Final Results for the year ended 31 December 2019

RNS Number : 7119K

Wentworth Resources PLC

24 April 2020

 

PRESS RELEASE  24 April 2020

WENTWORTH RESOURCES PLC
("Wentworth" or the "Company")

Final Results for the year ended 31 December 2019

Wentworth (AIM: WEN), the independent, East Africa-focused natural gas company , is pleased to announce its audited financial results for the year ended 31 December 2019. All dollar values are expressed in US dollars unless stated otherwise.

Wentworth confirms that the Annual Report and Financial Statements for the year ended 31 December 2019 have been published, and are available on the Company's website at wentplc.com . Hard copies have today been posted to those shareholders who elected to receive them.

HIGHLIGHTS

2020 Outlook

· 2020 Mnazi Bay production guidance remains unchanged at 65 - 75 MMscf/d (gross)

· The Government of the United Republic of Tanzania has taken a robust and proactive approach to the COVID-19 pandemic

· 284 COVID-19 cases have been confirmed so far in Tanzania with the first reported case on the 16 March 2020

· Zero COVID-19 cases at Mnazi Bay with robust precautionary measures in place to mitigate the risk of any operational disruption

· Mnazi Bay remains fully operational with no current impact on operations due to COVID-19

Financial

· Revenues of $18.6 million, underpinned by long-term fixed price contracts 

· Adjusted EBITDAX of $8.8 million (2018: $8.3 million) excluding non-recurring expenses of $1.0 million

· Declaring a second dividend in respect of FY 2019 of 0.9 pence per share ($2.0 million in aggregate); a total dividend distribution in respect of 2019 of $3.0 million representing a yield of 7.2%, based on the closing share price at 20 April 2020

· Wentworth's share of Gross 2P Reserves as at 31 December 2019 estimated by RPS to be 95.1 Bcf with a post-tax NPV10 of $118.6 million  

· Debt free with cash on hand of $14 million at end March 2020

· TPDC receivables are now the lowest since first production, standing at two months at end of 2019 and one month at end of March 2020  

Operational

· Production averaged 70.3 MMscf/day (2018: 83.2 MMscf/day), lower due to fluctuating demand but in line with guidance of 68-72 MMscf/day

· Capacity from existing wells and production facilities increased to in excess of 100 MMscf/day

· Low operational cost of production of $0.69 / Mscf

Corporate

· Katherine Roe promoted to CEO in November 2019

· Operational and financial resilience, accompanied by minimal 2020 work programme, positions the Company to absorb the impact from the current difficult macroeconomic backdrop

· Delisting from Oslo Børs and redomicile to the UK providing a simpler and more cost-effective platform for growth along with a more transparent corporate governance structure  

Sustainable Growth

· The power access gap in Tanzania is growing despite domestic energy supply increasing, with a reported access rate of only 32.7% and 7.7 million households without power

· Transformational growth needed in domestic energy supply to deliver the Government's target of universal access by 2030 through low-cost, low carbon solutions

· Natural gas will play a critical role in meeting this target to support cheaper and more reliable electricity as well as facilitating an enabling environment to supplement carbon-free renewable energy systems, such as hydro and solar

· Wentworth is committed to being a long-term partner for Tanzania to deliver low-carbon, domestic energy supply growth that will underpin the socio-economic development of the country in the near and longer-term

Dividend

A dividend is declared of GBP 0.9 pence per share (US$2.0 million), payable by the end of June 2020. This second dividend follows the Company's maiden interim dividend of US$1.0 million, which was declared in September 2019, bringing a total distribution in respect of FY 2019 of US$3.0 million, which delivers an annual yield of approximately 7.2%, based on the closing share price at 20 April 2020, in line with previous guidance.

In light of uncertainty around timing and logistics of the Company's 2020 AGM due to the COVID-19 pandemic, Wentworth has declared this as a second interim dividend rather than a final dividend for 2019 to avoid any delay in shareholders receiving the dividend which, if declared as a final dividend, could not be paid until after the AGM has been held.  There will be no final dividend declared for 2019, however, it is anticipated that in future years the Company will revert to a declaration of an interim dividend with the Interim Results and a final dividend declared with the Final Results to be put to shareholders at the Company's AGM.

Interim Dividend Payment Timetable:

· Ex-dividend date: 14 May 2020

· Record Date: 15 May 2020

· UK Payment Date (for shareholders who hold shares on the UK Register): 12 June 2020

· VPS Payment Date (for shareholders who hold shares on the VPS Register): 26 June 2020

Results Conference Call

The Company is holding a conference call for analysts at 11:00am BST today, Friday 24 April 2020 and an updated presentation will be available on the company's website  wentplc.com .

To register for the call, please click on the following link:

https://secure.emincote.com/client/wentworth/wentworth004/vip_connect

You can view the presentation during the call via the following link:

https://secure.emincote.com/client/wentworth/wentworth004

Katherine Roe, CEO, commented:

"Debt free and with a healthy balance sheet, Wentworth has never been in a more financially and operationally robust position, especially important in these uncertain times we're experiencing due to the COVID-19 pandemic and stock market volatility. Following strong performance across the board in 2019 and a resilient 2020 outlook, further underlined by our decision to announce a second interim dividend, we are excited and confident about the future.

"We have increased capacity at the Mnazi Bay concession area which is well positioned to supply the expected demand increase over the near term as gas-fired power generation in Tanzania is increased by the Government.

"Responsible growth remains a priority for us. With over 65% of Tanzania's population having no reliable access to power and a universal energy access target set by the Government for 2030, we see a huge opportunity for Wentworth. We aim to continue to play a critical role in helping to plug the energy gap whilst facilitating an enabling environment for the longer-term growth of a low-to-no carbon power sector by using our gas to supplement renewable technologies when they need it."

Enquiries:  Wentworth	Katherine Roe, Chief Executive Officer	[e-mail] +44 (0)  7841 087 230
Stifel Nicolaus Europe Limited	AIM Nominated Adviser and Joint Broker  Callum Stewart Ashton Clanfield Simon Mensley	[phone]
Peel Hunt LLP	Joint Broker  Richard Crichton Alexander Allen	[phone]
FTI	Investor Relations Adviser  Sara Powell  Ben Brewerton	[phone]

 

CHAIRMAN'S STATEMENT

2019 was a year in which our Company continued to gain financial strength.  This was highlighted by the Company declaring its first dividend with a yield of 7.2% on a 18p per share price and a total distribution of $3.0 million for 2019.

In addition, at the end of January 2020, the Company also became debt free after making its final loan repayment.  Cash reserves continue to increase and at 31 March 2020 the Group has a cash balance of $14.0 million. 

Mnazi Bay is performing as expected from a world class reservoir, but production rates have been affected over the past year by fluctuations in demand primarily driven by increased supply by hydroelectric generation.  The production volumes for 2019 were within the guidelines provided by Wentworth management and averaged 70.3MMscf/day. Mnazi Bay today has the capacity to deliver in excess of 100 MMscf/day from existing wells and production facilities ensuring it is well positioned to supply the expected demand increase over the near term.

During the past year the Company made a significant change in its senior management with the promotion of Katherine Roe to CEO following the departure of Eskil Jersing in November 2019.  Following this, the Board was reduced to four Non-Executive Directors and one Executive Director, supported by long-standing and dedicated teams in both the UK and Tanzania.

2019 was a difficult year for the oil and gas business as public environmental protests affected financial institutions' ability to further invest in our industry. Although Wentworth's gas focused business model shields it from most negative sentiment, the Company still faces the pressures put forward by environmental groups to remove fossil fuels from the world energy supply mix.

The power access gap in Tanzania is growing, despite domestic energy supply increasing and transformational growth is needed to deliver universal access throughout the country through low-cost low carbon solutions. Natural gas will play a critical role in meeting this target to support cheaper and more reliable electricity alongside carbon-free renewable energy systems, such as hydro and solar. Wentworth is committed to being a long-term partner for Tanzania in delivering low-carbon, domestic energy supply growth that will underpin the socio-economic development of the country in the near and longer-term.  

In closing, I would once again like to thank all shareholders for their continued support and to give special recognition to the entire Wentworth family, including the Board of Directors, for their hard work and loyalty in 2019.

Robert McBean

Chairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Year-ended 31 December
	Note	2019 $000	2018 $000
Total revenue	5	18,636	16,224
Production and operating costs		(3,935)	(2,290)
Depletion	16	(6,236)	(7,803)
Total cost of sales		(10,171)	(10,093)
Gross profit		8,465	6,131
Recurring administrative costs	7	(5,883)	(6,289)
New venture and pre - licence costs		(609)	-
Amounts capitalised to E&E assets		-	664
Impairment loss on E&E assets	15	-	(41,598)
Provision for Tanzania Government receivables	14	-	(4,959)
Management restructuring costs	10	(489)	(940)
Redomicile costs		-	(1,393)
Share-based payment charges	24	(63)	(98)
Depreciation	16	(2)	(12)
Loss on sale of PPE		-	(3)
Tanzanian withholding tax costs	28	-	(993)
Total costs		(7,046)	(55,621)
Profit/(loss) from operations		1,419	(49,490)
Finance income	11	21	2,659
Finance expense	11	(453)	(1,616)
Profit/(loss) before tax		987	(48,447)
Current tax expense	28	(132)	(63)
Deferred tax income / (expense)	28	1,511	(26,714)
		1,379	(26,777)
Net and comprehensive profit/(loss) after tax		2,366	(75,224)
Net profit/(loss) per ordinary share
Basic and diluted (US$/share)	26	0.01	(0.40)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Note	31 December 2019 $000	31 December 2018 (Restated)1 $000
ASSETS
Current assets
Cash and cash equivalents		13,487	9,403
Trade and other receivables	12	6,075	7,553
TPDC receivables	13	-	5,238
		19,562	22,194
Non-current assets
Exploration and evaluation assets	15	8,129	8,129
Property, plant and equipment	16	77,559	83,777
Deferred tax asset	28	5,548	4,036
		91,236	95,942
Total assets		110,798	118,136
LIABILITIES
Current liabilities
Trade and other payables	18	2,125	3,062
Current portion of long-term loans	20	1,714	7,091
Contingent PTTEP liability	21	-	848
		3,839	11,001
Non-current liabilities
Long-term loans	20	-	1,688
Decommissioning provision	22	1,085	969
		1,085	2,657
Equity
Share capital	25	416,426	416,426
Equity reserve	25	26,651	26,588
Accumulated deficit		(337,203)	(338,536)
		105,874	104,478
Total liabilities and equity		110,798	118,136

¹ Restated amounts relate to the presentation adjustment net-off of $2.5 million cash and cash equivalents within current assets against $2.5 million credit overdraft facility within current liabilities with respect to the undrawn overdraft credit facility at 31 December 2018 (note 19).

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Note		Number of shares	Share capital	Equity reserve	Accumulated deficit	Total  equity
				$000	$000	$000	$000
Balance at 31 December 2017 as previously reported			186,488,465	416,426	26,490	(262,566)	180,350
IFRS 9 transitional adjustment	2		-	-	-	(746)	(746)
Restated balance at 31 December 2017			186,488,465	416,426	26,490	(263,312)	179,604
Net loss and comprehensive loss			-	-	-	(75,224)	(75,224)
Share based compensation	24		-	-	98	-	98
Balance at 31 December 2018			186,488,465	416,426	26,588	(338,536)	104,478
Dividends Net profit and comprehensive profit	27		- -	-   -	- -	(1,033) 2,366	(1,033) 2,366
Share based compensation	24		-	-	63	-	63
Balance at 31 December 2019			186,488,465	416,426	26,651	(337,203)	105,874

CONSOLIDATED STATEMENT OF CASH FLOWS

				Year-ended 31 December
	Note			2019 $000	2018 (Restated)1 $000
Operating activities
Net profit/(loss) for the year				2,366	(75,224)
Adjustments for:
Depreciation and depletion	16			6,238	7,815
Impairment loss on E&E assets	15			-	41,598
Provision for Tanzania Government receivables	14			-	4,959
Finance costs/(income), net	31			432	(1,043)
Deferred tax expense	28			(1,511)	26,714
Share based compensation	24			63	98
Loss on sale of PPE				-	3
				7,588	4,920
Change in non-cash working capital	31			410	1,576
Net cash generated from operating activities				7,998	6,496
Investing activities
Additions to exploration and evaluation assets	31			-	(1,806)
Additions to property, plant and equipment	31			(20)	(1,968)
Reduction of TPDC receivable	31			5,238	15,377
Proceeds from sale of office assets	16			-	3
Interest income				21	-
Net cash from investing activities				5,239	11,606
Financing activities
Principal term loan repayments	20			(6,661)	(6,996)
Overdraft credit facility repayment1	19			-	(2,500)
Interest on term loan	20			(593)	(1,544)
Interest/renewal fee on overdraft facility	19			(18)	(68)
Payment of contingent PTTEP liability	21			(848)	(1,341)
Dividends paid	27			(1,033)	-
Net cash used in financing activities				(9,153)	(12,449)
Net change in cash and cash equivalents				4,084	5,653
Cash and cash equivalents, beginning of the period				9,403	3,750
Cash and cash equivalents, end of the period				13,487	9,403

 

NOTES TO THE FINANCIAL STATEMENTS

1.  Incorporation and basis of preparation

Wentworth Resources plc ("Wentworth" or the "Company") is an East Africa-focused upstream oil and natural gas company. These audited consolidated financial statements include the accounts of the Company and its subsidiaries (collectively referred to as "Wentworth Group of Companies" or the "Group"). The Company is actively involved in oil and gas exploration, development and production operations. Wentworth is incorporated in Jersey and shares of the Company as at 31 December 2019 were widely held and listed on the AIM part of the London Stock Exchange (ticker: WEN).

The Company's principal place of business is located at Thames Tower, 2^nd Floor, Station Road, Reading RG1 1LX, United Kingdom.

The Company maintains offices in Dar es Salaam, Tanzania and Reading, United Kingdom.

Basis of presentation and statement of compliance

These consolidated financial statements have been prepared on a historical cost basis and have been prepared using the accrual basis of accounting. The consolidated financial statements are prepared in accordance with International Financial Reporting Standard ("IFRS") as issued by the International Accounting Standards Board ("IASB"). 

The consolidated financial statements were approved by the Board of Directors on 24 April 2020.

At the time of writing this report, relatively little is known about the behaviour and ultimate impact of the Covid-19 virus, both operational and financial. The virus was entirely unanticipated, and the speed of infection and reinfection has taken worldwide authorities by surprise. Freedom of movement and security protocols have been put in place in the United Kingdom that are unprecedented in the past 75-years. That being said, Wentworth has never been in a stronger position to be able to absorb and deal with the potential downside scenarios that we have been working very hard to model and mitigate internally. Ultimately, however, it will be the macro-economic environment that influences the impact upon the wider Group and there can be no certainty as to what this final outcome will be. We continue to apply the judgement that the business will continue, anticipating minimal disruption and do not at this stage foresee these to be either longstanding or material to our business. We do, however, continue to monitor the situation as it progresses and are mindful of the speed in which circumstances may change, both for the better or for the worse.

Functional and presentation currency

These consolidated financial statements are presented in US dollars which is the functional currency the majority of its subsidiaries.

Basis of consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries.  Subsidiaries are entities that the Company controls. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and can affect those returns through its authority over the investee.  The existence and effect of potential voting rights are considered when assessing whether a company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. The legal entities within the Wentworth Group of Companies are disclosed within note 17. All inter- company transactions, balances and unrealised gains on transactions between the parent and subsidiary companies are eliminated on consolidation.

The Group holds a 31.94% participation interest in the Mnazi Bay Concession through two subsidiaries.  Wentworth Gas Limited ("WGL"), which is a wholly owned subsidiary, owns a 25.40% participation interest and CMBL owns a 16.38% participation interest of which the Group's proportionate share is 6.54% (i.e. Wentworth's interest of 39.925% interest in CMBL multiplied by 16.38% participation interest). CMBL is considered a jointly controlled entity and accounted for as a joint operation rather than a joint venture. The Group proportionately consolidates CMBL as related contractual agreements establish that the parties to the joint arrangement have rights to the assets and obligations for the liabilities of ownership in proportion to their interest in the arrangement.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. The financial position of the Group, its cash flows and liquidity position are described in the Financial Review contained within this report.

With the world currently struggling to come to terms with the unprecedented events of the Covid-19 pandemic and the risk presented to the continued health and well-being of our workforce alongside the disruption that preventative measures have had on the global supply chain in placing restrictions on the transportation of goods, services and personnel set to continue for some time to come, considerable time and resource have been allocated by Directors and senior management in ensuring that Wentworth is best placed to be able to continue to safely produce gas from Mnazi Bay alongside the Operator, Maurel et Prom.  Given the essential nature of services provided and the forecasted impact of the virus in the country, the Group notes that an interruption of production and unavailability of key workforce is remote.  The Directors however are mindful of the speed with which circumstances may change, both for the better or for the worse, and all modelling is based on information that we currently have available to us.

The Group has a long established and collaborative relationship with the Government of the United Republic of Tanzania, having operated in-country for many years, however the Directors do recognise that the Group is dependent upon the continued collection of gas sales invoices and ongoing operational support of the Government as its sole gas sales customer through its operating agencies TPDC and TANESCO.

The Directors have, therefore, judged that on a risk-weighted basis which takes into consideration both the probability of occurrence and an estimate of the financial impact, the continued timely settlement of gas-sales invoices by the Government of the United Republic of Tanzania continues to be the most significant risk currently faced by the Group. To this end, should no settlement of future gas sales invoices be received from the date of approval of these financial statements, we have assessed that the Group would be able to continue to operate for a period of up to 14-months without the need for a further injection of working capital. 

Further to this based on the application of reasonable and foreseeable sensitivities, which include potential changes in demand, capital spend, operating costs, the Directors believe that the Group is well placed to manage its financial exposures The Directors have judged that owing to a combination of the stability of this relationship which has seen payment terms continue to improve during 2019 and its much improved financial position having fully repaid all of its fixed-term debt in January 2020, the Group has sufficient cash resources for its working capital needs, committed capital and operational expenditure programmes for at least the next 14-months based on the Directors  worst case scenario of no settlement of future gas sales as noted above.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Future accounting pronouncements

The following amended standards and interpretation are effective for financial years commencing on or after 1 January 2020. The Group does not intend to adopt the standards below, before their mandatory application date.

New and amended standards

Standard	Description	Effective date	EU Endorsement Status
IFRS 3 (amendments	Definition of a Business	1 January 2020	Endorsed
IAS 1 and IAS 8 (amendments)	Definition of Material	1 January 2020	Endorsed
IFRS 9, IAS 39 and IFRS 7 (Amendments)	Interest Rate Benchmark Reform	1 January 2020	Endorsed
IFRS 17	Insurance Contracts	1 January 2021	Endorsed

The Company intends to adopt the above listed standards and interpretations in its financial statements for the annual period beginning 1 January 2020. The Company does not expect the interpretation to have a material impact on the financial statements.

2.  Summary of accounting policies

The principal accounting policies applied in the preparation of these Company and Group consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Joint arrangements

The analysis of joint arrangements requires management to analyse numerous agreements and the requirements of IFRS 10 and IFRS 11. Several judgements and estimates are made by management including whether joint control exists and the extent of exposure to the underlying assets and liabilities of the joint arrangement. By virtue of the provisions contained within the underlying shareholder agreements, to which Cyprus Mnazi Bay Limited (see below for accounting considerations of this entity) and Wentworth Holdings Gas Limited, a wholly owned subsidiary of Wentworth Resources plc, are parties to,  management have assessed that the Company has a joint arrangement through its 31.94% ownership in the license and accounts for this interest as a joint operation as no single individual shareholder may exercise absolute control over the entity. The agreement is bilateral, with Maurel & Prom Mnazi Bay Holdings SAS (M&P) and whilst the Operator may make day-to-day decisions, the overall strategic direction of the partnership requires unanimous consent between M&P and Wentworth. M&P hold 48.06% share in the license and 20% is owned by TPDC.  As such the Group is entitled to its share of production from the license and therefore revenue generated from the sale of this output.  Wentworth also recognise its share of all expenses incurred the joint arrangement, its right to the assets, as well as its share of the liabilities and obligations.  Financial instruments

The Group recognises financial assets and liabilities on its balance sheet when it becomes a party to the contractual provisions of the instrument.

Accounting treatment of CMBL

The Group holds a 31.94% participation interest in the Mnazi Bay Concession through two subsidiaries.  Wentworth Gas Limited ("WGL"), which is a wholly owned subsidiary, which owns a 25.40% participation interest and Wentworth Holdings (Jersey) Limited, a wholly owned subsidiary whom hold 39.925% in  Cyprus Mnazi Bay Limited ("CMBL"), which owns a 16.38% participation  interest of which the Group's proportionate share is therefore 6.54% (i.e. Wentworth's interest of 39.925% interest in CMBL multiplied by 16.38% participation interest). CMBL is considered a jointly controlled entity and accounted for as a joint operation rather than a joint venture. The Group therefore recognises its share of production from the license and therefore revenue generated from the sale of this output.  It also recognises its share of all expenses incurred the joint arrangement, its right to the assets, as well as its share of the liabilities and obligations."

(i)  Financial assets

Classification and initial measurement

Financial assets within the scope of IFRS 9 are classified as financial assets at amortised cost, fair value through profit or loss or fair value through other comprehensive income. The Group determines this classification at initial recognition depending on the business model for managing the financial asset and the contractual terms of the cash flows.

The Group's financial assets include cash and cash equivalents, trade and other receivables.

When financial assets are initially recognised, they are measured at fair value being the consideration given or received plus directly attributable transaction costs. Any gain or loss at initial recognition is recognised in the income statement.

The Group's financial assets measured at amortised cost are held for the collection of contractual cash flows where those cash flows have specified dates and represent solely payments of principal and interest, such as cash and cash equivalents or trade receivables.

The Group's financial assets measured at fair value through profit or loss are those financial assets where the contractual cash flows do not represent solely payments of principal and interest, such as trade receivables.

Subsequent measurement

Financial assets held for the collection of contractual cash flows that are solely payments of principal and interest (and classified as amortised cost) are subsequently measured at amortised cost using the effective interest rate method ("EIR"). Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. Allowance for impairment is estimated on a case-by-case basis.

Derecognition

A financial asset is derecognised when the Group loses control over the contractual rights that comprise that asset. This occurs when the rights are realised, expire or are surrendered. 

Impairment of financial assets

The Group assesses on a forward-looking basis the expected credit losses that might arise on financial assets measured at amortised cost. This assessment considers the probability of a default event occurring that could result in the expected cash flows due from a counterparty falling short of those contractually agreed.

Expected credit losses are estimated for default events possible over the lifetime of a financial asset measured at amortised cost. However, where the financial asset is not a trade receivable measured at amortised cost and there have been no significant increases in that financial asset's credit risk since initial recognition, expected credit losses are estimated for default events possible within 12 months of the reporting date.

(ii)  Financial liabilities

Classification and initial measurement

Financial liabilities within the scope of IFRS 9 are classified as financial liabilities at amortised cost or fair value through profit or loss. The Group determines the classification of its financial liabilities at initial recognition.

The Group's financial liabilities include trade and other payables, other liabilities and borrowings which are classified as amortised cost. Trade payables may be designated and measured at fair value through profit or loss when doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities on a different basis.

All financial liabilities are recognised initially at fair value while financial liabilities at amortised cost additionally include directly attributable transaction costs.

Subsequent measurement

Trade and other payables, borrowings and other financial liabilities are subsequently measured at amortised cost using the EIR method after initial recognition. Gains and losses are recognised in the income statement through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.

A gain or loss on a financial liability measured at fair value through profit or loss is recognised in the income statement in the period in which it arises.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

(iii)  Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when there is an enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. 

(iv)  Fair value of financial instruments

At each reporting date, the fair value of financial instruments that are traded in active markets is determined by reference to quoted market prices, without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm's length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis or other valuation models.

Cash and cash equivalents

Cash and cash equivalents include cash on hand, term deposits and short-term highly liquid investments with the original term to maturity of three months or less, which are convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of changes in value.

Long-term receivables

Long-term receivables plus applicable accrued interest are initially recognised at their fair value based on the discounted cash flows.  The discounted cash flows are reviewed at least every year to adjust for variations in the estimated future cash flows with the change in estimate reported in profit or loss. The discount rate is based on the credit quality and term of the financial instrument.  The financial instrument is subsequently valued at amortised costs by accreting the instrument over the life of the asset.  The accretion is reported in profit or loss.

Exploration and evaluation ("E&E") exploration assets

E&E costs, including costs of licence acquisition, technical services and studies, exploratory drilling, whether successful or unsuccessful, and testing and directly attributable overhead, are capitalised as E&E assets according to the nature of the assets acquired. These costs are accumulated in cost centres by well, field or exploration area pending determination of technical feasibility and commercial viability.

E&E assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.

The technical feasibility and commercial viability of extracting a resource is generally considered to be determinable when proven and/or probable reserves are determined to exist. A review of each exploration licence or field is carried out, at least annually, to ascertain whether it is technically feasible and commercially viable. Upon determination of technical feasibility and commercial viability, intangible E&E assets attributable to those reserves are first tested for impairment with the unimpaired amounts reclassified from E&E assets to a separate category within tangible assets within PP&E referred to as oil and gas interests.

Costs incurred prior to the legal awarding of petroleum and natural gas licences, concessions and other exploration rights are recognised in profit or loss as incurred.

PP&E - oil and natural gas properties

Items of PP&E, which include oil and gas development and production assets, are measured at cost less accumulated depletion and depreciation and accumulated impairment losses. PP&E assets include costs incurred in developing commercial reserves and bringing them into production, such as drilling of development wells, tangible costs of facilities and infrastructure construction, together with the E&E expenditures incurred in finding the commercial reserves that have been reclassified from E&E assets as outlined above, the projected cost of retiring the assets and any directly attributable general and administrative expenses. Expenditures on developed oil and natural gas properties are capitalised to PP&E when it is probable that a future economic benefit will flow to the Company as a result of the expenditure and the cost can be reliably measured. The initial cost of an asset is comprised of its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of any decommissioning obligations associated with the asset and borrowing costs on qualifying assets.  When significant parts of an asset with PP&E, including oil and gas interests, have different useful lives, they are accounted for as separate items (major components). Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of PP&E are recognised as capitalised oil and gas interests only when they increase the future economic benefits embodied in the specific asset to which they relate.  Subsequent changes in estimated decommissioning obligation due to changes in timing, amounts and discount rates are included in the cost of the asset.  Such capitalised oil and gas interests generally represent costs incurred in developing proved and/or probable reserves and bringing in or enhancing production from such reserves and are accumulated on a field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognised. The costs of the day-to-day operating of PP&E are recognised in profit or loss as incurred.

Depletion

The net carrying amount of PP&E is depleted on a field by field unit of production method by reference to the ratio of production in the year to the related proven and probable reserves. If the useful life of the asset is less than the reserve life, the asset is depreciated over its estimated useful life using the straight-line method.  Future development costs are estimated considering the level of development required to produce the proven and probable reserves. These estimates are reviewed by third party independent reserves engineers. Changes in factors such as estimates of reserves that affect unit-of-production calculations are dealt with on a prospective basis. Capital costs for assets under construction included in development and production assets are excluded from depletion until the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

Disposals

Oil and natural gas properties are derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss on derecognition of the asset, including farm out transactions or asset sales or asset swaps, is calculated as the difference between the proceeds on disposal, if any, and the carrying value of the asset, is recognised in profit or loss in the period of derecognition.

PP&E - office and other equipment

Office and other equipment are carried at cost less accumulated depreciation and impairment losses.  Depreciation of the cost of these assets less residual value is charged to profit and loss on a straight-line basis over their estimated useful economic lives of between three and five years.

Leases

IFRS 16 Leases applies to all leases, including subleases, but does not apply to leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following:

· Fixed payments, including in-substance fixed payments;

· Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

· Amounts expected to be payable under a residual guarantee; and

· The exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there as a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in a profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in 'property plant and equipment' and lease liabilities in 'loans and borrowings' in the statement of financial position.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12-months or less and leases of low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Decommissioning obligation

Decommissioning obligations are recognised for legal obligations related to the decommissioning of long-lived tangible assets that arise from the acquisition, construction, development or normal operation of such assets.  A liability for decommissioning is recognised in the period in which it is incurred and when a reasonable estimate of the liability can be made with the corresponding decommissioning provision recognised by increasing the carrying amount of the related long-lived asset.  The recognised decommissioning provision is subsequently allocated in a rational and systematic method over the underlying asset's useful life.  The initial amount of the liability is accreted by charges to the profit or loss to its estimated future value.

Impairment

The carrying values of production assets , exploration and evaluation expenditure s that have been capitalised and property, plant and equipment are   assessed for impairment when indicators of such impairment exist. In performing impairment reviews, assets are categorised into the   smallest identifiable groups (cash generating units) that generate cash flows independently. If any indication of impairment exists, the   estimated recoverable amount of the asset or cash generating unit ( " CGU ") is calculated.

If the carrying amount of the asset or CGU exceeds its recoverable amount, it is impaired with the loss charged to the income statement   so as to reduce the carrying amount to its recoverable amount.

Impairment losses are recognised in the income statement in those expense categories consistent with the function of the impaired asset   or CGU.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no   longer exist or may have decreased. If such indication exists, the Group makes an estimate of the recoverable amount.

(i)  Calculation of recoverable amount

The recoverable amount of an asset or CGU is the greater of its value in use and fair value less costs to sell. In assessing value in use,   the estimated future cash flows of the asset or CGU in its present condition are discounted to their present value using a pre-tax   discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair   value less costs to sell, consideration will be given to whether the value of the asset or CGU can be determined from an active market   (e.g. recognised exchange) or a binding sale agreement which are classified as level 1 in the fair value hierarchy under IFRS 13 'Fair Value   Measurements'. Where this is not determinable, fair value less costs to sell for a CGU is usually estimated with reference to a discounted   cash flow model, similar to the method used for value in use, but may include estimates of future production, revenues, costs and capital   expenditure not currently included in the economic model. Additionally, cash flow estimates include the impact of tax and are discounted   using a post-tax discount rate. An estimate made on this basis is classified as level 3 in the fair value hierarchy.

(ii)  Reversals of impairment

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If this is the case, the carrying amount of the asset is increased to its recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised for the asset in prior years. Such reversals are recognised in the income statement. Impairment losses recognised in relation to goodwill are not reversed for subsequent increases in the recoverable amount.

Share capital

The proceeds from the exercise of share options and the issuance of shares from treasury are recorded as share capital in the amount for which the option, warrant, or treasury share enables the holder to purchase a share in the Company.

Proceeds for shares in excess of the nominal value are recorded within share premium. 

Share issuance costs

Commissions paid to underwriters, and other related share issue costs, such as legal, auditing and advisory, on the issue of the Company's shares are charged directly to share capital, net of tax within the share premium account.

Share based payments

The fair value of the options at the date of the grant is determined using the Black-Scholes option pricing model and share based compensation is accrued and charged to profit or loss, with an offsetting credit to equity reserve over the vesting periods. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest.

Capitalisation of interest

The Company capitalises interest expense incurred during the construction phase of the projects, except E&E assets which were funded by the related financing.

Revenue recognition

Natural gas revenues are recognised upon the transfer of control over its gas to its customers, TPDC and TANESCO, which is when delivery is made to them through the offtake network.

Investment income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying value.

Income taxes

Tax expense comprises current and deferred tax. Tax is recognised in the profit or loss except to the extent it relates to items recognised in other comprehensive income ("OCI") or directly in equity.

Current income tax

Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax

Deferred taxes are the taxes expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the consolidated statement of financial position and their corresponding tax basis. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that future taxable profits are expected to be available against which deductible temporary differences to the tax basis can be utilised. Deferred income tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill, if any, or from the initial recognition (other than in a business combination) of other assets in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and joint arrangements except where the reversal of the temporary difference can be controlled, and it is probable that the difference will not reverse in the foreseeable future.

Deferred tax assets are reviewed at each reporting period and reduced to the extent that it is no longer probable that sufficient future taxable profits are expected to be available to allow all or part of the asset to be recovered. Deferred tax assets are recognised for taxable temporary differences arising on investments in subsidiaries to the extent that it is probable that the temporary difference will reverse in the foreseeable future and future taxable profits are expected to be available against which the temporary difference can be utilised.

Foreign currency translation

Items included in the financial statements of the Company and its subsidiaries are measured using the currency of the primary economic environment in which the legal entity operates (the "functional currency"). Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction.  Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities not denominated in the functional currency of an entity are recognised in profit or loss.

The functional currency of all Wentworth subsidiaries is US dollars except for Wentworth Resources (UK) Limited which is Pound Sterling.  The assets and liabilities of this Company are translated into US dollars at the period-end exchange rate.  The income and expenses of the Company are translated to US dollars at the average exchange rate for the period.

Translation gains and losses are included in other comprehensive income; however, this subsidiary has limited operations so there is no significant amount of foreign exchange gains and losses to include in other comprehensive income.  All other foreign exchange gains and losses are recognised in profit or loss.

Changes in accounting policies

IFRS 16 'Leases' was adopted on 1 January 2019, replacing IAS 17 'Leases'. The new standard has not been applied retrospectively. The standard changes the identification of leases and how they will be recognised, measured and disclosed by lessees, requiring the recognition of a right-of-use asset and liability for the future lease payments on the balance sheet. The standard requires the right-of-use asset to be depreciated over the duration of the lease term and shown within operating profit in the income statement, with the interest cost associated with the financing of the asset included within interest expense. In applying the transition requirements and provisions of the new standard, the Group reviewed its lease contracts, which mainly related to leased office buildings and the right-of-use asset and related liability was found to be immaterial. The standard does not apply to leases to explore for or use natural resources, such as production licences and rights.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases which have low value, or short-term leases with a duration of 12 months or less. The payments associated with such leases are charged directly to the income statement on a straight-line basis over the lease term.

In assessing the application of IFRS 16, the Group considered the following practical expedients:

· the previous determination of whether a contract is, or contains, a lease pursuant to IAS 17 'Leases' and IFRIC 4 'Determining whether an Arrangement Contains a Lease' has been maintained for existing contracts;

· right-of-use assets or lease liabilities for leases where the lease term ends within 12 months of the date of initial application have not been recognised;

· initial direct costs from right-of-use assets have been excluded; and

· hindsight was used when assessing the lease term.

Earnings or loss per share ("EPS")

Basic earnings or loss per share is calculated by dividing profit or loss attributable to owners of the Company (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the period. The denominator is calculated by adjusting the shares outstanding at the beginning of the period by the number of shares bought back or issued during the period, multiplied by a time-weighting factor.

Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of all dilutive potential ordinary shares deemed to have been converted at the beginning of the period or if later, the date of issuance. The effects of anti-dilutive potential ordinary shares are ignored in calculating diluted EPS.

3.  Critical accounting judgements and key sources of estimation uncertainty

In applying the Group's accounting policies, the preparation of consolidated financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts may differ materially from these estimates due to changes in general economic conditions, changes in laws and regulations, changes in future operating plans and the inherent imprecision associated with estimates. Significant estimates and judgments used in the preparation of these consolidated financial statements include the assessment of impairment triggers related to E&E and PP&E assets, estimation of decommissioning obligations and recognition of a deferred tax asset.

Recoverable value of Mnazi Bay E&E and PP&E costs

Significant accounting Judgements

The Directors review the carrying value of the Groups assets to determine whether there are any indicators if impairment such that the carrying values of the assets may not be recoverable.  The assessment of whether an indicator of impairment or reversal thereof has arisen requires considerable judgement, taking account of factors such as future operational and financial plans, commodity prices and the competitive environment.

E&E are inherently judgemental to value. The amounts for E&E represent active exploration projects and investments. These amounts are expensed to profit or loss as exploration costs unless the determination process over whether reserves are recoverable or not is not completed and there are no indications of impairment at the reporting date or commercial reserves are established. Indictors of impairment include; (a) the right to explore the specific area has expired and is not expected to be renewed; (b) significant expenditure for further exploration of evaluation activities is not being planned; (c) exploration and evaluation of resources have not led to discovery or confirmation of commercially viable resource; (d) the sufficient data exists to indicate that the carrying amount of the asset may not be recovered in full from development or sale. The outcome of ongoing exploration and evaluation activities and whether the carrying value of E&E will ultimately be recovered is inherently uncertain and requires significant judgement.  .

Management performs impairment tests on the Company's PP&E when indicators of impairment are present. The assessment of impairment indicators is subjective and considers the various internal and external factors such as the financial performance of individual CGUs, market capitalisation and industry trends.  

Key sources of estimation uncertainty

The preparation of discounted cash flows used to assess the recoverable amount of the Groups CGUs includes management's estimates of future operating costs, economic and regulatory environments, capital expenditures requirements, long term field plans and other factors including discount rates and the total level of reserves deemed to be commercial.

The valuation underpinning the carrying value of PP&E assets are largely dependent on supply and demand variables.

The gas sales price is fixed and the cost base of production operations is also largely fixed in nature. Whilst the benefits of increased production volumes are clear, the opposite is equally true during operational downtime, prolonged or permanent gas supply outages which may in turn impact upon the commerciality of the field. Mnazi Bay currently has 5 producing wells and formally signed the COD making all terms contained within the Mnazi Bay GSA legally binding and fully in effect from 10 September 2019. The Mnazi Bay JO is committed to supplying a minimum quota of natural gas to TPDC and TANESCO of 80.0 MMscf/d rising to 130.0 MMscf/d for the entire remaining term of the GSA and is guaranteed of future revenue streams via a take or pay provision of 85% of these amounts. This greatly strengthens and formally ratifies the long-term commerciality of the Mnazi Bay asset, and as such it would require significant reductions in daily production operations to trigger an indication of impairment under IFRS 6 and IAS 36 and a subsequent write down in the book value of the Mnazi Bay asset which currently totals $77.6 million. During the current fiscal period there have no indicator of impairment of EE assets and DP assets'.

Reserves estimates

Significant accounting judgements

Oil and natural gas reserves are estimates of the amount of product that can be economically and legally extracted from the Groups oil and gas properties.  In order to estimate reserves the Group employed an external independent reserve evaluator as at December 31, 2019.  These reserve estimates are used in the calculation of depletion, impairment and impairment reversal determinations and recognition of deferred tax asset. Reserve estimates are based on engineering data, estimated future prices and costs, expected future rates of production and the timing of future capital expenditures; all of which are subject to many uncertainties.. The Group expects that, over time, its reserve estimates will be revised upward or downward based on updated information such as the results of future drilling, oil and gas production levels and reservoir performance and may also be affected by changes in commodity prices.

The Directors do not expect significant changes in the carrying value of the Groups oil and gas properties, property plant and equipment, decommissioning liabilities and deferred taxes to arise from changes in reserves estimates within a reasonably possible range in the next 12 months.

Foreign currency exposure

Significant accounting judgements

The Group operates across a number of different jurisdictions with primary exposures to US Dollars, Tanzanian Shillings and Pound Sterling. The Directors have judged both the functional and presentation currencies of the Group to be US Dollars.

Key sources of estimation uncertainty

Foreign exchange rate risk is the risk that the Company suffers financial loss as a result of changes in the value of an asset or liability or in the value of future cash flows due to movements in foreign currency exchange rates.  All group revenue is generated from gas sales in Tanzania and upon declaration of COD on 10 September 2019 the Production Sharing Agreement entered the Commercial Development phase under which both TPDC and TANESCO may elect to pay the operator in either US Dollars or Tanzanian Shillings for the gas that is produced and sold. Currently the Operator continues to be paid in US Dollars. While some costs are denominated in Tanzanian Shillings, most of the operating expenditures are denominated in US Dollars which would lead to an increased currency exposure if payment were to be received in Tanzanian Shillings. Wentworth Resources plc deposits any cash reserves that it does not immediately need with counterparties rated BB- or better (S&P long-term rating or equivalent). Deposits are made primarily in US Dollars, the functional currency of the Group, unless a future requirement for other currencies is identified and reserves of that currency are held but not immediately required. Where possible, cash reserves are deposited with more than one counterparty to mitigate the risk of counterparty default. The Company does not currently undertake any currency hedges. 

 

Abandonment provision

Significant accounting judgements

The Directors use judgement and experience to determine the expected timing, closure and decommissioning methods, which can vary in response to changes in the relevant legal requirements or decommissioning technologies.   

Key sources of estimation uncertainty

The ultimate cost of decommissioning and rehabilitation is uncertain and cost estimates can vary in response to many factors including the emergency of new restoration techniques and costs of labour.  Therefore the Group periodically reviews the cost estimate for its operations. Decommissioning and Abandonment obligations have been estimated using technology at current prices inflated and discounted using discount rates that reflect current market assessments of the time value of money and the risks specific to each liability. These assessments are subjective by nature and may be significantly more or less than management's current discounted cost estimations.  Due to the relatively long life of the Groups assets, changes in estimates within a reasonably possible range in the next 12 months are not expected to significantly impact the carrying value of the Groups provisions for decommissioning and site restoration costs.

Taxes

Significant accounting judgements

The Directors make judgements in relation to the recognition of various taxes levied on the Group, which are both payable and recoverable. Judgement applies as the Group operates in countries where the legal and tax systems are less developed, which increases the requirement for management to make assumptions as to whether certain payments will be required related to matters such as income taxes, value added taxes, and other indirect taxes as well as outcomes of any tax disputes which would affect the recognition of tax liabilities and deferred tax assets. A provision is recognized in the financial statements for such matters if it is considered probable that a future outflow of cash resources will be required. The provision, if any, is subject to management estimates and judgements with respect to the outcome of the event, the costs to defend, the quantum of the exposure and past practice in the country.

Key sources of estimation uncertainty

Estimates may be made to determine the amount of taxes recoverable, principally deferred tax assets. The commencement of commercial production and gas sales under the Gas Sales Agreement, allowed for the recognition of a deferred tax asset within the financial statements. The amount that the company recognizes is subject to the following estimates:

·The timing of future profits for the utilization of tax losses from the current tax pools which are based on management assessments and forecasts of future performance;

·The effective tax rate at which the losses will be utilized at throughout the Group which is currently the prevailing tax rate of the ultimate parent company;

·The status of any current tax assessments and disputes and their impact on the deferred tax pool on a probabilistic basis;

· Any material changes in legislation that may impact upon the fiscal regime on which the deferred tax asset is computed.

Changes in these estimates within a reasonably possible range in the next 12 months are not expected to significantly alter the carrying amount of the Groups taxes that are recoverable.

4.  Segment information

The Company conducts its business through Tanzania ("Mnazi Bay Concession") segment. Gas operations include the exploration, development, and production of natural gas and other hydrocarbons.  The Mozambique ("Rovuma Onshore Block") segment was relinquished, effective 30 April 2019. The Corporate segment activities include investment income, interest expense, financing related expenses, share based compensation relating to corporate activities and general corporate expenditures.  Inter-segment transfers of products, which are accounted for at market value, are eliminated on consolidation.

Net income/(loss) for the year-ended 31 December 2019

	Tanzania Operations $000	Corporate $000	Consolidated $000
Total revenue	18,636	-	18,636
Production and operating costs	(3,935)	-	(3,935)
Depletion	(6,236)	-	(6,236)
Total cost of sales	(10,171)	-	(10,171)
Gross profit	8,465	-	8,465
Recurring administrative costs	(2,939)	(2,944)	(5,883)
New venture and pre - licence costs	-	(609)	(609)
Management restructuring costs	-	(489)	(489)
Share-based payment charges	(23)	(40)	(63)
Depreciation and depletion	-	(2)	(2)
Total costs	(2,962)	(4,084)	(7,046)
Profit/(loss) from operations	5,503	(4,084)	1,419
Finance income	-	21	21
Finance costs	(338)	(115)	(453)
Profit/(loss) before tax	5,165	(4,178)	987
Current tax expense	(83)	(49)	(132)
Deferred tax income	1,511	-	1,511
	1,428	(49)	1,379
Net profit/(loss) and comprehensive profit/(loss) from continued operation	6,593	(4,227)	2,366

 

Net income/(loss) for the year-ended 31 December 2018

	Tanzania Operations $000	Mozambique (Discontinued) $000	Corporate $000	Consolidated $000
Total revenue	16,224	-	-	16,224
Production and operating costs	(2,290)	-	-	(2,290)
Depletion	(7,803)	-	-	(7,803)
Total cost of sales	(10,093)	-	-	(10,093)
Gross profit	6,131	-	-	6,131
Recurring administrative costs	(3,151)	(19)	(3,119)	(6,289)
Amounts capitalised as E&E assets	449	-	215	664
Impairment loss on E&E assets	-	(41,598)	-	(41,598)
Provision for Tanzania Government receivables	(4,959)	-	-	(4,959)
Management restructuring costs	-	-	(940)	(940)
Redomicile costs	-	-	(1,393)	(1,393)
Share-based payment charges	(5)	-	(93)	(98)
Depreciation and depletion	-	-	(12)	(12)
Loss of sale of PPE	(3)	-	-	(3)
Tanzanian withholding tax costs	(993)	-	-	(993)
Total costs	(8,662)	(41,617)	(5,342)	(55,621)
Loss from operations	(2,531)	(41,617)	(5,342)	(49,490)
Finance income	2,659	-	-	2,659
Finance costs	(1,592)	-	(24)	(1,616)
Loss before tax	(1,464)	(41,617)	(5,366)	(48,447)
Current tax expense	(33)	-	(30)	(63)
Deferred tax expense	(26,714)	-	-	(26,714)
	(26,747)	-	(30)	(26,777)
Net loss and comprehensive loss from continued operation	(28,211)	-	(5,396)	(33,607)
Net loss and comprehensive loss from discontinued operation	-	(41,617)	-	(41,617)

Selected balances at 31 December 2019

	Tanzania Operations $000	Mozambique (Discontinued) $000	Corporate $000	Consolidated $000
Current assets	8,758	118	10,686	19,562
Exploration and evaluation assets	8,129	-	-	8,129
Property, plant and equipment	77,556	-	3	77,559
Deferred tax asset	5,548	-	-	5,548
Total assets	99,991	118	10,689	110,798
Current liabilities	3,356	-	483	3,839
Non-current liabilities	1,085	-	-	1,085
Total Liabilities	4,441	-	483	4,924

Capital additions for the year-ended 31 December 2019

Additions to property, plant   and equipment	18	-	2	20

Selected balances at 31 December 2018

	Tanzania Operations (Restated)1 $000	Mozambique (Discontinued) $000	Corporate $000	Consolidated (Restated)1 $000
Current assets1	21,391	392	411	22,194
Exploration and evaluation assets	8,129	-	-	8,129
Property, plant and equipment	83,773	-	4	83,777
Deferred tax asset	4,036	-	-	4,036
Total assets	117,329	392	415	118,136
Current liabilities1	9,870	428	703	11,001
Non-current liabilities	2,657	-	-	2,657
Total Liabilities	12,527	428	703	13,658

¹ Restated amounts relate to the presentation adjustment net-off of $2.5 million cash and cash equivalents within current assets against $2.5 million credit overdraft facility within current liabilities with respect to the fully undrawn overdraft credit facility at 31 December 2018 (note 19).

 Capital additions for the year-ended 31 December 2018

Additions to exploration and   evaluation assets	-	1,806	-	1,806
Additions to property, plant   and equipment	1,256	-	6	1,262

5.  Revenue

	2019 $000	2018 $000
Revenue from gas sales	18,601	16,169
Revenue from condensate sales	35	55
	18,636	16,224

 

6.  Leases

Amounts recognised in profit or loss

The following amounts have been recognised in profit or loss for which the Company is a lessee:

2019: Leases under IFRS 16

	$000
Expenses relating to short-term leases	250

2018: Operating leases under IAS 17

	$000
Leases expenses	281

Amounts recognised in statement of cash flows

	2019 $000	2018 $000
Cash outflow for leases	250	281

7.  Expenses and auditor's remuneration

	2019 $000	2018 $000
Employee salaries and benefits	2,277	2,685
Contractors and consultants	972	775
Travel and accommodation	248	347
Professional, legal and advisory	829	1,257
Office and administration	638	696
Corporate and public company costs	919	529
	5,883	6,289
Auditor's remuneration:
Audit of these financial statements	111	107
Audit of financial statements of subsidiaries of the Company	151	52
Taxation compliance services	62	202
Other tax advisory services	60	15
	384	376

 

8.  Staff numbers and costs

The average number of persons employed by the Company during the year, analysed by category, was as follows:

	2019	2018
	Number of employees
Senior Managers	1	2
Managers and supervisors	5	5
Support staff	9	8
	15	15

The aggregate payroll costs were as follows:

	2019 $000	2018 $000
Salaries	775	845
Social security costs	167	79
Bonus	116	93
Severance	-	111
Other payroll costs	141	169
	1,199	1,297

9.  Directors' remuneration

	2019 $000	2018 $000
Director's remuneration	1,062	787
Bonus	152	334
Severance	489	-
Other benefits	112	46
LTIP charges	43	37
Share option charges	-	15
	1,858	1,219

The aggregate of remuneration of the highest paid Director was $341k (2018: $202k).

10.  Management restructuring costs

During year 2019, management restructuring costs of $489 (2018: $940k) were incurred and comprise employee severance related to the departure of Eskil Jersing, formerly CEO of the Company, who was based in Reading, United Kingdom.

11.  Finance income and finance costs 

	2019 $000	2018 $000
Finance income
Interest income	21	-
Accretion - TPDC receivable (Note 13)	-	2,188
Accretion - Tanzanian Government receivable (Note 14)	-	471
	21	2,659
Finance costs
Accretion - decommissioning provision	(116)	(104)
Change in estimates - Tanzanian Government receivable (Note 14)	-	(471)
Interest expense and other finance costs	(208)	(980)
Foreign exchange loss	(129)	(61)
	(453)	(1,616)

12.  Trade and other receivables

	2019 $000	2018 $000
Trade receivable from TPDC Other receivable from TPDC  Trade receivable from TANESCO	4,014 513 789	5,760 513 491
Other receivables	759	789
	6,075	7,553

Other receivables from TPDC represent income tax of $513k (2018: $513k) paid by Wentworth Gas Limited, a wholly owned subsidiary of the Company. The income tax is anticipated to be recovered from TPDC's share of profit gas within the next 12-months under the terms of the Mnazi Bay PSA, which provides such a mechanism for the recovery of all corporate taxes.

Other receivables include VAT recoverable of $279k (2018: $258k), gas condensate sales of $35k (2018: $74k) and corporate tax prepayments with respect to changes in the Tanzanian tax law of $312k (2018: $326) in accordance with IFRS 9. The Company notes no material expected credit losses.

13.  TPDC receivables

On 30 June 2009, the Company and TPDC entered into a Joint Operating Agreement ("JOA") related to the Mnazi Bay Concession in Tanzania.  Under the terms of the JOA, TPDC has a 20% participating interest share in the Mnazi Bay Development Area production and will pay the Company for 20% of past costs incurred in respect of the Mnazi Bay Concession from TPDC's share of future production.  This receivable from TPDC was considered a financial instrument and initially recorded at fair value based on discounted cash flows and its carrying amount has been adjusted for accretion and changes in the estimated timing of cash flows.

As at 31 December 2019, the receivable from TPDC was fully recovered (2018: $5.2 million).

	$000
Balance at 31 December 2017	15,550
Accretion	2,188
Retained gas revenue to offset receivable	(13,585)
Share of TPDC Mnazi Bay Concession costs paid by the Company	1,085
Balance at 31 December 2018	5,238
Retained gas revenue to offset receivable	(5,685)
Share of TPDC Mnazi Bay Concession costs paid by the Company	447
Balance at 31 December 2019	-

14.  Tanzania Government receivables

As at 31 December 2019, the undiscounted Tanzanian Government receivable is $6.5 million (2018: $6.5 million). 

	$000
Balance at 31 December 2017	4,959
Accretion	417
Change in estimated timing of receipt	(417)
Provision against amortised balance	(4,959)
Balance of amortised cost at 31 December 2018	-
Accretion	516
Change in estimated timing of receipt	(516)
Balance of amortised cost at 31 December 2019	-

The Group has an agreement with the Government of the United Republic of Tanzania (TANESCO, TPDC and the Ministry of Energy and Minerals) to be reimbursed for all the project development costs associated with T&D expenditures at cost.  An audit of the Mtwara Energy Project ("MEP") development expenditures was completed in November 2012 and costs of approximately $8.1 million were verified to be reimbursable. After deducting costs associated with the Tariff Equalisation Fund and VAT input credits associated with the MEP totalling $1.6 million, the amount agreed to be reimbursed was $6.5 million.

During 2017, the Government initiated its first review of the costs to verify the balance owing by it. On 8 February 2018 the Government issued the results which differed from the previously audited and approved gross receivable of $6.5 million, which the Group maintains was accurate and correct.

The Government is conducting a second review and due to the age and uncertainty surrounding the receivable and its recoverability, the Group made a provision in-full during 2018 against the carrying amount without prejudice to the ongoing commercial discussions with the Government, the Group has reviewed this at the year-end and continues to feel the provision is appropriate.

15.  Exploration and evaluation assets

	Tanzania $000	Mozambique $000	Total $000
Cost
Balance at 31 December 2017	8,129	39,792	47,921
Additions	-	1,806	1,806
Impairment loss	-	(41,598)	(41,598)
Balance at 31 December 2018 and 2019	8,129	-	8,129

During 2018, the Company performed a technical and commercial review of the Mozambique E&E asset portfolio and determined that the Tembo licence did not provide the Company with suitable monetisation solutions in keeping with the Company's material growth mandate. All Mozambique E&E assets of $41.6 million were impaired in 2018.

Tanzania E&E assets were $8.1 million (2018: $8.1 million).  The Mnazi Bay Concession agreement will expire in 2031. The Mnazi Bay joint operation have identified several prospects within the concession area but outside of the area covering discovered gas reserves. The costs incurred in evaluating these prospects have been capitalised and, to the extent that it is possible to do so given their maturity, have been assessed as being recoverable in full.

16.  Property, plant and equipment

	Natural gas properties	Office and other equipment	Total
	$000	$000	$000
Cost
Balance at 31 December 2017	102,854	600	103,454
Additions	1,256	6	1,262
Disposals of assets	(82)	-	(82)
Balance at 31 December 2018	104,028	606	104,634
Additions	18	2	20
Balance at 31 December 2019	104,046	608	104,654

Accumulated depreciation and depletion
Balance at 31 December 2017	(12,527)		(591)		(13,118)
Depreciation and depletion	(7,803)		(12)		(7,815)
Disposal of assets	76		-		76
Balance at 31 December 2018	(20,254)		(603)		(20,857)
Depreciation and depletion	(6,236)		(2)		(6,238)
Balance at 31 December 2019	(26,490)		(605)		(27,095)

Carrying amounts
31 December 2018	83,774	3	83,777
31 December 2019	77,556	3	77,559

The Company assessed triggers for impairment on the natural gas properties and determined that none of the criteria had been met. An impairment test was therefore not required.  Materially all of the Company's natural gas is sold under long-term, fixed price gas sales and purchase agreements, eliminating the current volatility in the commodity market.  In addition, the independent valuation of the Company's Proved plus Probable reserves of $118.6 million is in excess of the net book value of the Company's PP&E. 

 

17.  Subsidiary undertakings

The subsidiary undertakings at 31 December 2019 are:

Name of Company	Country of incorporation	Class of shares held	Types of ownership	Percentage holding	Nature of business
Wentworth Resources (UK) Limited	United Kingdom	Ordinary	Direct	100%	Investment holding company
Wentworth Holding (Jersey) Limited	Jersey	Ordinary	Direct	100%	Investment holding company
Wentworth Tanzania (Jersey) Limited	Jersey	Ordinary	Indirect	100%	Investment holding company
Wentworth Gas (Jersey) Limited	Jersey	Ordinary	Indirect	100%	Investment holding company
Wentworth Gas Limited	Tanzania	Ordinary	Indirect	100%	Exploration production company
Cyprus Mnazi Bay Limited	Cyprus	Ordinary	Indirect	39.925%	Exploration production company
Wentworth Mozambique (Mauritius) Limited	Mauritius	Ordinary	Indirect	100%	Investment holding company
Wentworth Moçambique Petroleos, Limitada 1	Mozambique	Ordinary	Indirect	100%	Exploration company

¹ The Wentworth Moçambique Petroleos, Limitada is in the process of liquidation after relinquishment of the Tembo Block Appraisal Licence. 

18.  Trade and other payables

	2019 $000	2018 $000
Payable to Maurel et Prom (Operator)	1,303	1,710
Trade payables	150	413
Other payables and accrued expenses	672	939
	2,125	3,062

Other payables and accrued expenses includes accrued bonus $203k (2018: nil), payroll taxes $25 (2018: $133k) and accrued third party services $372k (2018: $806k).

19.  Restatement of overdraft credit facility

The Company has a rolling one-year, $2.5 million overdraft credit facility with a Tanzanian Government owned bank which was is in the process of being renewed for a further 12 months to 5 April 2021 subject to the mutual agreement of the bank and the Company.  The overdraft facility has an interest rate of the lender's base lending rate, minus 1% per annum to be paid monthly. 

Security provided to the lender includes a debenture over the fixed and floating assets of the Company's Tanzanian assets and a deed of assignment of 20% of the revenue and cash flow from sales of natural gas from the Tanzanian assets.

During the year-ended December 2019, the Company paid interest expense and renewal fee of $18k (2018: $68k) on the overdraft credit facility.

The credit facility, which was fully repaid on 9 July 2018, was not drawn-down at the year-ended 31 December 2018 but was included within cash and cash equivalents, with a matching current liability recognised within "overdraft credit facility". It was felt that to better reflect the true nature of the Group's position, provide enhanced transparency to the financial reporting process and bring the presentation in-line with established international accounting convention, that the cash and cash equivalents asset be netted down against the undrawn overdraft credit facility liability. This restatement has had no effect on either the net asset position or the net and comprehensive profit after tax of the Group at 31 December 2018.

20.  Long-term loans

Credit facilities from Tanzania based banks

On 8 December 2014, Wentworth Gas Limited, a wholly owned subsidiary of the Company, entered into a $20.0 million loan to finance field infrastructure development within the Mnazi Bay Concession in Tanzania.

The term of each loan was initially forty-eight months in duration commencing on the first draw-down date and each loan bears interest at six-month LIBOR rate plus 750 basis points, subject to a minimum (floor) of 8% p.a. and a maximum (ceiling) of 9.5% p.a.  Security is in the form of a debenture creating first ranking charge over all the assets of the WGL (assets of WGL include a 25.4% participation interest in the Mnazi Bay Concession), assignment over the TPDC long-term receivable and assignment of revenues generated from the Mnazi Bay Concession.

During the year-ended 31 December 2019, the Company incurred interest expense on long-term loans, inclusive of accretion of financing costs, of $0.2 million (2018: $0.9 million).  A total of $0.6 million was settled in cash during 2019 (2018: $1.5 million).

The carrying amount of the long-term loans include transaction costs of $25k (net of accretion).  At 31 December 2019, the carrying amount of the credit facilities approximates its fair value as the loan's effective interest rate approximates market rates.

	$000
Credit facilities balance
Balance as at 01 January 2018	15,661
Proceeds from loan	-
Loan repayments	(6,996)
Total changes from financing cash flows	(6,996)
Other changes
Interest expense	1,178
Interest paid	(1,544)
Finance cost accretion	(266)
Transitional adjustment	746
Total other charges	114
Balance as at 31 December 2018	8,779
Proceeds from loan	-
Loan repayments	(6,661)
Total changes from financing cash flows	(6,661)
Interest expense	474
Interest paid	(593)
Finance cost accretion	(285)
Total other charges	(404)
Balance as at 31 December 2019	1,714

The $20 million credit facility

During 2017, the Company executed amendments to the credit facility agreement, which included the restructuring of principal loan repayments and added provisions. The new provisions were not finalised at the time of the execution of the amendment to the credit facility agreement. On 6 June 2018, the Company formalised the new provisions, which became effective 6 June 2018.

The new provisions contain a requirement for the Company to maintain two financial covenants both calculated semi-annually beginning on 30 June and 31 December. The Debt Service Coverage Ratio provides that the Company has adequate cover to meet its loan interest and principal repayment obligations for the next twelve months, while the Loan Life Coverage Ratio provides that adequate free discounted cash flow coverage is maintained for all future loan repayments over the full life of the loan.

The $20.0 million credit facility is subject to interest rate of six-month LIBOR rate plus 750 basis points subject to a minimum (floor) of 8.5% p.a. and no maximum (ceiling). As at 31 December 2019, the six-month interest rate was 9.69%. 

As at 31 December 2019, only one principal repayment of $1,668k was outstanding which was paid on 30 January 2020. 
 

21.  Contingent PTTEP liability

On 26 July 2012, the Company completed the acquisition of Cove Energy plc's 16.38 percent interest in Mnazi Bay production operations which was held by Cove Energy's 100 percent owned subsidiary Cove Energy Tanzania Mnazi Bay Limited. 

Part of the consideration was a contingent payment to Cove Energy of up to $8.5 million, should certain future natural gas production thresholds from Mnazi Bay be achieved.  

At the same time, the Company completed the sale of 60.075 percent of the share capital of CETMBL to Maurel et Prom for which their part of the contingent consideration was $5.1 million.

The net contingent liability for the Company after the completion of the two transactions was, therefore, $3.4 million ($8.5 million less $5.1 million).

The net contingent liability as at 31 December 2019 was $nil (31 December 2018: $850k).

	2019 $000	2018 $000
Balance at 1 January	848	2,189
Payments to reduce liability	(848)	(1,341)
Balance at 31 December	-	848

22.  Decommissioning and Abandonment provision

The Company's decommissioning provisions result from net ownership interests in petroleum and natural gas assets including well sites, pipeline gathering systems, and processing facilities in Tanzania. The operator of the Mnazi Bay Concession have estimated the Company's share of the undiscounted inflation-adjusted amount of cash flow required to settle decommissioning obligations for the infrastructure within the Mnazi Bay Concession to be $4.23 million. The costs are expected to be incurred around 2030. The obligations have been estimated using existing technology at current prices inflated and discounted using discount rates that reflect current market assessments of the time value of money and the risks specific to each liability. The discount and inflation rates used in determining the value of the decommission provision at 31 December 2019 were 12.0% and 2.03%, respectively (2018: 12.0% and 2.03%, respectively).

A reconciliation of the decommissioning obligations is provided below:

	2019 $000	2018 $000
Balance at 1 January	969	865
Accretion	116	104
Balance at 31 December	1,085	969

23.  Contingent liabilities

Following the completion of the corporate transition to UK and Oslo Børs delisting, a number of shareholders exercised certain Dissent Rights under Canadian law which may require the Company to buy back their equity holdings at fair value. The Company received Dissent Rights notices over a total of 2,329,326 shares with an anticipated fair value of $768k. As the process has yet to be finalised and fair values agreed, the buy back remains contingent at the balance sheet date.

24.  Share-based payments

	2019 $000	2018 $000
Share based compensation recognised in the statement of Comprehensive loss	63	98

Movement in the total number of share options outstanding and their related weighted average exercise prices are summarised as follows:

	2019		2018
	Number of options	Weighted average exercise price (US$) (i)	Number of options	Weighted average exercise price (US$)
Outstanding at 1 January	12,560,301	0.49	10,600,000	0.52
Granted	495,422	-	3,560,301	0.49
Forfeited	(5,020,226)	0.29	(1,600,000)	0.49
Lapsed	(1,650,000)	0.62	-	-
Outstanding at 31 December	6,385,497	0.57	12,560,301	0.49

The following table summarises share options outstanding and exercisable at 31 December 2019:

		Outstanding		Exercisable
Exercise price (NOK)	Exercise price (US$)1	Number of options	Weighted average remaining life (years)	Number of options
-	-	1,385,497	9.4	-
3.85	0.44	750,000	6.0	750,000
3.60	0.41	1,600,000	0.8	1,600,000
4.08	0.46	250,000	3.3	250,000
5.18	0.59	200,000	4.4	200,000
5.18	0.59	1,700,000	4.2	1,700,000
5.57	0.63	500,000	1.3	500,000
		6,385,497		5,000,000

¹ The US Dollar to Norwegian Kroner exchange rate used for determining the exercise price at 31 December 2019 is 0.113891.

 

The following table summarises share options outstanding and exercisable at 31 December 2018:

		Outstanding		Exercisable
Exercise price (NOK)	Exercise price (US$) (i)	Number of options	Weighted average remaining life (years)	Number of options
3.15	0.36	1,000,000	1.8	1,000,000
3.52	0.40	500,000	3.0	500,000
3.60	0.41	1,800,000	1.8	1,800,000
3.85	0.44	1,850,000	7.0	1,850,000
4.08	0.47	250,000	4.3	250,000
4.70	0.54	200,000	5.4	200,000
4.90	0.56	100,000	3.3	100,000
5.18	0.59	2,800,000	4.8	2,800,000
5.55	0.66	500,000	2.3	500,000
-	-	3,560,301	9.9	-
		12,560,301		9,000,000

25.  Share capital and reserve

	2019 $000	2018 $000
Authorised, called up, allotted and fully paid
186,488,465 (2018: 186,488,465) ordinary shares	416,426	416,426

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

Reserve

	2019 $000	2018 $000
Balance at 1 January	26,588	26,490
Share base compensation charges	-	61
LTIP charges	63	37
Balance at 31 December	26,651	26,588

26.  Earnings per share

Basic and diluted eps

	2019 $000	2018 $000
Net profit/(loss) for the period	2,366	(75,224)
Weighted average number of ordinary shares outstanding	186,488,465	186,488,465
Dilutive weighted average number of ordinary shares outstanding	186,488,465	186,488,465
Net profit/(loss) per ordinary share	0.01	(0.40)

During the year-ended 31 December 2019 11,285,497 (2018: 13,460,075) options were excluded from the dilutive weighted average number of shares outstanding because they were anti-dilutive.

27.   Dividends

 The following dividends were declared and paid by the Company during the year.

	2019 $000	2018 $000
0.45 pence (US$ 0.00583; NOK 0.0514) per ordinary share (2018: nil)	1,033	-

On 3 September 2019, the Company announced a maiden interim dividend of 0.45 pence per share, being a total interim distribution of US$1.0 million.

The interim dividend payment timetable was:

· Ex-dividend date: 12 September 2019

· Record Date: 13 September 2019

· UK Payment Date (for shareholders who hold shares on the UK Register): 11 October 2019

· VPS Payment Date (for shareholders who hold shares on the VPS Register): 22 October 2019

28.  Income taxes 

Income taxes

The Company's income tax expense for the year-end 31 December is as follows:

	2019 $000	2018 $000
Profit/(loss) before income taxes	987	(48,447)
Expected income tax (recovery) expense at combined Tanzanian rate of 30% (2018: 30%)	296	(14,236)
Rate differentials	541	1,396
Share based compensation	12	29
2014- 2015 Tanzania tax reassessments	-	8,096
Tanzania cost gas excluded from taxable income	(3,367)	(2,015)
Derecognition of Mozambique and Canada tax pools	-	13,236
Movement in deferred tax assets not previously recognised and other	1,139	20,271
Income tax expense/(recovery)	(1,379)	26,777

The Company operates in multiple jurisdictions with complex tax laws and regulations which are evolving over time. The Company has taken certain tax positions in its tax filings and these filings are subject to audit and potential reassessment after the lapse of considerable time.  Accordingly, the actual income tax impact may differ significantly from that estimated and recorded by management. 

The Company has unrecognised deductible temporary differences that results in unrecognised deferred income tax assets of:

	2019 $000	2018 $000
Non-capital losses	20,262	19,675
Property and equipment	(263)	-
Accounts receivables and others	16	1,470
	20,015	21,145

The total non-capital losses of the Company are $163.6 million (2018: $164.4 million) of which $163.6 million (2018: $163.6 million) are in Tanzania and $6.6 million (2018: $800k) are in the UK.

A deferred tax asset is recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences and the loss carry forwards can be utilised.  A deferred tax asset of $5.5 million as at 31 December 2019 (2018 - $4.0 million) is attributable to the accumulated tax loss carry-forward of the Company's Tanzanian subsidiary, which are expected to be offset against future taxable income.  Recognition of the tax asset is supported by the proven and probable reserves as determined by a third-party external reserves engineer, RPS Canada.

	2019 $000	2018 $000
Balance at 1 January	4,036	30,751
Deferred income tax assets recognised in profit or loss:
Non-capital losses	820	(27,300)
Asset retirement obligations	(50)	124
Deferred income tax liabilities recognised in profit or loss:
PP&E	1,200	1,002
Receivables	(458)	(541)
Balance at 31 December	5,548	4,036

29.  Financial instruments

The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (currency fluctuations, interest rates and commodity prices). The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance. A full description of the risks and key risks affecting the business is noted in the Business Risks section of the Strategic Report. 

Credit risk

Wentworth's credit risk exposure is equal to the carrying value of its cash and cash equivalents, trade, other and long-term receivables. 

Trade and other receivables are comprised predominantly of amounts due from government owned entities in Tanzania and Value Added Tax ("VAT") in Tanzania and Mozambique. 

The Group's ongoing exposure to trade receivables from TANESCO, the state power company, relates to the gas sales from the Mnazi Bay Concession to a TANESCO owned 18-megawatt gas-fired power plant located in Mtwara, Tanzania. At 31 December 2019, the Mnazi Bay Concession partners were owed eight months of invoices for gas sales made to TANESCO, with $789k owing to Wentworth (2018: $491k). Subsequent to year-end, TANESCO has paid $293k net to Wentworth. The receivable from TANESCO was not discounted at year-end (2018: $nil) as the receivable consisted of less than twelve months of invoices. The Company continues to be engaged in ongoing discussions with TANESCO to accelerate payment of amounts past due.

During 2015, the Group commenced gas sales to TPDC under a long-term gas sales agreement, the operator of the new transnational gas pipeline in Tanzania. Credit risk relating to sales to TPDC is substantially mitigated through a two-part payment guarantee structure. The first part relates to a prepayment amount of approximately three to four months of gas deliveries at current sales volumes which has been received and is held by the Operator of the Mnazi Bay Concession. The second part is a one-month replenishable letter of credit which is not yet executed but expected to be executed during 2020.  At 31 December 2019, the Mnazi Bay Concession partners were owed two months gas sales invoices, with $4.0 million owing to Wentworth (2018 - $5.7 million).  Subsequent to year-end, TPDC has paid $6.7 million net to Wentworth.

At 31 December 2019, an undiscounted long-term receivable of $6.5 million (2018: $6.5 million) related to the Group's disposal of transmission and distribution assets, and the costs associated with the MEP incurred in prior years by a wholly owned subsidiary of Wentworth (see note 14).  On February 6, 2012, the Company, TANESCO, TPDC and MEM reached an agreement that the Group's cost of historical operations in respect of the Mtwara Energy Project should be reimbursed.

During 2017, the Government initiated its first review of the costs to verify the balance owing by it. On 8 February 2018 the Government issued the results which differed from the previously audited and approved gross receivable of $6.5 million, which the Group maintains was accurate and correct.

The Government is conducting a second review and due to the age and uncertainty surrounding the receivable and its recoverability the Group made a provision in-full during 2018 against the carrying amount without prejudice to the ongoing commercial discussions with the Government; the Group has reviewed this at the year-end and continues to feel the provision is appropriate.

The Group's cash and cash equivalents are held at recognised international financial institutions.

The exposure to credit risk as at:

	2019 $000	2018 (Restated)1 $000
Trade and other receivables	6,075	7,553
TPDC receivable (Note 13)	-	5,238
Cash and cash equivalents	13,487	9,403
	19,562	22,194

¹ Restated amounts relate to the presentation adjustment net-off of $2.5 million cash and cash equivalents within current assets against $2.5 million credit overdraft facility within current liabilities with respect to the undrawn overdraft credit facility at 31 December 2018 (note 19).  

Aged trade and other receivables

	Current  1-30 days $000	31-60  days $000	61-90  days $000	>90  days $000	Total $000
Balance at 31 December 2019
Trade receivables	1,720	1,736	94	1,254	4,804
Other receivables	448	-	-	823	1,271
	2,168	1,736	94	2,077	6,075
Balance at 31 December 2018
Trade receivables	3,007	1,507	1,420	243	6,177
Other receivables	1,376	-	-	-	1,376
	4,383	1,507	1,420	243	7,553

Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient funds to meet its liabilities as they become payable. Other than routine trade and other payables, incurred in the normal course of business, the Company also has an undrawn $2.5 million overdraft credit facility.

The table below summarises the maturity profile of the Company's financial liabilities based on contractual undiscounted payments including future interest payments on long-term loans.

	Less than 1 year $000	1 to 2 years $000	2 to 5 years $000	Total $000
Balance at December 31, 2019
Trade and other payables	2,125	-	-	2,125
Long-term loans, including interest 1	1,732	-	-	1,732
	3,857	-	-	3,857
Balance at December 31, 2018
Trade and other payables	3,062	-	-	3,062
Contingent PTTEP liability	848	-	-	848
Long-term loans, including interest 1	7,548	1,732	-	9,280
	11,458	1,732	-	13,190

 ¹Includes future interest expense at the rate in effect at December 31. 

The fair value of the Company's trade and other payables approximates their carrying values due to the short-term nature of these instruments.  The fair value of the long-term loans approximates their carrying amounts as they bear market rates of interest. The fair value of the other liability approximates its carrying amount.

The Company has a working capital surplus at 31 December 2019 and generated positive cash flow from operations in 2019. The Company plans to pay its financial liabilities in the normal course of operations and fund future operating and capital requirements through operating cash flows, bank debt, bank overdraft credit facility and equity raises, when deemed appropriate.  Operating cash flow of the Company is dependent upon the purchasers of natural gas, TPDC and TANESCO, continuing to meet their payment obligations on a timely manner. Any delays in collecting funds from these purchasers for an extended period of time could negatively impact the Company's ability to pay its financial liabilities in a timely manner in the normal course of business (see also Capital management section).

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of foreign currency risk, interest rate risk and other price risk (e.g. commodity price risk). The objective of market risk management is to manage and control market price exposures within acceptable limits, while maximising returns.

Commodity price risk

Commodity price risk is the risk that the Company suffers financial loss as a result of fluctuations in oil or natural gas prices.  The Company's exposure to commodity price risk is mitigated as the sale prices for gas sold by the Company is fixed under the existing gas sale and purchase agreements. An increase of 1% in the gas production would result in an increase of $57k (2018: $49k) in revenue.

Interest rate risk

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates.  The Company had a $20.0 million credit facility with a floating interest rate of six-month LIBOR plus 7.5 percentage points with a minimum 8.5% and with no maximum interest rate per annum. The Company's objective is to minimise its interest rate risk on its cash balances by investing for short periods of time (less than 1 year) and only in term deposits. An increase of 1% in the six-month LIBOR rate would result in an increase of $17k (2018: $102k) in interest expense on an annualised basis.

Foreign exchange risk

Foreign exchange rate risk is the risk that the Company suffers financial loss as a result of changes in the value of an asset or liability or in the value of future cash flows due to movements in foreign currency exchange rates.  Wentworth operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Tanzanian Shilling and Pound Sterling against its functional currency of its operating entities, the US dollar. The Company's objective is to minimise its risk by borrowing funds in US dollars as revenues are paid (or indexed) to the US dollar. In addition, the Company holds substantially all its cash and cash equivalents in US dollars and converts to other currencies only when cash requirements demand such conversion. 

Current receivables and liabilities denominated in various currency:

	Pound Sterling $000	Tanzanian Shilling $000	Other Currency $000	United States Dollar $000	Total $000
Balance at 31 December 2019
Cash and cash equivalents	1,442	47	120	11,878	13,487
Trade and other receivables	105	1,000	92	4,878	6,075
Trade and other payables	(62)	(52)	(10)	(2,027)	(2,151)
	1,485	995	202	14,729	17,411
	Pound Sterling 000	Tanzanian Shilling $000	Other Currency $000	United States Dollar $000	Total $000
Balance at 31 December 2018
Cash and cash equivalents	56	37	29	9,281	9,403
Trade and other receivables	43	106	152	7,252	7,553
Trade and other payables	(232)	(246)	(58)	(2,671)	(3,207)
	(133)	(103)	123	13,862	13,749

A 10% increase/decrease of the Pound Sterling against US dollar would result in a change in profit or loss before tax of $28k (2018: $11k).  In addition, a 10% increase/decrease of the Tanzanian shilling against the US dollar would result in a change in profit or loss before tax of approximately $5k (2018: $5k).

Financial instrument classification and measurement

The Company classifies the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument:

·Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting                 date. Active markets are those in which transactions occur in sufficient frequency and volume to provide                 pricing information on an ongoing basis.

·Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2               are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs,             including expected interest rates, share prices, and volatility factors, which can be substantially observed or           corroborated in the marketplace.

·      Level 3 - Valuation in this level are those with inputs for the asset or liabilities that are not based on                          observable market data.

The Company does not have any fair value measurements considered as Level 1.  The Company's long-term receivables, long-term loans, and other liability are considered Level 2 and Level 3 measurements.

Capital management

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern, in order to develop its oil and gas properties and maintain a flexible capital structure for its projects for the benefit of its stakeholders. In the management of capital, the Company includes the components of shareholders' equity as well as cash and long-term liabilities.

The Company manages the capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets. As part of its capital management process, the Company prepares budgets and forecasts, which are used by management and the Board of Directors to direct and monitor the strategy, ongoing operations and liquidity of the Company. Budgets and forecasts are subject to judgement and estimates such as those relating to future gas demand and ultimate timing of collectability of trade receivables for gas sales.  These factors may not be within the control of the Company, which may create near term risks that may impact the need to alter the capital structure. The Company continues to effectively manage its relationships with its gas purchasers to ensure timely collection and with external lenders such that lending facilities are available to the Company as and when needed. The Company may attempt to issue new shares, enter into joint arrangements or acquire or dispose of assets in order to maintain or adjust the capital structure. Management reviews the capital structure on a regular basis to ensure that the above-noted objectives are met. The Company's overall strategy remains unchanged from the prior year.

30.  Related party transactions

Transactions with key management personnel

Details of Directors' remuneration, which comprise key management personnel, are provided below:

	2019 $000	2018 $000
Short-term employee benefits	1,815	1,167
Share based compensation	43	52
	1,858	1,219

31.  Supplemental cash flow information

Change in non-cash working capital: 

	2019 $000	2018 $000
Net change in non-cash working capital related to operating activities:
Trade and other receivables	1,376	3,381
Prepayments and deposits	101	(300)
Trade and other payables	(1,067)	(1,505)
	410	1,576

Cash movements from investing activities in the Statements of Cash Flows consists of the following:

	Exploration and evaluation $000	Property, plant and equipment $000	TPDC receivable $000
Year-ended 31 December 2019
Total additions/(reductions)	-	20	(9,161)
Change in non-cash investing activities	-	-	3,923
Cash additions/(reductions)	-	20	(5,238)
Year-ended 31 December 2018
Total additions/(reductions)	1,806	1,262		(18,254)
Change in non-cash investing activities	-	-		2,877
Change in non-cash working capital	-	706		-
Cash additions/(reductions)	1,806	1,968		(15,377)

 Closing balance of liabilities arising from financing liabilities:

	Long-term Loan $000	Contingent liability $000	Total liability $000
Balance as at 01 January 2019	8,779	848	9,627
Changes from financing cash flows
Principal term loan repayments	(6,661)	-	(6,661)
Contingent liability payment	-	(848)	(848)
Total changes from financing cash flows	(6,661)	(848)	(7,509)
Other changes
Interest expense	474	-	474
Interest paid	(593)	-	(593)
Finance cost accretion	(285)	-	(285)
Total liabilities related to other charges	(404)	-	(404)
Balance as at 31 December 2019	1,714	-	1,714
Balance as at 01 January 2018	15,661	2,189	17,850
Changes from financing cash flows
Principal term loan repayments	(6,996)	-	(6,996)
Contingent liability payment	-	(1,341)	(1,341)
Total changes from financing cash flows	(6,996)	(1,341)	(8,337)
Other changes
Interest expense	1,178	-	1,178
Interest paid	(1,544)	-	(1,544)
Finance cost accretion	(266)	-	(266)
Transitional adjustment	746	-	746
Total liabilities related to other charges	114	-	114
Balance as at 31 December 2018	8,779	848	9,627

Finance costs/(income), net

	2019 $000	2018 $000
Finance income
Interest income	21	-
Accretion - TPDC receivable (Note 13)	-	2,188
Accretion - Tanzanian Government receivable (Note 141)	-	471
	21	2,659
Finance costs
Accretion - decommissioning provision	(116)	(104)
Change in estimates - Tanzanian Government receivable (Note 14)	-	(471)
Interest expense and other finance costs	(208)	(980)
Foreign exchange loss	(129)	(61)
	(453)	(1,616)
Finance costs/(income), net	(432)	1,043

32.  Commitments

Lease payments

The Company has office locations in Reading, UK and Dar es Salaam, Tanzania.  The future minimum lease payments associated with these office premises as at 31 December 2019 is $61k committed for year 2019.

33.  Subsequent event

On 2 January 2020, the Company announced an LTIP award of 2,485,621 to Katherine Roe subject to a three-year performance period and certain other provisions.

On 3 February 2020, the Company announced the publication of its 2019 CPR Reserves Report.

On 24 April 2020, the Company announced that the Directors had declared a second dividend of $2.0 million, bringing a total distribution of $3.0 million for 2019. 

APPENDICES

GLOSSARY OF TERMS

$ or US Dollar	United States Dollar
£	UK Pound Sterling
2D	Two Dimensional
2P	1P (proven reserves) + probable reserves, hence "proved AND probable"
3D	Three Dimensional
AIM	AIM, a SME Growth market of the London Stock Exchange
AGM	Annual General Meeting
Articles	The Articles of Association of the Company
Bcf	Billion standard cubic feet
Boe	Barrel of oil equivalent, a measure of the gas component converted into its equivalence in barrels of oil
Board	The Board of Directors of the Company
Capex	Capital expenditure
CGU	Cash Generating Units
CMBL	Cyprus Mnazi Bay Limited
COD	Commercial Operations Date
Company	Wentworth Resources plc
Companies (Jersey) Law	The Companies (Jersey) Law 1991
CSR	Corporate Social Responsibility
Directors	The Directors of the Company
Dissent Rights	Alberta Business Corporations Act Dissent Right in compliance with Section 191 of that Act entitling shareholders compensation for the fair value of the common shares determined as of the close of business on the last business day (in Alberta) before the day on which the Continuance is approved by the Shareholders.
E&E	Exploration and Evaluation assets
E&P	Exploration and Production
EBITDAX	(Adjusted) earnings before interest, taxation, depreciation, depletion and amortisation, impairment, share-based payments, provisions, and pre-licence expenditure
EIR	Effective Interest Rate
EITI	Extractive Industries Transparency Initiative
ENH	Empresa Nacional de Hidrocarbonetos
EPS	Earnings Per Share
ESG	Environmental, social and governance
EWURA	Energy and Water Utilities Regulatory Authority
FCA	Financial Conduct Authority of the United Kingdom
FEED	Front End Engineering Design
G&A	General and Administrative
GPF	Gas Production Facility
GSA	Gas Sales Agreement
Group	The Company and its subsidiary undertakings
HSSE	Health, Safety, Security and Environment
IAS	International Accounting Standards
IASB	International Accounting Standards Board
IFRS	International Financial Reporting Standards
JOA	Joint Operating Agreement
JV	Joint Venture
K	Thousands
Km	Kilometre(s)
km2	Square kilometre(s)
KPIs	Key Performance Indicators
London Stock Exchange or LSE	London Stock Exchange plc
LTI	Lost Time Incident
LTIP	Long-Term Incentive Plan adopted in 2018
M&A	Merger and Acquisition
MEM	Ministry of Energy and Minerals
MEP	Mtwara Energy Project
Mcf	Thousand cubic feet
Mmboe	Million barrels of oil equivalent
MMscf/day	Million standard cubic feet per day of gas
MW	Megawatt
NGO	Non-Government Organisation
NPV	Net Present Value (at a specified discount rate and specified discount date)
NNGI	National Natural Gas Infrastructure (Pipeline)
Ordinary Shares	Ordinary share capital (no par value)
P90	The value on a probabilistic distribution which is exceeded by 90% of the outcomes
P50	The value on a probabilistic distribution which is exceeded by 50% of the outcomes. The P50 is also the median value of the distribution
P10	The value on a probabilistic distribution which is exceeded by 10% of the outcomes
Pmean	The average of the values in the probabilistic distribution between defined 'boundary conditions'. Universally regarded as the best single value to quote or communicate for any uncertain distribution of outcomes involved in repeated trial investigations
Petroleum	Oil, gas, condensate and natural gas liquids
PPE	Property Plant and Equipment
PSA	Production Sharing Agreement
PTTEP	PTT Exploration and Production Public Company Limited is a national petroleum exploration and production company based in Thailand
PURA	Petroleum Upstream Regulatory Authority
QCA Code	Corporate Governance Code for Small and Mid-Size Quoted Companies 2012
Reserves	Reserves are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves must satisfy four criteria; they must be discovered, recoverable, commercial and remaining based on the development projects applied. Reserves are further categorised in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterised by development and production status
Reservoir	A porous and permeable rock capable of containing fluids
Seismic	Data, obtained using a sound source and receiver, that is processed to provide a representation of a vertical cross-section through the subsurface layers
Shares	Ordinary shares
Shareholders	Ordinary shareholders in the Company
Subsidiary	A subsidiary undertaking as defined in the 2006 Act
TANESCO	The Tanzania Electric Supply Company
TEITI	Tanzania Extractive Industries Transparency Initiative
Tembo	The Tembo Block Appraisal Licence, Mozambique (85% Wentworth, 15% ENH)
TPDC	Tanzania Petroleum Development Corporation
TRA	Tanzanian Revenue Authority
VAT	Value Added Tax
VETA	Vocational Training Institution (Tanzania)
WAF	Wentworth Africa Foundation
WGL	Wentworth Gas Limited
Working Interest or WI	A company's equity interest in a project before reduction for royalties or production share owed to others under the applicable fiscal terms Working interest attributable to Wentworth

About Wentworth Resources

Wentworth Resources is a publicly traded (AIM: WEN), independent oil & gas company with natural gas production; exploration and appraisal opportunities in the Rovuma Delta Basin of coastal southern Tanzania.

Inside Information

This announcement does not contain inside information.

Cautionary note regarding forward-looking statements

This press release may contain certain forward-looking information. The words "expect", "anticipate", believe", "estimate", "may", "will", "should", "intend", "forecast", "plan", and similar expressions are used to identify forward looking information.

The forward-looking statements contained in this press release are based on management's beliefs, estimates and opinions on the date the statements are made in light of management's experience, current conditions and expected future development in the areas in which Wentworth is currently active and other factors management believes are appropriate in the circumstances. Wentworth undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless required by applicable law.

Readers are cautioned not to place undue reliance on forward-looking information. By their nature, forward-looking statements are subject to numerous assumptions, risks and uncertainties that contribute to the possibility that the predicted outcome will not occur, including some of which are beyond Wentworth's control. These assumptions and risks include, but are not limited to: the risks associated with the oil and gas industry in general such as operational risks in exploration, development and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the imprecision of resource and reserve estimates, assumptions regarding the timing and costs relating to production and development as well as the availability and price of labour and equipment, volatility of and assumptions regarding commodity prices and exchange rates, marketing and transportation risks, environmental risks, competition, the ability to access sufficient capital from internal and external sources and changes in applicable law. Additionally, there are economic, political, social and other risks inherent in carrying on business in Tanzania. There can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements.

Use of a Standard

Reserve and resource assessments in this announcement are made in accordance with the standard defined in the SPE/WPC Petroleum Resources Management System (2007) and the Canadian Oil and Gas Evaluation Handbook ("COGEH").

Notice 

The AIM Market of the London Stock Exchange has not reviewed this press release and does not accept responsibility for the adequacy or accuracy of this press release.

 

 

END

 

 

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