Annual results for the year ended 31 December 2019

RNS Number : 6485J

Sterling Energy PLC

15 April 2020

 

15 April 2020

STERLING ENERGY PLC

ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019

Sterling Energy plc is today issuing its results for the year ended 31 December 2019.

OVERVIEW

Sterling Energy plc ('Sterling' or the 'Company'), together with its subsidiary undertakings (the 'Group'), is an upstream oil and gas company listed on the AIM market of the London Stock Exchange. The Company is an experienced operator of international exploration and production licences, with a primary geographic focus on emerging markets including, Africa and the Middle East, although the Board would consider other regions for material opportunities. The Group has a high potential exploration asset in Somaliland and an active strategy to deliver shareholder value through disciplined, exploration and production projects; leveraging the Company's experience, with an emphasis on securing near term cash flow generative opportunities.

2019 SUMMARY

Operations

· Government of the Republic of Somaliland granted a continued extension to the current period of the Odewayne production sharing agreement ('PSA').

· Throughout 2019: Odewayne block, Somaliland - Sterling continued to support the Operator in progressing the technical understanding of the block.

Corporate 

· Continued merger and acquisition ('M&A') mandate for transformational growth (asset and corporate options).

· Screened over fifty separate opportunities globally over 2019 and engaged with five of these to the point of indicative offer.

Financial

· Cash resources net to the Group at 31 December 2019 of $44.9 million (2018: $46.3 million).

· The Group remains debt free and fully funded for all commitments.

· Adjusted EBITDAX¹: loss for the Group of $917k (2018: $1.5 million loss).

· Ongoing focus on capital discipline, cash general and administrative overheads ('G&A') expenses reduced by 15% to $2.6 million (2018: $3.0 million).

· Proactive focus on treasury management, with interest received totaling $1.1 million (2018: $1.0 million).

¹ defined within the definitions and glossary of terms.

For further information contact:

Sterling Energy plc   [phone]

David Marshall, Chief Executive Officer

Michael Kroupeev, Chairman

Peel Hunt LLP                                       [phone]

Richard Crichton

David McKeown

www.sterlingenergyplc.com           Ticker Symbol: SEY

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

CHAIRMAN'S STATEMENT

A number of key factors affected oil price expectations in 2019 including global demand, performance of the Chinese economy, the wider macro-economic environment, maritime regulations, revision of trade deals, production cuts as well as Iranian sanctions. Following the year end, and into 2020, Coronavirus concerns became a new and extremely significant factor of uncertainty and further affected underlying net asset value and risk appetite, with Brent crude plunging by over 30% in one day. Some of the E&P deals that looked promising throughout the year at $60/bbl have proven not to have sustainable value as midterm investments and are currently languishing along with international indexes.

During 2019 our team intensified screening and pre-selection of E&P opportunities that meet corporate standards and the class of assets targeted by the Group. Some of the key criteria were reviewed and updated by the Board to improve focus and concentrate on added value and secure cases in what has been and continues to be a volatile market.

The Somaliland acreage remains an attractive opportunity in the long term, subject to good progress by the Operator Genel Energy which carries our costs inclusive of the drilling of the first well and has a strong cash balance to weather the downturn and fund its operations. Results of the reprocessed 2D seismic data are now ready for interpretation and we are hopeful this will show potential for material accumulations of hydrocarbons. During the year, the operator successfully applied for the extension of the Third Exploration Period, which was subsequently granted by the state authority. Once interpretation work is complete the Operator may elect to proceed to the Fourth Exploration Period which will focus on additional seismic and the drilling of an exploration well.

Financial

2019 costs were further reduced by the means of the improved overhead management and the net cash resources at the end of the year remain solid. 2020 financial obligations are minimal and fully funded. 

Board and management

In 2019 the Board and the management team led by David Marshall as the Chief Executive Officer and Director of the Company remained stable and focused on the corporate strategy and its objectives. The overall expertise and the background of the team allowed the group to effectively screen opportunities in all major basins around the world and to short list the most promising ones for the Board to review.

Outlook for 2020

The Covid-19 virus has had a significant impact, affecting economies and populations globally. The spread of Covid-19 has been unlike any previous virus, taking governments and populations by surprise. It is widely expected that the world economy will be severely impacted by the Covid-19 despite measures by governments to protect it. Sterling is currently in a very strong position, preserving its capabilities, strengths and cash position to absorb any shock to the UK and wider economy and anticipates distressed M&A opportunities to arise as a result of this situation. Sterling has not experienced any significant disruption to its operations and continues to be fully functional, however Government lockdowns across the globe will undoubtably have an effect on our counterparties and progress on potential investments. The Company continues to monitor the situation in Somaliland.

The Company continues to be fully set to evaluate M&A opportunities that continue to arise in 2020 and remains committed to executing an accretive acquisition once the right opportunity is identified. We expect that despite the current global uncertainties and the risk factors which are currently impacting the fossil fuel industry as a whole, our past background and professional excellence will allow us to target a deal for the benefit of all our shareholders.

The backing of our stakeholders, and their continued support is much appreciated and we now have in place all the tools we require to be able to conduct a successful transaction over the course of the year.

Michael Kroupeev - Chairman

CEO'S STATEMENT

2019 & 2020 Market Landscape

Oil price in 2019 started strongly with Brent reaching $67 per barrel in the first Quarter, dropping back to $60 per barrel at end 2019, the price cushioned by increased USA oil productions despite OPEC interventions and geopolitical disruption. 

A relatively stable oil price during 2019 should have encouraged M&A activity, but the large proportion of assets available were higher risk exploration prospects with operators reluctant to sell oil production and development opportunities. Production assets that were available tended to have marginal economics at flat ~$60 per barrel.

The dramatic change in oil price following the Covid-19 impact on demand, along with the collapse of the Opec+ Alliance, has further weakened highly leveraged oil companies, who will see the benefit of partnering with a cash rich entity. This steep decline, as a result of world events, has particularly impacted financial markets and will allow us to benefit from the database of companies we have evaluated in 2019 whilst presenting new opportunities to acquire assets at advantageous terms.

The Company is well financed and is positioned to take advantage of acquisition opportunities during these volatile market conditions.

Operations

During 2019 work on the Odewayne block in Somaliland focused on the reprocessing of the entire 2D seismic dataset acquired in 2017 to pre-stack time migration ('PSTM'). This product was delivered to the Company in Q1 2020. Sterling will review this newly reprocessed 2D seismic data set in 1H 2020 and will update its technical assessment and outlook on block prospectivity accordingly.

We will continue to support the Operator and look forward to the results from the reprocessing. The costs associated with current period (Third Period) and the Fourth Period are fully carried by Genel Energy Somaliland Limited ('Genel Energy'), hence the minimal capital investment shown within the accounts.

Corporate

During 2019 Sterling reviewed over fifty opportunities, of which 5 bids were placed and a number are still under consideration. The oil price environment in 2019 saw high expectations of value from sellers which in turn made concluding a deal with reasonable terms challenging.

Our strong cash position of $44.9 million, with no debt or other liabilities, can be used to leverage a production foothold and include low risk exploration commitment. In 2020 Sterling's ability to fund exploration and development is key to our forward strategy. Our focus for 2020 is onshore low-cost operators, who will benefit from our cash position to develop and explore their existing portfolio.

The Company has continued to reduce G&A and focus on robust treasury management, in line with the Board mandate for cash preservation to maximise our ability to deploy capital into existing and new assets. In 2019 G&A expenditure reduced by 15% in comparison to 2018 whilst increasing interest received.

Sterling has a detailed understanding of the current M&A market and intends to take advantage of the current volatile marketplace.   As such, we look to the remainder of 2020 with confidence in the belief that the current turmoil will present a number of exciting opportunities for Sterling.

David Marshall - Chief Executive Officer

OPERATIONS REVIEW

Since late 2015, the Company implemented a strategic mandate of exiting non-core exploration portfolio assets, and reducing outstanding liabilities, to provide a simpler and rejuvenated platform for M&A led growth. The Group's remaining African exploration focused Odewayne block provides fully carried exposure to a frontier basin that has the potential to deliver material hydrocarbon reserves.

SOMALILAND

Somaliland offers one of the last opportunities to target an undrilled onshore rift basin in Africa. The Odewayne block, with access to Berbera deepwater port less than a 100km to the north, is ideally located to commercialise any discovered hydrocarbons. A 2D geophysical survey acquired in 2017 and reprocessed in 2019, along with potential field data and legacy geological field studies, are the focus of the company's 2020 work programme to determine if a Mesozoic sedimentary basin is present in the block.

Odewayne (W.I. 34%) Exploration block

Overview

This large and unexplored frontier acreage position comprises an area of 22,840km², the equivalent of ca. 100 UK North Sea blocks. Exploration activity prior to the 2017 regional 2D seismic acquisition program has been limited to the acquisition of airborne gravity and magnetic data and surface fieldwork studies, with no wells drilled on block.

The Odewayne production sharing agreement was awarded in 2005. It is in the Third Period, with a minimum work obligation of 500km of 2D seismic. The Third Period has been further extended, through the 8th deed of amendment, and its minimum work obligation was met in 2017 when the Somaliland Government (Ministry of Energy and Minerals) contracted   BGP (Geophysical contractor) to undertake a 1,000km (full fold, 1,076km surface) 10km by 10km 2D seismic campaign. The minimum work obligation during the optional Fourth Period of the PSA, which has also been extended by 2 years, is for 1,000km of 2D seismic and one exploration well.

The Company's wholly owned subsidiary, Sterling Energy (East Africa) Limited ('SE(EA)L'), holds a 34% working interest in the PSA. SE(EA)L originally acquired a 10% position from Petrosoma Limited ('Petrosoma') in November 2013 and an additional 30% from Jacka Resources Somaliland Limited ('Jacka') in two transactions during 2014.

In April 2017, the Company agreed to revised farm-out terms to reduce the staged contingent consideration payments due to Petrosoma and reduce SE(EA)L's interest in the Odewayne asset by 6%. The farm-out agreement was amended such that the parties cancelled the $8.0 million contingent consideration in return for: (i) a payment by SE(EA)L to Petrosoma of $3.5 million; and (ii) a transfer from SE(EA)L to Petrosoma of a 6% interest in the PSA. Post Government of Somaliland approval, SE(EA)L holds a 34% interest in the Odewayne Block, fully carried by Genel Energy for its share of the costs of all exploration activities during the Third and Fourth Periods of the PSA.

In early 2018, following encouraging results from an integrated geoscience review in late 2017 of the basic post-stack processed 2D dataset provided by the Operator Genel Energy, Sterling undertook a highly focused and rigorous processing effort, independent of the Operator. The first phase deliverables were a full PSTM dataset, consisting of 3 lines of ca. 235km and were received in May 2018. These reprocessed lines showed significant improvements in subsurface imaging and were shared with the joint venture ('JV') partners in order to assist the decisions on forward work programs.

In parallel to Sterling's efforts, the Operator undertook a number of studies to support the interpretation of the 2D seismic dataset. This included the integration of the 2D seismic data with the potential fields data in the form of a 2D gravity modeling study, alongside an updated review of the regional geology of the Odewayne basin. These studies led to the development of a number of geological models that were used to interpret the seismic data which in the Company's view help support the likely presence of a sedimentary basin. Following this work, the JV partners agreed that reprocessing of the seismic data was needed to further improve the understanding of the prospectivity of the Odewayne Basin.

Outlook

Following the various tests performed by both Sterling and the Operator, in 2019 the Operator undertook the reprocessing of the whole 2D seismic data set to pre-stack time migrated data. An interpretation dataset was made available by the Operator in November 2019 and final products were delivered in January 2020.

Sterling will review this newly reprocessed 2D seismic data set in Q2 2020 and will update its technical assessment and outlook on block prospectivity accordingly. Alongside the seismic reprocessing, a surface seep study focused on areas highlighted by the seismic as most likely to be situated above migration pathways from potential hydrocarbon kitchens. It is anticipated that the above work will aid the JV partnership in developing an appropriate forward work program to further evaluate the prospectivity of the licence.  

FINANCIAL REVIEW

Selected financial data			2019	2018
Adjusted EBITDAX	$million		(0.9)	(1.5)
Loss after tax	$million		(1.6)	(2.0)
Year end cash net to the Group	$million		44.9	46.3
Year end share price	Pence		8.7	10.4

Non-IFRS measures

The Group uses certain measures of performance that are not specifically defined under IFRS or other generally accepted accounting principles. These non-IFRS measures include capital investment, debt and adjusted EBITDAX.

Income Statement

Group G&A decreased by 15% during the year to $2.6 million (2018: $3.0 million). The continued reduction in the Group's administrative overhead is in keeping with the Board driven KPI for cash preservation.

In 2019, a portion of the Group's staff costs and associated overheads have been expensed as pre-licence expenditure ($1.3 million), or capitalised/recharged ($23k) where they are directly assigned to capital projects or recharged. This totalled $1.4 million in the year (2018: $1.4 million).  

Interest received during the year was $1.1 million (2018: $1.0 million). Net finance income (finance income less finance expenses) totalled $1.0 million in the year (2018: $1.0 million).

The loss for the year was $1.6 million (2018: loss $2.0 million):

		$ million
Loss for year 2018		(2.0)
Decrease in revenue		(0.5)
Decrease in cost of sales		0.5
Decrease in G&A and pre-licence costs		0.4
Loss for year 2019		(1.6)

Group adjusted EBITDAX loss totalled $917k (2018: $1.5 million loss):

	2019	2018
	$000	$000
Loss after tax	(1,600)	(1,956)
Interest and finance costs	(952)	(1,024)
Depletion and depreciation	191	10
Pre-licence costs	1,444	1,453
Total EBITDAX (Adjusted)	(917)	(1,517)

The basic loss per share was 0.7 cents per share (2018: loss 0.9 cents per share). No dividend is proposed to be paid for the year ended 31 December 2019 (2018: $nil).

Statement of financial position

At the end of 2019, non-current assets totalled $22.1 million (2018: $21.1 million) relating in principal to the Odewayne block ($21.1 million).

At the end of 2019, net assets/total equity stood at $65.8 million (2018: $67.3 million). 

IFRS 16 (Leases) was adopted on 1 January 2019 and required the Company to account for all leases under a single balance sheet model, recognising both the rights to the asset and the liability arising under the lease.

Net current assets reduced to $44.5 million (2018: $46.2 million). At the end of 2019 cash and cash equivalents totalled $44.9 million (2018: $46.3 million), this reduction is for the most part due to G&A overheads.

Cash flow

Total net decrease in cash and cash equivalents in the year was $1.5 million (2018: $35.1 million, primarily due to the termination of the Chinguetti Funding Agreement), a full reconciliation of which is provided in the Consolidated Statement of Cash Flows.

During the year there were minimal cash investments on the Odewayne Block in Somaliland due to the Group's interest being fully carried by Genel Energy for its share of the costs during the Third and Fourth Periods of the PSA.

Accounting Standards

The Group has reported its 2019 and 2018 full year accounts under International Financial Reporting Standards ('IFRS'), as adopted by the European Union.

Cautionary statement

This financial report contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst the Directors believe the expectation reflected herein to be reasonable in light of the information available up to the time of their approval of this report, the actual outcome may be materially different owing to factors either beyond the Group's control or otherwise within the Group's control but, for example, owing to a change of plan or strategy. Accordingly, no reliance may be placed on the forward-looking statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		31st December 2019		31st December 2018
		$000		$000
Revenue		-		534
Cost of sales		-		(515)
Gross profit		-		19
Other administrative expenses		(1,108)		(1,546)
Pre-licence costs		(1,444)		(1,453)
Total administrative expenses		(2,552)		(2,999)
Loss from operations		(2,552)		(2,980)
Finance income		1,068		1,044
Finance expense		(116)		(20)
Loss before tax		(1,600)		(1,956)
Tax		-		-
Loss for the year attributable to the owners of the parent		(1,600)		(1,956)
Other comprehensive expense - items to be reclassified to the income statement in
subsequent periods
Currency translation adjustments		(3)		(12)
Total other comprehensive expense for the year		(3)		(12)
Total comprehensive expense for the year attributable to the owners of
the parent		(1,603)		(1,968)
Basic and diluted loss per share (US cents)		(0.7)		(0.9)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Note	31st December 2019		31st December 2018
		$000		$000
Non-current assets
Intangible exploration and evaluation assets	4	21,119		21,093
Property, plant and equipment		975		8
		22,094		21,101
Current assets
Trade and other receivables		250		390
Cash and cash equivalents		44,851		46,312
		45,101		46,702
Total assets		67,195		67,803
Equity
Share capital		28,143		28,143
Currency translation reserve		(204)		(201)
Retained earnings		37,844		39,387
Total equity		65,783		67,329
Current liabilities
Trade and other payables		439		474
Lease liability		208		-
		647		474
Non-current liabilities
Lease liability		735		-
Long-term provision		30		-
		765		-
Total liabilities		1,412		474
Total equity and liabilities		67,195		67,803

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

			Currency
		Share	translation	Retained
		capital	reserve	earnings 1	Total
		$000	$000	$000	$000
At 1 January 2018		28,143	(189)	41,343	69,297
Loss for the year		-	-	(1,956)	(1,956)
Currency translation adjustments		-	(12)	-	(12)
Total comprehensive expense for the year attributable to the owners of the parent		-	(12)	(1,956)	(1,968)
At 31 December 2018		28,143	(201)	39,387	67,329
Changes in accounting policy - IFRS 16		-	-	57	57
At 1 January 2019		28,143	(201)	39,444	67,386
Loss for the year		-	-	(1,600)	(1,600)
Currency translation adjustments		-	(3)	-	(3)
Total comprehensive expense for the year attributable to the owners of the parent		-	(3)	(1,600)	(1,603)
At 31 December 2019		28,143	(204)	37,844	65,783

¹ The share option reserve has been included within the retained earnings reserve and is a non-distributable reserve.

CONSOLIDATED STATEMENT OF CASH FLOWS

	Note	2019		2018
		$000		$000
Operating activities:
Loss before tax		(1,600)		(1,956)
Depreciation, depletion & amortisation		191		10
Finance income and gains		(1,068)		(1,044)
Finance expense and losses		55		12
Decommissioning costs paid		-		(32,500)
Operating cash flow prior to working capital movements		(2,422)		(35,478)
Decrease in inventories		-		363
Decrease in trade and other receivables		140		478
Decrease in trade and other payables		(35)		(41)
Increase in provision		30		-
Net cash flow used in operating activities		(2,287)		(34,678)
Investing activities
Interest received		1,068		1,044
Purchase of property, plant and equipment		-		(4)
Exploration and evaluation costs	4	(26)		(1,391)
Net cash used in investing activities		1,042		(351)
Financing activities
Principal paid on lease liability		(201)		-
Interest paid on lease liability		(54)		-
Net cash used in financing activities		(255)		-
Net decrease in cash and cash equivalents		(1,500)		(35,029)
Cash and cash equivalents at beginning of year		46,312		81,365
Effect of foreign exchange rate changes		39		(24)
Cash and cash equivalents at end of year		44,851		46,312

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.  General information 

The results announcement is for the year ended 31 December 2019.

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2019 or 2018, but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

While the financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs.

The Annual Report and Accounts and the notice for the Company's Annual General meeting, which is to be confirmed, will be posted to Shareholders in due course.

2.  Going concern

The Group business activities, together with the factors likely to affect its future development, performance and position are set out in the Operations review. The financial position of the Group and Company, its cash flows and liquidity position are described in the Financial Review.

The Group has sufficient cash resources for its working capital needs and its committed capital expenditure programme at least for the next 12 months. As a consequence, the Directors believe that both the Group and Company are well placed to manage their business risks successfully despite the uncertain economic outlook.

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. This assessment has been made by the Directors who remain confident the group has sufficient cash resources at the date of signing the annual report to meet its liabilities as they fall due for a period of at least 12 months from the date of signing these financial statements, and notwithstanding the impact that COVID-19 has had internationally. The Directors believe that the Group is in a strong position to absorb any potential impact on the Group arising from COVID-19, and thus, they continue to adopt the going concern basis of accounting in preparation of the financial statements.

3.  Operating segments

Africa operations in 2019 focused on exploration and appraisal activities in Somaliland. The UK corporate office is a technical and administrative cost centre focused on new ventures. The operating results of each segment are regularly reviewed by the Board of Directors in order to make decisions about the allocation of resources and to assess their performance.

The following table's present revenue, profit and certain asset and liability information regarding the Group's operating segments for the year ended 31 December 2019 and for the year ended 31 December 2018.

	Corporate		Africa		Total
	2019	2018	2019	2018	2019	2018
	$000	$000	$000	$000	$000	$000
Statement of comprehensive income
Revenue	-	-	-	534	-	534
Cost of sales	-	-	-	(515)	-	(515)
Gross profit	-	-	-	19	-	19
Other administrative expenses	(1,108)	(1,546)	-	-	(1,108)	(1,546)
Pre-licence costs	(1,444)	(1,453)	-	-	(1,444)	(1,453)
(Loss)/profit from operations	(2,552)	(2,999)	-	19	(2,552)	(2,980)
Finance income	1,068	1,044	-	-	1,068	1,044
Finance expense	(116)	(20)	-	-	(116)	(20)
Segment (loss)/profit before tax	(1,600)	(1,975)	-	19	(1,600)	(1,956)
Segment assets and liabilities
Non-current assets 1	975	8	21,119	21,093	22,094	21,101
Segment assets 2	45,101	46,702	-	-	45,101	46,702
Segment liabilities 3	(1,396)	(460)	(16)	(14)	(1,412)	(474)

1 Segment non-current assets of $21.1 million in Somaliland (2018: $21.1 million).

2 Corporate segment assets include $44.9 million cash and cash equivalents (2018: $46.3 million). Carrying amounts of segment assets exclude investments in subsidiaries.

3 Carrying amounts of segment liabilities exclude intra-group financing.

4.  Intangible Exploration and Evaluation assets

			Group
			$000
Net book value at 1 January 2018			21,041
Additions during the year			52
Net book value at 31 December 2018			21,093
Additions during the year			26
Net book value at 31 December 2019			21,119

Group intangible assets at the year end 2019:

Odewayne PSA, Somaliland: SE(EA)L 34%, Genel Energy 50%, Petrosoma 16%

Classified as a joint arrangement in accordance with IFRS 11.

5.  Subsequent events

Save for the events surrounding Covid-19 which have been discussed within the Chairman's and CEOs statements , no significant subsequent events requiring disclosure or adjustment have occurred.

The measurement of expected credit losses in accordance with IFRS 9 (Financial Instruments), are not impacted by subsequent global developments related to Covid-19 and are therefore non-adjusting.

DEFINITIONS AND GLOSSARY OF TERMS

$   US dollars

Companies Act or Companies Act   the Companies Act 2006, as amended

2006  

1P   proven reserves (both proved developed reserves + proved undeveloped reserves).

2D   two dimensional

2P   1P (proven reserves) + probable reserves, hence "proved AND probable."

3D   three dimensional

3P   the sum of 2P (proven reserves + probable reserves) + possible reserves, all 3Ps "proven AND probable AND possible."

AIM   AIM, a SME Growth market of the London Stock Exchange

AGM   Annual General Meeting

Articles   the Articles of Association of the Company

bbl   barrel, equivalent to 42 US gallons of fluid

bopd   barrel of oil per day

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

City Code  The City Code on Takeovers and Mergers

Company   Sterling Energy plc

CSOP   Company Share Option Plan (HMRC approved share option scheme)

Directors   the Directors of the Company

D&P  development and production assets

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

EITI   Extractive Industries Transparency Initiative

EUR   the total amount of hydrocarbons expected to be produced from the hydrocarbon accumulation over the life of the project.  Estimated ultimate recovery is synonymous with recoverable resource and the terms are used interchangeably.

Farm-in & farm-out   a transaction under which one party (farm-out party) transfers part of its interest to a contract to another party (farm-in party) in exchange for a consideration which may comprise the obligation to pay for some of the farm-out party costs relating to the contract and a cash sum for past costs incurred by the farm-out party

FCA   Financial Conduct Authority of the United Kingdom

G&A  general and administrative

G&G   geological and geophysical

GBP   pounds sterling

Genel Energy   Genel Energy Somaliland Limited

Group   the Company and its subsidiary undertakings

HMRC   Her Majesty's Revenue and Customs

HSSE   Health, Safety, Security and Environment

hydrocarbons   organic compounds of carbon and hydrogen

IAS  International Accounting Standards

IFRS   International Financial Reporting Standards

Jacka  Jacka Resources Somaliland Limited

JV   joint venture

k   thousands

km   kilometre(s)

km ²   square kilometre(s)

KPIs  key performance indicators

lead   indication of a potential exploration prospect

London Stock Exchange or LSE   London Stock Exchange Plc

M&A  merger and acquisition

m   metre(s)

mcf   thousand cubic feet

OECD   Organisation for Economic Cooperation and Development

OPEC  Organisation of the Petroleum Exporting Countries 

Ordinary Shares   ordinary shares of 10 pence each

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.

Panel or Takeover Panel   the Panel on Takeovers and Mergers

Petroleum   oil, gas, condensate and natural gas liquids

Petroleum system   geologic components and processes necessary to generate and store hydrocarbons, including a mature source rock, migration pathway, reservoir rock, trap and seal.

Petrosoma   Petrosoma Limited (JV partner in Somaliland)

Pre-Stack Depth Migration   process by which seismic events are geometrically re-located in space and depth to the location the event occurred in the subsurface

Pre-Stack Time Migration   process by which seismic events are geometrically re-located in seismic travel time to the location the event occurred in the subsurface

Prospect   an area of exploration in which hydrocarbons have been predicted to exist in economic quantity. A group of prospects of a similar nature constitutes a play.

PSA   production sharing agreement

PSC   production sharing contract

QCA Code   Corporate Governance Code for Small and Mid-Size Quoted Companies 2018

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   10p ordinary shares

Shareholders   ordinary shareholders of 10p each in the Company

Subsidiary   a subsidiary undertaking as defined in the 2006 Act

Tcf   Trillion cubic feet

United Kingdom or UK   the United Kingdom of Great Britain and Northern Ireland

Waterford Finance and Investment   Waterford 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

 

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