Preliminary Results for Year Ended 31 Dec. 2018

RNS Number : 6649C

Petrel Resources PLC

19 June 2019

 

19^th June 2019

Petrel Resources plc

("Petrel" or "the Company")

Preliminary Results for the Year Ended 31^st December 2018

Petrel announces its results for the year ended 31^st December 2018.

Highlights

·    The Iolar well, being drilled by CNOOC / ExxonMobil during mid-2019, is a key test of ultra-deep-rock (6,310 metres below sea-bed), deep-water plays in the Irish Atlantic Porcupine.

·    Petrel has applied to assume operatorship and extend the 1st phase of FEL 3/14, and to convert LO 16/24 to a Frontier Exploration Licence.

·    The reforming Ghanaian NPP Government is expediting Petroleum development.  A systematic review of historic Petroleum Agreements is underway, which includes Tano 2A Block.

·    Revised coordinates for Tano offshore acreage, submitted by Clontarf, are under consideration by the Ghanaian authorities.  Most of the original 1,532km2 is immediately available, though part awaits relinquishment.

·    Riadh Hameed has joined Petrel Resources plc as a Non-Executive Director, and is helping re-establish Petrel's Baghdad operations.

A copy of the Company's Annual Report and Accounts for 2018 will be mailed shortly only to those shareholders who have elected to receive it. Otherwise shareholders will be notified that the Annual Report will be available on the website at www.petrelresources.com.  Copies of the Annual Report will also be available for collection from the Company's registered office, 162 Clontarf Road, Dublin 3, Ireland.

The Company's Annual General Meeting will be held on 24^th July 2019 in the Gresham Hotel, 23 O'Connell Street Upper, Dublin 1, D01 C3W7 at 10:30 am.

ENDS

For further information please visit http://www.petrelresources.com/  or contact:

Enquiries:

Petrel Resources PLC John Teeling, Chairman David Horgan, Director	[phone]
Beaumont Cornish - Nominated Adviser  Felicity Geidt Roland Cornish	[phone]
Novum Securities Limited - Broker  Colin Rowbury	[phone]
Blytheweigh - PR Julia Tilley Fergus Cowan	[phone] [phone] [phone]

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 ("MAR"). The person who arranged for the release of this announcement on behalf of the Company was Jim Finn, Director.

CHAIRMANS STATEMENT

Petrel is a grassroots exploration company. That means we pursue high risk high potential projects. But high risk means there is a high risk of total loss. The only true lie detector in exploration is a drill hole. The most sophisticated and best informed analyses and evaluation of a prospect comes with high risk. No better example that the well currently being drilled in the Atlantic Porcupine offshore Ireland. From surface to target depth is over 8,000 metres - 8 kilometres! 2,162 metres of water and 6,310 metre of rock. And there is a good probability of finding nothing of value.

Petrel was first founded in the early 1980's to participate in offshore Irish exploration. It failed. Revived in the 1990's with new management and new risk capital we entered Iraq, then offshore Ireland and offshore Ghana.

When choosing places to explore there are three overriding considerations - the probability of finding something, the potential size of the discovery and can we develop and profit from.  There are two main risks, Geological and Political. Our strategy has been to go where the best chances are of finding something. Often this is in areas where the political rules change. So we accept higher political risk for lower geological risk.

How has this worked out? Not well. The big surprise is that Ireland where we assumed low political risk and higher geological risk and turning out to have high political risk while the geological has not improved.

Petrel and the partners it attracted to Ireland saw a stable environment, clear terms and rights to develop. This is not what has happened.

-           The Corrib debacle lasting 20 years has done serious damage to our international reputation. It now is taken for granted that there will be objections to any natural resource developments. Delays of years are common thus destroying the present value of the project.

-           The state changed the taxation laws applying to petroleum projects. There is absolutely no logic for doing this. Exploration has found almost nothing. There are no profits to tax. Ireland has one of the highest failure rates in oil exploration in the world. We should be increasing incentives not diminishing them.

-           There is an active political movement to outlaw all offshore exploration. This in a country which is dependent on Siberian gas!!! What began as a fanciful proposition from a tiny left wing party got support from mainstream parties. The recent proposition before parliament has lapsed but damage has been done and a precedent established. Foreign investors can spend their money in over 200 countries, it does not have to be Ireland.

-           Finally, companies who obtained exploration licences are being frustrated in getting drilling permits and are having permits overturned on technicalities. The state has allowed explorers to spend tens of millions on early stage prospecting only to frustrate and delay the granting of drilling licences.

Trying to be positive. Should the current well be a hit and should the long delayed work commence on the Barryroe prospect then sentiment may change.

Where is Petrel in all of this? We have applied to assume 100% operatorship of Frontier Exploration License 3/14 and to extend the first phase by one year. It has taken almost the full year to get approval. We have worked up the extensive data on the block and believe that we have a good package with which to attract a major but we have no time.

We have applied to transfer our 100% owned Licence Option 16 / 24 to a Frontier Exploration Licence. Here again we believe the geology holds potential. We will pitch the opportunities to majors.

Finally we hold a 10% working interest in Frontier Exploration Licence 11 / 18, Woodside holds the remaining 90%. We have met commitments until now. When we receive proposed budgets for the coming year we will evaluate whether to stay in or not.

Overall the Irish offshore is a sorry scene.

Ghana

After ten years in Ghana, Petrel (30%) and partners Clontarf (60%) local Ghanaian interests (10%) await ratification of the Tano 2A Petroleum Agreement negotiated with the Ghana National Petroleum Corporation.  It needs cabinet and parliamentary approval. Relationships in Ghana have improved in the last two years, particularly with the Ghana National Petroleum Corporation, but there is little evidence that political promises are being delivered on.

In the ten years we have been waiting for ratification Ghana has become a significant oil producer, not without difficulty with both the geology and with government. The change in government has renewed a focus on oil development. This should assist Petrel and partners. I hesitate to give any guidance.

Iraq

We had high hopes of commercial success in Iraq. It has the best oil geology on the planet with drilling success over 90% and a $2 to 4 a barrel production cost. But the political risk offsets all of this.

Petrel first entered Iraq in 1997 and had initial success in obtaining a large exploration block in the Western Desert between Baghdad and Amman Jordan. We were seeking development rights to any one of the many proven but undeveloped oil fields but we needed to establish our credentials. We undertook exploration work but were frustrated by sanctions which stopped us from drilling.

We continued involvement with the Iraqi Oil Ministry and undertook extensive technical work, with Itochu of Japan on the Merjan oil field.

Post 2003 we were awarded a development contract on the Subba and Luhais oil fields. Bureaucratic interference and payment problems forced Petrel to sell out in 2010.

We maintained our interest and appointed an Iraqi Arman Kayablian to work in Iraq. We purchased a 20% stake in Amira Hydrocarbon which had joint operations with Oryx Petroleum, in the Wasit province.  The joint venture failed to obtain a licence. In 2018 the agreement was dissolved and some 20 million Petrel shares returned to the company.

We have recently appointed Riadh Mahmoud Hameed to the Petrel board. Riadh worked as project co-ordinator for six years for Petrel in Iraq.

Activities are normalising in Iraq. There are many oil projects in Iraq which need to be developed. Petrel will be making a case to be part of the development.

Future

Oil and gas grassroots exploration has proven to be an expensive experience for Petrel shareholders. There is little interest in the sector.

Petrel has had a loyal following for decades but as the downward cycle in exploration share prices continues and intensifies even the loyalists lose hope. We continue to press of ratification in Ghana and continue to seek farm in partners for our offshore Ireland interests.

Interest is reviving in Iraq. We now have the people to seek out operations on the ground.  

As a board we are awake to other opportunities both in our sector and in different industries. Because we are a small, tightly held company with a big shareholder base we are an attractive vehicle for a new project. Nothing presented to the board has yet been deemed good enough for shareholders.

John Teeling

Chairman

18^th June 2019

PETREL RESOURCES PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018

	2018	2017
	€	€
CONTINUING OPERATIONS
Administrative expenses	(239,042)	(297,381)
Impairment of investments	-	(4,094,804)
OPERATING LOSS	(239,042)	(4,392,185)
LOSS BEFORE TAXATION	(239,042)	(4,392,185)
Income tax expense	-	-
LOSS FOR THE FINANCIAL YEAR: all attributable to equity holders of the parent	(239,042)	(4,392,185)
Other comprehensive income	-	-
Items that are or may be reclassified subsequently to profit or loss	-	-
Exchange differences	95,741	(321,858)
TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL YEAR	(143,301)	(4,714,043)
Loss per share - basic and diluted	(0.27c)	(4.40c)

PETREL RESOURCES PLC

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2018

	2018	2017
	€	€
Assets
Non-Current Assets
Intangible assets	2,523,279	2,179,283
	2,523,279	2,179,283
Current Assets
Trade and other receivables	58,016	27,573
Cash and cash equivalents	329,503	371,380
	387,519	398,953
Total Assets	2,910,798	2,578,236
Current Liabilities
Trade and other payables	(632,615)	(584,693)
Net Current Liabilities	(245,096)	(185,740)
NET ASSETS	2,278,183	1,993,543
Equity
Called-up share capital	1,306,966	1,246,025
Capital conversion reserve fund	7,694	7,694
Capital redemption reserve	209,342	-
Share premium	21,601,057	21,416,085
Share based payment reserve	26,871	26,871
Translation reserve	495,202	399,461
Retained deficit	(21,368,949)	(21,102,593)
TOTAL EQUITY	2,278,183	1,993,543

PETREL RESOURCES PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018

	Share Capital €	Share Premium €	Capital Redemption Reserve €	Capital Conversion Reserve fund €	Share Based Payment Reserve €	Translation Reserve €	Retained Deficit €	Total €
At 1 January 2017	1,246,025	21,416,085	-	7,694	26,871	721,319	(16,710,408)	6,707,586
Total comprehensive income for the financial year	-	-	-	-	-	(321,858)	(4,392,185)	(4,714,043)
At 31 December 2017	1,246,025	21,416,085	-	7,694	26,871	399,461	(21,102,593)	1,993,543
Shares issued	270,283	184,972						455,255
Share issue expenses	-		-	-	-	-	(27,314)	(27,314)
Shares cancelled	(209,342)	-	209,342	-	-	-	-	-
Total comprehensive income for the financial year	-	-	-	-	-	95,741	(239,042)	(143,301)
At 31 December 2018	1,306,966	21,601,057	209,342	7,694	26,871	495,202	(21,368,949)	2,278,183

Share premium

Share premium comprises of the excess of monies received in respect of the issue of share capital over the nominal value of shares issued.

Capital redemption reserve

On 25 July 2018 the shareholders approved the buy back and cancellation of 16,747,368 shares for nominal consideration from Amira Petroleum N.V., Amira International Holdings Limited and their advisors.  These shares were immediately cancelled upon their repurchase and the cost of these shares were transferred into the Capital redemption reserve.

Capital conversion reserve fund

The ordinary shares of the company were renominalised from €0.0126774 each to €0.0125 each in 2001 and the amount by which the issued share capital of the company was reduced was transferred to the capital conversion reserve fund.

Share based payment reserve

The share based payment reserve represents share options granted which are not yet exercised and issued as shares.

Translation Reserve

The translation reserve comprises of foreign exchange movement on translation from US Dollars (functional currency) to Euro (presentation currency).

Retained deficit

Retained deficit comprises accumulated losses in the current and prior financial years.

PETREL RESOURCES PLC

CONSOLIDATED CASH FLOW STATEMENT

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018

	2018	2017
	€	€
CASH FLOW FROM OPERATING ACTIVITIES
Loss for the financial year	(239,042)	(4,392,185)
Write of financial asset	-	4,094,804
OPERATING CASHFLOW BEFORE
MOVEMENTS IN WORKING CAPITAL	(239,042)	(297,381)
Movements in working capital:
Increase in trade and other payables	2,922	129,799
Increase in trade and other receivables	(30,443)	(4,570)
CASH USED IN OPERATIONS	(266,563)	(172,152)
NET CASH USED IN OPERATING ACTIVITIES	(266,563)	(172,152)
INVESTING ACTIVITIES
Payments for exploration and evaluation assets	(195,671)	(259,161)
Funds on disposal of financial assets	-	116,319
NET CASH USED IN INVESTING ACTIVITIES	(195,671)	(142,842)
FINANCING ACTIVITIES
Shares issued	455,255	-
Share issue expenses	(27,314)	-
NET CASH GENERATED FROM FINANCING ACTIVITIES	427,941	-
NET DECREASE IN CASH AND CASH EQUIVALENTS	(34,293)	(314,994)
Cash and cash equivalents at beginning of financial year	371,380	745,195
Effect of exchange rate changes on cash held in
foreign currencies	(7,584)	(58,821)
Cash and cash equivalents at end of financial year	329,503	371,380

NOTES:

1.    ACCOUNTING POLICIES

There were no changes in accounting policies from those used to prepare the Group's Annual Report for financial year ended 31 December 2017.  The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

2.    LOSS PER SHARE

	2018	2017
	€	€
Loss per share - basic and diluted	(0.27c)	(4.40c)

Basic loss per share

The earnings and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:

	2018	2017
	€	€
Loss for the financial year attributable to equity holders	(239,042)	(4,392,185)
	2018	2017
	Number	Number
Weighted average number of ordinary shares for the
purpose of basic earnings per share	87,733,283	99,681,992

Basic and diluted loss per share are the same as the effect of the outstanding share options is anti-dilutive.

3.    GOING CONCERN

The Group and Company incurred a loss for the financial year of €239,042 (2017: loss of €4,392,185) and had a retained earnings deficit of €21,341,635 (2017 deficit of €21,102,593), at the balance sheet date leading to doubt about the Group and Company's ability to continue as a going concern.

Cashflow projections prepared by the directors indicate that the funds available are sufficient to meet the obligations of the group and company for at least 12 months from the date of approval of the financial statements.

The Group and Company had a cash balance of €329,503 (2017: €371,380) at the balance sheet date.  Accordingly the directors are satisfied that it is appropriate to continue to prepare the financial statements of the Group and Company on the going concern basis, as the group has sufficient cash resources that can be used to develop exploration projects along with funding the day to day running of the Group. The financial statements do not include any adjustment to the carrying amount, or classification of assets and liabilities, which would be required if the Group or Company was unable to continue as a going concern.

4.    FINANCIAL ASSET

	2018	2017
Investment	€	€
At the beginning of the financial year	-	4,211,123
Disposal	-	(116,319)
Impairment	-	(4,094,804)
At the end of the financial year	-	-

The Company's investment in financial assets, through its wholly owned subsidiary Petrel Resources (TCI) Limited, consisted of a 20 per cent shareholding in Amira Hydrocarbons Wasit B.V.("Amira") which was acquired from Amira Petroleum N.V. on 14 August 2013. Amira is a special purpose vehicle which holds a 25 per cent carried to production interest in an early stage oil opportunity in the large, underexplored and underdeveloped province of Wasit.

The consideration for the acquisition included the issue of 18,947,368 shares in Petrel.  The Initial Consideration Shares were agreed to be locked-in until the date of spudding the first conventional oil well in respect of Amira's interest in the Wasit province but that, if the Spudding Date had not occurred by 19 August 2018, Petrel could, amongst other things, elect to re-acquire the Initial Consideration Shares for a nominal amount. As part of the agreement with Amira Petroleum, 2.8 million of the Initial Consideration Shares were, at the direction of Amira Petroleum, issued to its advisers in satisfaction of fees payable by Amira Petroleum and were subject to a lock in agreement as detailed above.

During December 2017, the Directors learnt that 2.2 million of the Adviser Shares had been sold between March and July 2017, notwithstanding the lock-in agreement. The parties reached a settlement and agreed that the vendors of the 2.2 million Adviser Shares make a payment of £100,000 to the Company which has been received pre year end (representing approximately 4.5p per Adviser Share sold).

The Spudding Date did not occur. Accordingly, the directors decided to write off the investment in Amira Hydrocarbons Wasit B.V. and an impairment charge of €4,094,804 was recorded in 2017. No further shares were issued to Amira and the 16,747,368 shares already issued were re-acquired for nominal consideration on 25 July 2018 after shareholder approval and the shares were immediately cancelled.

5.    INTANGIBLE ASSETS

Exploration and evaluation assets:	2018	2017
	€	€
Cost:
Opening balance	2,179,283	2,138,159
Additions	240,67	304,159
Exchange translation adjustment	103,325	(263,035)
Closing balance	2,523,279	2,179,283

Segmental Analysis	2018	2017
	€	€
Ghana	911,631	843,988
Ireland	1,611,648	1,335,295
	2,523,279	2,179,283

Exploration and evaluation assets at 31 December 2018 represent exploration and related expenditure in respect of projects in Ireland and Ghana. The directors are aware that by its nature there is an inherent uncertainty in relation to the recoverability of amounts capitalised on the exploration projects.

Relating to the remaining exploration and evaluation assets at the financial year end, the directors believe there were no facts or circumstances indicating that the carrying value of the intangible assets may exceed their recoverable amount and thus no impairment review was deemed necessary by the directors. The realisation of these intangible assets is dependent on the successful discovery and development of economic reserves and is subject to a number of significant potential risks, as set out below:

The Group's exploration activities are subject to a number of significant and potential risks including:

·    Licence obligations;

·    Funding requirements;

·    Political and legal risks, including title to licence, profit sharing and taxation;

·    Geological and development risks;

·    Exchange rate risk;

·    Political risk; and

·    Financial risk management.

Directors' remuneration of €30,000 (2017: €30,000) and salaries of €15,000 (2017: €15,000) were capitalised as exploration and evaluation expenditure during the financial year.

6.    SHARE CAPITAL

	2018	2017
	€	€
Authorised:
200,000,000 ordinary shares of €0.0125	2,500,000	2,500,000

Allotted, called-up and fully paid:
	Number	Share	Share
		Capital	Premium
		€	€
At 1 January 2017	99,681,992	1,246,025	21,416,085
Issued during the financial year	-	-	-
At 31 December 2017	99,681,992	1,246,025	21,416,085
At 1 January 2018	99,681,992	1,246,025	21,416,085
Issued during the financial year	21,622,622	270,283	184,972
Shares cancelled	(16,747,368)	(209,342)	-
At 31 December 2018	104,557,246	1,306,966	21,601,057

Movements in share capital

On 25 July 2018 the company received shareholder approval for the following transaction:

(i)          the contract between Amira Petroleum N.V., Amira International Holding Limited and the Company for the purchase of 16,147,368 ordinary shares of €0.0125 each in the capital of the Company for nominal consideration; and

(ii)         the contract between Hannam & Partners (Advisory) Group Services Ltd and the Company for the purchase of 600,000 ordinary shares of 0.0125 each in the capital of the Company for nominal consideration.

The aggregate 16,747,368 ordinary shares of €0.0125 each were immediately cancelled upon their repurchase by the Company.

The purchase consideration of £20 was funded by the issue of 1000 Ordinary shares of €0.0125 at 2p per share.

Further details are outlined in note 4 above.

On 11 October 2018 a total of 21,621,622 shares were placed at a price of 1.85 pence per share. Proceeds were used to provide additional working capital and fund development costs.

7.    POST BALANCE SHEET EVENTS

There were no material post balance sheet events affecting the company or group.

8.    ANNUAL GENERAL MEETING

The Company's Annual General Meeting will be held on 24^th July 2019 in the Gresham Hotel, 23 O'Connell Street Upper, Dublin 1 , D01 C3W7 at 10:30 am.

9.    GENERAL INFORMATION

The financial information set out above does not constitute the Company's financial statements for the year ended 31 December 2018.  The financial information for 2017 is derived from the financial statements for 2017 which have been delivered to the Companies Registration Office.  The auditors have reported on 2017 statements; their report was unqualified with an emphasis of matter in respect of considering the adequacy of the disclosures made in the financial statements concerning the valuation of intangible assets, investment in subsidiaries and amounts due by group undertakings. The financial statements for 2018 will be delivered to the Companies Registration Office.

A copy of the Company's Annual Report and Accounts for 2018 will be mailed shortly only to those shareholders who have elected to receive it. Otherwise shareholders will be notified that the Annual Report will be available on the website at www.petrelresources.com.  Copies of the Annual Report will also be available for collection from the Company's registered office, 162 Clontarf Road, Dublin 3, Ireland.

 

END

 

 

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