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Sirius Petroleum PLC (SRSP)

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Friday 28 September, 2018

Sirius Petroleum PLC

Half-year Report

RNS Number : 2554C
Sirius Petroleum PLC
28 September 2018
 

 

28 September 2018

Sirius Petroleum Plc.

 

("Sirius" or the "Company")

 

Half Year Report
for the six month period ended 30 June 2018

 

Sirius Petroleum (AIM: SRSP), the Nigeria focused oil and gas exploration and development company, announces unaudited results for the six-month period ended 30 June 2018.

 

Enquiries

 

Sirius Petroleum plc  

Bobo Kuti, Chief Executive

Mark Henderson, Chief Financial Officer

 

+44 (0) 20 3740 7460

www.siriuspetroleum.com

 

Cantor Fitzgerald Europe

David Porter/Nick Tulloch

 

+44 (0) 20 7894 7000

 

Gable Communications

John Bick

+44 (0) 20 7193 7463

Email: [email protected]

 


Half Year Statement

 

The interim results for the six month period ended 30 June 2018 reflect the costs incurred during the period to continue to build the operational Ororo infrastructure, funding the contracted operation team and planning work on the Ororo Field, in collaboration with our Technical Advisors, and our Nigerian partners, Owena Oil & Gas Limited and Guarantee Petroleum Company Limited, and our London and Nigerian operations.

 

The operating loss in the half year amounted to $3,003,000, an increase of $2,040,000 on the six months to 30 June 2017 operating loss of $963,000 (year to 31 December 2017: $2,147,000) giving a loss per share of 0.08 cents (30 June 2017: 0.04 cents loss per share, 31 December 2017: 0.09 cents loss per share).

 

Group Strategy

 

The Board continues to appraise opportunities to farm into or acquire high quality assets located in major proven complexes leveraging on the Group's arrangements with its range of operational and asset funding partners.

 

Nigeria continues to present an attractive investment proposition for inward investment institutions, evidenced by the range of prospective debt funding partners we have consulted with during the period, particularly against the backdrop of the region's history of delivering strong levels of operational cash flows, referenced by consultants Wood Mackenzie, stating that contractors operating in the country have been cash flow break even or better in every year since 1975 and goes on to say that they have generated some US$100 billion in net cash flow.

 

We also concur with further industry analysis that points to an improving economic and political environment in-country, evidenced by the approval of the National Gas Policy in 2017 and more recently, whilst the Senate approval of the Petroleum Industry Bill (PIB) was an affirmative step. The PIB has subsequently been sub-divided into four Bills as follows: Petroleum Industry Governance Bill (PIGB), Petroleum Industry Administration Bill (PIAB), Petroleum Industry Fiscal Bill (PIFB) and Petroleum Host Community Bill (PHCB) have now gone through a second reading in Parliament's upper chamber. Whilst the expectation appears to be that the bills will be enacted in 2018, the progress made to date represents significant strides in the stature of the resulting regulatory environment for the industry. We believe this can only enhance a climate that encourages increasing levels of inward investment into the Nigerian E&P sector whether that is into existing assets, working with indigenous co-owners, or through the next proposed marginal bid round, which was originally expected to take place earlier in 2018. Regardless of timing, which will ultimately be appropriately prescribed by the Department of Petroleum Resources, we believe that Sirius will be well positioned alongside indigenous partners to participate in the next marginal round.

The development of the Ororo Field is the first of the Company's marginal field developments, in line with the Group's strategy to target proven opportunities and maximize hydrocarbon production and recovery from proven discovered assets in Nigeria. The company's strategy remains focused on appraising shallow water offshore areas where Sirius can also realise upside potential for all stakeholders in potential assets through appraisal and development activities.

 

Ororo - OML 95

 

The Ororo-2 well is planned to penetrate all of the D sands with the top three sands (D1, D2 and D3) being sampled and pressure tested. The objectives of the tests are to determine GOCs, the pressure regimes, fluid compositions, and in situ gasoil ratios to gain confidence for the full field development.

 

In its Competent Persons Report ("CPR"), Rockflow Resources Limited ("Rockflow") has estimated that the Ororo-2 well will target a total stocktank oil initially in place ("STOIIP") of 2.98 mmbbls in the G sands within the Ororo Field (at a midcase scenario). Drilling of the Ororo-2 well is expected to take approximately 45 days from mobilisation of the drilling rig to the Ororo-2 site.

 

During the extended well testing ("EWT") phase, the Ororo-2 well is expected to initially produce into a temporary well test production facility mounted on a barge. Hydrocarbon production is expected to be treated (degassing and dehydration) to standard specifications for shuttle tanker transportation via the production facility and barge. Separate oil storage capacity is expected to be provided on the barge to store up to 10 days' production (approximately 50,000 bbls).

 

As originally stated in the Admission document sent to shareholders in November 2017, following completion of the Ororo-2 well and conditional on further funding being obtained, the Ororo-2 drilling rig is intended to proceed to drill the Ororo-3 well, which is proposed to target the D sand reservoir sequence.

 

The Company has today made a brief announcement updating shareholders on the current rig status for the Ororo field drilling programme due to commence in Q4 2018.

Corporate Governance Update

 

Sirius Petroleum has also recently updated the Corporate Governance practices of the Company in line with Quoted Company Alliance guidelines. See the Company's website at: www.siriuspetroleum.com.

 

Board and Management Team

 

During the period there were no changes to the Board and Senior Management composition.

 

Finance

 

During the period the Company continued to progress the proposed development debt funding discussions with a number of international financial institutions. This process is being led by Reyl et Cie, in relation to development of the Ororo field as has been previously announced.

 

Outlook

 

During the first half of year and to date the shore-based work streams have continued in association with the Group's operational partners to make all available resources available for the commencement of the Ororo development programme, pending the availability of a rig to commence drilling in 2018 at Ororo-2.

 

In line with our strategy we are continuing to appraise assets with production growth, appraisal and exploration potential.

 

We will continue to work towards delivering on the Company's strategy, to build a portfolio of assets with like minded asset owners where we can match development capital to enable good near term production and build solid development potential and appraisal prospects.

 

 

J Pryde

Chairman

 

O Kuti

Chief Executive Officer

 

28 September 2018

 

 

 

 

 

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2018

 

 

Note

Unaudited Period ended 30 June 2018

 

Unaudited Period ended 30 June 2017

 

Audited        Year ended  31 December 2017

 

 

US$'000

 

US$'000

 

US$'000

 

 

 

 

 

 

 

Other income

 

27

 

33

 

59

 

 

 

 

 

 

 

Share based payments

 

(1,367)

 

-

 

(465)

Other administrative expenses

 

(1,663)

 

(996)

 

(1,741)

 

 

 

 

 

 

 

Total administrative expenses

 

(3,030)

 

(996)

 

(2,206)

Loss from operations

 

(3,003)

 

(963)

 

(2,147)

Finance costs

 

(1)

 

(29)

 

(122)

Loss before taxation

 

(3,004)

 

(992)

 

(2,269)

 

 

 

 

 

 

 

Taxation

2

-

 

-

 

-

 

 

 

 

 

 

 

Loss after taxation and loss attributable to the equity holders of the Company

 

(3,004)

 

(992)

 

(2,269)

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

(6)

 

(13)

 

(36)

Total comprehensive loss for the period/year

 

(3,010)

 

(1,005)

 

(2,305)

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

 

Total basic and diluted (cents per share)

3

(0.08)

 

(0.04)

 

(0.09)

 

 

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2018

 

 

Share capital

Share premium account

Share-based payment reserve

Exchange reserve

Retained earnings

Total equity

 

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

 

 

 

 

 

 

 

 

Balance at 1 January 2017

8,927

25,749

2,596

11

(229)

(36,943)

111

Issue of share capital

886

1,728

-

-

-

-

2,614

Share issue costs

-

(140)

-

-

-

-

(140)

Transactions with owners

886

1,588

-

-

-

-

2,474

Loss for the period

-

-

-

-

-

(992)

(992)

Other comprehensive loss for the period

-

-

-

-

(13)

                -  

(13)

Balance at 30 June 2017

9,813

27,337

2,596

             11

(242)

(37,935)

1,580

Share issue

3,397

8,347

-

-

-

-

11,744

Share issue costs

-

(468)

-

-

-

-

(468)

Share based payments

-

-

465

-

-

-

465

Transfer on lapse of share options/warrants

-

-

(339)

-

-

339

-

Transfer on repayment of loan fees equity instruments

-

-

-

(11)

-

11

-

Transactions with owners

3,397

7,879

126

(11)

               -  

350

11,741

Loss for the period

-

-

-

-

-

(1,277)

(1,277)

Other comprehensive income for the period

-

-

-

-

(23)

-

(23)

Balance at 31 December 2017

13,210

35,216

2,722

              -  

(265)

(38,862)

12,021

Share based payments

-

-

1,367

-

-

-

1,367

Transfer on lapse of share options/warrants

 

 

(11)

 

 

11

-

Transactions with owners

          -  

               -  

       1,356

              -  

               -  

               11

1,367

Loss for the period

-

-

-

-

-

(3,004)

(3,004)

Other comprehensive income for the period

-

-

-

-

(6)

-

(6)

Balance at 30 June 2018

13,210

35,216

4,078

              -  

(271)

(41,855)

10,378

 

 

 

 

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2018

 

 

 

Unaudited        30 June 2018

 

Unaudited        30 June 2017

 

Audited            31 December 2017

 

 

 

 

 

 

Assets

Note

US$'000

 

US$'000

 

US$'000

 

 

 

 

 

 

 

Non-current

 

 

 

 

 

 

Intangible exploration and evaluation assets

4

18,037

 

6,901

 

10,554

Property, plant and equipment

5

800

 

17

 

13

 

 

18,837

 

6,918

 

10,567

Current

 

 

 

 

 

 

Cash and cash equivalents

 

945

 

259

 

4,014

Trade and other receivables

6

1,740

 

118

 

4,013

 

 

 

 

 

 

 

Total current assets

 

2,685

 

377

 

8,027

 

 

 

 

 

 

 

Total assets

 

21,522

 

7,295

 

18,594

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current

 

 

 

 

 

 

Trade and other payables

7

10,537

 

4,506

 

6,236

Loans payable

 

328

 

1,209

 

337

 

 

 

 

 

 

 

Total current liabilities

 

10,865

 

5,715

 

6,573

 

 

 

 

 

 

 

Liabilities due after one year

 

279

 

-

 

-

 

 

 

 

 

 

 

Total liabilities

 

11,144

 

5,715

 

6,573

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Issued share capital

8

13,210

 

9,813

 

13,210

Share premium

 

35,216

 

27,337

 

35,216

Share based payment reserve

 

4,078

 

2,596

 

2,722

Other reserve

 

-

 

11

 

-

Exchange reserve

 

(271)

 

(242)

 

(265)

Retained earnings

 

(41,855)

 

(37,935)

 

(38,862)

Equity attributable

 

 

 

 

 

 

to owners of the company

 

10,378

 

1,580

 

12,021

 

 

 

 

 

 

 

Total equity and liabilities

 

21,522

 

7,295

 

18,594

 

 

 

 

 

 

 

 

 

 

SIRIUS PETROLEUM PLC

CONSOLIDATED  STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 30 JUNE 2018

 

 

 

Unaudited Period ended

 

Unaudited Period ended

 

Audited Year ended

 

 

30 June 2018

 

30 June 2017

 

31 December 2017

 

 

 

 

 

 

 

 

 

US$'000

 

US$'000

 

US$'000

Operating activities

 

 

 

 

 

 

Loss after tax

 

(3,004)

 

(992)

 

(2,269)

Depreciation

 

90

 

3

 

6

Finance cost

 

1

 

29

 

122

Decrease/(increase) in trade and other receivables

 

2,273

 

106

 

(879)

Equity settled share-based payments

 

1,367

 

-

 

465

Expenses settled in shares

 

-

 

-

 

680

Increase/(decrease) in trade and other payables

 

3,729

 

102

 

(440)

Net cash inflow/(outflow) from operating activities

 

4,456

 

(752)

 

(2,315)

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Purchase of property, plant and equipment

 

(364)

 

(1)

 

(1)

Investment in intangibles

 

(7,483)

 

(2,258)

 

(3,525)

Net cash outflow from investing activities

 

(7,847)

 

(2,259)

 

(3,526)

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Proceeds from issue of share capital

 

-

 

2,494

 

9,230

Share issue costs

 

-

 

(109)

 

(608)

Finance cost

 

(3)

 

-

 

(48)

Loans received

 

331

 

88

 

526

Net cash inflow from financing activities

 

328

 

2,473

 

9,100

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(3,063)

 

(538)

 

3,259

Cash and cash equivalents at beginning of period

 

4,014

 

830

 

830

Exchange difference on cash and cash equivalents

 

(6)

 

(33)

 

(75)

Cash and cash equivalents at end of period

 

945

 

259

 

4,014

 

 

 

SIRIUS PETROLEUM PLC

NOTES TO THE INTERIM REPORT

FOR THE PERIOD ENDED 30 JUNE 2018

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The Group's statutory financial statements for the year ended 31 December 2017 have been completed and filed at Companies House.  The auditor's report on the annual financial statements was unqualified and did not contain statements under section 498(2) or section 498(3) of the Companies Act 2006.

1. ACCOUNTING POLICIES

 Basis of preparation

 

The Company's ordinary shares are quoted on the AIM market of the London Stock Exchange and the Company applies the Companies Act 2006 when preparing its annual financial statements.

 

The annual financial statements for the year ending 31 December 2018 will be prepared under International Financial Reporting Standards as adopted by the European Union (IFRS) and the principal accounting policies adopted remain unchanged from those adopted in preparing its financial statements for the year ended 31 December 2017.

 

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements. IFRS 9 - Financial Instruments, IFRS 15 - Revenue from contracts with customers and IFRS 16 - Leases have been applied from 1 January 2018. The impact of adopting IFRS 9 and IFRS 15 are not significant. The impact of IFRS 16 has been to recognise the property lease as a right-of-use asset of $570,000, with a lease liability of $483,000 of which $279,000 is due after one year. A depreciation charge has been recognised in the income statement of $53,000. As there were no assets leased prior to the period no adjustments were necessary.

 

Going concern

 

The directors have prepared cash flow projections through to 30 September 2019.  These projections take into account the Reyl facility. These projections forecast revenue streams and costs based on the Competent Person's Report produced, and demonstrate the total funding level required.

 

The cash flow projections indicate that the Group has sufficient headroom to meet its immediate working capital requirements. On the basis of the assumptions above and following a detailed review by the directors of the Group's cash flow forecast, the directors believe that the Group will have sufficient cash resources to meet its liabilities as they fall due for a period of at least 12 months.

 

Segmental reporting

 

An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's Chief Executive Officer to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available.

The Chief Executive Officer reviews financial information for and makes decisions about the Group's performance as a whole, as the Group has not generated revenue during the period.

Subject to further acquisitions and the future development of the business in Nigeria the Group expects to further review its segmental information during the forthcoming financial year.

 

2. TAXATION

No tax is due for the period as the Company has made a taxable loss.  The Directors expect these losses to be available to offset against future taxable trading profits.  The Group has not recognised any deferred tax asset at 30 June 2018 (30 June and 31 December 2017: £nil) in respect of these losses on the grounds that it is uncertain when taxable profits will be generated by the Group to utilise any such losses.

 

3. LOSS per share 

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.  The impact of the options and warrants on the loss per share is anti-dilutive.

 

 

Unaudited

 

Unaudited

 

Audited

 

six months ended

 

six months ended

 

year ended

 

30 June 2018

 

30 June 2017

 

31 December 2017

 

 

 

 

 

 

Loss on ordinary activities after tax ($'000)

(3,004)

 

(992)

 

(2,269)

 

 

 

 

 

 

Weighted average number of shares for calculating basic loss per share

    3,555,965,801

 

    2,460,957,699

 

    2,550,274,003

 

 

 

 

 

 

Basic and diluted loss per share (US cents)

(0.08)

 

(0.04)

 

(0.09)

 

4. INTANGIBLE EXPLORATION AND EVALUATION ASSETS
 

Cost of oil and gas exploration - pending determination

 

 

US$'000

Cost

 

At 1 January 2017

                  4,643

Additions

                   2,258

At 30 June 2017

                   6,901

Additions

                   3,653

At 31 December 2017

                 10,554

Additions

                   7,483

At 30 June 2018

                 18,037

 

 

Amortisation and impairment

 

At 1 January 2017, 30 June 2017, 31 December 2017 and 30 June 2018

 -

 

 

Net book value at 30 June 2018

                 18,037

Net book value at 31 December 2017

                 10,554

Net book value at 30 June 2017

                   6,901

 

During the year ended 31 December 2011 Sirius Ororo OML95 Limited entered into an agreement with Guarantee Petroleum Company Limited and Owena Oil and Gas Limited which gives it the right to acquire a 40% interest in the Ororo Oil Field.

The Group has undertaken certain works including commissioning the preparation of a Competent Persons Report and has conducted an environmental impact assessment. It has also commenced planning appropriate community projects and site surveys to finalise the subsequent drilling programme and will also cover certain operational costs related to the field. Under the agreement with our partners, the Group will cover all costs of this phase of the project. Costs plus interest of LIBOR+3% will be recoverable on the production of oil before the profit interest split is applied; these costs are being added to the costs of the asset.

The Directors have reviewed the investment for impairment. On 8 September 2016, the Group announced that an independent valuation of the Ororo field prepared by Rockflow Resources Limited, gave a mid-case net present value of the asset of $49.2m based on a $50 per barrel flat real oil price for the life of the field, and a low case net present value of $8.5m. This valuation was confirmed in the updated CPR in our admission document dated 30 November 2017. These valuations were recalculated at $65 per barrel and resulted in a low case net present value of $32.9m and a mid-case net present value of $96.1m. These valuations support the value of the investment held on the Statement of Financial Position and support the view that no impairment triggering events have occurred.  

The Group intends investing further amounts into the Ororo Oil Field, as part of its strategic development plans. The costs of the capital and operating costs will be covered by either separate funding facilities or by financial and technical industry partners on a joint farm-in basis.

5. property, plant ant equipment

 

Leasehold

 

Computer equipment

 

Office equipment

 

Motor

 

Total

 

Property

 

Equipment

 

Equipment

 

Vehicles

 

 

 

$' 000

 

$' 000

 

$'000

 

$'000

 

$'000

Cost

 

 

 

 

 

 

 

 

 

At 1 January 2017

-

 

50

 

29

 

27

 

106

Additions

-

 

1

 

-

 

-

 

1

Exchange difference

-

 

-

 

-

 

(1)

 

(1)

At 30 June 2017

                -  

 

             51

 

             29

 

         26

 

      106

Additions

 -

 

 -

 

 -

 

 -

 

           -  

Exchange difference

-

 

-

 

-

 

(1)

 

(1)

At 31 December 2017

                -  

 

             51

 

             29

 

          25

 

      105

Additions

570

 

27

 

281

 

-

 

878

Exchange difference

-

 

-

 

-

 

(1)

 

(1)

Cost at 30 June 2018

         570

 

             78

 

          310

 

         24

 

     982

 

 

 

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

 

 

 

At 1 January 2017

-

 

50

 

29

 

7

 

86

Charge for the period

-

 

-

 

-

 

3

 

3

At 30 June 2017

                -  

 

             50

 

              29

 

          10

 

        89

Charge for the period

-

 

1

 

-

 

2

 

3

At 31 December 2017

                -  

 

             51

 

             29

 

          12

 

         92

Charge for the period

53

 

11

 

24

 

2

 

90

At 30 June 2018

           53

 

             62

 

             53

 

          14

 

      182

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

Balance at 30 June 2018

         517

 

             16

 

           257

 

          10

 

      800

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2017

                -  

 

                  -  

 

                  -  

 

         13

 

        13

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2017

                -  

 

                1

 

                  -  

 

         16

 

         17

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2017

                -  

 

                  -  

 

                  -  

 

         20

 

         20

 

6. trade and other receivables

 

Unaudited

 

Unaudited

 

Audited

 

30 June 2018

 

30 June 2017

 

31 December 2017

 

US$'000

 

US$'000

 

US$'000

 

 

 

 

 

 

Other receivables

422

 

66

 

3209

Prepayments and accrued income

                1,318

 

52

 

804

Total

1,740

 

118

 

4,013

 

Other receivables are usually due within 30 - 60 days and do not bear any effective interest rate.  The fair value of these short term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value.

 

7. trade and other PAYABLES

 

Unaudited

 

Unaudited

 

Audited

 

30 June 2018

 

30 June 2017

 

31 December 2017

 

US$'000

 

US$'000

 

US$'000

 

 

 

 

 

 

Trade payables

                7,945

 

                 1,022

 

                 3,803

Other payables

                 1,586

 

                   611

 

                 1,099

Accruals

                 1,006

 

                 2,873

 

                 1,334

Total

10,537

 

4,506

 

6,236

 

The fair value of trade and other payables has not been disclosed as, due to their short duration, management considers the carrying amounts recognised in the balance sheet to be a reasonable approximation of their fair value.

 

8.  SHARE CAPITAL
 

The movement in ordinary shares and share premium in the period was as follows:

 

 

 

Number

 

Nominal amount (USD $'000)

 

Share premium (USD $'000)

 

 

 

 

 

 

 

As at 1 January 2017

 

2,258,029,523

 

8,927

 

25,749

Shares issued for cash

 

266,666,666

 

832

 

1,663

Loan repayments

 

14,000,000

 

44

 

44

Fees paid in shares

 

3,333,333

 

10

 

21

Share issue costs

 

-

 

-

 

(140)

At 30 June 2017

 

2,542,029,522

 

9,813

 

27,337

Shares issued for fees due

 

60,989,850

 

204

 

445

Shares issued for cash

 

723,700,000

 

2,426

 

7,279

Loan repayments

 

229,246,429

 

767

 

623

Share issue costs

 

-

 

-

 

(468)

At 31 December 2017

 

3,555,965,801

 

13,210

 

35,216

At 30 June 2018

 

3,555,965,801

 

13,210

 

35,216

 

 


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