Final Results

RNS Number : 8487F

Clontarf Energy PLC

30 May 2013

 



30 May 2013

Clontarf Energy plc

("Clontarf" or "the Company")

Final Results for the Year Ended 31 December 2012

Clontarf Energy, the oil and gas exploration company focused on Ghana and Peru, today announces its results for the year ending 31 December 2012.

Operational Highlights include:

1.    Ghana

·     The Directors believe the Tano 2A block is a top class prospect

·     The company is fully engaged with the Ghanaian National Petroleum Company

·     Now awaiting licence ratification

2.    Peru

·    On 15 May 2013 it was announced that Peruvian Oil and Gas Exploration Limited ("POGEL"), an energy investment company, will undertake responsibility to put up performance bonds and conduct contractual work on the Exploration and Development Contracts on Peruvian Blocks 183 and 188. POGEL will also assume the agreed Peruvian liabilities of Hydrocarbon Exploration Limited, a wholly-owned subsidiary of Clontarf Energy plc.

·    Under the Agreement, Clontarf Energy plc will convert its interest to an overriding royalty of 3 per cent on production from any commercial discovery.  The royalty payments will be capped at US$5 million per structure, US$10 million per Block and US$20 million in total. The agreement is subject to regulatory approval.

John Teeling, Chairman, said, "Clontarf is focused on Ghana licence ratification and will then build on the extensive work already undertaken.  We will maintain our royalty interest in Peru and we will dispose of Petrolex which holds the Bolivian and United States interests."                                                                                          

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

Clontarf Energy plc

John Teeling, Chairman                                                                                        [phone]

David Horgan, Director

James Finn, Director

Nominated Adviser and Joint Broker

Shore Capital

Pascal Keane/Toby Gibbs, Corporate Finance                                            [phone]

Jerry Keen, Corporate Broking

Joint Broker

Optiva Securities Limited

Jeremy King                                                                                                              [phone]

Jason Robertson                                                                                                      [phone]

Public Relations

Blythe Weigh Communication                                                                          [phone]

Tim Blythe                                                                                                                 [phone]

Robert Kellner                                                                                                         [phone]

Eleanor Parry                                                                                                            [phone]

Pembroke Communications

David O'Siochain                                                                                                     [phone]

Statement Accompanying the Final Results

Clontarf Energy was formed in 2010 by reversing the unlisted Hydrocarbon Exploration Plc into Persian Gold Plc and then relisting. Hydrocarbon Exploration contained oil and gas prospects in Boliva, Ghana and the United States, interests which were spun out of the acquisition of Pan Andean Resources by Petrominerales. Persian Gold, an AIM listed Iranian gold explorer severely impacted by sanctions on Iran, needed a new direction. During the extended listing process two new Peruvian exploration licences were acquired by Hydrocarbon Exploration.

On listing Clontarf Energy held 60% of a licence agreement on the Tano 2A block in Ghana, 100% of two onshore licences in Peru, as well as interests in Bolivia and in the US which were valued at nominal sums. The Bolivian interests were subject to a nationalisation decree and legal uncertainties while an on-going court case in Texas made valuing the US assets a difficult task. Our strategy was simple - develop the Ghanaian block and farm out the two Peruvian blocks while holding on to what we could in Bolivia.  The focus on Ghana continues.

Ghana

The Directors believe that the Tano 2A block in Ghana is a top class prospect. We knew Ghana having explored for gold over many years. We saw potential in the offshore but the financial commitment would have been too big for us. In 2008 we signed an agreement on Tano 2A - a shallow offshore/onshore block. We signed a revised agreement in 2010 with the Ghanaian National Petroleum Company (GNPC). The agreement requires cabinet and parliamentary approval which is awaited. In 2010/2011 we gathered and acquired all available historical data and using the latest technology reviewed the potential of the Tano 2A block. We believe that we have identified a number of good quality leads.  Our advisors believe that oil has migrated northwards from the deeper offshore reservoirs where big discoveries have been made. There are numerous seepages onshore some of which were worked over 100 years ago. Further seismic will be shot to define targets once the ratification process is completed. During the three year wait for ratification we have remained fully engaged with the GNPC. We have put in place an insurance bond covering half of the initial three year agreed work programme, though there is no requirement for this in our contract.

Clontarf is not alone in awaiting licence ratification, we understand that numerous other agreements are in the queue. Ghana has had outstanding exploration success and there is significant upside potential on the blocks where agreements have been signed.

Peru

We were pleased in October 2010 when Clontarf was awarded two exploration licences over two large onshore blocks in the Peruvian jungle - Block 183 covering nearly 400,000 hectares located in North Central Peru and Block 188, covering nearly 600,000 hectares, in the Southern Ucayali basin.  Clontarf was the only junior to be awarded licences in that licensing round. We immediately set to work hoping to repeat the earlier successes we had with four blocks in Peru then held by Pan Andean Resources, the forerunner of Clontarf.

We obtained, analysed and reviewed available seismic and well log data and were heartened to identify what we believed to be excellent leads, prospects and targets. An extensive farm out process began in 2011. Our prior work had given us a contact list and the credibility to gain access. Over a period of 18 months, over 50 presentations were made in Canada, North America, South America and Europe. The expectation was of a deal to recover all prior costs together with at least a 20% carry through the initial work programme plus one well. More than ten companies signed the Confidentiality Agreement and received the data.

There was interest from potential farminees and terms were discussed. Gradually interested parties faded away until by the end of 2012 we were left with a number of local groups and one international consortium. A Memorandum of Agreement was signed in late 2012 with the international consortium. Despite continued discussions a final deal never materialised. An agreement in principle was reached with a South American group. Once again the deal never completed. Now time became a threat. As licence holder, Hydrocarbon Exploration was obliged to put up a $500,000 performance bond by mid-March for Block 188 and another by mid-May for Block 183. We were assured by all parties concerned that a deal would be completed in time. This became unlikely. Peruvian Oil and Gas Exploration Ltd (POGEL), a private group, had approached us in early 2013 with a specific proposal related to sourcing gas for electricity generation. As the deadline for bond placement loomed, the board decided against raising funds to put up the bonds, as we were not able to farm out, so we either gave up the blocks or negotiated with POGEL. The royalty deal announced was not well received by the market because no cash was received. A royalty agreement of 3%, though capped at US$5 million per commercial discovery, has the same impact as a bigger free carry through to production because it is before costs.

How did this happen? We were running out of time and our expectation of significant multinational interest was wrong. We continue to believe that Peru is a prospective country for hydrocarbons with good commercial terms but the international oil industry appears to think otherwise. Delays due to bureaucracy, political posturing, environmental constraints and indigenous peoples' opposition are impacting badly on investor perceptions. Supporting this view is the fact that the parties interested at the end were either local or overseas companies with local interests.

It has cost significant sums to undertake the preliminary work on the blocks, to undertake the long farm out process, to pay training grants and to run the Peruvian operation. In March 2013 Hydrocarbon borrowed $400,000 from a financial institution in Lima, Peru to meet its commitments. This one year loan has a 10% coupon.  The lenders have indicated that they will convert into shares in Clontarf Energy at the prevailing price of any future fundraise.  The Board believes that the geology of the blocks is good.  POGEL is expected to drill targets already identified by Clontarf.

Bolivia

After operating in Bolivia since 1988 we reluctantly deem it necessary to make full provision in the accounts for the remaining asset value of around £850,000. In 2010 a law was enacted nationalising all hydrocarbon assets. The implementation of this statute is confusing. Clontarf holds a 30% interest in the producing Monteagudo gas and oil field. We believe there is a high probability of significant gas reserves in deeper formations on the block. Our partners are Petrobras, Repsol and Andina -YPFB.  Together with an Argentinian company we negotiated a deal with our partners for them to exit the block and for the interest of Clontarf to increase to 50%. This requires cabinet and parliamentary approval. No progress has been made in the past year. Title remains unclear.  A similar situation exists on the El Dorado gas field where Clontarf claims a 10% ownership. We did not meet cash calls because there was or is no certainty of title. So we claimed force majeure. We subsequently negotiated a deal with the state oil company YPFB to regain the 10% interest by paying back costs. Again lack of clarity on what exactly we would own meant that we did not make the payments. We will attempt to recover what we can by available means including arbitration, legal action and selling Petrolex, the Bolivian subsidiary.

In 2001 the then Pan Andean acquired a UK company, Endeavour Oil & Gas Ltd., which had a US subsidiary with onshore and offshore oil/gas assets. The purchase price was $13 million.  The operation was profitable until falling gas prices as a result of the shale gas revolution led to losses in Endeavour. In total since 2001 Clontarf and Pan Andean received over $7 million from Endeavour - not a good investment.    Meanwhile a disagreement with Hunt Oil, the operator of our High Island 30 oil platform, relating to a well abandonment led, to a court case in Texas.   Judgement was given against Endeavour Oil & Gas Inc., the local Texan subsidiary owned by Petrolex, our subsidiary. Hunt was offered ownership of Endeavour but declined. Hunt initiated legal cases against Endeavour, its directors and Hydrocarbon Exploration.  Our legal advice is that there is no legal recourse to Clontarf Energy.

Clontarf was born at a difficult time.  The AIM market in London was imploding for exploration ventures.  New funding sources dried up and have stayed dry. We listed in 2011 with less than £2 million in cash but with high hopes for our activities in Ghana and Peru.  Over $1 million has been spent on the Ghanaian block while awaiting ratification.  In Peru we spent money keeping the new licences in good standing, identifying prospects and attempting to farm out. The farm out did not happen in the way it was envisioned.  The royalty agreement negotiated provides some potential future value to the company.  As the farm out process dragged on local costs in Peru were funded by a locally sourced loan.  The lenders have indicated a willingness to accept shares for sums due.  To preserve Company funds no salaries or fees have been paid to the three principal directors since the company was formed.

The directors will support a new fundraising and it is also the intention that sums due to directors and the Peruvian loans will be converted into shares as part of any future fundraising.  This will help strengthen the balance sheet. 

Clontarf is focused on Ghana licence ratification and will then build on the extensive work already undertaken.  We will maintain our royalty interest in Peru and we will seek to dispose of Petrolex which holds the Bolivian and United States interests.

John Teeling

Chairman

30 May 2013

__________________________________________________________________________________

CLONTARF ENERGY PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2012

	2012	2011
CONTINUING OPERATIONS	£	£
REVENUE	-	-
Cost of sales	-	-
GROSS PROFIT	-	-
Listing Costs	-	(446,216)
Administrative expenses	(458,501)	(422,516)
Impairment of evaluation and exploration assets	(844,782)	-
OPERATING LOSS	(1,303,283)	(868,732)
Finance revenue	450	667
Finance costs	(1,759)	(2,017)
LOSS BEFORE TAXATION	(1,304,592)	(870,082)
Income tax expense	-	-
LOSS FOR THE YEAR AND TOTAL
COMPREHENSIVE INCOME	(1,304,592)	(870,082)
LOSS PER SHARE - Basic and diluted	(0.65p)	(0.52p)

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2012

	2012	2011
	£	£
ASSETS:
NON CURRENT ASSETS
Intangible assets	5,214,930	5,248,152
	5,214,930	5,248,152
CURRENT ASSETS
Other receivables	10,416	261,915
Cash and cash equivalents	98,880	491,865
	109,296	753,780
TOTAL ASSETS	5,324,226	6,001,932
LIABILITIES:
CURRENT LIABILITIES
Trade payables	(455,366)	(146,862)
Other payables	(622,717)	(304,335)
TOTAL LIABILITIES	(1,078,083)	(451,197)
NET ASSETS	4,246,143	5,550,735
EQUITY
Called-up share capital	500,461	500,461
Share premium	9,248,336	9,248,336
Retained earnings - (deficit)	(5,833,241)	(4,528,649)
Share based payment reserve	330,587	330,587
TOTAL EQUITY	4,246,143	5,550,735

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2012

	Called-up Share Capital	Share Premium	Share Based Payment Reserve	Retained Deficit	Total
	£	£	£	£	£
At 1 January 2011	187,932	2,673,913	207,297	(3,732,450)	(663,308)
Exercise of Warrants	12,786	191,789	(73,883)	73,883	204,575
Exercise of Share Options	17,300	26,100	-	-	43,400
Shares issued for cash	113,659	2,614,161	-	-	2,727,820
Share issue costs	-	(133,081)	-	-	(133,081)
Shares issued on acquisition of Hydrocarbon Exploration	168,784	3,882,032	-	-	4,050,816
Issue of Warrants	-	(6,578)	6,578	-	-
Issue of Share Options	-	-	190,595	-	190,595
Loss for the year	-	-	-	(870,082)	(870,082)
At 31 December 2011	500,461	9,248,336	330,587	(4,528,649)	5,550,735
Loss for the year	-	-	-	(1,304,592)	(1,304,592)
At 31 December 2012	500,461	9,248,336	330,587	(5,833,241)	4,246,143

Share premium

The share premium reserve comprises of a premium arising on the issue of shares.

Share based payment reserve

The share based payment reserve arises on the grant of share options under the share option plan.

Retained deficit

Retained deficit comprises of losses incurred in 2012 and prior years.

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2012

	2012	2011
	£	£
CASH FLOW FROM OPERATING ACTIVITIES
Loss for financial year	(1,304,592)	(870,082)
Finance costs recognised in loss	1,759	2,017
Finance revenue recognised in loss	(450)	(667)
Exchange movement	12,806	1,562
Profit on disposal of licence	-	(206,582)
Impairment of exploration and evaluation assets	844,782	-
	(445,695)	(1,073,752)
MOVEMENTS IN WORKING CAPITAL
Increase/(Decrease) in payables	626,886	(919,151)
Decrease/(Increase) in trade and other receivables	251,499	(43,405)
CASH GENERATED/(USED) BY OPERATIONS	432,690	(2,036,308)
Finance costs	(1,759)	(2,017)
Finance revenue	450	667
NET CASH GENERATED BY/(USED) IN OPERATING ACTIVITIES	431,381	(2,037,658)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for intangible assets	(811,560)	(606,766)
Cash transfers on acquisition	-	34,007
Proceeds from disposal of licence	-	206,582
NET CASH USED IN INVESTING ACTIVITIES	(811,560)	(366,177)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from exercise of warrants	-	204,575
Proceeds from exercise of options	-	43,400
Proceeds from share issue	-	2,727,820
Share issue costs	-	(133,081)
NET CASH GENERATED FROM FINANCING ACTIVITIES	-	2,842,714
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS	(380,179)	438,879
Cash and cash equivalents at beginning of the financial year	491,865	54,548
Effect of exchange rate changes on cash held in foreign currencies	(12,806)	(1,562)
Cash and cash equivalents at end of the financial year	98,880	491,865

Notes:

1.    ACCOUNTING POLICIES

There were no changes in accounting policies from those used to prepare the Group's Annual Report for financial year ended 31 December 2011. The financial statements have been prepared in accordance with International Financial Reporting Standards and IFRSs as adopted by the European Union and in accordance with the Companies Act 2006.

2.    LOSS PER SHARE

Basic loss per share is computed by dividing the loss after taxation for the year available to ordinary shareholders by the weighted average number of ordinary shares in issue and ranking for dividend during the year.  Diluted earnings per share is computed by dividing the loss after taxation for the year by the weighted average number of ordinary shares in issue, adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the year.

The following table sets out the computation for basic and diluted earnings per share (EPS):

	2012	2011
	£	£
Numerator
For basic and diluted EPS retained loss	(1,340,592)	(870,082)
Denominator
For basic and diluted EPS	200,184,469	167,785,327
Basic EPS	(0.65p)	(0.52p)
Diluted EPS	(0.65p)	(0.52p)

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

3.    INTANGIBLE ASSETS

	2012	2011
Exploration and evaluation assets:	£	£
Cost:
At 1 January	6,976,377	2,105,346
Additions during the year	811,560	606,766
Asset acquired	-	4,470,847
Disposal	-	(206,582)
At 31 December	7,787,937	6,976,377
Impairment:
At 1 January	1,728,225	1,934,807
Provision for impairment	844,782	-
Disposal	-	(206,582)
At 31 December	2,573,007	1,728,225
Carrying Value:
At 1 January	5,248,152	170,539
At 31 December	5,214,930	5,248,152
Segmental analysis	2012	2011
	£	£
Peru	4,749,552	4,192,786
Ghana	465,378	440,764
Bolivia	-	614,602
	5,214,930	5,248,152

Exploration and evaluation assets relates to expenditure incurred in prospecting and exploration for oil and gas in Peru, Ghana and Bolivia. The directors are aware that by its nature there is an inherent uncertainty in such development expenditure as to the value of the asset. 

Interests held in Ghanian licences by the company's subsidiary, Hydrocarbon Exploration Limited, were transferred to the company at carrying value during the year.

The Group's projects in Bolivia continue to encounter a number of prolonged legal disputes. Due to the political and legal uncertainty the directors have decided to provide in full against the carrying value of the Bolivian assets. Accordingly an impairment provision of £844,782 in respect of the full carrying value of the Group's Bolivian assets has been recorded by the Group in the current year.

In the prior year the group sold their interest in an Iraninan licence to a third party. The carrying value of the licence had been fully impaired in a prior year.

The realisation of these intangible assets is dependent on the discovery and successful development of economic oil and gas reserves which is affected by risks including:

·      licence obligations

·      requirement for further funding

·      geological and development risks

·      title to assets

·      political risk

Should this prove unsuccessful the value included in the balance sheet would be written off to the statement of comprehensive income.

4.    CALLED-UP SHARE CAPITAL

		2011	2011
Authorised:		£	£
800,000,000 Ordinary shares of 0.25p each		2,000,000	2,000,000
Allotted, called-up and fully paid:	Number	Share Capital	Share Premium
		£	£
At 1 January 2011	75,172,835	187,932	2,673,913
Issued during the year	125,011,634	312,529	6,574,423
At 31 December 2011	200,184,469	500,461	9,248,336
Issued during the year	-	-	-
At 31 December 2012	200,184,469	500,461	9,248,336

Movements in issued share capital

On 6 April 2011 a total of 67,513,600 consideration shares were issued to Hydrocarbon Exploration Shareholders                (excluding the company) as consideration for the acquisition of Hydrocarbon Exploration.

On 6 April 2011 a total of 45,463,671 shares were placed at a price of 6p per share.  Proceeds were used to provide additional working capital and fund development costs.

During the prior year 5,114,363 warrants were exercised at a price of 4p per share

During the prior year 6,920,000 share options were exercised at prices ranging from 0.25p to 2.5p per share.

On 6 April 2011 a total of 649,616 warrants were granted to the Company's broker to subscribe for

649,616 shares at a price of 6p per share. These warrants are exercisable for 3 years from the date

of Admission.

Share Options

A total of 9,940,000 share options were in issue at 31 December 2012 (2011: 10,850,000).  These options are exercisable, at prices ranging between 2.5p and 25p, up to seven years from the date of granting of the options unless otherwise determined by the board.

Warrants

A total of 649,616 warrants were in issue at 31 December 2012 (2011: 649,616).  These warrants are exercisable at a price of 6p up to three years from the date of granting of the warrants.

5.    Annual General Meeting

The Company's Annual General Meeting will be held on Friday 28 June 2013 in the City of London Club, 19 Old Broad Street, EC2N 1DS, London at 11am.

6.    General Information

The financial information set out above does not constitute the Company's financial statements for the year ended 31 December 2012 or the year ended 31 December 2011. The financial information for 2011 is derived from the financial statements for 2011 which have been delivered to the Registrar of Companies. The auditors had reported on 2011 statements; their report was unqualified with an emphasis of matter in respect of considering the adequacy of the disclosures made in the financial statements concerning the valuation of intangible assets, and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The financial statements for 2012 will be delivered to the Registrar of Companies.

A copy of the Company's Annual Report and Accounts for 2012 will be mailed shortly only to those shareholders who have elected to receive it. Otherwise, shareholders will be notified that the Annual Report will be available on the website www.clontarfenergy.com . Copies of the Annual Report will also be available for collection from the Company's registered office, 20-22 Bedford Row, London WC1R 4JS.

 

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