Final Results

Molecular Energies PLC

28 June 2023

 

28 June 2023

Molecular Energies PLC

("Molecular", "the Company", or "the Group")

Audited Results for the year ended 31 December 2022

2023 update and outlook

AGM date

Molecular (AIM: MEN), the international energy company is pleased to announce its audited results for the year ended 31 December 2022 and a 2023 update and outlook.

The Company's Annual Report will be posted to Shareholders on 30 June 2023 together with the Notice for the Annual General Meeting.

Peter Levine, Chairman, commented:

"The year under report was challenging and volatile in certain ways, rewarding in others and, considering all the circumstances, the results were sound. However, activities since the start of the year point to a more stable future and there is potential for some exciting developments in the Group as a whole going forward.

"As separately announced today, we are encouraged by the progress made in Green House Capital and look forward to developing its potential as a separate listed entity."

Highlights FY2022

Financial

·      Adjusted EBITDA contribution from Argentina US$9.8 million (2021: US$10.5 million) with adjusted Group EBITDA* of US$7.0 million (2021: US$7.5 million).

·      Group revenue of US$33.2 million (2021: US$34.1 million) as lower sales volumes, due in part to the Rio Negro incident, were offset by higher realised prices in both Argentina and the USA.

·      The average price across the Group was US$55.9/boe (2021: US$40.7/boe) due to the recovery in market prices in the year.

·      Net cash generated by operating activities increased by 3% to US$11.4 million (2021: US$11.1 million).

·      Free cash generation from core operations* (excluding workovers) of US$11.3 million (2021: US$12.8 million).

·      Year-end cash balances US$7.9 million (2021: US$2.0 million).

·      After depreciation, depletion and amortisation of US$8.8 million (2021: US$11.5 million) loss after tax of US$10.5 million (2021 profit US$4.6 million).

·      Borrowings at year end increased to US$47.5 million (2021: US$29.3 million). Of this, US$35 million is third party financial debt in Argentina with no recourse to the Group. The majority of this is dollar-based debt at low average interest rates of less than 5%. This has no material impact on the Group as it is a dollar-based business. The balance is in effect peso-denominated which is advantageous to the Group. The balance of US$11.9 million is owed by the Group to IYA, an affiliate company of Chairman Peter Levine. The increase in third party debt in Argentina relates to the heavy capex programme last year and the incident at the Puesto Flores facility. All borrowings are being serviced in accordance with their terms.

·      Since the end of the period, the IYA debt has been converted to an interest free loan with a maturity now out to the end of 2025 and financial borrowings in Argentina have been measurably reduced with much of the remaining debt refinanced and extended on attractive terms. 

Corporate

·      Name of Company changed from 'President Energy PLC' to 'Molecular Energies PLC' to reflect the expansion of our interests in alternative energies and related technologies. 

·      Capital reorganisation consolidating every 200 existing ordinary shares into one consolidated share, and the sub-division of every such consolidated share into one new ordinary share and one deferred share.

·      Further tranche of US$3.585 million in bonds issued to the Argentine market to fund further working capital and capital expenditure. The interest rate was 3.89% with a 25-month repayment period and an initial 16-month capital repayment holiday.

·      Market value of retained 22.5% holding in Atome Energy PLC ("Atome"), the Company's green hydrogen and ammonia affiliate, increased in US dollar terms by approximately 14% throughout the year, whilst the share price in GB pound terms increased by approximately 28%.

·      Became 75% beneficial shareholder in Green House Capital, an incubator company for alternative energy projects which is subject to a separate RNS today regarding the potential forthcoming spin-off.

Operations

·      Group net average production 1,708 boepd (2021: 2,473 boepd).

·      Production in Argentina adversely impacted by the incident in Rio Negro concession announced on 11 August 2022 that impacted on production from the Puesto Flores oil field in the latter parts of the year.

·      Three new well drilling programme in Salta, Argentina commenced late 2021 and successfully completed during the year. All three wells on stream and now producing.

·      Argentina well operating costs per boe in 2022, excluding royalties and workovers* US$25.9 per boe (2021: US$17.0) due to lower production.

·      Group-wide administrative costs stable at US$4.5m (2021: US$4.4m) excluding directly attributable Atome expenses in 2021.

·      Work on our Paraguay exploration well progressed with our partners.

·      Studies continued regarding potential secondary recovery project in the Rio Negro concession.

·      Exploration planning continued at the Martinez del Tineo field which, subject to rig availability, is slated to be drilled towards the end of 2023.

·      Matorras and Ocultar licences in Salta successfully relinquished.

Production and reserves

·      Net 2P (proven and probable) reserves in Argentina at year end, as confirmed by an independent reserves audit of 18.9 mmboe (2021: 24.4 mmboe).

·      Louisiana 1P current proven producing reserves to be written off completely this year and contingency for liabilities released.

Production	Oil (bbls)		Natural Gas (mmcf)		Total (mmboe)
Country	2022	2021	2022	2021	2022	2021
Argentina	408,999	561,947	1,172.5	1,838.9	604.4	868.4
USA	15,470	19,831	22.6	87.0	19.2	34.3
	424,469	581,778	1,195.1	1,925.9	623.6	902.7

Net Reserves (mboe)	Argentina	USA	Total
As at 31 December 2021	24,399.5	723.8	25,123.3
Revisions in reserves	(4,894.2)	(681.6)	(5,575.8)
Production	(604.4)	(19.2)	(623.6)
As at 31 December 2022	18,900.9	23.0	18,923.9

Reserve revisions in Argentina reflect the results of production performance, drilling and workovers in the year and the subsequent independent auditor's reserve report by J&R Consultora. It is important to note that the reserves as at 31 December 2022 do not represent the total of what is present and/or recoverable in the respective fields in Rio Negro but only what are present and/or recoverable over the remaining term of Molecular's current licenses to 2026 / 2027. It is contemplated that, in due course, Molecular's core licences will be extended for a further 10 years which would then increase the reserves, ceteris paribus.

* Calculation of all quoted metrics not directly corresponding to GAAP measures are detailed in the Alternative Performance Measure glossary and cross referenced to the Notes where applicable

Current Trading

Argentina

With a second separator this month brought up to full capacity in the core area of Puesto Flores, oil production is climbing, with an anticipated level from that field by the beginning of July of over 150m3/day. This excludes oil and gas production from our other fields in Rio Negro such as Estancia Vieja and Puesto Prado. Production from Salta Province is stable at approximately 60m3/day.

A frac campaign is slated to commence in the Puesto Flores field by September targeting, on a success case, an initial additional 60m3/day of oil production. A mobile workover/light drilling rig has been identified to be acquired by the Group and put into working order within the next few months which will enable Molecular to react to downhole issues in wells as and when they arise and reactivate relevant shut-in wells whether in Rio Negro or Salta Province. The rig, which, if purchased, is expected to cost some US$1.5 million, is intended to be funded without recourse to equity dilution. 

A new high-impact exploration well is scheduled to start to be drilled before the end of the year at the Martinez del Tineo field in the Puesto Guardian Concession, Salta. Previously considered as a farm-out candidate, Molecular has decided to go it alone. The well is going through its planning and permission stages, and it will be targeting both an oil rim with existing 2P reserves of 1.1 mmboe in the Martinez del Tineo field and a deeper gas exploration reservoir of a potentially larger size of some 110 mmboe of unrisked resources (as estimated by Gaffney, Cline) but with a lower chance of success. The size of the prize is however too big to ignore. The well's cost is still being assessed but is likely to be in the region of US$5 million and is intended to be funded without recourse to equity dilution.

With elections coming up later this year, it is hoped that 2024 will see a more stable macro environment for Argentina with the EBITDA for our Argentine business expected to increase for Q2 from the US$2 million in Q1.

Paraguay

The high-impact well to be drilled at the Tapir location in the Chaco, Paraguay is now scheduled to commence mid-August with the further delay due to a further inspection of the rig by Molecular requiring the drilling company to make additional repairs with drill safety a paramount concern. The delays place no further cost burden on Molecular or its partner, CPC.

All other necessary preparations are in hand, and we look forward to at last getting down to business. I plan to be on site when this happens.

Atome

This spin-out from Molecular has proved to be a great success with the Company founding Atome from scratch within the last three years. Since the IPO at the end of 2021, Atome has gone from strength to strength with the share price increasing approximately 30% since the IPO. With a market capitalisation of some US$55 million, Molecular retains a solid investment of 22.5% in Atome after providing Molecular shareholders with a substantial dividend in specie at the time of the 2021 IPO.

With the recent Baker Hughes investment into Atome, Molecular looks forward to Atome's future with confidence.

Green House

Following on from the success of the spin-off of Atome, Molecular has initiated steps towards spinning-off this division in the latter part of this year to unlock the value in Green House not currently reflected by being part of the Molecular Group. The spin-off will expose Green House to a wider investor audience that is more focussed on green-energy solutions in a similar manner to Atome. Reference is made to the separate announcement made by the Group in this regard at the same time as announcement of these report and accounts.

Management 

The Board appointed Jordan Coleman as CEO (non-board) of our hydrocarbons division late last year and these results prove the positive impact he is having on operations. Similarly, the Board now intends to appoint a CEO of our Green House division in the near term.

Outlook

The outlook for Molecular is looking a tad brighter. With good traction and new elections in Argentina this year, two high-impact wells planned, material progress on the business within Green House, allied with its potential spin-off later this year, there are many moving parts. Whilst one has to be severely realistic as to the chances of success in exploration wells, the Group has positives to look forward to over the next 12 months.

The Company's Annual Report will be posted to shareholders on 30 June 2023. 

Annual General Meeting and Investor Q&A

The Annual General Meeting will be held on Tuesday 25 July 2023 at 1.00 p.m. BST at Carrwood Park, Selby Road, Leeds LS15 4LG.

For further information, please visit www.molecularenergiesplc.com or contact:

Molecular Energies PLC Peter Levine, Chairman  Rob Shepherd, Group FD	[phone]
finnCap (Nominated Advisor and Broker) Christopher Raggett, Tim Harper	[phone]

Notes to Editors

Molecular Energies PLC is an AIM listed company at the forefront of energy development and has interests across the energy spectrum, from oil and gas projects to subdivisions in the green and alternative energy sub-sectors.

The Company has oil and gas production in Argentina as well as exploration assets in both Argentina and Paraguay. The Company has two separate subdivisions which are focused on early-stage opportunities in the green and/or alternative energy sub- sector.

Activities in the green and alternative energy space are being carried out under the Green House Capital brand and through AIM listed Atome Energy PLC, a green hydrogen, ammonia, and fertiliser company operating in Paraguay, Costa Rica and Iceland, in which Molecular currently has 22.5%.

With a strong strategic and institutional base of support, an in-country management team as well as the Chairman whose interests as the largest shareholder are aligned to those of its shareholders, Molecular gives UK investors access to an energy growth story combined with world class standards of corporate governance, environmental and social responsibility.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR"). The person who arranged for the release of this announcement on behalf of the Company was Peter Levine, Chairman.

Detailed Financial Review

2022 has proved a challenging year as production decline in both Argentina and USA hydrocarbon businesses have impacted on the financial returns. While world oil prices have been higher than 2021, controlled prices in Argentina and restricted access to export markets has limited the ability of the Group to benefit from these. However, efforts have continued to focus on developing alternative energy businesses with the establishment of Green House Capital to pursue opportunities akin to that achieved with Atome in 2021 which will assist in rebalancing the assets and business of the Group going forward. The Group retains a 22.5% stake in Atome, with the accounting rules governing consolidation of investments in associate undertakings with significant influence, shareholders will need to look to the Company Balance Sheet to see the improvement in the market value of the investment in the period as highlighted in Note 9.

Revenue fell by 3% to US$33.2 million (2021: US$34.1 million) as lower sales volumes were offset by higher realised prices in both Argentina and the USA; the average Group product price was US$55.9/boe (2021: US$40.7/boe) due to the recovery in market prices in the year. Overall Group production fell by 31% to 1,708 boepd (2021: 2,473 boepd).

Production in Argentina was adversely impacted by an incident in our Rio Negro concession that impacted on production from the Puesto Flores oil field in the latter part of the year although the financial impact was partially offset by a successful insurance claim.

Cost of sales decreased to US$30.3 million (2021: US$33.4 million) due to lower production related depreciation and a one-off credit arising on the release of an abandonment provision.

Free cash generation from core operations excluding changes in working capital, administrative expense and non-recurring workovers fell by 12% to US$11.3 million (2021: US$12.8 million).

After depreciation, depletion and amortisation of US$8.8 million (2021: US$11.5 million) and administrative expenses of US$4.5 million (2021: US$5.8 million), the Group recorded a reduced operating loss of US$1.6 million (2021: loss US$5.0 million).

Included within administrative expenses in 2021 were US$1.4 million of directly attributable Atome expenses largely offset by the US$1.3 million non-operating gain arising on migration to an associate investment, and directly linked to the US$1.3 million receivable ultimately recovered in 2022. The overall impact of Atome related expenses was essentially neutral in 2021.

An impairment of US$10.0 million (2021: US$0.1 million) was recognised in the period. Following a decision to focus exploration efforts the Hernadarias concession was relinquished in 2023 resulting in an impairment of the carrying value at the end of 2022 of US$8.5 million. While the reduction in USA reserves triggered an impairment review and an impairment of US$1.4 million.

Non-operating gains largely arising on recoveries of previously impaired costs, insurance proceeds and asset disposals resulted in a US$1.3 million gain (2021: gain US$14.5 million) in contrast to the Atome related gains in the prior period. Higher interest on Argentina related borrowings were offset by foreign exchange gains including related treasury income. Loss before tax for the year was US$12.2 million (2021: profit US$5.7 million) with loss after tax totalling US$10.5 million (2021 profit: US$4.6million).

Argentine operating performance

Production in Argentina decreased by 30% to 604,411 boe (2021: 868,427 boe) or 1,656 boepd (2021: 2,379 boepd). Average realised sales prices in Argentina rose by 35% to US$54.7 per boe (2021: US$40.6 per boe) benefitting from partial exposure to world market prices on export sales.

Well operating costs in Argentina before non-recurring items* rose by 52% to US$25.9/boe (2021: US$17.0/boe) on lower volumes associated with production decline. Depreciation fell during the year to US$12.1/boe (2021: US$12.9/boe)* reflecting changes in future reserve development cost estimates. The extension of the Rio Negro licence period and/or the secondary recovery project which are both under discussion with the Neuquén Province would lead to a significant reduction in depreciation rates. Overall, following the annual independent review, proved and probable reserves in Argentina decreased by 21% largely on the Rio Negro assets. This change triggered an impairment review for these cash generating units, but no impairment was considered necessary.

USA operating performance

Overall production from the Group's working interest in US operations fell by 44% to 53 boepd (2021: 94 boepd). Despite production rates returning to previous levels in May 2022, production stagnated in middle of the year requiring a two-month shut-in and further workover of the well. Production resumed in early November, but it became apparent by the end of the year that future performance from the new reservoir zone would be materially below historic levels triggering a reduction in future reserves and an impairment review. Subsequent to the higher depreciation charge, an impairment of US$1.4 million was recognised.

Average realised prices in the US more than doubled over the prior year to US$87.8/boe (2021: US$43.1/boe). Well operating costs excluding royalty related expenses and non-recurring workovers* rose to US$44.1 /boe (2021: US$14.3 /boe) due to lower production levels. Depreciation rose during the year to US$72.4/boe (2021: US$6.3/boe)* due to the reduction in future reserves estimates. 

This asset has now been sold by the Group and the accounts for 2023 will show a release of the associated contingent liabilities.

Corporate

While much of the focus in 2021 was on the value creation in bringing Atome to the market, development drilling in Argentina and concluding the farm out of the Pirity Concession in Paraguay, activity through 2022 focused on transition. The Group changed its name to Molecular Energies plc and with the sub-division of shares in October 2022, the emphasis was on preparing the business for the future. New entities have been created under the Green House Capital division that are expected to develop new alternative energy opportunities in future periods. Argentina remains the core hydro-carbon division and continues to self-fund through access to local capital markets. Through 2022, preparations to drill the exploration well on the Pirity concession in 2023 continued. Accordingly, management consider that it is appropriate to continue to capitalise the balance of US$46 million at 31 December 2022 (2021: US$54 million).

Investment in the Oil & Gas Assets component of Property, Plant and Equipment in the year amounted to US$24.2 million (2021: US$ 14.7 million) with the completion and re-entry of four wells in the Salta Concession in Argentina, installation of new facilities in Rio Negro following fire damage and capitalised workovers in Argentina. In the USA, ownership of the Pacific Enterprises well was acquired for future use as a saltwater disposal well.

Overall, Trade and Other Payables increased to US$24.1 million (2021: US$22.0 million) due to obligations arising on drilling commitments.

Trade and Other Receivables decreased to US$11.7 million (2021: US$11.9 million). In financing Argentine drilling activity, the Group managed currency exposure by prepaying for US$1.6 million (2021: US$3.2 million) of drilling costs to be discharged on future activity. Under borrowing arrangements, proceeds are received net of interest earned in future periods resulting in a prepayment of interest.

At the end of the year, the Group had a net current liability of US$19.4 million (2021: US$9.2 million). However, after deducting the liabilities on drilling and capital accruals, which are periodic in nature as detailed in Note 19, the underlying net current liability from ongoing operations is lower at US$7.1 million (2021: US$3.2 million). Year-end cash balances were US$7.9 million (2021: US$2.0 million).

Key Performance Indicators

Key Performance Indicators are used to measure the extent to which Directors and management are reaching key business objectives for the Group. The principal methods by which the Directors monitor the Group's performance are volumes of net production, well operating costs and the extent of exploration success. The Directors also carry out a regular review of cash available for exploration and development and review actual capital expenditure and operating expenses against forecasts and budgets.

	2022		2021		Increase/ (Decrease)
Production mboe
USA	19.2		34.3		-44.0%
Argentina	604.4		868.4		-30.4%
Total net hydrocarbons	623.6		902.7		-30.9%
Well operating costs US$000*
USA	1,000		488		104.9%
Argentina	15,917		15,538		2.4%
Total operating costs	16,917		16,026		5.6%
Well operating costs per boe US$*
USA	52.1		14.2		266.1%
Argentina	26.3		17.9		47.2%
Total well operating costs per boe US$	27.1		17.8		52.8%

* calculation of all quoted metrics not directly corresponding to GAAP measures are detailed in the Alternative Performance Measure glossary and cross referenced to the Notes where applicable

Underlying operating costs excluding non-recurring items have been calculated and detailed in the Alternative Performance Measure section of this report.

Consolidated Statement of Comprehensive Income

Year ended 31 December 2022

	Note		2022 US$000		2021 US$000
Continuing Operations
Revenue			33,233		34,147
Cost of sales	2		(30,344)		(33,431)
Gross profit/(loss)			2,889		716
Administrative expenses	3		(4,543)		(5,764)
Operating profit /(loss) before impairment and non-operating gains/(losses)			(1,654)		(5,048)
Presented as:
Adjusted EBITDA			6,947		7,526
Non-recurring items			(407)		(751)
EBITDA excluding share options			6,540		6,775
Release of abandonment provision			711		-
Depreciation, depletion & amortisation			(8,790)		(11,456)
Share based payment expense			(115)		(367)
Operating profit / (loss)			(1,654)		(5,048)
Non-operating gains / (losses)	4		1,270		14,494
Loss on investment in associate undertaking			(25)		-
Impairment credit / (charge)	5		(10,016)		(51)
Profit / (loss) after impairment and non-operating gains/(losses)			(10,425)		9,395
Finance income			4,907		1,633
Finance costs			(6,649)		(5,324)
Profit / (loss) before tax			(12,167)		5,704
Income tax (charge)/credit comprises:
Current tax income tax (charge)/credit			(59)		-
Deferred tax: foreign exchange arising on provision for future taxes			(3,409)		(1,341)
Deferred tax being underlying provision for future taxes			5,137		216
Total income tax (charge)/credit			1,669		(1,125)
Profit / (loss) for the year from continuing operations			(10,498)		4,579
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations			5		-
Total comprehensive profit /(loss) for the year attributable
to the equity holders of the parent			(10,493)		4,579
Earnings / loss per share	6		US cents		US cents
Basic profit/(loss) per share from continuing operations			(102.02)		45.07
Diluted profit(loss) per share from continuing operations			(102.02)		44.17

The accompanying accounting policies and notes form an integral part of these financial statements.

Consolidated Statement of Financial Position

31 December 2022

ASSETS		2022 US$000		2021 US$000
Non-current assets
Intangible exploration & evaluation assets		45,721		54,304
Goodwill		705		705
Property, plant and equipment		71,937		59,148
Investment in associate		-		25
Deferred tax		45		350
Other non-current assets		103		103
		118,511		114,635
Current assets
Trade and other receivables		11,710		11,887
Stock		-		1,336
Cash and cash equivalents		7,941		2,014
		19,651		15,237
TOTAL ASSETS		138,162		129,872
LIABILITIES
Current liabilities
Trade and other payables		20,708		17,424
Borrowings		18,391		7,014
		39,099		24,438
Non-current liabilities
Trade and other payables		3,362		4,580
Long-term provisions		7,854		7,480
Borrowings		29,134		22,250
Deferred tax		250		2,283
		40,600		36,593
TOTAL LIABILITIES		79,699		61,031
EQUITY
Share capital		36,179		36,179
Share premium		48		48
Translation reserve		(50,235)		(50,240)
Profit and loss account		64,647		75,145
Reserve for share-based payments		7,824		7,709
TOTAL EQUITY		58,463		68,841
TOTAL EQUITY AND LIABILITIES		138,162		129,872

Consolidated Statement of Changes in Equity

Year ended 31 December 2022

									Reserve
							Profit		for share-
	Share		Share		Translation		and loss		based
	capital		premium		reserve		account		payments		Total
	US$000		US$000		US$000		US$000		US$000		US$000
Balance at 1 January 2021	35,708		257,992		(50,240)		(174,631)		7,538		76,367
Share-based payments	-		-		-		-		367		367
Debt conversion	82		58		-		-		-		140
Subscription	241		254		-		-		-		495
Exercise of options	148		48		-		-		(196)		-
Capital reduction	-		(258,304)		-		258,304		-		-
Dividend in specie	-		-		-		(13,130)		-		(13,130)
Transactions with the owners	471		(257,944)		-		245,174		171		(12,128)
Profit for the year	-		-		-		4,579		-		4,579
Other comprehensive income
Exchange differences on
translation	-		-		23		-		-		23
Reclassified to profit and loss	-		-		(23)		23		-		-
Total comprehensive income for
the year	-		-		-		4,602		-		4,602
Balance at 1 January 2022	36,179		48		(50,240)		75,145		7,709		68,841
Share-based payments	-		-		-		-		115		115
Transactions with the owners	-		-		-		-		115		115
Loss for the year	-		-		-		(10,498)		-		(10,498)
Other comprehensive income
Exchange differences on
translation	-		-		5		-		-		5
Total comprehensive income for
the year	-		-		5		(10,498)		-		(10,493)
Balance at 31 December 2022	36,179		48		(50,235)		64,647		7,824		58,463

Attributable to the owners of the Company

Consolidated Statement of Cash Flows

Year ended 31 December 2022

	2022 US$000		2021 US$000
Cash flows from operating activities
Cash generated by operating activities (note 7)	11,366		11,078
Interest received	244		145
	11,610		11,223
Cash flows from investing activities
Expenditure on exploration and evaluation assets	-		(1,652)
Expenditure on development and production assets	(21,832)		(19,431)
Proceeds from asset sales	-		29
Insurance proceeds	1,289		-
Recovery of previously impaired costs	748		-
Proceeds from Paraguay farmout	-		4,000
Acquisition & licence extension in Argentina	-		(284)
USA acquisition	(450)		-
Deposits with state authorities	-		(1)
	(20,245)		(17,339)
Cash flows from financing activities
Loan drawn	40,345		11,731
Proceeds from issue of shares (net of expenses)	-		495
Repayment of obligations under leases	(1,067)		(1,332)
Repayment of borrowings	(21,747)		(3,130)
Payment of interest and loan fees	(4,366)		(1,338)
	13,165		6,426
Net increase/(decrease) in cash and cash equivalents	4,530		310
Opening cash and cash equivalents at beginning of year	2,014		1,144
Exchange gains/(losses) on cash and cash equivalents	1,397		560
Closing cash and cash equivalents	7,941		2,014

Notes

1.    Accounting policies and preparation

The financial information set out in this announcement does not constitute the Company's statutory accounts for the years ended 31 December 2022 or 2021 but is derived from the 2022 accounts.

A copy of the statutory accounts for the year to 31 December 2021 has been delivered to the Registrar of Companies and is also available on the Company's website. Statutory accounts for 2022 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2021 nor 2022.

Whilst the financial statements from which this preliminary announcement is derived have been prepared in accordance with International Financial Reporting Standards ("IFRS") and applicable law, this announcement does not itself contain sufficient information to comply with IFRS. The Annual Report, containing full financial statements that comply with IFRS, will be sent out to shareholders by the end of June.

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, in the preparation of the 2022 financial statements they continue to adopt the going concern basis. 

			2022		2021
2	Cost of sales		US$000		US$000
	Depreciation		8,686		11,374
	Release of abandonment provision		(711)		-
	Royalties & production taxes		5,452		6,031
	Well operating costs		16,917		16,026
			30,344		33,431

Well operating costs include US$407,000 (2021: US$751,000) in non-recurring workover costs expensed in the period.

			2022		2021
3	Administrative expenses		US$000		US$000
	Directors and staff costs (including non-executive Directors)		2,519		2,530
	Share-based payments		115		367
	Depreciation		104		82
	Other		1,805		2,785
			4,543		5,764
	Attributable to Atome business included above		-		(1,397)
			4,543		4,367

To allow for meaningful comparison, staff costs, share based payments and depreciation expenses are reflected gross before the effect of allocations to operating costs or balance sheet assets. Other expenses are shown net of the effect of allocations totalling US$1.3 million (2021: US$1.3 million). 

Included with administrative expenses in 2021 are US$1.4 million directly attributable to the Atome businesses which are no longer part of the Group following the flotation at the end of December 2021.

4	Other non-operating (gains)/losses		2022		2021
			US$000		US$000
	Gain on dividend in specie of Atome shares		-		(13,130)
	Recovery of impaired costs		(748)		-
	Gain on insurance proceeds net of costs derecognized		(115)		-
	Gain on termination of leases		(52)		(18)
	Other (gains)/losses arising on asset disposals		(355)		(29)
	Gain on Atome transition to an associate investment		-		(1,317)
			(1,270)		(14,494)

Gains on insurance proceeds recovered in December 2022 relate to an incident at a facility in Argentina and are net of the cost of the asset impaired.

			2022		2021
5	Impairment (credit) / charge		US$000		US$000
	Matorras & Ocultar in Argentina (intangible)		-		51
	Hernandarias concession in Paraguay (intangible)		8,583		-
	USA operations (tangible)		1,433		-
			10,016		51

6   Earnings / (Loss) per share	2022		2021
	US$000		US$000
Net profit / (loss) for the period attributable to
the equity holders of the Parent Company	(10,498)		4,579
	Number		Number
	'000		'000
Weighted average number of shares in issue	10,290		10,159
	US cents		US cents
Earnings /(loss) per share
Basic earnings / (loss) per share from continuing operations	(102.02)		45.07
Diluted earnings / (loss) per share from continuing operations	(102.02)		44.17

Following the conversion and subdivision of shares in October 2022 the weighted average number of shares for 2021 have been adjusted based on the conversion 200 to 1 share ratio duly approved.

At 31 December 2022, 134,255 (2021: 207,544) share option and share warrant awards were in issue that, if exercised, would dilute earnings per share in the future. No dilution per share was calculated for 2022 as with the reported loss they are anti-dilutive.

7   Notes to the consolidated statement cash flows	2022		2021
	US$000		US$000
Profit / (loss) from operations before taxation	(12,167)		5,704
Interest on bank deposits	(244)		(145)
Interest payable and loan fees	6,649		5,324
Depreciation of property, plant and equipment	8,790		11,456
Impairment (credit)/charge	10,016		51
Release of abandonment provision	(711)		-
(Gain) / loss on non-operating transaction	(1,270)		(14,494)
Loss on investment in associate undertaking	25		-
Share-based payments	115		367
Foreign exchange difference	(4,663)		(1,488)
Operating cash flows before movements in working capital	6,540		6,775
Decrease / (increase) in receivables	(3,137)		(2,430)
Movement in stock	1,691		-
Increase / (decrease) in payables	6,272		6,733
Net cash generated by operating activities	11,366		11,078

8    Segment reporting

	Argentina		Paraguay		USA		UK		Total
	2022		2022		2022		2022		2022
	US$000		US$000		US$000		US$000		US$000
Revenue	31,463		-		1,686		84		33,233
Cost of sales
Depreciation	7,296		-		1,390		-		8,686
Release of abandonment provision	(711)		-		-		-		(711)
Royalties & production taxes	4,968		-		484		-		5,452
Well operating costs	15,917		-		1,000		-		16,917
Administrative expenses	1,126		11		473		2,933		4,543
Segment costs	28,596		11		3,347		2,933		34,887
Segment operating profit/(loss)	2,867		(11)		(1,661)		(2,849)		(1,654)
	Argentina		Paraguay		USA		UK		Total
	2021		2021		2021		2021		2021
	US$000		US$000		US$000		US$000		US$000
Revenue	32,669		-		1,478		-		34,147
Cost of sales
Depreciation	11,158		-		216		-		11,374
Royalties & production taxes	5,612		-		419		-		6,031
Well operating costs	15,538		-		488		-		16,026
Administrative expenses	1,889		64		389		3,422		5,764
Segment costs	34,197		64		1,512		3,422		39,195
Segment operating profit/(loss)	(1,528)		(64)		(34)		(3,422)		(5,048)

Segment assets	Argentina		Paraguay		USA		UK		Total
	2022		2022		2022		2022		2022
	US$000		US$000		US$000		US$000		US$000
Intangible assets	129		45,592		-		-		45,721
Goodwill	705		-		-		-		705
Investment in associate	-		-		-		-		-
Property, plant and equipment	71,785		-		152		-		71,937
	72,619		45,592		152		-		118,363
Other assets	9,533		1,657		584		84		11,858
	82,152		47,249		736		84		130,221
	Argentina		Paraguay		USA		UK		Total
	2021		2021		2021		2021		2021
	US$000		US$000		US$000		US$000		US$000
Intangible assets	129		54,175		-		-		54,304
Goodwill	705		-		-		-		705
Investment in associate	-		-		-		25		25
Property, plant and equipment	57,022		-		2,126		-		59,148
	57,856		54,175		2,126		25		114,182
Other assets	10,257		1,350		582		1,487		13,676
	68,113		55,525		2,708		1,512		127,858

 Segment assets can be reconciled to the Group as follows:

					2022		2021
					US$000		US$000
Segment assets					130,221		127,858
Group cash					7,941		2,014
Group assets					138,162		129,872

Segment liabilities	Argentina		Paraguay		USA		UK		Total
	2022		2022		2022		2022		2022
	US$000		US$000		US$000		US$000		US$000
Total liabilities	50,710		8,892		1,956		18,141		79,699
	Argentina		Paraguay		USA		UK		Total
	2021		2021		2021		2021		2021
	US$000		US$000		US$000		US$000		US$000
Total liabilities	39,095		4,056		1,963		15,917		61,031

9    Atome Energy plc

Selected key financial extracts		2022		2021
		US$000		US$000
Group Statement of Comprehensive Income
Administrative expense per Note 3		-		(1,397)
Gain on Atome transition to an associate investment per Note 4		-		1,317
Gain on dividend in specie of Atome shares per Note 4		-		13,130
Loss on investment in associate undertaking		(25)		-
		(25)		13,050
Group Statement of Financial position
Non-current Investment in associate at cost		-		25
Current receivable due from Atome		-		1,291
Company Profit & Loss Statement
Gain on dividend in specie of Atome shares per Note 4		-		13,096
Gain arising on mark to market of investment		1,414		10,150
		1,414		23,246
Company Statement of Financial position
Investment in Atome Energy plc at market value		11,589		10,175

Alternative Performance Measures

The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted accounting principles. These non-IFRS measures include net debt and well operating and underlying well operating costs per boe and free cash flow. Where used in the context of segmental disclosure the metrics are calculated in the same manner.

Net debt

Net debt is a useful indicator of the Group's indebtedness, financial flexibility, and capital structure because it indicates the level of cash borrowings after taking account of cash and cash equivalents within the Group's business. Net debt is defined and calculated as follows:

	2022		2021
Net debt	US$000		US$000
Borrowings Current	(18,391)		(7,014)
Borrowings Non-current	(29,134)		(22,250)
Cash	7,941		2,014
Net (debt)/ net cash	(39,584)		(27,250)

Total operating cost and underlying well operating cost per boe

Total operating cost per boe is a useful straight forward indicator of the Group's costs incurred to produce oil and gas including all relevant expenses. However, since royalty, production taxes and similar expenses are not controllable these have been disaggregated to allow well operating costs to be measured.

	2022		2021
Total operating cost per boe	US$000		US$000
Royalties & production taxes (Note 2)	5,452		6,031
Well operating costs (Note 2)	16,917		16,026
Total operating costs	22,369		22,057
Production (mmboe)	623.6		902.7
Total operating costs per boe US$	35.87		24.43

Where one-off or cyclical costs, such as workovers, are material these have been disclosed and the underlying well cost per boe referred to show the core performance. These have been defined and calculated as follows:

	2022		2021
Underlying well operating cost per boe	US$000		US$000
Well operating costs (Note 2)	16,917		16,026
Less workover costs (per text in Note 2)	(407)		(751)
	16,510		15,275
Production (mmboe)	623.6		902.7
Underlying well operating costs per boe US$	26.48		16.92

Core operating performance arose in Argentina and was calculated as follows:

	2022		2021
	US$000		US$000
Well operating costs (Note 2)	15,917		15,538
Less workover costs	(252)		(751)
	15,665		14,787
Production (mmboe)	604.4		868.4
Underlying well operating costs per boe US$	25.92		17.03

Administrative cost per barrel

Underlying administrative expense excluding non-recurring items is calculated as follows:

	2022		2021
Administrative cost per boe	US$000		US$000
Administrative expense (note 3)	4,543		5,764
Attributable to Atome business included above (note 3)	-		(1,397)
	4,543		4,367
Production (mmboe)	623.6		902.7
Administrative cost per boe	7.29		4.84

Adjusted EBITDA

The calculation is detailed on the Income Statement with further details on the non-recurring items include below. The Adjusted EBITDA for Argentina is calculated as follows:

	2022		2021
Adjusted EBITDA Argentina	US$000		US$000
Operating profit / (loss)	2,867		(1,528)
Release of abandonment provision	(711)		-
Depreciation, depletion & amortisation	7,400		11,278
EBITDA excluding share options	9,556		9,750
Non-recurring items	252		751
Adjusted EBITDA	9,808		10,501

Non-recurring items

Where referred to in the calculation of Adjusted EBITDA and in alternative performance measures these comprise the following:

	2022		2021
Non-recurring	US$000		US$000
Workover costs (per text in Note 2)	407		751
	407		751

Free cash generation from core operations

A measure of cash generation from operations excluding changes in working capital, administrative expense and non-recurring workovers. Used by management as an indication of cash generation at asset level.

	2022		2021
	US$000		US$000
Sales	33,233		34,147
Royalties & production taxes (Note 2)	(5,452)		(6,031)
Well operating costs (Note 2)	(16,917)		(16,026)
Add back non-recurring workovers	407		751
	11,271		12,841

Included within the foreign exchange gains of US$4.7 million (2021: US$1.5 million) as detailed in Note 9 are gains of US$ 1.4 million which arise on the treasury management of cash resources ("treasury income") takes the cash generation in the period to US$12.7 million (2021: US$14.3 million).

Reconciliation to cash flow from operations

The reported cash flow generated from operating activities can be reconciled to free cashflows from core operations as follows:

	2022		2021
	US$000		US$000
Net cash generated by operating activities	11,366		11,078
Working capital movement	(4,826)		(4,303)
Add back administrative expense per Note 3	4,543		5,764
Add back non cash depreciation in admin expense (Note 3)	(104)		(82)
Add back non cash share based payments in admin expense (Note 3)	(115)		(367)
Add back non-recurring workovers	407		751
	11,271		12,841

Depreciation per boe

Depreciation per barrel of oil equivalent can change between accounting periods due to costs incurred, changes in reserves or changes in future costs and hence is a useful metric for reporting purposes.

Where calculated on at a group or segment level the calculation is as follows:

·      Reported depreciation charge as reported in Cost of Sales per Note 2 in accordance with IFRS GAAP reporting.

·      Divided by the barrel of oil equivalent of production reported in the Chairman's Statement in accordance with industry standards and state reports.

Glossary

Boe	barrels of oil equivalent
Bopd	barrels of oil per day
Boepd	barrels of oil equivalent per day
M³/day	cubic metres of oil per day
MMscf/d	million standard cubic feet of gas production per day
1P	proven hydrocarbon reserves
2P	proven and probable hydrocarbon reserves
Contingent Resources	quantities of hydrocarbons estimated to be potentially recoverable from known accumulations
Prospective Resources	quantities of hydrocarbons estimated to be potentially recoverable from undiscovered accumulations
NPV10	net present value over the life of the concessions/licences discounted by 10%

-ends-

 

END