2012 Interim Financial Results

RNS Number : 8031K

Argos Resources Ltd

28 August 2012

 



28 August 2012

ARGOS RESOURCES LIMITED

("Argos" or "the Company")

2012 Interim Financial Results

Argos Resources Limited (AIM: ARG.L), the Falkland Islands based explorationcompany focused on the North Falkland Basin, is pleased to announce its interim financial results for the six months ended 30 June 2012.

Highlights

·     With the final processed 3D seismic now available, ongoing work is identifying additional prospects and leads

·     Best estimate of prospective recoverable oil resources, currently 2.1 billion barrels, is expected to increase

·     A farmout programme seeking industry partners is under way

·     Premier Oil's commitment to develop Sea Lion and undertake further exploration drilling is an  endorsement of North Falkland Basin prospectivity and a major boost to its commerciality

Mr. Ian Thomson, Chairman of Argos, said:

"We are delighted with the early results of our 3D seismic with a best estimate 2.1 billion barrels of recoverable oil in 28 prospects, and upside of 7.3 billion barrels.  Mapping of the 3D data continues and is identifying additional prospects and leads which we expect will add further to the resource potential of the licence.

Premier Oil's farm-in to the adjacent Sea Lion oil field and its commitment to develop the field is a significant milestone in the exploitation of the North Falkland Basin and a major step towards the commercialisation of discoveries. 

Further exploration drilling is planned and we are extremely well placed to participate in this activity."

For further information:

Argos Resources Limited ([phone])

www.argosresources.com 

Ian Thomson, Chairman

John Hogan, Managing Director

Cenkos Securities plc

Jon Fitzpatrick ([phone])

Neil McDonald ([phone])

Citigate Dewe Rogerson ([phone])

Martin Jackson

Kate Lehane

Notes to Editors

Argos Resources is an oil and gas exploration company listed on AIM and based in the Falkland Islands. The Company's principal asset is a 100 per cent interest in production licence PL001 covering an area of approximately 1,126 square kilometres in the North Falkland Basin.

A 3D seismic survey was acquired in early 2011 covering the entire licence area. The quality of the seismic data acquired is excellent and clearly demonstrates a material increase in the prospectivity of the licence over that which could be identified from the older 2D seismic data. Twenty eight prospects have been identified to date by Argos in the licence area. These prospects have a total unrisked potential of 2.1 billion barrels of prospective recoverable resource in the most likely case and up to 7.3 billion barrels in the upside case. The licence area adjoins licences PL032 and PL004b. The Sea Lion oil discovery was made in licence PL032 in 2010 and a total of nine wells have now been drilled to complete the appraisal of this large discovery. An extension of the Sea Lion field into licence PL004b was proven by drilling in late 2011 and additional shallower stacked oil and gas accumulations above the Sea Lion field have also been proven in the Casper, Casper South and Beverley discoveries.

The presence of gas in these latest discoveries, together with gas in the Johnson discovery and gas condensate in the Liz discovery to the south points to a second deeper source rock generating commercial volumes of hydrocarbons into the basin, in addition to the Lower Cretaceous oil source rock.

The Company has a strong and experienced management team with extensive experience in both the oil and gas industry and the Falkland Islands.

This statement has been approved by John Hogan, Managing Director of Argos Resources and a qualified geologist with over 35 years of experience in the petroleum industry.

Chairman's statement

A Competent Person's Report based upon the interpretation of the 3D seismic data acquired in 2011 across the entire licence area was published in October 2011.  The Best Estimate of unrisked prospective recoverable resource was reported to be 2.1 billion barrels of oil in 28 prospects, with an upside of 7.3 billion barrels. Further mapping of the 3D data continued throughout the first half of 2012 and this work, which is still in progress, is identifying additional prospects and leads which we expect will add further to the resource potential listed above for the licence.

The prospectivity of our licence was exhibited for the first time at industry events in Houston and London in February and March respectively of this year and attracted much attention.  Following these events, in the second quarter of the year, the Company commenced a farmout programme to seek industry partners to participate in an exploration drilling campaign to test a number of highgraded prospects.  That farmout programme is being actively pursued at the time of writing and is expected to take several months to conclude.

Of particular significance for the future exploitation of our licence was the announcement on 7 July that Premier Oil had acquired a 60% interest and operatorship in the adjacent Sea Lion oil field.  Premier has committed to the development of the field, with financing of the full development costs in place.  Gross contingent oil resources to be developed are reported to be 386 million barrels of oil, and production from the field is expected to reach 70,000 barrels of oil per day.  The Sea Lion development will create an infrastructure from which the development of other future discoveries may benefit.  Premier has also already announced its intention to undertake further exploration activity in the area.  With several prospects similar to Sea Lion in our licence, and confirmed by excellent quality 3D seismic, we are extremely well placed to participate in this activity.

We were pleased to announce in June the appointment of Cenkos Securities as the Company's nominated financial advisor and sole broker.  Cenkos has a wealth of experience in the oil and gas sector and has been broker to a number of very successful exploration companies.

Financial overview

Losses for the Group for the 6 months to 30 June 2012 were $800K (2011 $557K) giving a loss per share of 0.37 cents (2011 0.26 cents).

Administrative expenses increased from $708K to $845K, largely due to an increase in salaries and travel costs associated with trade show attendance.

The $505K increase in exploration and development expenditure was mainly spent on continued interpretation of the seismic data.

Net assets at the period end have decreased from $35.1M to $34.3M as a result of the losses incurred.

Financial outlook

The Group is fully funded to carry out its current activities and has funds to cover administration costs beyond 2013.

Ian Thomson OBE

Chairman

Consolidated statement of comprehensive income

Period ended 30 June 2012

	Note	6 months ended 30 June 2012 unaudited $'000	6 months ended 30 June 2011 unaudited $'000	Year ended 31 December 2011 audited $'000
Administrative expenses		(845)	(708)	(1,449)
Finance income		18	31	40
Foreign exchange gains		27	173	123
Loss before tax		(800)	(504)	(1,286)
Tax (expense)/credit		-	(53)	146
Loss from operations attributable to owners of the parent		(800)	(557)	(1,140)
Total comprehensive income for the period attributable to owners of the parent		(800)	(557)	(1,140)
Basic and diluted loss per share (cents)	3	(0.37)	(0.26)	(0.53)

Consolidated statement of financial position

As at 30 June 2012

	Note	As at 30 June 2012 unaudited $'000	As at 30 June 2011 unaudited $'000	As at 31 December 2011 audited $'000
Assets
Non-current assets
Capitalised exploration expenditure		27,895	25,090	27,390
Plant and equipment		54	7	59
		27,949	25,097	27,449
Current assets
Other receivables		123	143	204
Cash and cash equivalents		6,885	12,677	8,175
Total current assets		7,008	12,820	8,379
Total assets		34,957	37,917	35,828
Liabilities
Total and current liabilities
Other payables	4	621	2,038	731
Corporation tax		-	198	-
Total net assets		34,336	35,681	35,097
Capital and reserves attributable to equity holders of the company
Share capital		6,595	6,556	6,556
Share premium		30,071	30,071	30,071
Retained losses		(2,330)	(946)	(1,530)
Total shareholders' equity		34,336	35,681	35,097

Consolidated statement of cash flows

Period ended 30 June 2012

	6 months ended 30 June 2012 unaudited $'000	6 months ended 30 June 2011 unaudited $'000	Year ended 31 December 2011 audited $'000
Cash flows from operating activities
Loss for period	(800)	(504)	(1,286)
Adjustments for:
Finance income	(18)	(31)	(40)
Depreciation	8	-	7
Net cash outflow from operating activities before changes in working capital	(810)	(535)	(1,319)
Decrease in other receivables	48	31	6
(Decrease) in other payables	(42)	(72)	(90)
Net cash (outflow) from operating activities	(804)	(576)	(1,403)
Investing activities
Interest received	18	36	43
Exploration and development expenditure	(566)	(19,113)	(22,671)
Purchase of plant and equipment	(2)	-	(66)
Net cash used in investment activities	(550)	(19,077)	(22,694)
Financing activities
Issue of ordinary shares (share options exercised)	39	-	-
Net cash from financing activities	39	-	-
Net (decrease) in cash and cash equivalents	(1,315)	(19,653)	(24,097)
Cash and cash equivalents at beginning of period	8,175	32,151	32,151
Exchange gains on cash and cash equivalents	25	179	121
Cash and cash equivalents at end of period	6,885	12,677	8,175

Consolidated statement of changes in equity - unaudited

Period ended 30 June 2012

		Share capital $'000	Share premium $'000	Retained earnings/ deficit $'000	Total equity $'000
At 1 January 2011		6,556	30,071	(394)	36,233
Total comprehensive income  for period to 30 June 2011		-	-	(557)	(557)
Share based payment expense		-	-	5	5
At 30 June 2011		6,556	30,071	(946)	35,681
Total comprehensive income for period to 31 December 2011		-	-	(584)	(584)
At 31 December 2011		6,556	30,071	(1,530)	35,097
Total comprehensive income for period to 30 June 2012		-	-	(800)	(800)
Shares issued (share options exercised)		39	-	-	39
At 30 June 2012		6,595	30,071	(2,330)	34,336

Notes to the interim report - unaudited

Period ended 30 June 2012

1      Accounting Policies

General information

Argos Resources Limited is a limited liability company incorporated and domiciled in the Falkland Islands under registration number 10605.  The address of its registered office is Argos House, H Jones Road, Stanley, Falkland Islands.

This consolidated interim report was approved for issue by the directors on 24 August 2012.

Basis of preparation

The financial information included within this interim report is reviewed but unaudited and is based on the consolidated financial statements of Argos Resources Limited and its subsidiary Argos Exploration Limited ("the Group").  They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2011 Annual Report.  These accounts have been prepared in accordance with the accounting policies that are expected to be applied in the Report and Accounts of Argos Resources Limited for the year ending 31 December 2012.

The comparative financial information for the year ended 31 December 2011 has been derived from the full statutory financial statements for that period which were prepared under IFRS.  The Independent Auditors' Report on the Annual Report and Financial Statements for 2011 was unqualified and did not draw attention to any matters by way of emphasis.

The IASB has issued various new and revised standards, amendments and interpretations to existing standards that are not effective for the financial year ending 31 December 2012 and have not been adopted early as the directors do not expect these standards and interpretations to have material impact on the financial statements.

Significant accounting judgements, estimates and assumptions

The Group makes certain estimates and assumptions regarding the future in relation to intangible assets and impairment of these assets.  Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  In the future, actual experience may differ from these estimates and assumptions.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed as follows:

Notes to the interim report - unaudited

Period ended 30 June 2012

1      Accounting Policies (continued)

Exploration and evaluation expenditure

As permitted under IFRS 6 the Group has accounted for evaluation and exploration expenditure using the "full cost" method whereby all costs associated with oil exploration are capitalised as intangible assets, pending determination of feasibility of the project.

Impairment of Intangible assets

If there are circumstances which suggest that the carrying value of intangible assets may be impaired, the Group is required to test whether the intangible assets have suffered any impairment.  The valuation of intangible assets requires judgements to be made in respect of discount rates, growth rates and future cash flows and the cost of capital.  Actual outcomes may vary.

2       Segmental reporting

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (the "CODM").  The CODM has been identified as the board of directors.  The CODM in accordance with IFRS 8 has considered the Group's activities and is of the opinion that the Group has only one operating segment which is that of oil and gas exploration in the waters around the Falkland Islands.

3       Loss per share	6 months ended 30 June 2012 unaudited $’000	6 months ended 30 June 2011 unaudited $’000	Year ended 31 December 2011 audited $’000
Loss for the period	(800)	(557)	(1,140)
Weighted average number of ordinary
shares in issue during the period	216,223,095	216,113,205	216,113,205
Basic and diluted loss per ordinary share (cents)	(0.37)	(0.26)	(0.53)

In accordance with IAS 33 as the Group is reporting a loss for this, the preceding period and the year to 31 December 2011 the share options are not considered dilutive because the exercise of share options would have the effect of reducing the loss per share.

Notes to the interim report - unaudited

Period ended 30 June 2012

4       Other payables	6 months ended 30 June 2012 unaudited $'000	6 months ended 30 June 2011 unaudited $'000	Year ended 31 December 2011 audited $'000
Trade payables	446	809	603
Accruals	175	1,229	128
	621	2,038	731

5       Events after the reporting date

There are no events after the balance sheet date which are required to be reported.

Independent review report to Argos Resources Limited

Introduction

We have been engaged by the Company to review the set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises of the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in equity and notes to the interim report.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors.  The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the Company a conclusion on the set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose.  No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent.  Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

BDO LLP

Chartered Accountants

London

United Kingdom

Date        24 August 2012

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Investor Information and advisors

Registered Office Argos House H Jones Road Stanley Falkland Islands	Registrars Computershare Investor Services (Jersey) Ltd Queensway House Hilgrove Street St Helier Jersey,  JE1 1ES
Business address Argos House H Jones Road Stanley Falkland Islands	Bankers Lloyds TSB 3 -5 Bridge Street Newbury, RG14 5HB
Company Secretary Kevin Kilmartin Argos House H Jones Road Stanley Falkland Islands	Bankers Lloyds TSB Offshore Ltd Corporate Banking 9 Broad Street St Helier Jersey, JE4 8RS
Nominated adviser and broker Cenkos Securities PLC 6.7.8 Tokenhouse Yard London EC2R 7AS	Bankers Standard Chartered Bank Ross Road Stanley Falkland Islands
Solicitors (Falkland Islands law) Kilmartin Marlor Argos House H Jones Road Stanley Falkland Islands	Bankers HSBC Bank Bermuda Ltd 6 Front Street Hamilton, HM 11 Bermuda
Solicitors (English law) Peachey & Co LLP 95 Aldwych London  WC2B 4JF	Public relations Citigate Dewe Rogerson 3 London Wall Buildings London  EC2M 5SY
Auditors BDO LLP 55 Baker Street London W1U 7EU	Web site www.argosresources.com

 

END

 

 

IR EALPSASSAEEF