PROVIDENCE RES.

Providence Resources - 2019 Half Year Results

Providence Resources - 2019 Half Year Results

Providence Resources P.l.c.

2019 Half Year Results

Dublin and London – September 12, 2019 - Providence Resources P.l.c. (PVR LN, PRP ID), the Irish based Energy Company, today announces its unaudited interim results for the half year ended June 30, 2019.

Tony O’Reilly, Chief Executive Officer commented:
“The first half of 2019 was a very difficult period for the Company where we had endure significant delays for key operational related consents at Barryroe, manage the increasingly negative political climate action agenda and, post period-end, continue to deal with the delays in the payment of the funds due from APEC Energy Enterprises in respect of the Barryroe farm-out, implement a major corporate re-engineering process and execute a Placing to provide essential working capital for our business.

Earlier this morning, we announced a conditional placing to raise approximately US$ 3.762 million with the proposed issuance of 59,765,890 million ordinary shares at £0.051 per share.  The need for the Placing arises from the ongoing delays to the receipt of the US$9 million loan advance due to the Company from APEC.  This Placing is required to fund the costs associated with the re-engineering of the Company’s business model, to fund the balance of the costs associated with the acquisition of the site survey and to provide working capital to cover general, administrative and licence operational costs for the period through to the beginning of February 2020.  The placing is subject to approval of shareholders at an EGM to be convened on September 30, 2019.

Providence has been at the forefront of promoting exploration offshore Ireland for over two decades.  During that period, the Company has been successful in concluding a number of significant farm-out transactions with some of the world’s largest energy companies.  Our success in farming out these projects has led to Providence’s role changing from Operator to non-operating partner.  This, combined with other factors such as the lack of new licensing opportunities offshore Ireland and a limitation being placed on pursuing international expansion, led the Company to re-engineer its business model, which, unfortunately has resulted in a significant decline in our staffing requirements and a reduction in the size of the Board. The implementation of this re-engineering has been difficult for all parties and I want to express my sincere appreciation to all of our staff and fellow directors who have or are soon to leave the Company and who have made such a meaningful contribution to the Company over the years. On a personal note, I would like to add what an honour it has been to work with them over many years and how hard it has been to part with the team in recent weeks.

Our other major focus during the past nine months has been to respond to the Climate Emergency Measures Bill, which is currently in a legislative ‘limbo’, but which has  already caused significant damage to sentiment and investment interest in offshore Ireland.  Providence, like all operators offshore Ireland, believe that there needs to be a well thought through plan of action on climate related matters whilst also ensuring that Ireland continues to have its own source of indigenous oil and gas supply in order to avoid the increased risk of any energy supply shocks as a result of Ireland becoming even more reliant on imported oil and gas from places like Russia and the Middle East. 

Despite the significant political and commercial headwinds that we have faced, the materiality of both our portfolio and investment in offshore Ireland remains, and the Board remain focused on realising value for all of our shareholders.”

H1 2019 OPERATIONAL HIGHLIGHTS

OTHER LICENCE ACTIVITY

H1 2019  FINANCIAL HIGHLIGHTS

POST H1 2019 EVENTS - LICENCES

POST H1 2019 EVENTS - RE-ENGINEERING OF PROVIDENCE’S BUSINESS MODEL

POST H1 2019 EVENTS - RESTRUCTURING OF SUBSIDIARIES




1 Subject to assignment by the Minister
2 Other licence interests will continue to be held directly by the parent company, Providence Resources P.l.c.


PLACING

OUTLOOK
The first half of 2019 has been a very difficult period for the Company.  The key immediate focus remains on receiving the US$9 million loan advance from APEC and the receipt of required consents to be able to progress the future drilling programme at Barryroe.  In terms of guidance on drilling, the Company is currently not in a position to provide guidance on the timeline as this is subject to the receipt of APEC funds and the consenting process, which in turn, was held up by the delayed consenting for the site survey.  Notwithstanding this current timing uncertainty, the magnitude and value of our portfolio of assets offshore Ireland continues to grow and reflects the significant investment made by Providence and others over the past two decades. The Board remains singularly focused on developing and monetising this value for all of our shareholders.

INVESTOR ENQUIRIES
 
Providence Resources P.l.c.Tel: +353 1 219 4074
Tony O’Reilly, Chief Executive Officer  
   
Cenkos Securities plcTel: +44 131 220 9771 
Neil McDonald/Derrick Lee  
   
J&E DavyTel: +353 1 679 6363 
Anthony Farrell   
   
Mirabaud Securities LimitedTel: + 44 20 3167 7221
Peter Krens  

 

 
MEDIA ENQUIRIES
 
PowerscourtTel: +44 207 250 1446 
Peter Ogden  
   
Murray ConsultantsTel: +353 1 498 0300 
Pauline McAlester  

ANNOUNCEMENT & FORWARD-LOOKING STATEMENTS

This announcement contains certain forward-looking statements. Actual results may differ materially from those projected or implied in such forward-looking statements. Such forward-looking information involves risks and uncertainties that could significantly affect expected results. No representation is made that any of those statements or forecasts will come to pass or that any forecast results will be achieved. You are cautioned not to place any reliance on such statements or forecasts. Those forward-looking and other statements speak only as at the date of this announcement. Providence Resources P.l.c undertakes no obligation to update any forward-looking statements.

ABOUT PROVIDENCE RESOURCES PLC
Providence Resources P.l.c. is an Irish based Oil & Gas Energy company with a portfolio of appraisal and exploration assets located offshore Ireland.  Providence’s shares are quoted on the AIM in London and the Euronext Growth market in Dublin. Further information on Providence can be found on www.providenceresources.com

SUMMARY OF LICENCE INTERESTS

Licence Issued Key Asset Operator Providence Partners PVR % Classification
SEL 1/11 2011 BARRYROE PROVIDENCE* APEC, LANSDOWNE 40.00 Oil discovery
SEL 2/07 2007 HOOK HEAD PROVIDENCE ATLANTIC, SOSINA 72.50 Oil & gas discovery
LU 2016 HELVICK PROVIDENCE ATLANTIC, SOSINA, LANSDOWNE, MFDEVCO 56.25 Oil & gas discovery
LU 2016 DUNMORE PROVIDENCE ATLANTIC, SOSINA,MFDEVCO 65.25 Oil discovery
FEL 2/04 2004 SPANISH POINT CAIRN CAIRN, SOSINA 58.00 Oil & gas discoveries
FEL 2/19 2019 AVALON TOTAL TOTAL, SOSINA 40.00 Oil & gas exploration
FEL 2/14 2014 DIABLO TOTAL TOTAL, CAIRN, SOSINA 28.00 Oil & gas exploration
FEL 3/04 2004 DUNQUIN SOUTH ENI ENI, REPSOL, SOSINA 26.85 Oil exploration
SEL 2/11 2011 KISH BANK PROVIDENCE   100.00 Oil & gas exploration
SEL 1/07 2007 DRAGON PROVIDENCE   100.00 Gas discovery

* Held through wholly owned subsidiary, EXOLA DAC.

PROVIDENCE RESOURCES P.l.c.
Condensed consolidated income statement
   For the 6 months ended 30 June 2019

  Notes  

6 months ended 30 June 2019
Unaudited
€’000
 

6 months ended 30 June 2018
Unaudited
€’000

 
 

Year ended 31 December 2018
Audited
€’000
Continuing operations

 
       
Administration expenses 2(2,235)(1,545)(3,368)
Pre-licence expenditure   -(55)(334)
Impairment of exploration and evaluation assets 4(3,072)(610)(723)
Operating loss   (5,307)(2,210)(4,425)
         
Finance income   224196
Finance expense 3(258)(202)(450)
         
Loss before income tax   (5,543)(2,371)(4,779)
Income tax expense   ---
Loss for the period   (5,543)(2,371)(4,779)
         
Loss per share (cent) – continuing operations        
Basic and diluted loss per share 9(0.93)(0.40)(0.80)

The total recognised loss for the period is entirely attributable to equity holders of the Company.
The accompanying notes are an integral part of these condensed consolidated financial statements.

PROVIDENCE RESOURCES P.l.c.
Consolidated statement of comprehensive income
For the 6 months ended 30 June 2019

  Notes6 months ended 30 June 2019
Unaudited
€’000
6 months ended 30 June 2018
Unaudited
€’000
Year ended 31 December 2018
Audited
€’000
Loss for the financial period   (5,543)(2,371)(4,779)
OCI Items that may be reclassified into profit or loss        
         
Foreign exchange translation differences 33891,6372,703
         
Total expense recognised in other comprehensive income from continuing operations    

389
 

1,637
 

2,703
         
Total comprehensive expense for the period   (5,154)(734)(2,076)

The total recognised expense for the period is entirely attributable to equity holders of the Company.
The accompanying notes are an integral part of these condensed consolidated financial statements.

PROVIDENCE RESOURCES P.l.c.
Consolidated statement of financial position
As at 30 June 2019

  Notes30 June 2019
Unaudited
€’000
30 June 2018
Unaudited
€’000
31 December 2018
Audited
€’000
Assets        
Exploration and evaluation assets 483,21478,49981,867
Property, plant and equipment   753828
Intangible assets   -35-
Total non-current assets   83,28978,57281,895
         
Trade and other receivables 66614,764464
Cash and cash equivalents   1,78812,3557,617
Total current assets   2,44917,1198,081
         
Total assets   85,73895,69189,976
         
Equity        
Share capital 571,45271,45271,452
Share premium 5247,918247,918247,918
Undenominated capital   623623623
Foreign currency translation reserve   9,2817,8268,892
Share based payment reserve   1,7851,6871,745
Retained deficit   (254,302)(246,351)(248,759)
Total equity attributable to equity holders of the company   76,75783,15581,871
         
Liabilities        
Decommissioning provision 87,6747,2087,406
Total non-current liabilities   7,6747,2087,406
         
Trade and other payables 71,3075,328699
Total current liabilities   1,3075,328699
         
Total liabilities   8,98112,5368,105
Total equity and liabilities   85,73895,69189,976

The accompanying notes are an integral part of these condensed consolidated financial statements.


 

PROVIDENCE RESOURCES P.l.c.
Consolidated statement of changes in Equity
For the 6 months ended 30 June 2019

  Share Capital €’000Undenominated capital €’000Share Premium €’000Foreign Currency Translation Reserve  €’000Share Based Payment Reserve €’000Retained Deficit €’000Total €’000
At 1 January 201971,452623247,9188,8921,745(248,759)81,871
Loss for financial period - - - - - (5,543) (5,543)
Currency translation - - - 389 - - 389
Total comprehensive income - - - 389 - (5,543) (5,154)
Transactions with owners, recorded directly in equity              
Share based payments in period - - - - 40 - 40
At 30 June 201971,452623247,9189,2811,785(254,302)76,757
               
At 1 January 201871,452623247,9186,1891,502(243,980)83,704
Loss for financial period - - - - - (2,371) (2,371)
Currency translation - - - 1,637 - - 1,637
Total comprehensive income - - - 1,637 - (2,371) (734)
Transactions with owners, recorded directly in equity              
Share based payments in period - - - - 185 - 185
At 30 June 201871,452623247,9187,8261,687(246,351)83,155
               
At 1 January 201871,452623247,9186,1891,502(243,980)83,704
Loss for financial year - - - - - (4,779) (4,779)
Currency translation - - - 2,703 - - 2,703
Total comprehensive income - - - 2,703 - (4,779) (2,076)
Transactions with owners, recorded directly in equity              
Share based payments - - - - 243 - 243
At 31 December 201871,452623247,9188,8921,745(248,759)81,871

The accompanying notes are an integral part of these condensed consolidated financial statements.


 

PROVIDENCE RESOURCES P.l.c.
Consolidated statement of cash flows      
For the 6 months ended 30 June 2019

  6 months ended 30 June 20196 months ended 30 June 2018Year ended 31 December 2018
  UnauditedUnauditedAudited
  €’000€’000€’000
Cash flows from operating activities      
       
Loss before income tax for the period (5,543)(2,371)(4,779)
Adjustments for:      
Depletion and depreciation 93455
Amortisation of intangible assets -5288
Impairment of exploration and evaluation assets 3,072610723
Finance income (22)(41)(96)
Finance expense 258202450
Equity settled share-based payment charge 40185243
Foreign exchange (13)(197)(677)
Change in trade and other receivables (197)2,8967,196
Change in trade and other payables 608(6,256)(10,885)
       
Net cash outflow from operating activities(1,788)(4,886)(7,682)
       
Cash flows from investing activities      
Interest received 224196
Acquisition of exploration and evaluation assets (4,013)(2,633)(5,043)
Acquisition of property, plant and equipment (56)(9)(21)
       
Net cash used in investing activities(4,047)(2,601)(4,968)
       
Net decrease in cash and cash equivalents(5,835)(7,487)(12,650)
       
Cash and cash equivalents at beginning of period7,61719,60319,603
Effect of exchange rate fluctuations on cash and cash equivalents 6239664
       
Cash and cash equivalents at end of period1,78812,3557,617

The accompanying notes are an integral part of these condensed consolidated financial statements.

PROVIDENCE RESOURCES P.l.c.
Note 1 - Accounting Policies

General Information

Providence Resources P.l.c (“the Company”) is a Company incorporated and domiciled in the Republic of Ireland. The registration number of the Company is 268662 and the address of the registered office is Airfield House, Airfield Park, Donnybrook, Dublin 4, D04 CP49. The unaudited consolidated interim financial statements of the Company for the six months ended 30 June 2019 (the "Interim Financial Statements") include the Company and its subsidiaries (together referred to as the "Group").  The Interim Financial Statements were authorised for issue by the Directors on 11 September 2019.

Basis of accounting
These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 December 2018 ('last annual financial statements'). They do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.

The condensed set of financial statements included in this half-yearly financial report has been prepared on a going concern basis as the Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future.

In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual report.

The Interim Financial Statements are presented in Euro, rounded to the nearest thousand, which is the functional currency of the Company and also the presentation currency for the Group’s financial reporting.

Changes in significant accounting policies
Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the last annual financial statements. The changes in accounting policies will also be reflected in the Group's consolidated financial statements as at and for the year ending 31 December 2019.

The Group has initially adopted IFRS 16 Leases from 1 January 2019. A number of other new standards are effective from 1 January 2019 but they do not have a material effect on the Group's financial statements.

IFRS 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognised right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments.

The Group has applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019. Accordingly, the comparative information presented for 2018 has not been restated - i.e. it is presented, as previously reported, under IAS 17 and related interpretations.

The Group adopted IFRS 16 Leases (“IFRS 16”), effective 1 January  2019 which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessee and lessor. The adoption of IFRS 16 eliminated the classification of leases as either operating leases or finance leases and introduced a single lessee accounting model. The Company, as a lessee, recognized right-of-use assets of €80,000 representing its rights to use the underlying assets and recognized lease liabilities of €80,000 representing its obligation to make lease payments as at 1 January 2019. At the 30 June 2019 the Company as a lessee has a recognised right-of-use assets of €45,000 and recognised lease liability of €45,000.

Adoption of IFRS 16 Leases

Definition of a lease
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining Whether an Arrangement contains a Lease (“IFRIC 4”). The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

The Group has availed of the practical expedient allowing leases previously classified as operating leases and ending within 12 months of the date of transition or deemed to be of an immaterial value of less than €1,000 to be accounted for as short-term leases. The right-of-use assets and lease liabilities are included in property, plant and equipment and trade and other payables on the face of the statement of financial position.

Going concern     
The Directors have considered carefully the financial position of the Group and, in that context, have prepared the interim financial statements on a going concern basis.

The announced farm-out of Barryroe with APEC reduces the Group’s cost exposure due to the expected receipt of funds from APEC in total of $24 million to cover the operator’s costs associated with the Barryroe drilling program.

During July, August and September 2019, the Company agreed to further extensions of the initial $9 million loan advance due to cover the costs of the well-site survey and consenting. The balance of the loan advance of $15 million is payable prior to spudding the first well. The Directors believe that the delay in funds from APEC is due to the composition of the APEC funding mechanism.

The Directors also note the financial effect of the recently announced Business re-engineering model due to the business moving from operated assets to non-operated assets. This reduced the number of staff required by the Group and as a result the general and administration costs will reduce by c. 65% on an annualised basis.

As there is a continued delay in the funding from APEC, the Company announced on 12 September 2019 that it would be raising funds through a conditional Placing by the issue of new ordinary shares to institutional investors.  The funds will provide financing through February 2020 and will cover the costs of the site survey and restructuring costs which are a result of the recently announced business re-engineering.

Should the APEC funds not be received, then longer term financing options will be required to ensure that the Group remains viable.

The Directors have considered the proposals put forward in the Petroleum and Other Minerals Development (Amendment) (Climate Emergency Measures) Bill 2018 (“Climate Emergency Measures Bill 2018”) and have noted that the “money message” was announced in July 2019 which effectively extinguishes the  bill.

The environmental challenges to the industry will be on going and pose a potential risk to the overall business from slowing down investment and making borrowing costs more expensive.

The Directors have concluded, based on their consideration of the cash flow forecasts, including the underlying assumptions outlined above, taking all information that is currently available into account, including the recently announced conditional Placing and other options available to fund the commitments, including further farm-out arrangements, disposal of assets and other funding alternatives, and noting the main risk factor, being the failure to receive the loan advances from APEC, that the Group will have sufficient funds available over the next 12 months.

However, the continuing failure to receive the APEC loan advance represents a material uncertainty that may cast significant doubt upon the Group and Company’s ability to continue as a going concern in the long term and that, therefore the Group and Company may be unable to continue realising assets and discharging liabilities in the normal course of business.

Nevertheless, after making enquiries and considering the uncertainties described above, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future.  For these reasons, the Directors have adopted the going concern basis in preparing the interim financial statements and the interim financial statements do not include any adjustments that would be necessary if this basis were inappropriate.

PROVIDENCE RESOURCES P.l.c.
Note 2 - Administration expenses

  6 months ended 30 June 20196 months ended 30 June 2018Year ended 31 December 2018
  UnauditedUnauditedAudited
  €’000€’000€’000
       
Corporate, exploration and development expenses 2,248 2,159 4,766
Restructuring costs 580 - -
Foreign exchange (gains)/losses, net (86) 151 (216)
       
Total administration expenses for the period2,7422,3104,550
       
Capitalised in exploration and evaluation assets (507) (765) (1,182)
       
Total charged to the income statement2,2351,5453,368

Note 3 - Finance Expense

  6 months ended 30 June 20196 months ended 30 June 2018Year ended 31 December 2018
  UnauditedUnauditedAudited
  €’000€’000€’000
       
Unwinding of discount on decommissioning provision 213 75 382
Foreign exchange on decommissioning provision 45 127 68
       
Total finance expense recognised in income statement258202450
       
Recognised directly in equity      
       
Foreign currency translation differences on foreign operations 389 1,637 2,703
       
Total foreign exchange recognised in equity3891,6372,703

PROVIDENCE RESOURCES P.l.c.
Note 4
Exploration and evaluation assets

  €’000
Cost and book value  
   
At 1 January 2018 74,831
Additions 5,075
Cash calls received in period (3,207)
Administration expenses capitalised 765
Impairment charge (610)
Foreign exchange translation 1,645
At 30 June 201878,499
   
At 1 January 2018 74,831
Additions 7,499
Administration expenses capitalised 1,182
Cash call received in year (3,638)
Impairment charge (723)
Foreign exchange translation 2,716
At 31 December 201881,867
   
At 1 January 2019 81,867
Additions 3,702
Cash calls received in period (196)
Administration expenses capitalised 507
Impairment charge (3,072)
Foreign exchange translation 406
At 30 June 201983,214

The exploration and evaluation asset balance at 30 June 2019 primarily relates to the Barryroe (€63.1 million), Dunquin (€16.4 million), Avalon (€3.4 million) and others (€0.3m) licenses. 

The directors have assessed the current activities ongoing within exploration and evaluation assets and have determined that an impairment charge of €3.1 million (2018: €0.7 million) (which is principally related to the Newgrange licence (€2.9 million)) is required at 30 June 2019.

PROVIDENCE RESOURCES P.l.c.
Note 5 - Share Capital and Share Premium

    Number  
Authorised:   ‘000€’000
At 1 January 2019      
Deferred shares of €0.011 each   1,062,442 11,687
Ordinary shares of €0.10 each   986,847 98,685
       
At 30 June 2019      
Deferred shares of €0.011 each   1,062,442 11,687
Ordinary shares of €0.10 each   986,847 98,685
       
  NumberShare CapitalShare Premium
Issued:‘000€’000€’000
       
Deferred shares of €0.011 each 1,062,442 11,687 5,691
Ordinary share of €0.10 each 597,659 59,765 242,227
       
At 1 January 2018 597,659 71,452 247,918
At 30 June 2018597,65971,452247,918
       
At 31 December 2018597,65971,452247,918
       
At 30 June 2019597,65971,452247,918

Note 6 - Trade and other receivables

  30 June 201930 June 201831 December 2018
  UnauditedUnauditedAudited
  €’000€’000€’000
       
VAT recoverable 72 56 59
Other receivables - 445 5
Prepayments 190 132 172
Amounts due from joint operation partner 399 4,131 228
       
Total6614,764464

Note 7 - Trade and other creditors

  30 June 201930 June 201831 December 2018
  UnauditedUnauditedAudited
  €’000€’000€’000
       
Accruals 882 1,297 401
Trade creditors 324 600 298
Amounts due to joint operation partner 56 3,431 -
Lease liability 45 - -
       
Total1,3075,328699

PROVIDENCE RESOURCES P.l.c.
Note 8 - Decommissioning provision

  30 June 201930 June 201831 December 2018
  UnauditedUnauditedAudited
  €’000€’000€’000
       
At beginning of year 7,406 6,956 6,956
Unwinding of discount 213 75 382
Foreign exchange loss 55 177 68
       
Total7,6747,2087,406

Note 9 - Earnings per share

  6 months ended 30 June 20196 months ended 30 June 2018Year ended 31 December 2018
  UnauditedUnauditedAudited
  €’000€’000€’000
       
Loss attributable to equity holders of the company from continuing operations (5,543) (2,371) (4,779)
       
The basic weighted average number of Ordinary shares in issue (‘000)      
       
In issue at beginning of year and end of period 597,659 597,659 597,659
       
Weighted average number of ordinary shares 597,659 597,659 597,659
       
Basic loss per share (cent) – continuing operations(0.93)(0.40)(0.80)
       
Diluted loss per share (cent) – continuing operations(0.93)(0.40)(0.80)

There is no difference between the loss per ordinary share and the diluted loss per share for the reported periods as all potentially dilutive ordinary shares outstanding are anti-dilutive.

Note 10 - Commitments

As at 30 June 2019, the Group has capital commitments of approximately €2.3m (31 December 2018: €5.1m) to contribute to its share of costs of exploration and evaluation activities. 

Note 11 – Post Period Events

On 12 September 2019, the Company announced that it conditionally raised US$ 3.762 million (before expenses) through the issuance of 59,765,890 new ordinary shares in the Company to institutional and other investors at £0.051 per Placing share.