain a requirement for the Company to maintain two
financial covenants both calculated semi-annually beginning on 30 June
and 31 December. The Debt Service Coverage Ratio provides that the
Company has adequate cover to meet it's loan interest and principal
repayment obligations for the next twelve months, while the Loan Life
Coverage Ratio provides that adequate free discounted cash flow coverage
is maintained for all future loan repayments over the full life of the
loan.
The $20.0 million credit facility is subject to interest rate of
six-month LIBOR rate plus 750 basis points subject to a minimum (floor)
of 8.5% p.a. and no maximum (ceiling). As at 31 December, the six-month
interest rate was 10.30%.
Principal repayments on the credit facility are set out in the following
table.
Repayment amount
Principal repayment date $000
30 January 2019 1,666
30 April 2019 1,665
30 July 2019 1,666
30 October 2019 1,665
30 January 2020 1,663
8,325
Medium term $6 million credit facility
At 31 December 2018, the Medium term $6 million credit facility was
fully paid with $2 million paid during the year.
18. Contingent PTTEP liability
2018 2017
$000 $000
Balance at 1 January 2,189 2,360
Accretion - 142
Change in accounting estimate - 9
Payments to reduce liability (1,341) (322)
Balance at 31 December 848 2,189
As a result of an asset purchase and sale transaction in 2012, the
Company has been obliged to make payments with a face value of $3.4
million should certain natural gas production thresholds from Mnazi Bay
Concession be reached. The payable as at 31 December 2018 is $850k (31
December 2017 - $2.2 million).
19. Decommissioning and Abandonment provisions
The Company's decommissioning provisions result from net ownership
interests in petroleum and natural gas assets including well sites,
pipeline gathering systems, and processing facilities in Tanzania. The
operator of the Mnazi Bay Concession estimated the Company's share of
the undiscounted inflation-adjusted amount of cash flow required to
settle decommissioning obligations for the infrastructure within the
Mnazi Bay Concession have to be $4.23 million. The costs are expected to
be incurred around 2030. The obligations have been estimated using
existing technology at current prices inflated and discounted using
discount rates that reflect current market assessments of the time value
of money and the risks specific to each liability. The discount and
inflation rates used in determining the value of the decommission
provision at 31 December 2018 were 12.0% and 2.03%, respectively (2017 -
12.0% and 2.03%, respectively).
A reconciliation of the decommissioning obligations is provided below:
2018 2017
$000 $000
Balance at 1 January 865 773
Accretion 104 92
Balance at 31 December 969 865
20. Contingent liabilities
Following the completion of the corporate transition to UK and Oslo
Børs delisting, a number of shareholders exercised certain Dissent
Rights under Canadian law which would require the Company to buy back
their equity holdings at fair value. The Company received Dissent Rights
notices over a total of 2,329,326 shares with an anticipated fair value
of $710k. As the process has yet to be finalised and fair values agreed,
the buy back remains contingent at the balance sheet date.
21. Share-based payments
2018 2017
$000 $000
Share based compensation recognized in the statement
of Comprehensive loss 98 215
Movement in the total number of share options outstanding and their
related weighted average exercise prices are summarized as follows:
2018 2017
Weighted Weighted
average average
Number of exercise price Number of exercise price
options (US$) (i) options (US$)
Outstanding at
January 1 10,600,000 0.52 10,600,000 0.50
Granted 3,560,301 0.49 - -
Forfeited (1,600,000) 0.49 - -
Outstanding at 31
December 12,560,301 0.49 10,600,000 0.52
The following table summarizes share options outstanding and exercisable
at 31 December 2018:
Outstanding Exercisable
Weighted
average
Exercise price Exercise price Number of remaining life Number of
(NOK) (US$)(1) options (years) options
3.15 0.36 1,000,000 1.8 1,000,000
3.52 0.40 500,000 3.0 500,000
3.60 0.41 1,800,000 1.8 1,800,000
3.85 0.44 1,850,000 7.0 1,850,000
4.08 0.47 250,000 4.3 250,000
4.70 0.54 200,000 5.4 200,000
4.90 0.56 100,000 3.3 100,000
5.18 0.59 2,800,000 4.8 2,800,000
5.75 0.66 500,000 2.3 500,000
- - 3,560,301 9.9 -
12,560,301 9,000,000
(1) The US Dollar to Norwegian Kroner exchange rate used for determining
the exercise price at 31 December 2018 is 0.11456.
The following table summarizes share options outstanding and exercisable
at 31 December 2017:
Outstanding Exercisable
Weighted
average
Exercise price Exercise price Number of remaining life Number of
(NOK) (US$) (i) options (years) options
3.15 0.38 1,000,000 2.7 1,000,000
3.52 0.43 500,000 4.0 500,000
3.60 0.44 2,300,000 2.8 2,300,000
3.85 0.47 2,000,000 8.0 1,333,338
4.08 0.50 250,000 5.3 250,000
4.70 0.57 200,000 6.4 200,000
4.90 0.60 350,000 4.3 350,000
5.18 0.63 3,500,000 5.8 3,500,000
5.75 0.70 500,000 3.3 500,000
10,600,000 5.2 9,933,338
1. The US Dollar to Norwegian Kroner exchange rate used for determining the
exercise price at 31 December 2017 is 0.12166.
22. Share capital
2018 2017
$000 $000
Authorised, called up, allotted and fully paid
186,488,465 (2017 - 186,488,465) ordinary shares 416,426 416,426
23. Earnings per share
Basic and diluted eps
2018 2017
$000 $000
Net loss for the period (75,224) (709)
Weighted average number of ordinary shares
outstanding 186,488,465 179,846,410
Dilutive weighted average number of ordinary shares
outstanding 186,488,465 179,846,410
Net profit/(loss) per ordinary share (0.40) -
During the year ended 31 December 2018 and 2017, 12,560,301 (2017:
10,600,000) options were excluded from the dilutive weighted average
number of shares outstanding because they were anti-dilutive.
24. Tax assessments and income taxes
Tax assessments
On 16 March 2018 the Company received correspondence from the Tanzania
Revenue Authority ("TRA") regarding their preliminary findings for WGL
(the Company's Tanzanian subsidiary) for taxation years 2013 to 2016. On
26 June 2018, following further discussion with the TRA and exchange of
information between the Company and the TRA, the TRA issued notice of
adjusted assessments in respect of these taxation years. The following
two matters were raised in the adjusted assessments:
(a) Impairment Reversal of Mnazi Bay Costs and other denied
deductions
The TRA has reassessed the 2014 income tax filing of WGL and included in
taxable income an impairment reversal of $23.81 million. The impact of
this reassessment is a non-cash reduction of the Company's deferred
income tax asset by $7.1 million.
The TRA has also denied $6.6 million of deductions in the 2014 and 2015
income tax filings of WGL in respect of interest and other costs. The
impact of this reassessment is a non-cash reduction of the Company's
deferred income tax asset of $2.0 million.
(b) Withholding Taxes on Loan Interest, Employment and Other Taxes
The TRA issued an adjusted assessment certificate which included the
principal taxes of $1.0 million (Tsh 2.3 billion), the principal taxes
have been included in the statement of net loss and comprehensive loss.
WGL was granted with TRA an interest and penalties waiver of the $740k
(Tshs 1.69 billion) and made payment by instalments of principle taxes
of $1.0 million (Tshs 2.3 billion).
Changes on Income Tax Act, 2004 (ITA) relating to petroleum operations.
Effective 2018 the TRA has introduced significant changes in respect to
the computation of taxable income in Tanzania. The Miscellaneous
Amendment Act, 2017 amended sections 65M and 65N of the Income Tax Act,
2004 (ITA). The Company is still evaluating the complete tax effects of
the these changes, however, it has determined a reasonable estimate of
the impact of them on its existing current and deferred tax balances.
Based on this estimate, the Company has determined that while previously
a contractor's share of cost and profit gas alongside their allowable
deductions would be taxable, under the new legislation no tax would be
levied or allowances recognised on the cost gas element of its revenues.
Profit gas would continue to be taxed in the usual way.
Furthermore, and more significantly this new legislation would only
allow up to 70% tax relief of current year profits from historic tax
loss pools. The Company has calculated an estimated deferred tax asset
write-down of $19.0 million with respect to these changes alone
predominately with respect to timing differences and the
under-utilization of tax losses at the current licence expiry date of
2031.
Whilst the Company is still evaluating the complete tax effects of the
enactment of the legislation, there are a number of uncertainties and
ambiguities as to the specific interpretation and application of many of
the provisions. In the absence of precedence on these matters and until
the 2018 tax returns are finalized, which the Company expects to occur
in 2019, the Company expects to use what it believes are reasonable
interpretations and assumptions in applying the legislative changes for
purposes of determining its cash tax liabilities and results of
operations, which may change as it receives additional clarification and
implementation guidance.
Income taxes
The Company's income tax expense for the year end 31 December is as
follows:
2018 2017
$000 $000
Loss before income taxes (48,447) (315)
Expected income tax (recovery) expense at combined
Tanzanian rate of 30% (2017 - Canadian federal and
provincial rate of 27.0%) (14,236) (85)
Rate differentials 1,396 137
Share based compensation 29 58
2014- 2015 Tanzania tax reassessments 8,096 -
Tanzania cost gas excluded from taxable income (2,015) -
Derecognition of Mozambique and Canada tax pools 13,236 -
Movement in deferred tax assets not previously recognized
and other 21,264 284
Income tax expense/(recovery) 27,770 394
The Company operates in multiple jurisdictions with complex tax laws and
regulations, which are evolving over time. The Company has taken certain
tax positions in its tax filings and these filings are subject to audit
and potential reassessment after the lapse of considerable time.
Accordingly, the actual income tax impact may differ significantly from
that estimated and recorded by management.
The Company has unrecognized deductible temporary differences that
results in unrecognized deferred income tax assets of:
2018 2017
$000 $000
Non-capital losses 19,675 22,691
Property and equipment - 487
Share issue costs - 168
Accounts receivables 1,470 -
21,145 23,346
The total non-capital losses of the Company are $164.4 million (2017 -
$273.4 million) of which nil (2017 - $83.3 million) are in Canada,
$163.6 million (2017 - $189.5 million) are in Tanzania, nil (2016 -
$590k) are in Mozambique and $800k are in the UK.
The unrecognized non-capital losses in Canada expired in the year 2018
due to Company redomiciling to Jersey and becoming tax resident in the
UK. The unrecognized non-capital losses in Mozambique they also expired
due to relinquishment of the Tembo block and shutdown activities in the
country.
A deferred tax asset is recognized to the extent that it is probable
that taxable profit will be available against which deductible temporary
differences and the loss carry forwards can be utilized. A deferred tax
asset of $4.0 million as at 31 December 2018 (2017 - $30.8 million) is
attributable to the accumulated tax loss carry-forward of the Company's
Tanzanian subsidiary, which are expected to be offset against future
taxable income. Recognition of the tax asset is supported by the proven
and probable reserves as determined by a third-party external reserves
engineer, RPS Canada.
2018 2017
$000 $000
Balance at 1 January 30,751 31,145
Deferred income tax assets recognized in profit or
loss:
Non-capital losses (27,300) (130)
Asset retirement obligations 124 28
Deferred income tax liabilities recognized in profit
or loss:
PP&E 1,002 (259)
Receivables (541) (33)
Balance at 31 December 4,036 30,751
25. Financial instruments
The Company's activities expose it to a variety of financial risks:
credit risk, liquidity risk and market risk (currency fluctuations,
interest rates and commodity prices). The Company's overall risk
management program focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the Company's
financial performance. A full description of the risks and key risks
affecting the business is noted in the Business Risks section of the
Strategic Report.
Credit risk
Wentworth's credit risk exposure is equal to the carrying value of its
cash and cash equivalents, trade, other and long-term receivables.
Trade and other receivables are comprised predominantly of amounts due
from government owned entities in Tanzania and Value Added Tax ("VAT")
in Tanzania and Mozambique.
The Company's ongoing exposure to trade receivables from TANESCO, the
state power company, relates to the gas sales from the Mnazi Bay
Concession to a TANESCO owned 18-megawatt gas-fired power plant located
in Mtwara, Tanzania. At 31 December 2018, the Mnazi Bay Concession
partners were owed four months of invoices for gas sales made to TANESCO,
with $491k owing to Wentworth which includes sales revenue of $251k and
the Company's share of TPDC sales revenue to recover a long-term
receivable of $240k (2017 - $1.1 million representing sales revenue of
$613k and the Company's share of TPDC sales revenue to recover a
long-term receivable of $527k). Subsequent to year end, TANESCO has
paid $427 net to Wentworth. The receivable from TANESCO was not
discounted at year end (2017 - $nil) as the receivable consisted of less
than twelve months of invoices. The Company continues to be engaged in
ongoing discussions with TANESCO to accelerate payment of amounts past
due.
During 2015, the Company commenced gas sales to TPDC under a long-term
gas sales agreement, the operator of the new transnational gas pipeline
in Tanzania. Credit risk relating to sales to TPDC is substantially
mitigated through a two-part payment guarantee structure. The first part
relates to a prepayment amount of approximately three to four months of
gas deliveries at current sales volumes which has been received and is
held by the operator of the Mnazi Bay Concession. The second part is a
one-month replenishable letter of credit which is not yet executed but
expected to be executed during 2019. At 31 December 2018, the Mnazi Bay
Concession partners were owed four months gas sales invoices, with $5.7
million owing to Wentworth which includes sales revenue of $2.5 million
and the Company's share of TPDC sales revenue to recover a long-term
receivable of $3.2 million (2017 - $12.0 million representing sales
revenue of $6.4 million and the Company's share of TPDC sales revenue to
recover a long-term receivable of $5.6 million). Subsequent to year end,
TPDC has paid $5.7 million net to Wentworth. The Company continues to be
engaged in ongoing discussions with TPDC to accelerate payment of
amounts past due.
In addition to the receivable for current gas sales to TPDC, at 31
December 2018, an undiscounted long-term receivable of $5.2 million net
to Wentworth (2017 - $17.3 million) is due from TPDC, a partner in the
Mnazi Bay Concession (see note 10). The Company currently receives,
directly from the operator of the Mnazi Bay Concession, a significant
portion of TPDC's and the Government's share of gas sales from the Mnazi
Bay Concession to reduce the long-term receivable from TPDC. The risk
that future production from the Mnazi Bay Concession may not be
sufficient to settle the receivable is very low.
At 31 December 2018, an undiscounted long-term receivable of $6.5
million (2016 - $6.5 million) related to the Company's disposal of
transmission and distribution assets, and the costs associated with the
MEP incurred in prior years by a wholly owned subsidiary of Wentworth
(see note 11). On February 6, 2012, the Company, TANESCO, TPDC and MEM
reached an agreement that the Company's cost of historical operations in
respect of the Mtwara Energy Project should be reimbursed. Wentworth is
currently in discussions with TANESCO, TPDC and MEM on agreeing on a
method of reimbursement. There is a risk that the cost reimbursement
method may not be in cash, but rather in a long-term recovery from other
sources. Timing of reaching an agreement on the reimbursement procedure
is uncertain.
The Company's cash and cash equivalents are held at recognized
international financial institutions.
The exposure to credit risk as at:
2018 2017
$000 $000
Trade and other receivables 7,553 13,513
TPDC receivable (Note 10) 5,238 15,550
Tanzania Government receivable (Note 11) 4,959 4,959
Cash and cash equivalents 11,903 3,750
29,653 37,772
Aged trade and other receivables
Current 31-60 61-90 >90
1-30 days days days days Total
$000 $000 $000 $000 $000
Balance at 31 December 2018
Trade receivables 3,007 1,507 1,420 243 6,177
Other receivables 1,376 - - - 1,376
4,384 1,507 1,420 243 7,553
Balance at 31 December 2017
Trade receivables 2,692 2,483 - 7,973 13,148
Other receivables 365 - - - 365
3,057 2,483 - 7,973 13,513
Liquidity risk
Liquidity risk is the risk that the Company will not have sufficient
funds to meet its liabilities as they become payable. Other than routine
trade and other payables, incurred in the normal course of business, the
Company also has long-term loans and an overdraft credit facility.
The table below summarizes the maturity profile of the Company's
financial liabilities based on contractual undiscounted payments
including future interest payments on long-term loans.
Less than 1 year 1 to 2 years 2 to 5 years Total
$000 $000 $000 $000
Balance at December 31,
2018
Trade and other payables 3,207 - - 3,207
Contingent PTTEP
liability 848 - - 848
Overdraft facility 2,500 - - 2,500
Long-term loans,
including interest (1) 7,548 1,732 - 9,280
14,103 1,732 - 15,835
Balance at December 31,
2017
Trade and other payables 5,726 - - 5,726
Contingent PTTEP
liability 2,189 - - 2,189
Overdraft facility 2,500 - - 2,500
Long-term loans,
including interest (1) 7,940 7,099 1,701 16,740
18,355 7,099 1,701 27,155
1. Includes future interest expense at the rate in effect at December 31.
The fair value of the Company's trade and other payables approximates
their carrying values due to the short-term nature of these instruments.
The fair value of the long-term loans approximates their carrying
amounts as they bear market rates of interest. The fair value of the
other liability approximates its carrying amount.
The Company has working capital surplus at 31 December 2018 and
generated positive cash flow from operations in 2018. The Company plans
to pay its financial liabilities in the normal course of operations and
fund future operating and capital requirements through operating cash
flows, bank debt, bank overdraft and equity raises, when deemed
appropriate. Operating cash flow of the Company is dependent upon the
purchasers of natural gas, TPDC and TANESCO, continuing to meet their
payment obligations on a timely manner. Any delays in collecting funds
from these purchasers for an extended period of time could negatively
impact the Company's ability to pay its financial liabilities on a
timely manner in the normal course of business (see also Capital
management section).
Market risk
Market risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market prices.
Market risk is comprised of foreign currency risk, interest rate risk
and other price risk (e.g. commodity price risk). The objective of
market risk management is to manage and control market price exposures
within acceptable limits, while maximizing returns.
Commodity price risk
Commodity price risk is the risk that the Company suffers financial loss
as a result of fluctuations in oil or natural gas prices. The Company's
exposure to commodity price risk is mitigated as the sale prices for gas
sold by the Company is fixed under the existing gas sale and purchase
agreements. An increase of 1% in the gas production would result in an
increase of $57k (2017 - $34k) in revenue.
Interest rate risk
Interest rate risk is the risk that future cash flows of a financial
instrument will fluctuate because of changes in market interest rates.
The Company has a $20.0 million credit facility with a floating interest
rate of six-month LIBOR plus 7.5 percentage points with a minimum 8.5%
and with no maximum interest rate per annum. The $6.0 million credit
facility which was fully paid in December 2018 had a floating interest
rate of six-month LIBOR plus 7.5 percentage points with a minimum 8.0%
and maximum 9.5% interest rate per annum. The Company's objective is to
minimize its interest rate risk on its cash balances by investing for
short periods of time (less than 1 year) and only in term deposits. An
increase of 1% in the six-month LIBOR rate would result in an increase
of $102k (2017 - $159k) in interest expense on an annualized basis.
Foreign exchange risk
Foreign exchange rate risk is the risk that the Company suffers
financial loss as a result of changes in the value of an asset or
liability or in the value of future cash flows due to movements in
foreign currency exchange rates. Wentworth operates internationally and
is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the Tanzanian shilling, Pound
Sterling and Canadian dollar against its functional currency of its
operating entities, the US dollar. The Company's objective is to
minimize its risk by borrowing funds in US dollars as revenues are paid
(or indexed) to the US dollar. In addition, the Company holds
substantially all its cash and cash equivalents in US dollars and
converts to other currencies only when cash requirements demand such
conversion.
Current receivables and liabilities denominated in various currency:
Canadian United States
Dollar Tanzanian Shilling Other Currency Dollar Total
$000 $000 $000 $000 $000
Balance at
31 December
2018
Cash and
cash
equivalents 14 37 15 11,837 11,903
Trade and
other
receivables 21 106 174 7,252 7,553
Trade and
other
payables (42) (246) (248) (2,671) (3,207)
(7) (103) (59) (16,418) (16,249)
Canadian United States
Dollar Tanzanian Shilling Other Currency Dollar Total
$000 $000 $000 $000 $000
Balance at
31 December
2017
Cash and
cash
equivalents 70 102 3 3,575 3,750
Trade and
other
receivables 27 103 44 13,339 13,513
Trade and
other
payables (72) (129) (65) (5,460) (5,726)
25 76 (18) (11,454) (11,537)
A 10% increase/decrease of the GBP against US dollar would result in a
change in profit or loss before tax of $11k (2017: $3k). In addition, a
10% increase/decrease of the Tanzanian shilling against the US dollar
would result in a change in profit or loss before tax of approximately
$5k (2017: $8k).
Financial instrument classification and measurement
The Company classifies the fair value of financial instruments according
to the following hierarchy based on the amount of observable inputs used
to value the instrument:
-- Level 1 - Quoted prices are available in active markets for identical
assets or liabilities as of the reporting date. Active markets are those
in which transactions occur in sufficient frequency and volume to provide
pricing information on an ongoing basis.
-- Level 2 - Pricing inputs are other than quoted prices in active markets
included in Level 1. Prices in Level 2 are either directly or indirectly
observable as of the reporting date. Level 2 valuations are based on
inputs, including expected interest rates, share prices, and volatility
factors, which can be substantially observed or corroborated in the
marketplace.
-- Level 3 - Valuation in this level are those with inputs for the asset or
liabilities that are not based on observable market data.
The Company does not have any fair value measurements considered as
Level 1. The Company's long-term receivables, long-term loans, and
other liability are considered Level 2 and Level 3 measurements.
Capital management
The Company's objectives when managing capital are to safeguard the
Company's ability to continue as a going concern, in order to develop
its oil and gas properties and maintain a flexible capital structure for
its projects for the benefit of its stakeholders. In the management of
capital, the Company includes the components of shareholders' equity as
well as cash and long-term liabilities.
The Company manages the capital structure and adjusts it in light of
changes in economic conditions and the risk characteristics of the
underlying assets. As part of its capital management process, the
Company prepares budgets and forecasts, which are used by management and
the Board of Directors to direct and monitor the strategy, ongoing
operations and liquidity of the Company. Budgets and forecasts are
subject to judgement and estimates such as those relating to future gas
demand and ultimate timing of collectability of trade receivables for
gas sales. These factors may not be within the control of the Company,
which may create near term risks that may impact the need to alter the
capital structure. The Company continues to effectively manage its
relationships with its gas purchasers to ensure timely collection and
with external lenders such that lending facilities are available to the
Company as and when needed. The Company may attempt to issue new shares,
enter into joint arrangements or acquire or dispose of assets in order
to maintain or adjust the capital structure. Management reviews the
capital structure on a regular basis to ensure that the above-noted
objectives are met. The Company's overall strategy remains unchanged
from the prior year.
26. Related party transactions
Details of Directors' remuneration, which comprise key management
personnel, are provided below:
2018 2017
$000 $000
Short-term employee benefits 1,167 560
Share based compensation 52 67
1,219 627
27. Supplemental cash flow information
Change in non-cash working capital:
2018 2017
$000 $000
Net change in non-cash working capital related to
operating activities:
Trade and other receivables 3,381 (3,158)
Prepayments and deposits (300) (4)
Trade and other payables (1,505) (2,201)
1,576 (5,363)
Cash movements from investing activities in the Statements of Cash Flows
consists of the following:
Exploration and evaluation Property, plant and equipment Long-term receivable
$000 $000 $000
Year ended 31 December 2018
Total additions/(reductions) 1,806 1,262 (18,254)
Change in non-cash investing
activities - - 2,877
Change in non-cash working
capital - 706 -
Cash additions/(reductions) 1,806 1,968 (15,377)
Year ended 31 December 2017
Total additions/(reductions) 2,383 1,061 (8,759)
Change in non-cash investing
activities - - 1,729
Change in non-cash working
capital - 667 -
Cash additions/(reductions) 2,383 1,728 (7,030)
28. Commitments
Lease payments
The Company has office locations in Reading, UK and Dar es Salaam
Tanzania. The future minimum lease payments associated with these
office premises as at 31 December 2018 is $152k committed for year 2019.
29. Subsequent events
On 6 February the Company announced confirmation that from 14 February
2019, it's shares would be delisted from the Oslo Børs Stock
Exchange.
On 14 February the Company announced the publication of its 2018 CPR
Reserves Report.
GLOSSARY OF TERMS
$ or US Dollar United States Dollar
GBP UK Pound Sterling
1P Proven Reserves (both proved developed reserves +
proved undeveloped reserves)
2C Best estimate contingent resource
2D Two Dimensional
2P 1P (proven reserves) + probable reserves, hence "proved
AND probable"
3D Three Dimensional
3P The sum of 2P (proven reserves + probable reserves)
+ possible reserves, all 3Ps "proven AND probable
AND possible"
A&D Abandonment and Decommissioned
AIM AIM, a SME Growth market of the London Stock Exchange
AGM Annual General Meeting
Articles The Articles of Association of the Company
Bbl Barrel, equivalent to 42 US gallons of fluid
Bcf Billion standard cubic feet
Boe Barrel of oil equivalent, a measure of the gas component
converted into its equivalence in barrels of oil
Bopd barrel of oil per day
Board The Board of Directors of the Company
Capex Capital expenditure
CGU Cash Generating Units
City Code The City Code on Takeovers and Mergers
COD Commercial Operations Date
Company Wentworth Resources PLC
Companies The Companies (Jersey) Law 1991
(Jersey) Law
CSR Corporate Social Responsibility
DCQ Daily Committed Quotient
Directors The Directors of the Company
Dissent Rights Alberta Business Corporations Act Dissent Right in
compliance with Section 191 of that Act entitling
shareholders compensation for the fair value of the
common shares determined as of the close of business
on the last business day (in Alberta) before the day
on which the Continuance is approved by the Shareholders.
D&P Development and Production assets
E&A Exploration and Appraisal
E&E Exploration and Evaluation assets
E&P Exploration and Production
EBITDAX (Adjusted) earnings before interest, taxation, depreciation,
depletion and amortisation, impairment, share-based
payments, provisions, and pre-licence expenditure
ECL Expected Credit Lose
EITI Extractive Industries Transparency Initiative
EPS Earnings Per Share
EWURA Energy and Water Utilities Regulatory Authority
FA Funding Agreement
FCA Financial Conduct Authority of the United Kingdom
G&A General and Administrative
G&G Geological and Geophysical
GAAP Generally Accepted Accounting Principles
GBP UK Pounds Sterling
GDP Gross Domestic Product
GHG Greenhouse Gases
GSA Gas Sales Agreement
Group The Company and its subsidiary undertakings
HMRC Her Majesty's Revenue and Customs
HSSE Health, Safety, Security and Environment
hydrocarbons Organic compounds of carbon and hydrogen
IAS International Accounting Standards
IASB International Accounting Standards Board
INP Mozambique regulator
IFRS International Financial Reporting Standards
Index FTSE 350 Index
JV Joint Venture
K Thousands
Km Kilometre(s)
km2 Square kilometre(s)
KPIs Key Performance Indicators
Lead Indication of a potential exploration prospect
LNG Liquid natural gas
London Stock London Stock Exchange Plc
Exchange or
LSE
LTI Lost Time Incident
LTIP Long-Term Incentive Plan adopted in 2019??
M&A Merger and Acquisition
M Metre(s)
MEM Ministry of Energy & Minerals
MEP Mtwara Energy Project
Mcf Thousand cubic feet
Mmboe Million barrels of oil equivalent
Mscf Thousand standard cubic feet of gas
MMscf/d Million standard cubic feet per day of gas
MW Megawatt
NPV Net Present Value (at a specified discount rate and
specified discount date)
OECD Organisation for Economic Cooperation and Development
OPEC Organisation of the Petroleum Exporting Countries
Ordinary Shares Ordinary shares of 10 pence each
P90 The value on a probabilistic distribution which is
exceeded by 90% of the outcomes
P50 The value on a probabilistic distribution which is
exceeded by 50% of the outcomes. The P50 is also the
median value of the distribution
P10 The value on a probabilistic distribution which is
exceeded by 10% of the outcomes
Pmean The average of the values in the probabilistic distribution
between defined 'boundary conditions'. Universally
regarded as the best single value to quote or communicate
for any uncertain distribution of outcomes involved
in repeated trial investigations
PAET Pan African Energy Tanzania
Panel or The Panel on Takeovers and Mergers
Takeover Panel
Petroleum Oil, gas, condensate and natural gas liquids
Petroleum Geologic components and processes necessary to generate
system and store hydrocarbons, including a mature source
rock, migration pathway, reservoir rock, trap and
seal
PPE Property Plant and Equipment
Prospect An area of exploration in which hydrocarbons have
been predicted to exist in economic quantity. A group
of prospects of a similar nature constitutes a play
PSA Production Sharing Agreement
PSC Production Sharing Contract
PT Pertamina An Indonesian state-owned oil and natural gas corporation
based in Jakarta
PTTEP PTT Exploration and Production Public Company Limited
is a national petroleum exploration and production
company based in Thailand
PURA Petroleum Upstream Regulatory Authority
QCA Code Corporate Governance Code for Small and Mid-Size Quoted
Companies 2012
RA Royalty Agreement
Reserves Reserves are those quantities of petroleum anticipated
to be commercially recoverable by application of development
projects to known accumulations from a given date
forward under defined conditions. Reserves must satisfy
four criteria; they must be discovered, recoverable,
commercial and remaining based on the development
projects applied. Reserves are further categorised
in accordance with the level of certainty associated
with the estimates and may be sub-classified based
on project maturity and/or characterised by development
and production status
Reservoir A porous and permeable rock capable of containing
fluids
Seismic Data, obtained using a sound source and receiver,
that is processed to provide a representation of a
vertical cross-section through the subsurface layers
Shares Ordinary shares
Shareholders Ordinary shareholders of 10p each in the Company
Subsidiary A subsidiary undertaking as defined in the 2006 Act
TANESCO The Tanzania Electric Supply Company
Tcf Trillion cubic feet
TEITI Tanzania Extractive Industries Transparency Initiative
TPDC Tanzania Petroleum Development Corporation
TND Transmission and Distribution
Tsh Tansanian Shillings
TSR Total Shareholder Return (End Share Price - Opening
Share Price/Opening Share Price) plus (Sum of Dividends
per Share/Opening Share Price)
VAT Value Added Tax
WAF Wentworth Africa Foundation
Working A Company's equity interest in a project before reduction
Interest or WI for royalties or production share owed to others under
the applicable fiscal terms Working interest attributable
to Wentworth
About Wentworth Resources
Wentworth Resources is a publicly traded (AIM: WEN), independent oil &
gas company with natural gas production; exploration and appraisal
opportunities in the Rovuma Delta Basin of coastal southern Tanzania.
Inside Information
This announcement does not contain inside information.
Cautionary note regarding forward-looking statements
This press release may contain certain forward-looking information. The
words "expect", "anticipate", believe", "estimate", "may", "will",
"should", "intend", "forecast", "plan", and similar expressions are used
to identify forward looking information.
The forward-looking statements contained in this press release are based
on management's beliefs, estimates and opinions on the date the
statements are made in light of management's experience, current
conditions and expected future development in the areas in which
Wentworth is currently active and other factors management believes are
appropriate in the circumstances. Wentworth undertakes no obligation to
update publicly or revise any forward-looking statements or information,
whether as a result of new information, future events or otherwise,
unless required by applicable law.
Readers are cautioned not to place undue reliance on forward-looking
information. By their nature, forward-looking statements are subject to
numerous assumptions, risks and uncertainties that contribute to the
possibility that the predicted outcome will not occur, including some of
which are beyond Wentworth's control. These assumptions and risks
include, but are not limited to: the risks associated with the oil and
gas industry in general such as operational risks in exploration,
development and production, delays or changes in plans with respect to
exploration or development projects or capital expenditures, the
imprecision of resource and reserve estimates, assumptions regarding the
timing and costs relating to production and development as well as the
availability and price of labour and equipment, volatility of and
assumptions regarding commodity prices and exchange rates, marketing and
transportation risks, environmental risks, competition, the ability to
access sufficient capital from internal and external sources and changes
in applicable law. Additionally, there are economic, political, social
and other risks inherent in carrying on business in Tanzania. There can
be no assurance that forward-looking statements will prove to be
accurate as actual results and future events could vary or differ
materially from those anticipated in such statements.
Use of a Standard
Reserve and resource assessments in this announcement are made in
accordance with the standard defined in the SPE/WPC Petroleum Resources
Management System (2007) and the Canadian Oil and Gas Evaluation
Handbook ("COGEH").
Notice
The AIM Market of the London Stock Exchange has not reviewed this press
release and does not accept responsibility for the adequacy or accuracy
of this press release.
-Ends-
Wentworth Resources PLC, Final Results for the year ended 31 Dec 2019:
http://hugin.info/136496/R/2242477/885010.pdf
This announcement is distributed by West Corporation on behalf of West
Corporation clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Wentworth Resources Plc via Globenewswire
https://www.wentplc.com
(END) Dow Jones Newswires
April 25, 2019 02:00 ET (06:00 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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