Interim Results

RNS Number : 7514R

Tlou Energy Ltd

11 March 2016

 

Tlou Energy Limited / EPIC: TLOU / Sector: Oil & Gas

Tlou Energy Limited ('Tlou' or 'the Company')

Interim Results

Tlou Energy Limited, the AIM and ASX listed company focused on delivering power in Botswana and Southern Africa through the development of coal bed methane ('CBM') projects, is pleased to announce its interim results for the six months ended 31 December 2015.

Highlights

·    Achieved a range of milestones towards delivering a 10MW gas-to-power pilot plant in Botswana to serve the constrained regional energy market

·    Completion of expanded drilling program at the Lesedi project and de-watering completed

·    Gas flow testing commenced post period end focused on enabling the Company to book independently certified reserves

·    EIS application for field development lodged with approval expected in H1 2016

·    Successful dual listing on AIM to fund 2016 gas testing operations

Tlou Managing Director Gabaake Gabaake said, "It has been a very busy few months for the Company with significant progress made at the Lesedi CBM Project specifically, developing the gas field, progressing our environmental approvals, and continuing negotiations with potential off-take partners.

"The Company is well positioned to achieve its planned near term goals; achieving sustained economic gas flows at the Lesedi project; obtaining independently certified gas reserves and moving the project from exploration and appraisal to development phase. Listing on AIM was a significant achievement, opening up the Company to the UK market which has a strong appetite for African focused projects like Tlou's.  This has set the foundation for further growth and I look forward to reporting our positive progress to both our Australian and UK investors alike."

Chairman's Statement

Tlou is focused on the development of its CBM project in Botswana to deliver power firstly in-country and then regionally.  The chronic energy shortage currently being experienced across the southern African region provides us with multiple routes to market and an attractive pricing environment, making our business strategy particularly compelling and relevant.  As the most advanced CBM project in Botswana, with an experienced team and supportive government, we believe that we are very well placed to deliver electricity to market.  With this in mind, our activities over the past six months have enabled Tlou to report the commencement of production testing at our 100% owned Lesedi CBM Project, marking the start of a very exciting period for Tlou and its shareholders. 

I would like to welcome our UK shareholders to the Company in my first statement since our dual listing on AIM in November 2015.  We felt that London's appetite and understanding of African resource and power projects made a listing in the UK a natural progression for Tlou, and we look forward to engaging regularly with the London investment community.  

By way of introduction to those that are new to the Company, Tlou has a long term vision to become a mid-tier energy provider in Southern Africa.  Our Lesedi project provides us with an ideal platform from which to commence this process.  Over the next 12-24 months, we will be making steps towards the successful commissioning of a 10MW pilot plant at Lesedi.  The project, once commissioned will allow the Company to generate revenue and importantly will demonstrate the commerciality of producing power from locally produced CBM, providing a platform for expansion of the project.  This scalable strategy, the location of our project and the potential high gas and power price available distinguishes us from many of the other gas-to-power peers where much larger funding is required up-front.

We are aiming to book independently certified reserves at Lesedi later this year, and once achieved we will be the first in Botswana to do so.  Accordingly, the period under review saw Tlou successfully dewater the Selemo area, which is comprised of three vertical production wells and their corresponding lateral wells.  With the two outer wells successfully shielding water from the central and main producing well, Selemo 1, we have now commenced the long term production testing phase and the initial results are very encouraging.  With this process underway, we expect to be able to update the market in the near term on gas flow rates achievable from the area.

Expanding our existing operations in the field will be a requirement ahead of delivering a 10MW pilot plant, and the data from ongoing gas flow testing will be incorporated into Tlou's field development plans.  To facilitate this future field development, we require an Environmental Impact Statement ('EIS'), and I am pleased to report that we are well along the path to achieve this.  The EIS application was lodged during the period and we expect approval in H1 2016.  Further EIS approvals will be required to enable our mid/downstream plans ahead of project commissioning.  This process is aided by the extensive government support for the development of domestic sources of power. 

During the period we have progressed various offtake opportunities.  In late 2015, the Botswanan Government announced an "Emergency Tender" for the delivery of a minimum of 10MW of power, which would provide a highly compelling offtake agreement for Tlou.  We look forward to providing an update on the result of this tender process in the near term.

Corporate Review

Post period end we were delighted to welcome our long-standing Chief Financial Officer, Colm Cloonan, to the Board as Finance Director, following the resignation of Chairman, Nathan Mitchell.  Colm has worked with the Company for a long time, so has a strong understanding of the business.  Martin McIver, a long serving Non-Executive Director, has been appointed to the role of Chairman.  Anthony Gilby continues his interim leave and we once again, wish him a speedy recovery and look forward to his return.  Gabaake Gabaake, our Botswanan-based Executive Director, has seamlessly transitioned into the role of interim Managing Director. 

Financial Review

The loss for the half-year amounted to AUD $1,993,250 compared to a loss of AUD $1,142,049 in the six months to December 2014. A substantial portion of the loss results from expenditure incurred in relation to the Company's admission to trading on the AIM Market. Excluding this amount the expenditure was in line with projections.  The Company has successfully reduced corporate and operating costs where possible, without affecting performance. Net spend on exploration activities during the period amounted to approximately AUD $4 million, mainly on drilling operations to expand the Selemo production area.  The Company is funded to achieve its upcoming targets including flowing gas, booking reserves, and converting part of the licence area from a prospecting licence to a development licence.  This conversion is a significant step towards demonstrating the Company's progress from appraisal or exploration to development.

Outlook

Tlou has a strong, defined vision to produce power in Botswana and southern Africa via CBM; a staged and scalable strategy with pre-defined milestones to achieve this goal; a highly experienced management team to implement these activities; and an attractive nearby market to which it can sell.  2016 will be characterised by activities focused on delivering sustained gas flows, booking reserves, award of an EIS for field development and grant of a development licence.  With this in mind, I hope shareholders will agree that this is a highly exciting time for Tlou, and I look forward to delivering on our plans in the coming months. 

I would like to thank our shareholders, advisers and management for their support during the period. 

**ENDS**

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

Tlou Energy Limited	[phone]
Gabaake Gabaake, Acting Managing Director
Solomon Rowland, Company Secretary
Grant Thornton (Nominated Adviser)	[phone]
Jen Clarke, Colin Aaronson, Harrison Clarke
Brandon Hill Capital (Financial Adviser and Joint broker)	[phone]
Jonathan Evans, Alex Walker
Optiva Securities Limited (Joint broker)	[phone]
Jeremy King, Christian Dennis
St Brides Partners Limited (Public relations)
Elisabeth Cowell, Lottie Brocklehurst	[phone]

Notes to Editor

Tlou Energy is an AIM and ASX listed company focused on delivering power in Botswana through the development of coal bed methane ('CBM') projects.  Botswana has a severe energy shortage and is currently relying on expensive imported power and diesel generation to deliver its requirements.  However, as the 100% owners of the most advanced gas project in the country, the Lesedi CBM Project ('Lesedi'), Tlou Energy provides investors with access to a compelling immediate and longer term opportunity using domestic gas to produce power and displace the expensive diesel and import market.

The Company is led by an experienced Board, management and advisory team including individuals with successful track records in the Australian CBM industry.

Since establishment in 2009 the Company has significantly de-risked the project in consideration of its goal to become a significant gas to power producer.  The Company has the most advanced CBM project in Botswana and flared its first gas in 2014.  It holds 10 prospecting licences covering an area of ~8,300Km² and the Lesedi project already benefits from significant, independently certified contingent resources of ~3.3 trillion cubic feet (TCF) (3C).  Following completion of the current gas flow tests at Selemo the Company is looking to book certified gas reserves, thereby becoming the first company in Botswana to do so. 

The first planned gas-to-power solution is expected to be delivered through a 10MW pilot project. Discussions with potential off-takers, including Government, to purchase the power is on-going and the company plans to sign a Power Purchase Agreement in the near term.  Following successful implementation of the 10MW pilot project the Company plans larger projects to provide further power to Botswana and the southern African region.

Consolidated statement of comprehensive income 

for the half-year ended 31 December 2015

			Note	Dec 2015	Dec 2014
				$	$
Revenue			3	19,849	78,955
Expenses
Employee benefits expense				(350,516)	(626,200)
Depreciation and amortisation expense				(130,206)	(168,210)
Foreign exchange loss				(83,791)	95,650
Share issue costs				(779,310)
Professional fees				(68,420)	(58,097)
Corporate expenses				(52)	(8,458)
Occupancy costs				(42,025)	(90,226)
Other expenses			4	(558,779)	(365,463)
PROFIT/(LOSS) BEFORE INCOME TAX				(1,993,250)	(1,142,049)
Income tax				-	-
PROFIT/(LOSS) FOR THE PERIOD				(1,993,250)	(1,142,049)
OTHER COMPREHENSIVE INCOME/(LOSS)
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations				(2,422,898)	1,659,231
Tax effect				-	-
TOTAL OTHER COMPREHENSIVE INCOME/(LOSS)				(2,422,898)	1,659,231
TOTAL COMPREHENSIVE INCOME/(LOSS)				(4,416,148)	517,182
Loss for the year is attributable to:
Owners of Tlou Energy Limited				(1,993,250)	(1,142,049)
				(1,993,250)	(1,142,049)
Total comprehensive income/(loss) attributable to:
Owners of Tlou Energy Limited				(4,416,148)	517,182
				(4,416,148)	517,182
Earnings per share
				Cents	Cents
Basic loss per share				(1.05)	(0.01)
Diluted loss per share				(1.05)	(0.01)

Consolidated statement of financial position 

as at 31 December 2015

			Note	Dec 2015	June 2015
				$	$
CURRENT ASSETS
Cash and cash equivalents				2,915,086	7,197,813
Trade and other receivables			5	443,931	221,944
Other current assets			6	14,750	214,291
TOTAL CURRENT ASSETS				3,373,767	7,634,048
NON-CURRENT ASSETS
Exploration and evaluation assets			7	45,407,097	43,559,315
Other non-current assets			8	925,449	1,378,017
Property, plant and equipment				573,229	724,334
TOTAL NON-CURRENT ASSETS				46,905,775	45,661,666
TOTAL  ASSETS				50,279,542	53,295,714
CURRENT LIABILITIES
Trade and other payables				396,337	1,321,234
Provisions				189,816	274,094
TOTAL CURRENT LIABILITIES				586,153	1,595,328
NON-CURRENT LIABILITIES
Deferred tax liabilities				369,353	369,353
Provisions				94,000	90,000
TOTAL NON-CURRENT LIABILITIES				463,353	459,353
TOTAL LIABILITIES				1,049,506	2,054,681
NET ASSETS				49,230,036	51,241,033
EQUITY
Contributed equity			11	73,931,569	71,606,519
Reserves				(2,723,041)	(380,244)
Accumulated losses				(21,978,492)	(19,985,242)
Equity attributable to the owners of Tlou Energy Limited				49,230,036	51,241,033
Non-controlling interests				-	-
TOTAL EQUITY				49,230,036	51,241,033

Consolidated statement of changes in equity 

for the half-year ended 31 December 2015

	Contributed Equity	Share Based Payments Reserve	Foreign Currency Translation Reserve	Accumulated Losses	Total
	$	$	$	$	$
Balance at 1 July 2014	66,532,786	4,225,291	(4,582,363)	(19,416,888)	46,758,826
Profit for the period	-	-	-	(1,142,049)	(1,142,049)
Other comprehensive income for the period	-	-	1,659,231	-	1,659,231
Total comprehensive income for the period	-	-	1,659,231	(1,142,049)	517,182
Transactions with owners in their capacity as owners
Shares issued, net of costs	-	-	-	-	-
	-	-	-	-	-
Balance at 31 December 2014	66,532,786	4,225,291	(2,923,132)	(20,558,937)	47,276,008
Balance at 1 July 2015	71,606,519	2,062,745	(2,442,989)	(19,985,242)	51,241,033
Loss for the period	-	-	-	(1,993,250)	(1,993,250)
Other comprehensive income	-	-	(2,422,898)	-	(2,422,898)
Total comprehensive income	-	-	(2,422,898)	(1,993,250)	(4,416,148)
Transactions with owners in their capacity as owners
Share based payments	-	80,101	-	-	80,101
Shares issued, net of costs	2,325,050	-	-	-	2,325,050
	2,325,050	80,101	-	-	2,405,151
Balance at 31 December 2015	73,931,569	2,142,846	(4,865,887)	(21,978,492)	49,230,036

Consolidated statement of cash flows 

for the half-year ended 31 December 2015

				Dec 2015	Dec 2014
				$	$
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees (inclusive of GST)				(1,959,245)	(986,168)
Interest received				19,849	78,955
GST and VAT received				410,946	37,270
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES				(1,528,450)	(869,943)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration and evaluation assets				(4,839,853)	(2,064,222)
Payment for property, plant and equipment				(24,009)	(257,799)
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES				(4,863,862)	(2,322,021)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares				2,292,540	-
Share issue costs				(192,979)	-
NET CASH PROVIDED BY FINANCING ACTIVITIES				2,099,561	-
Net increase/(decrease) in cash held				(4,292,751)	(3,191,963)
Cash at the beginning of the period				7,197,813	9,123,260
Effects of exchange rate changes on cash				10,024	(112,287)
CASH AT THE END OF THE PERIOD				2,915,086	5,819,010

Notes to the consolidated financial statements 

for the half-year ended 31 December 2015

Note 1.     Significant accounting policies

Introduction

Tlou Energy Limited (Tlou) is a company domiciled and incorporated in Australia. The Financial Report for the half-year ended 31 December 2015 consists of the Financial Statements of Tlou Energy Limited and the entities it controlled during the period ('Consolidated Entity').

Compliance with accounting standards

The half-year financial report is a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standard AASB 134: Interim Financial Reporting.

The half-year financial report does not include all of the notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report of the group.

Basis of preparation

The financial statements have been prepared on an accruals basis and are based on historical costs modified, where applicable, by the measurement at fair value of selected non‑current assets, financial assets and financial liabilities. The financial report is presented in Australian dollars.

The accounting policies and methods of computation adopted are consistent with those of the previous financial year and corresponding interim reporting period except for the impact of the Standards and Interpretations described below. Where required by Accounting Standards comparative figures have been adjusted to conform to changes in presentation for the current financial year.

New or revised accounting standards and interpretations that are first effective in the current reporting period

The group have adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to their operations and effective for the current reporting period. This adoption has not resulted in any changes to the group's accounting policies and has no effect on the amounts reported in the current and prior periods.

Going Concern

The consolidated financial statements have been prepared on a going concern basis which contemplates that the group will continue to meet its commitments and can therefore continue normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.

Because of the nature of the operations, exploration companies, such as Tlou Energy Limited, find it necessary on a regular basis to raise additional cash funds to fund future exploration activity and meet other necessary corporate expenditure. At the date of this financial report, the ability of the group to execute its currently planned exploration and evaluation activities requires the group to raise additional capital within the next 12 months. Accordingly, the group is in the process of investigating various options for the raising of additional funds which may include but is not limited to an issue of shares or the sale of exploration assets where increased value has been created through previous exploration activity.

At the date of this financial report, none of the above fund raising options have been concluded and no guarantee can be given that a successful outcome will eventuate. The directors have concluded that as a result of the current circumstances there exists a material uncertainty that may cast significant doubt regarding the group's and the company's ability to continue as a going concern and therefore the group and company may be unable to realise their assets and discharge their liabilities in the normal course of business. Nevertheless, after taking into account the current status of the various funding options currently being investigated and making other enquiries regarding other sources of funding, the directors have a reasonable expectation that the group and the company will have adequate resources to fund its future operational requirements and for these reasons they continue to adopt the going concern basis in preparing the financial report.

The interim financial report does not include adjustments relating to the recoverability or classification of recorded assets amounts nor to the amounts or classification of liabilities that might be necessary should the group not be able to continue as a going concern.

Fair values

The fair values of Consolidated Entity's financial assets and liabilities approximate their carrying value. No financial assets or liabilities are readily traded on organised markets in standardised form.

Accounting estimates and judgements

Critical estimates and judgements are continually evaluated and are consistent with those disclosed in the previous annual report.

Note 2.     Segment information

Identification of reportable segments

Operating segments are identified on the basis of internal reports that are regularly reviewed by the executive team in order to allocate resources to the segment and assess its performance. The Company currently operates in one segment, being the exploration, evaluation and development of coalbed methane resources in southern Africa.

Segment revenue

As at 31 December 2015 no revenue has been derived from its operations (2014: $nil).

Segment assets

Segment non-current assets are allocated to countries based on where the assets are located as outlined below.

								Dec 2015	June 2015
								$	$
Botswana								46,904,769	44,281,700
Australia								1,006	1,949

Note 3.     Revenue

								Dec 2015	Dec 2014
								$	$
Interest								19,849	78,955
								19,849	78,955

Note 4.     Expenses

Loss before income tax includes the following specific expenses:									Dec 2015	Dec 2014
									$	$
Other expenses
●	Stock exchange and secretarial fees								73,157	46,319
●	Insurance								33,708	33,725
●	Travel and accommodation								111,857	128,508
									218,722	208,552

Note 5.     Trade and other receivables

								Dec 2015	June 2015
								$	$
Current
Other receivables								292,508	239
GST/VAT receivable								151,423	221,705
								443,931	221,944

Other receivables include proceeds of shares issued on admission to the AIM market of the London Stock Exchange, held on behalf of the Company by the Company's joint broker Brandon Hill Capital Limited.

Note 6.     Other assets

								Dec 2015	June 2015
								$	$
Prepayments								14,750	214,291
								14,750	214,291

Note 7.     Exploration and evaluation expenditure

								Dec 2015	June 2015
								$	$
Exploration and evaluation assets								45,407,097	43,559,315
								45,407,097	43,559,315
								Dec 2015	Dec 2014
								$	$
Movements in exploration and evaluation phase
Balance at the beginning of period								43,559,315	37,344,231
Exploration and evaluation expenditure during the half-year								3,982,616	1,913,420
Foreign currency translation								(2,134,834)	1,647,517
Balance at the end of period								45,407,097	40,905,168

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phase is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

Note 8.     Other non-current assets

								Dec 2015	June 2015
								$	$
Inventory and well consumables								925,449	1,378,017
								925,449	1,378,017

Inventory and well consumables has been reclassified as a non-current asset. In prior periods it was reported under current assets.

Note 9.     Contingent liabilities

The Directors are not aware of any contingent liabilities at 31 December 2015.

Note 10.    Commitments

Exploration expenditure

In order to maintain an interest in the exploration tenements in which the group is involved, the group is committed to meet the conditions under the agreements. The timing and amount of exploration expenditure and obligations of the group are subject to the minimum work or expenditure requirements of the permit conditions and may vary significantly from the forecast based on the results of the work performed,  which will determine the prospectivity of the relevant area of interest. The obligations are not provided for in the financial statements.

Minimum expenditure requirements

							Dec 2015	June 2015
							$	$
●	not later than 12 months						10,143,760	15,051,886
●	between 12 months and 5 years						16,199,644	16,986,978
							26,343,404	32,038,864

Note 11.    Contributed equity

						Dec 2015	Dec 2014	Dec 2015	Dec 2014
						Shares	Shares	$	$
Opening balance						187,156,319	147,754,846	71,606,519	66,532,786
Issue of ordinary shares during the year						18,462,973	-	2,584,816	-
Share issue costs						-	-	(259,766)	-
Ordinary shares ‑ fully paid						205,619,292	147,754,846	73,931,569	66,532,786

Note 12.    Events occurring after balance date

Other than the matters discussed in this report, there has not arisen in the interval between the end of the half-year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect significantly the operations of the group, the results of those operations or the state of affairs of the group in subsequent financial periods.

 

END

 

 

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