2013 Financial Results

RNS Number : 9982H

Argos Resources Ltd

27 May 2014

 



27 May 2014

ARGOS RESOURCES LIMITED

("Argos" or "the Company")

2013 Financial Results

Argos Resources Limited (AIM: ARG.L), the Falkland Islands based exploration company focused on the North Falkland Basin, is pleased to announce its financial results for the year ended 31 December 2013.

Highlights

·      $0.7 million invested in further exploration and evaluation activities

·      $1.8 million loss from expensed overhead

·      $2.9 million cash reserves at 31 December 2013

·      New Competent Person's Report published in July 2013 identifies significant increase in number of prospects and prospective resources

·      52 prospects mapped with a Best Estimate of unrisked recoverable resource of 3.1 billion barrels of oil and an upside of 10.4 billion barrels

·      Several prospects similar to the adjacent Sea Lion oil discovery

·      40 further leads identified

·      Independent basin modelling work confirms the presence of two source rocks mature for oil generation within the licence area

·      Progressing farmout discussions with interested parties

·       Preparing for shared drilling activity in 2015

Mr. Ian Thomson, Chairman of Argos Resources, said:

"The next key step is to secure financing for exploration drilling to test the prospect inventory.  We are focussed on finding an industry partner to finance drilling operations with the capability and track record of progressing discoveries through to development.  We now have a number of companies who have been through the farmout data room and are expressing interest.  Negotiations are under way at the time of writing.

The farmout effort has been an extended process with the main contributing factor being the timing of rig availability with every potential farminee wanting to participate in a shared drilling programme to realise the considerable cost savings.  The operators in the region are making progress in arranging a shared drilling programme with a rig identified and under negotiation for a drilling programme commencing in early 2015.  While Argos Resources cannot make a commitment to this rig contract until we have completed a farmout, we have remained in close contact with the other operators to ensure there is an option to join this drilling programme once financing is secured."

The full Annual Report and Consolidated Financial Statements can be read and downloaded from the Company website:                http://www.argosresources.com/news.php?page=regulatory-news 

For further information:

Argos Resources Limited ([phone])

www.argosresources.com 

Ian Thomson, Chairman

John Hogan, Managing Director

Cenkos Securities plc

Derrick Lee ([phone])

Neil McDonald ([phone])

Citigate Dewe Rogerson ([phone])

Martin Jackson

Shabnam Bashir

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 interpretation of the final processed data has led to the identification of 52 prospects and 40 leads within the licence area. A Competent Person's Report issued in July 2013 describes the 52 prospects and the leads. The prospects have a total unrisked potential of 3.1 billion barrels of prospective recoverable resources in the most likely case and up to 10.4 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

Technical work on PL001 has progressed well. We have acquired a large 3D seismic database of exceptionally good quality at a competitive price. From this we have identified a large inventory of prospects, many of which are similar to the adjacent Sea Lion oil discovery. Independent studies also indicate the presence of mature oil source rocks across the licence area capable of generating significant volumes of oil.

The next key step is to secure financing for exploration drilling to test the prospect inventory. We have focussed on finding an industry partner to finance drilling operations with the capability and track record of progressing discoveries through to development. Given that we still hold 100 percent of the licence we believe that we have sufficient scope to attract an industry partner whilst still retaining a material stake in the licence for our shareholders.

The search for a partner has been underway through 2013 with a data room open and a farmout process managed by investment banking advisors to the Company. We now have a number of companies who have been through the data room and are expressing interest. Negotiations are underway at the time of writing.

The farmout effort has been an extended process with the main contributing factor being the timing of rig availability and drilling. Every potential farminee has wanted to participate in a shared drilling programme with the other operators in the Falklands to realise the considerable cost savings that are achievable through sharing mobilisation costs and logistics. This has required alignment with the other operators in the region on the timing and preparation for the forthcoming drilling campaign. This alignment is now being achieved with a shared rig identified and under negotiation for a drilling programme commencing in early 2015. While Argos Resources cannot make a commitment to this rig contract until we have completed a farmout, we have remained in close contact with the other operators to ensure that there is an option to join this drilling programme once financing is secured.

As part of the shared drilling programme, Premier Oil has announced the drilling of an additional appraisal well on Sea Lion, immediately to the east of PL001 and deepening it to test their Chatham prospect.  This and three further exploration wells on new prospects immediately to the south of our licence will provide additional information on the prospectivity of our licence. We believe there is a high likelihood of additional commercial oil discoveries being made during this drilling programme which will benefit Argos through the further de-risking of the basin's prospectivity.

We are naturally keen to conclude our own farmout and join this programme in the North Falkland Basin. I would like to thank shareholders for their continued support as we progress towards that objective.

Ian Thomson

Chairman

Managing Director's review

1,579 sq kms of proprietary 3D seismic data was acquired by the Company in 2011 which included coverage of the entire licence area and certain areas within the adjacent open acreage. An independent CPR, based on the preliminary results of processing of the 3D data was published in October 2011, and described 28 prospects with a Best Estimate of unrisked prospective recoverable resource of 2.1 billion barrels of oil and an upside of 7.3 billion barrels.

The final processed versions of the 3D data were received in January 2012 and showed much greater prospectivity than had been identified from the preliminary data. Work on mapping the additional prospects continued throughout 2012 and in February 2013 a new CPR was commissioned to independently document the full potential of the licence as indicated from the final processed data.

This new CPR was published in July 2013. It describes 52 prospects with a Best Estimate of unrisked prospective recoverable resource of 3.1 billion barrels of oil and an upside of 10.4 billion barrels, a significant increase on the previously reported figures. Of these prospects, 36 are Lower Cretaceous post-rift prospects in similar stratigraphic settings and of similar age to the Sea Lion oil field. 10 prospects are in the deeper Lower Cretaceous syn-rift stratigraphic section, and 6 are robust structural closures. Many of the stratigraphic prospects are vertically stacked or overlap, allowing several targets to be tested in a single vertical exploration well. A further 40 leads have been identified but are not included in the above figures and these will be the subject of further work if merited by early success. The Johnson gas discovery in the acreage to the east of PL001 may extend into the licence area, however no resources have been included in the above figures for this possibility.

In 2013 the Company also commissioned Platte River Associates, a leading industry provider of basin modelling solutions, to undertake a basin modelling and source rock study of the North Falkland Basin in the vicinity of PL001. The study independently assessed the quality and maturity of potential source rocks. The work concluded that the principal source rock in PL001 is in the Lower Cretaceous post-rift section, which is believed to be the source of the oil in the Sea Lion field, with additional source rocks in the deeper syn-rift section. Many of the syn-rift and post-rift prospects are encased within these source rocks, providing an ideal relationship between reservoir, source and seal. Both the syn-rift and post-rift source rocks were concluded to be mature for oil generation and expulsion within the licence area with a calculated total of about 30 billion barrels of expelled oil available to source prospects in PL001.

Geological and geophysical work on the licence is now largely complete and that work has confirmed a licence area that is rich in prospectivity, with mature oil source rock also present. Engineering work will be required for future well planning and design, and additional environmental data may need to be collected once final drilling locations have been selected.

The cash position at year end 2013 of $2.9 million is considered sufficient to meet the Company's ongoing needs

Results and dividend

The results for the year and the Group's financial position as at the year-end are shown in the attached financial statements.  The directors have not recommended a dividend for the year (2012: $nil).

Business review

The Group has incurred a loss for the year ended 31 December 2013 of $1.84 million (2012: $1.58 million) which equates to a loss per share of 0.85 cents (2012: 0.73 cents).  The increased loss over the comparative period was due principally to reduced foreign exchange gains.

Administration expenses increased marginally from $1.75 million to $1.85 million.

Shareholders' equity has decreased from $33.6 million to $31.7 million in the year since 31 December 2012, representing primarily the administration expenses.  Cash in the year reduced from $5.7 million to $2.9 million which reflects the overhead spend, the Company's continued investment in 3D seismic interpretation and a reduction in payables due to the payment of retention from the 3D seismic contract.

Outlook for the next financial year

The Group's administrative expenditure continues to be fully funded for the foreseeable future, but further fundraising will be required before the Group can embark upon a drilling programme.

John Hogan

Managing Director

Consolidated statement of comprehensive income

Year ended 31 December 2013

			Year ended 31 December 2013 $'000	Year ended 31 December 2012 $'000
Administrative expenses			(1,846)	(1,749)
Finance income			17	37
Foreign exchange (losses)/gains			(15)	130
Loss for the year attributable to owners of the parent			(1,844)	(1,582)
Total comprehensive income for the period
attributable to owners of the parent			(1,844)	(1,582)
Basic and diluted loss per share (cents)			(0.85)	(0.73)

Consolidated statement of financial position

As at 31 December 2013

			2013	2012
			$'000	$'000
Assets
Non-current assets
Capitalised exploration expenditure			28,956	28,280
Plant and equipment			36	54
			28,992	28,334
Current assets
Other receivables			140	169
Cash and cash equivalents			2,892	5,688
Total current assets			3,032	5,857
Total assets			32,024	34,191
Liabilities
Current liabilities
Trade and other payables			314	637
Total liabilities			314	637
Total net assets			31,710	33,554
Capital and reserves attributable to
equity holders of the Company
Share capital			6,595	6,595
Share premium			30,071	30,071
Retained losses			(4,956)	(3,112)
Total shareholders' equity			31,710	33,554

Consolidated statement of cash flows

Year ended 31 December 2013

		Year ended 31 December 2013 $'000	Year ended 31 December 2012 $'000
Cash flows from operating activities
Loss for period before taxation		(1,844)	(1,582)
Adjustments for:
Finance income		(17)	(37)
Depreciation		20	18
Net cash outflow from operating activities
before changes in working capital		(1,841)	(1,601)
Decrease in other receivables		28	30
Increase/(decrease) in other payables		174	(154)
Net cash outflow from operating activities		(1,639)	(1,725)
Investing activities
Interest received		18	42
Exploration and development expenditure		(1,154)	(966)
Purchase of plant and equipment		(2)	(13)
Net cash used in investment activities		(1,138)	(937)
Financing activities
Issue of ordinary shares (share options exercised)		-	39
Net cash from financing activities		-	39
Net decrease in cash and cash equivalents		(2,777)	(2,623)
Cash and cash equivalents at beginning of period		5,688	8,175
Exchange (losses)/gains on cash and cash equivalents		(19)	136
Cash and cash equivalents at end of the year		2,892	5,688

Consolidated statement of changes in equity

Year ended 31 December 2013

		Share capital $'000	Share premium $'000	Retained losses $'000	Total equity $'000
At 1 January 2012		6,556	30,071	(1,530)	35,097
Total comprehensive income for the year		-	-	(1,582)	(1,582)
Shares issued (share options exercised)		39	-	-	39
At 31 December 2012		6,595	30,071	(3,112)	33,554
At 1 January 2013		6,595	30,071	(3,112)	33,554
Total comprehensive income for the year		-	-	(1,844)	(1,844)
At 31 December 2013		6,595	30,071	(4,956)	31,710

 

END

 

 

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