Half Yearly Report

RNS Number : 5680W

Independent Resources PLC

30 December 2013

 

Independent Resources PLC
Interim Results
Twelve months ended 30 September 2013
Highlights
	- Transaction pipeline - The company has built a pipeline of potential acquisition targets and hopes to make an announcement to shareholders in the first quarter of next year.
	- Fiume Bruna and Casoni (Ribolla) Coal Bed Methane Project - Farm out discussions are proceeding actively to allow for execution of the seismic acquisition program in 2014.
	- Ksar Hadada Tunisia - IRG is working actively with the DGE and ETAP to resolve the disappointing failure of the operator to progress matters.
	- Rivara Gas Storage - The project remains on hold.
	- Net cash at 30 September 2013: £0.97m (2012: £0.73m).
	- Interim loss before taxation: £3.06m (2012: £1.82m).  The financial results for this period include a loss on the reorganisation of Rivara Gas Storage of £1.51m recognised in the first six months of the period.
Chairman's Statement
As I highlighted in my statement accompanying the March interim results, we have adopted a new strategic approach to our business focusing on building an appraisal, development and production portfolio in the Mediterranean basin. I am now announcing a further set of interim results as we have changed our year end to 31 December. This was previously announced and means that the next set of audited accounts and final results will be for the 15 month period to 31 December 2013.
During the second half of the year we have also been focusing on resolving the position on our existing Tunisian and Italian assets and to ensure that we have a rationalized portfolio with attractive prospects.
A significant effort over recent months on the growing pipeline has advanced prospects and the company hopes to make announcements about next steps to shareholders in the first quarter of next year.
I am also pleased to announce that the Chief Executive has been strengthening and adding to our management team with the appointment of a Chief Operations Officer, Brian Hepp, a Commercial Director, Owain Franks; and a Finance Director, Feilim McCole.  Brian has considerable senior level operations experience and was latterly Director, Group Operations for Northern Petroleum Plc. Owain was a senior partner in PwC in the UK and has substantial experience in the Oil and Gas industry. Feilim is an experienced Finance Director and has held this role on both a permanent and interim basis for a number of years in industry.  We have managed to agree terms with Owain and Brian that they will work for us on a flexible basis until funds allow (and there is a need for) more of their time to be taken by the company. Feilim has agreed to serve as a full time Finance Director.
If we are successfully to execute our strategy we need appropriate and committed resources but that does not mean that we will not be very cost conscious.  We will be reviewing the Group's administrative cost base continuously with a view to containing it to the minimum necessary for effective business development and operations.
Fiume Bruna and Casoni
We are actively progressing promising farm-out discussions with a number of interested parties and expect to reach a resolution so as to allow the seismic acquisition to progress during 2014.
As has been set out in previous reports to shareholders, DeGolyer and McNaughton in April, 2011 confirmed that this significant and attractive onshore coal bed methane resource contains original gas in place of 15.2 billion cubic meters (537 billion cubic feet) and gross mean prospective resources of 4.5 billion cubic meters (160 billion cubic feet).
Public opinion remains positive at local and regional level with the prospect of job creation and new sources of revenue for the community.  A new seismic survey is scheduled to be acquired in 2014 to improve the subsurface imaging in the Fiume Bruna exploration permit and to extend the coverage to the adjacent Casoni exploration permit.
A pilot programme has been developed to allow for a low cost early revenue generating phase to be progressed based on up to six wells that have already received environmental approval.  Once the farm out is in place, work will commence on this pilot project.
Ksar Hadada
The situation has changed in relation to this onshore licence. IRG owns an 18.97% working interest in the licence which relates to a prospective basin in southern Tunisia.
The operator (PetroAsian (Tunisia) Limited) is now controlled by the Hoifu Energy Group Limited (Hoifu) which is listed in Hong Kong. The operator currently holds a 78.03% interest in the licence.  In my last report, I noted that the operator had announced ambitious plans which IRG supported. Unfortunately, Hoifu has been going through some turbulent times at a corporate level and has singularly failed to deliver on plans for Ksar Hadada.
In consequence IRG carefully re-assessed its appetite for this licence.  It is clear that the Cambro-Ordovician prospects within the license identified following the 2005 and 2009 seismic programmes and 2010 drilling campaign remain of real interest to the company. The Board is carefully monitoring the political situation in Tunisia but remains of the view that the prospects justify continuing involvement and that the current level of project risk is acceptable.
The company has therefore been undertaking intensive discussions with the relevant Government departments and ETAP, the Tunisian national oil company, to ensure that the current unsatisfactory situation is sensibly resolved and that the programme of required works can be undertaken in a realistic timeframe. The company expects to make further announcements on the position shortly.
Rivara Underground Gas Storage
After the Italian Environmental Ministry's positive EIA Decree for the appraisal phase of the project, and the regional Government denial of its approval, the project was halted, ostensibly due to resident concerns following the May 2012 Emilia earthquake.  Our project has had no operational activity conducted on the site.
IRG continues to contest the position of the Emilia-Romagna Region in administrative courts and the consequent position of the Ministry for Economic Development. This process is painstakingly slow and whilst the Board would wish it accelerated, it is taking advice that seeking to move much faster will alienate currently favourably disposed stakeholders and may not be possible in any event.
Business development
The Company mentioned in previous reports two other projects in Italy, namely Sibilla and San Gervasio. Whilst a decision has not yet been announced by the Ministry of Economic Development on the award of the San Gervasio production concession, no activity will be undertaken by the company in relation to Sibilla following the recently awarded decree, pending clarification of some elements of the decree.
In accordance with the revised strategy, the Directors continue to evaluate and pursue acquisitions of companies and interests in assets which would deliver ongoing cash flows from oil and gas production.  Management is focused on opportunities which will allow them to apply their experience to enhance production levels significantly.
Management remains committed to controlling cash costs across the Group's operations in order to reduce external cash requirements.
Going concern
The Directors acknowledge that further funding will be required within the next 12 months in order for the Group to continue operating.  It is likely that any acquisition will also necessitate a fundraising for the Company's share of future field development.  Any fundraising exercise will need to raise sufficient capital to ensure the future viability of the Group.
In the event that no acquisition can be completed in an appropriate timeframe, it may become necessary for an equity fundraising to be completed to provide funds for the Group to meet its ongoing costs.
The Directors are confident that additional external funding should be available if and when required and they have considered the Group's current trading activities, its current funding position and the projected funding requirements for a period at least twelve months from the date of approval of these interim financial statements. Taking all of that into account, they consider it appropriate to adopt the Going Concern basis in preparing results for the twelve months ended 30 September 2013.  However, the need to raise new funds represents a material uncertainty.
Outlook
The Company is pursuing a transformational transaction in the strategic focus area of the Mediterranean Basin while it continues to seek alternate sources of capital to advance and de-risk the current portfolio. Recent emphasis has been on Ksar Hadada and building and progressing a pipeline of targets; both have exciting potential, particularly for a company of our size.
We are rigorous in our assessment of potential new opportunities and we believe that there are a number worth progressing.  We hope to be in a position to make announcements to shareholders next year in relation to these opportunities.
Chairman Grayson Nash stated, "It is hugely frustrating that we cannot persuade regulators, partners and prospective partners to move as fast as we would like in realising value from our portfolio and from our transaction pipeline.  I am however very optimistic that the first half of 2014 will see a major transformation in IRG's position and that shareholders will be as excited as I am by the prospects. We recognize that this has been a long wait for shareholders but we hope and expect that their patience will be rewarded in 2014."
For further information, please visit www.ir-plc.com or contact:
Greg Coleman				Independent Resources plc			020 3367 1134
Phil Davies				Charles Stanley Securities			020 7149 6942
				(Nominated Adviser)
Simon Hudson				Tavistock Communications			020 7920 3150
Roberto Bencini, Technical Director of Independent Resources, has reviewed this announcement for the purposes of the current Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in June 2009.  Mr. Bencini is a Chartered Petroleum Geologist. He is a member of the Society of Petroleum Engineers, the Geological Society of London and the American Association of Petroleum Geologists.
* The evaluation of the potential recoverable hydrocarbons mentioned in this announcement has been assessed in accordance with Petroleum Resources Management System prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers (SPE) November 2011 and reviewed and jointly sponsored by the World Petroleum Council (WPC), the American Association of Petroleum Geologists (AAPG) and the Society of Petroleum Evaluation Engineers (SPEE).

Independent Resources PLC
Consolidated statement of comprehensive income
Twelve months ended 30 September 2013
						Unaudited		Audited
						1 October 2012 to  30 September 2013		1 October 2011 to 30 September 2012
					Notes
Continuing operations						£		£
Revenue					2	-		-
Cost of sales						-		-
Gross profit						-		-
Administrative expenses						(1,551,489)		(1,387,942)
Operating loss before impairment						(1,551,489)		(1,387,942)
Reorganisation of Rivara Gas Storage srl					6	(1,511,722)		-
Operating loss						(3,063,211)		(1,387,942)
Financial income						3,787		5,784
Financial expense					7	(713)		(437,077)
Loss on ordinary activities before taxation						(3,060,137)		(1,819,235)
Taxation					4	-		-
Loss for the period						(3,060,137)		(1,819,235)
Other comprehensive income:
Exchange difference on translating foreign operations						724,284		(1,074,067)
Income tax relating to other comprehensive income						-		-
Total comprehensive loss for the period						(2,335,853)		(2,893,302)
Loss attributable to:
Owners of the parent						(3,069,501)		(1,781,779)
Non-controlling interests						9,364		(37,456)
						(3,060,137)		(1,819,235)
Total comprehensive loss attributable to:
Owners of the parent						(2,363,261)		(2,752,613)
Non-controlling interests						27,408		(140,689)
						(2,335,853)		(2,893,302)
Loss per share (pence)					5
From continuing operations:
Basic						(6.7)		(3.9)
Diluted						(6.7)		(3.9)

Independent Resources PLC
Consolidated statement of financial position
As at 30 September 2013
						Unaudited		Audited
						30 September		30 September
						2013		2012
					Notes
						£		£
Non-current assets
Property, plant and equipment						20,639		21,133
Goodwill						450,766		450,766
Other intangible assets						10,105,667		9,466,113
						10,577,072		9,938,012
Current assets
Other receivables					8	656,936		3,634,449
Cash and cash equivalents						968,504		729,786
						1,625,440		4,364,235
Current liabilities
Trade and other payables						(1,015,338)		(960,671)
						(1,015,338)		(960,671)
Net current assets						610,102		3,403,564
Net assets						11,187,174		13,341,576
Equity attributable to equity holders of the parent
Share capital						458,369		458,369
Share premium						15,287,351		15,287,351
Share option reserve						446,168		264,717
Foreign currency translation reserve						631,396		(74,844)
Retained earnings						(5,636,110)		(3,766,319)
						11,187,174		12,169,274
Non-controlling interests						-		1,172,302
Total equity						11,187,174		13,341,576

Independent Resources PLC
Consolidated statement of changes in equity
		Retained earnings	Share capital	Share premium	Share option reserve	Foreign currency translation reserve	Total	Non- controlling interests	Total equity
		£	£	£	£	£	£	£	£
1 October 2011		(1,984,540)	458,369	15,287,351	109,761	895,990	14,766,931	1,312,991	16,079,922
Loss for the period		(1,781,779)	-	-	-	-	(1,781,779)	(37,456)	(1,819,235)
Exchange differences		-	-	-	-	(970,834)	(970,834)	(103,233)	(1,074,067)
Total comprehensive loss for the period		(1,781,779)	-	-	-	(970,834)	(2,752,613)	(140,689)	(2,893,302)
Share-based payments		-	-	-	154,956	-	154,956	-	154,956
30 September 2012		(3,766,319)	458,369	15,287,351	264,717	(74,844)	12,169,274	1,172,302	13,341,576
1 October 2012		(3,766,319)	458,369	15,287,351	264,717	(74,844)	12,169,274	1,172,302	13,341,576
Loss for the period		(3,069,501)	-	-	-	-	(3,069,501)	9,364	(3,060,137)
Exchange differences		-	-	-	-	706,240	706,240	18,044	724,284
Total comprehensive loss for the period		(3,069,501)	-	-	-	706,240	(2,363,261)	27,408	(2,335,853)
Share-based payments		-	-	-	181,451	-	181,451	-	181,451
Non-controlling interest acquired by group		1,199,710	-	-	-	-	1,199,710	(1,199,710)	-
30 September 2013		(5,636,110)	458,369	15,287,351	446,168	631,396	11,187,174	-	11,187,174

Independent Resources PLC
Consolidated statement of cash flows
Twelve months ended 30 September 2013
						Unaudited		Audited
						1 October 2012		1 October 2011
						to		to
						30 September 2013		30 September 2012
						£		£
Cash flows from operating activities
Loss before taxation						(3,060,137)		(1,819,235)
Adjustments for:
	Reorganisation of Rivara Gas Storage srl					1,511,722		-
	Depreciation of property, plant and equipment					9,236		21,385
	Loss on disposal of property, plant and equipment					177		-
	Financial income					(3,787)		(5,784)
	Financial expense					713		437,077
						(1,542,076)		(1,366,557)
Decrease in other receivables						1,465,791		470,277
Increase in trade and other payables						54,667		196,779
Share-based payments						181,451		154,956
Exchange rate difference on investments						235,145		(341,796)
Cash used in operations						394,978		(886,341)
Income taxes received						-		-
Net cash used in operating activities						394,978		(886,341)
Cash flows used in investing activities
Interest received						3,787		5,784
Interest paid						(713)		(17,077)
Proceeds on disposal of property, plant and equipment						838		5,042
Purchase of intangible assets						(151,529)		(879,227)
Purchase of property, plant and equipment						(8,643)		-
Net cash used in investing activities						(156,260)		(885,478)
Net decrease in cash and cash equivalents						238,718		(1,771,819)
Cash and cash equivalents at beginning of the period						729,786		2,501,605
Cash and cash equivalents at end of the period						968,504		729,786

Independent Resources PLC
Notes to the interim financial information
Twelve months ended 30 September 2013
1.	Accounting policies
	General information
	The interim financial information is for Independent Resources plc ("the company") and subsidiary undertakings (together, the "Group"). The company is registered in England and Wales and incorporated under the Companies Act 2006. The consolidated financial information is presented in GBP ("£") unless otherwise stated.
	Basis of preparation
	As previously announced the company has changed its year end to 31 December, having extended its previous year end from 30 September 2013 to 31 December 2013. The company shall prepare statutory accounts for the 15 month period 1 October 2012 to 31 December 2013. The company therefore presents a further set of interim results.
	The interim financial information, for the period from 1 October 2012 to 30  September 2013, has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards and International Accounting Standards as adopted by the European Union, and on the going concern basis.  They are in accordance with the accounting policies set out in the statutory accounts for the year ended 30 September 2012.
	The Interim Report is unaudited and does not constitute statutory financial statements.  The financial information for the year ended 30 September 2012 does not constitute statutory accounts, as defined in section 435 of the Companies Act 2006 but is based on those statutory financial statements.  Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies.
	The interim consolidated financial statements for the twelve months ended 30 September 2013 have been prepared in accordance with IAS 34, Interim Financial Reporting.
	Going concern
	The Directors acknowledge that further funding will be required within the next 12 months in order for the Group to continue operating.
	The Directors are confident that additional external funding should be available if and when required and they have considered the Group's current trading activities, its current funding position and the projected funding requirements for a period at least twelve months from the date of approval of these interim financial statements. Taking all of that into account, they consider it appropriate to adopt the Going Concern basis in preparing results for the twelve months ended 30 September 2013.  However, the need to raise new funds represents a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern.
	The interim financial information does not include any adjustments that may be required should the Group be unable to continue as a going concern.  If the Group were unable to continue as a going concern, then adjustments would be necessary to write assets down to their recoverable amounts, non-current assets and liabilities would be reclassified as current assets and liabilities and provisions would be required for any costs associated with closure.
	Other information
	The operations of Independent Resources Plc are not affected by seasonal variations.
	The directors do not propose a dividend for the period (2012: nil).
	The Interim Report for the twelve months ended 30 September 2013 was approved by the Directors on 30 December 2013.
	Copies of the Interim Report are available from the Company's website www.ir-plc.com.

2.	Business segments
	The group has adopted IFRS 8 Operating segments from 1 October 2009. Per IFRS 8, operating segments are based on internal reports about components of the group, which are regularly reviewed and used by the Board of Directors being the Chief Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance. The group's reportable operating segments are as follows:
	a.	Parent company
	b.	Rivara
	c.	Ribolla Basin CBM & Shale Gas Assets
	d.	Ksar Hadada
	The CODM monitors the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. Performance is based on assessing progress made on projects and the management of resources used. Segment assets and liabilities are presented inclusive of inter-segment balances.
	The group did not generate any revenue during the year to 30 September 2012 nor in the period to 30 September 2013.

					Ribolla Basin
			Parent company	Rivara	CBM & Shale Gas Assets	Ksar Hadada	Consolidation	Total
			£	£	£	£	£	£
	Twelve months to 30 September 2013
	Interest revenue		789	178	2,820	-	-	3,787
	Interest expense		(713)	-	-	-	-	(713)
	Depreciation		-	1,237	7,999	-	-	9,236
	Impairment of intangible assets		-	-	-	-	-	-
	Income tax		-	-	-	-	-	-
	Loss for the period before taxation		(723,132)	(1,679,240)	(247,899)	(13,079)	(396,787)	(3,060,137)
	Assets		12,191,786	6,683,158	4,468,267	227,468	(11,368,167)	12,202,512
	Liabilities		(545,052)	(3,357,515)	(4,164,530)	(565,657)	7,617,416	(1,015,338)
	Twelve months to 30 September 2012
	Interest revenue		140,285	2,147	6	-	(136,654)	5,784
	Interest expense		-	(510,055)	(63,676)	-	136,654	(437,077)
	Depreciation		-	1,344	20,041	-	-	21,385
	Impairment of intangible assets		-	-	-	-	-	-
	Income tax		-	-	-	-	-	-
	Loss for the period before taxation		(1,065,445)	(758,419)	(567,201)	(20,084)	591,914	(1,819,235)
	Assets		12,339,855	11,375,970	4,128,810	217,340	(13,759,728)	14,302,247
	Liabilities		(151,438)	(5,594,817)	(4,001,708)	(542,451)	9,329,743	(960,671)

2.	Business segments
	The geographical split of non-current assets arises as follows:
						United
						Kingdom	Overseas	Total
						£	£	£
	30 September 2013
	Intangible assets					-	10,105,667	10,105,667
	Goodwill					-	450,766	450,766
	Property, plant and equipment					-	20,639	20,639
	30 September 2012
	Intangible assets					-	9,466,113	9,466,113
	Goodwill					-	450,766	450,766
	Property, plant and equipment					-	21,133	21,133

3.	Carrying value of investment in Rivara Gas Storage
	The Directors recognise the uncertainty regarding the future completion of the Rivara gas storage project. The Directors remain confident of the robustness of the Group's position and the final determined outcome of legal proceedings in Italy.  In light of this, the Directors do not believe that there has been any impairment of the Group's investment in the project.  If the ultimate outcome of the Italian legal processes results in an adverse judgement for the Group, then it may be necessary to impair materially the value of the Group's investment in Rivara.
4.	Taxation
	The group has tax losses available to be carried forward in certain subsidiaries and the parent. With anticipated substantial lead times for the group's projects, and the possibility that these may therefore expire before their use, it is not considered appropriate to anticipate an asset value for them.

5.	Loss per share
	The calculation of basic and diluted loss per share at 30 September 2013 was based on the loss attributable to ordinary shareholders of £3,069,501 (2012:  £1,781,779). The weighted average number of ordinary shares outstanding during the period ending 30 September 2013 and the effect of dilutive ordinary shares to be issued are shown below.
	Contingently issuable shares such as included within the share option scheme have not been treated as dilutive as either the market conditions have not been met at 30 September 2013 or the effect on loss per share would be to reduce the amount due per share.
					30 September 2013		30 September 2012
						£		£
	Net loss for the period					(3,069,501)		(1,781,779)
	Basic weighted average ordinary shares in issue during the period					45,836,867		45,836,867
	Diluted weighted average ordinary shares in issue during the period					45,836,867		45,836,867

6.	Reorganisation of Rivara Gas Storage srl (previously named ERG Rivara Storage srl)
	On 22 November 2012 the company completed negotiations with the third party which held a non-controlling interest in ERG Rivara Storage srl in order to bring back into full control of the group the valuable Rivara gas storage project. The following reorganisation took place:
	•	The non-controlling interest paid €1,400,000 (£1,182,432) for part settlement of the amount it owed in respect of share capital issued by ERG Rivara Storage srl;
	•	The non-controlling interest waived amounts owed by ERG Rivara Storage srl totalling €357,027 (£301,543);
	•	ERG Rivara Storage srl cancelled the remaining amount due to it by the non-controlling interest of €3,531,001 (£2,982,265) in relation to unpaid share capital and cancelled shares to this value. This amount had previously been discounted by £1,169,000.
	•	The non-controlling interest transferred its entire shareholding in ERG Rivara Storage srl to Independent Gas Management srl for €1 (£1); and
	•	ERG Rivara Storage srl changed its name to Rivara Gas Storage srl.
	The amount recognised in the consolidated statement of comprehensive income for the period is calculated as follows:
								£
	Cancellation of amount due from non-controlling interest (pre discounting adjustment)							2,982,265
	Discounting adjustment reversed							(1,169,000)
	Amount due to non-controlling interest waived							(301,543)
								1,511,722

7.	Net financial expense
	Net financial expense includes £nil (Period to 30 September 2012 - £420,000) relating to the decrease in the net present value of receivables which are measured at amortised cost due to the unwinding of the effective interest implicit in the discounting calculations. The charge for that period, rather than the more normal credit, arises from the expected deferral of the Rivara appraisal programme.

8.	Other receivables
				30 September 2013			30 September 2012
					£		£
	Deferred subscription payments due from non-controlling interest				-		2,781,677
	Other receivables				620,643		804,979
	Prepayments				36,293		47,793
					656,936		3,634,449

	Other receivables principally comprise recoverable Value Added Tax and expenditure recharged to project partners.
	The directors consider that the carrying amount of other receivables approximated their fair value.
	Deferred subscription payments due from non-controlling interest has been classified as current as the amounts receivable were anticipated to be realised within the asset's normal operating cycle. Please see note 6 with regards to the renegotiation and settlement of this amount during the period.

9.	Share-based payments
	The share option scheme, which was adopted by the company on 25 November 2005, was established to reward and incentivise the executive management team for delivering share price growth. The share option scheme is administered by the Remuneration Committee.
	On 4 March 2013 the company issued 200,000 share options to G Coleman upon his appointment to the board as chief executive officer.
	Details of this tranche of share options outstanding at the period end are as follows:

	Date of grant			30/09/2013	Date from which	Lapse date	Exercise price
		Number of	Issued in	Number of	options may be		per option
		options	period	options	first exercised
	04/03/2013	-	200,000	200,000	04/03/2013	03/03/2023	1p

	The fair value of these options was calculated using the Black-Scholes option pricing model. The inputs into the model were as follows:
	Weighted average share price			10.62p
	Weighted average exercise price			1p
	Expected volatility			92.00%
	Expected life			10 years
	Risk free rate			2.10%
	Expected dividend yield			Nil
	The group recognised total expenses of £181,451 in the period (2012: £154,956) related to equity-settled, share-based payment transactions. Of the amount recognised in the current period £20,573 related to the options issued to G Coleman as detailed above the value of which has been recognised in full as they could be exercised immediately.

Registered office
Independent Resources plc
Tower Bridge House, St. Katharine's Way, London E1W 1DD
Email: [e-mail]
Commercial office
1st Floor, 12 Melcombe Place London NW1 6JJ, United Kingdom
Telephone: [phone]
Fax: [phone]
Email: [e-mail]
Technical office
Viale Liegi 41,  00198 Rome, Italy
Telephone: [phone]
Fax: [phone]
Email: [e-mail]

 

END

 

 

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