2021 Financial Results

RNS Number : 5232T

Argos Resources Ltd

25 July 2022

 

25 July 2022

ARGOS RESOURCES LIMITED

("Argos" or "the Company")

2021 Financial Results

Highlights

Argos Resources Ltd (AIM: ARG.L), the Falkland Islands based exploration company focused on the North Falkland Basin, is pleased to announce its financial results for the year ended 31 December 2021.

· US$356,000 loss (2020 loss of US$299,000).

· US$304,000 cash reserves at 31 December 2021 (31 December 2020: US$438,000).

· In April 2022 the Falkland Islands Government agreed to extend the licence from 1 May 2022 until 31 December 2022, with no additional work commitments. ·     A loan provided by the Chairman in June 2022 provides additional working capital and t he Company plans to raise additional capital to support a further extension of the Licence beyond its current expiry date of 31 December 2022

· Ownership changes in the adjacent Sea Lion oilfield and surging oil prices enhance outlook for the Company.

The full Annual Report and Consolidated Financial Statements are available for download from the Company's website:  http://www.argosresources.com/news.php?page=regulatory-news

The full Annual Report will also be sent to those shareholders who have indicated that they wish to receive it by post on 29 July 2022.  Postal and electronic notification of availability will also be sent to shareholders the same day.

Argos Resources Limited ([phone])

www.argosresources.com

Ian Thomson, Chairman

John Hogan, Managing Director

Cenkos Securities plc (Nomad & Broker)

Derrick Lee ([phone])

Neil McDonald ([phone])

Chairman's statement and Managing Director's review

The Company noted in its 2021 Interim Report the decision announced on 23rd September by Harbour Energy plc, the then 60% owner and operator of the Sea Lion oilfield, to explore the options to exit the project and its other license interests in the Falkland Islands. Since then, Navitas Petroleum LP has committed to acquire Harbour's interest and the operatorship of the field and has already commenced work focussed on streamlining the development and reducing front-end capital costs. This is a positive development for Argos Resources as a commitment by Navitas to develop Sea Lion will attract industry attention to the North Falkland Basin and significantly increase the likelihood of the Company securing a farm-in partner. This positive development, coupled with the surge in oil prices in 2022 and the recognition that energy security has been an overlooked critical issue enhance the future prospects for the Company.

The Company also announced last year that a pilot study had been commissioned to reprocess some of the 3D seismic data on Licence PL001. The results of this work have been positive and sufficiently encouraging that the Company intends to extend that work across the main prospects identified in Licence PL001. The Company believes this additional work should further de-risk those prospects and enhance its farmout potential. The results of the pilot study have been shared with the Falkland Island Government and its technical advisers and the Company has informed them of its intention to seek a further two year licence extension to 31st December 2024 to allow sufficient time for this work to be undertaken and presented to the industry. Additional capital will need to be raised to meet the costs of this technical work and to fund the Company's working capital requirements should a licence extension be offered.

Results and dividend

The results for the year to 31 December 2021 and the Group's financial position as at the year-end are shown in the attached financial statements.  The directors have not recommended a dividend for the year (2020: $nil).

Business review

The Group has returned a loss for the year ended 31 December 2021 of US$356,000 (2020: loss of US$299,000) which equates to a loss per share of 0.15cents (2020: loss per share of 0.14 cents).

Administration expenses were US$355,000 in 2021 compared to US$303,000 in 2020.

Shareholders' equity increased from US$29.2 million to US$29.4 million in the year since 31 December 2020, reflecting the fund raise less administration costs and investment in the licence area.  Cash in the year decreased from US$438,000 to US$304,000.

Outlook for the next financial year

The Group carried out a successful fund raise in April 2021 which funded the Company until mid-2022.  In June 2022 the Chairman agreed a drawdown facility of £110,000 to enable the Group to continue beyond that point.  The Group intends to seek a licence extension of a further two years to take the licence to December 2024 and funding in support of a work programme which will be required under any licence extension.

Going concern

The financial statements have been prepared on the going concern basis as, in the opinion of the directors, there is a reasonable expectation that the Group and Company will continue in operational existence for the foreseeable future.

The Group and Parent Company's ability to continue in operational existence is, however, subject to a number of uncertainties as follows:

The Company's PL001 Licence currently expires on 31 December 2022. The Company has already advised the Falkland Islands Government of its wish to extend the Licence by a further 2 years beyond this date to undertake new technical work and to market the results of that work to potential industry partners.  A formal application for this Licence extension cannot be submitted before the Falkland Islands Government completes a review of its relationship with the oil and gas sector which is currently underway and expected to be completed in Q3 2022.  Assuming a favourable outcome to that review, the Company intends at that time to submit a formal application for the extension to the Licence.

Any offer of such an extension is likely to be conditional on the Company demonstrating that it has sufficient funding to carry out a work programme and cover administration costs during the Licence term.  Grant of an extension is therefore likely to be dependent on the Company raising significant further funds in Q3/Q4 2022.

Failure to secure an offer of a licence extension or to raise sufficient funds to meet the conditions of such an offer will result in the Company being unable to continue as a going concern in the near term.

If a licence extension and funding are forthcoming then the Group's ability to achieve its long term strategy of developing its exploration projects remains dependent on finding an exploration partner and the Group continues to seek partners to participate in drilling on its Licence.  As at the date of sign off on these financial statements the oil and gas markets continue to be in a state of considerable turmoil with very high prevailing prices.  The company does not anticipate making progress on finding a partner until the markets show signs of greater stability but is hopeful that the drivers behind the current situation will improve the chances of success.

If the Group is unable to find an exploration partner, raise funds or obtain further licence extensions then it may be unable to realise its assets and discharge its liabilities in the normal course of business.

All the above factors indicate the existence of material uncertainties which cast significant doubt over the Group and Parent Company's ability to continue as a going concern, some of which may crystalise before the end of 2022.  The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

Consolidated statement of comprehensive income

Year ended 31 December 2021

			Year ended 31 December 2021 $'000	Year ended 31 December 2020 $'000
Administrative expenses			(355)	(303)
Finance income			-	1
Foreign exchange (losses)/gains			(1)	3
Loss for the year attributable to owners of the parent			(356)	(299)
Total comprehensive loss for the
period attributable to owners of the parent			(356)	(299)
Basic and diluted loss per share (cents)			(0.15)	(0.14)

Consolidated statement of financial position

As at 31 December 2021

			2021	2020
			$'000	$'000
Assets
Non-current assets
Exploration intangible assets			29,135	28,815
			29,135	28,815
Current assets
Other receivables			43	40
Cash and cash equivalents			304	438
Total current assets			347	478
Total assets			29,482	29,293
Liabilities
Current liabilities
Trade and other payables			54	59
Total liabilities			54	59
Total net assets			29,428	29,234
Capital and reserves attributable to
equity holders of the Company
Share capital			7,095	6,696
Share premium			30,222	30,071
Retained losses			(7,889)	(7,533)
Total shareholders' equity			29,428	29,234

Consolidated statement of cash flows

Year ended 31 December 2021

		Year ended 31 December 2021 $'000	Year ended 31 December 2020 $'000
Cash flows from operating activities
Loss for period before taxation		(356)	(299)
Adjustments for:
Finance income		-	(1)
Foreign exchange losses/(gains)		1	(3)
Net cash outflow from operating activities
before changes in working capital		(355)	(303)
(Increase)/decrease in other receivables		(3)	1
(Decrease)/increase in other payables		(5)	1
Net cash outflow from operating activities		(363)	(301)
Investing activities
Interest received		-	1
Exploration and development expenditure		(320)	(33)
Net cash used in investment activities		(320)	(32)
Financing activities
Issue of ordinary shares		550	-
Net cash from financing activities		550	-
Net decrease in cash and cash equivalents		(133)	(333)
Cash and cash equivalents at beginning of period		438	768
Exchange (losses)/gains on cash and cash equivalents		(1)	3
Cash and cash equivalents at end of the year		304	438

Consolidated statement of changes in equity

Year ended 31 December 2021

		Share capital $'000	Share premium $'000	Retained losses $'000	Total equity $'000
At 1 January 2020		6,696	30,071	(7,234)	29,533
Total comprehensive loss for the year		-	-	(299)	(299)
At 31 December 2020 and 1 January 2021		6,696	30,071	(7,533)	29,234
Total comprehensive loss for the year		-	-	(356)	(356)
Shares issued during year		399	151	-	550
At 31 December 2021		7,095	30,222	(7,889)	29,428

Notes

1.  Basis of preparation

In preparing the financial information in this statement the Group, which consists of the Company Argos Resources Ltd, and its wholly owned subsidiary Argos Exploration Ltd, has applied policies in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").  The financial information has been prepared under the historical cost convention.

The financial information set out does not constitute the company's statutory accounts for 2020 or 2021. Statutory accounts for 2020 and 2021 have been reported on by the Independent Auditors. The Independent Auditors' Reports on the Annual Report and Financial Statements for 2020 and 2021 were unqualified with an emphasis of matter paragraph included highlighting the material uncertainty relating to going concern .

2.  Events after the reporting date

The Licence

Argos announced on 11 April 2022 that the Falkland Islands Government ("FIG") had extended the second term of the Company's PL001 Licence from 1 May 2022 to 31 December 2022, with no additional work commitments.

The Company is currently in discussions with FIG regarding the terms on which a further extension of the PL001 Licence may be granted, to enable Argos to undertake the necessary technical work to progress the project. The Board expects that any extension beyond 31 December 2022 would be subject to certain technical commitments from the Company, which would require Argos to raise additional capital.

Loan Facility

Mr Ian Thomson, OBE, Chairman of Argos, has agreed to provide a loan facility of up to £110,000 to the Company (the "Loan Facility"). Drawdown from the Loan Facility can be made at the Company's request. The Loan Facility is available until 31 January 2023 with no interest accruing on borrowed amounts. If the Company carries out a share issue by way of fund-raising, the lender shall be entitled to convert the loan then outstanding into new shares issued on the same terms as those available to other participants in the issue.

The Loan Facility, along with the Company's existing resources of approximately £100,000 as of 24 June 2022, will provide the Company with sufficient working capital until July 2023.

The provision of the Loan Facility is deemed to be a related party transaction for the purposes of the AIM Rules for Companies. The Independent Directors consider, having consulted with the Company's nominated adviser, Cenkos Securities plc, that the terms of the Loan Facility are fair and reasonable insofar as the Shareholders are concerned.

Publication of Results

As a result of the Company's extended discussions regarding its funding position, and the associated impact on the timing for the FY21 Accounts, the Company was not in a position to publish its 2021 Financial Statements by the deadline of 30 June 2022. Consequently, the Company's shares were temporarily suspended from trading on AIM as of 7.30 a.m. on 1 July 2022, pending publication of the FY21 Accounts.

 

END

 

 

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