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Westmount Energy Ld (WTE)

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Tuesday 31 March, 2020

Westmount Energy Ld

Interim Results

RNS Number : 1306I
Westmount Energy Limited
31 March 2020
 

31 March 2020

 

Westmount Energy Limited

("Westmount" or the "Company")

 

Interim Results

 

The Company is pleased to announce its Interim Results for the six months ended 31 December 2019.

 

Copies of the Company's interim results and are available on the Company's website, www.westmountenergy.com, and will be posted to shareholders shortly.

 

2019 Highlights

 

· Continued focus on emerging Guyana-Suriname Basin, where 19 discoveries and in excess of 8 Bn Boe discovered resources have been reported since 2015

 

· £5.57m raised in aggregate via Subscription at 13 pence per share

 

· Convertible Loan Note interest and partial principal conversion at 14.93 pence per share 
 

· Two Tertiary heavy oil discoveries (Jethro-1 and Joe-1) reported from 2019 drilling portfolio

 

· Positioned for exposure to imminent ExxonMobil operated drilling of Upper Cretaceous, light oil, prospects on Canje and Kaieteur Blocks

 

· Material new investment made in Cataleya Energy Corporation

 

· Strong cash balances of £2.6M at period end. 

 

Chairman's Review

 

The second half of 2019 reaffirmed the exciting potential of the emerging Guyana-Suriname basin while establishing important milestones. Aggressive exploration drilling, by a number of operators, has yielded new discoveries, new plays and stacked petroleum systems while extending the geographic and stratigraphic boundaries of this prolific province. In addition, Guyana became South America's newest oil producing nation with first oil from the Liza Phase I development being delivered, in December 2019, less than 5 years after discovery.  Production from this, ExxonMobil operated, development is currently ramping up and will produce up to 120,000 barrels of oil per day in the coming months, utilizing the Liza Destiny floating production storage and offloading vessel (FPSO). Anticipated sequential follow-on developments, including Liza Phase II, Payara and Hammerhead, are at various stages of design, engineering, government approval and project sanction and have the potential for Guyana to be producing circa 750,000 BOD by the mid-2020s.

 

ExxonMobil and Stabroek Block partners added 3 new light oil discoveries in this period (Tripletail-1, Mako-1 and Uaru-1) and reported, in January 2020, cumulative discovered resources on the Stabroek Block of in excess of 8 Bn Boe (not including Uaru-1). This brings the total number of discoveries, to date, on the Stabroek Block to 16 from the 18 exploration wells drilled since 2015 (a prodigious success rate of 89%).


Tullow and Orinduik Block partners reported two heavy oil discoveries (Jethro-1 and Joe-1) in separate Tertiary age reservoirs during August/September 2019. Repsol and partners followed up in January 2020 with the reporting of a light oil discovery (Carapa-1), in Upper Cretaceous reservoirs, on the Kanuku Block. While the commercial potential of these discoveries remains to be fully evaluated they have established a south-westwards and updip extension of the Upper Cretaceous and Tertiary play fairways, albeit with a more complicated hydrocarbon sourcing and charging history.

 

In January 2020 Apache and Total reported a substantial, stacked pay, hydrocarbon discovery (Maka Central-1) which extended the Upper Cretaceous play fairways to the southeast into Block 58, Suriname. This well encountered 50m of net, light oil and gas-condensate, pay (40o-60oAPI) in Campanian reservoirs overlying 73m of net light oil pay (35o-45oAPI) in Santonian reservoirs. This deeper Santonian pool represents a new play opening discovery and confirms the potential for deeper light oil discoveries throughout the deepwater Guyana-Suriname Basin.

 

These discoveries have confirmed that the petroleum system extends beyond the Stabroek Block. The drilling results continue to support the presence of quality reservoirs, multiple source rocks and multiple phases of hydrocarbon expulsion.  Furthermore, a total of 5 plays have now been proven in the basin though the Upper Cretaceous Liza play dominates in terms of number of discoveries and discovered volumes to date.

 

In late 2019 ExxonMobil submitted drilling permit applications for 3 wells on Canje Block and 3 wells on Kaieteur Block. They also announced the contracting of a 5th drillship (Noble Sam Croft) for duty offshore Guyana from late Q2 2020. Guidance from Canje and Kaieteur partners indicates that three wells have been selected as potential drilling targets in the Canje Block (Bulletwood-1, Jabillo-1 and Sapote-1), with one well (Tanager-1) as the main drilling target in the Kaieteur Block. Subject to any operational delays introduced by the COVID-19 pandemic, it is anticipated that drilling will commence in Q2 2020 with Westmount shareholders having exposure to a minimum of 3 ExxonMobil operated Upper Cretaceous wells within the next 12 months via your Company's strategic investments in JHI Associates Inc ("JHI"), Cataleya Energy Corporation ("CEC") and Ratio Petroleum Energy Limited Partnership ("Ratio Petroleum"). 

 

Access to opportunities in offshore Guyana remains one of the key challenges for both the industry and investors as your company continues to endeavour to deploy capital in this space. However, no new offshore deepwater licences have been awarded since January 2016 and Total remains the only major player to gain access (post Liza-1 Discovery) to direct licence interests via its 2018 multi-block farm-in to the Orinduik, Kanuku and Canje Licences. On 27th August 2019 Total announced that Qatar Petroleum had acquired a 40% interest in its subsidiary holding company with respect to the Orinduik and Kanuku Blocks. Current guidance from the various deepwater operators offshore Guyana indicates that Westmount will be the only London listed junior player offering exposure to drilling offshore Guyana in 2020.

 

Share Subscription, Convertible Loan Note and Investments

On 23rd and 28th August 2019 the Board announced the raising of £5.573m in total at 13p per share, by way of a share subscription. This financing inter alia enabled the completion of our second CEC investment, announced on the 30th August 2019, with the acquisition of an additional 313,500 common shares in CEC at a price of US$10 per share, for a total consideration of US$3,135,000 (equivalent to £2,582,372) including transaction costs. As a result of this share purchase, Westmount holds a total of 567,185 common shares in CEC, representing approximately 5.4% of the fully diluted share capital of CEC.

 

This investment increases your company's exposure to the ExxonMobil operated Kaieteur Block and to the Tanager Prospect one of the portfolio of drilling targets anticipated for drilling over the next 12 months. A Ratio Petroleum published CPR by NSAI describes the Tanager Prospect as a stacked reservoir prospect (Maastrichtian to Turonian reservoir intervals) and assigns a 'Best Estimate' Unrisked Gross (100%) Prospective Oil Resource of 256.2 MMBBLs to the prospect (Low to High Estimates 135.6 MMBBLs to 451.6 MMBBLs), with an aggregate Probability of Geologic Success (POSg) of 72%.

 

On 1st November 2019 the Board announced in conjunction with making the 1st Interest Payment of £67,446.56, in relation to the residual £660,000 principal of 10% p.a. convertible unsecured loan notes 2021 ("Convertible Loan Notes"), the early repayment of £260,000 principal of the £660,000 residual principal of Convertible Loan Notes through the issue, in aggregate, of 2,193,210 New Ordinary Shares at 14.93p per share. Following this subscription the residual principal of Convertible Loan Notes has been reduced to £400,000.

 

Summary/Outlook

Post the end of this reporting period, March 2020 has heralded the arrival of a series of unprecedented events on the back of the COVID-19 pandemic. Flight cancellations, industrial shutdowns, quarantines and travel bans have resulted in a sharp downturn in economic activity and collapsing capital markets which has had a devastating impact on the oil and gas industry globally. Dramatic declines in demand has seen Brent oil prices crash to sub $30/bbl and this price crash has been accentuated by the ending of the 'Opec-plus' supply cut arrangement from 1st April 2020 and the signalling of substantial oil supply increases to the market by Saudi Arabia, Russia and others.

 

As a result, the near term outlook is likely to be dominated by extreme volatility, in the first instance, as public health authorities globally grapple with containment and mitigation measures with respect to the virus. The duration of the pandemic is unclear at this stage, though there is some evidence from China in recent days which suggest that the measures taken there have been successful and that the peak of the epidemic there has now passed (after 3 months). In addition, synchronized economic stimuli are being put in place by governments across the main global economies to cushion the immediate impacts and promote economic rebound. 

 

In spite of this immediate outlook, proven plays, large discovered volumes and prodigious exploration success rates, continue to highlight the Guyana-Suriname Basin as a global exploration hotspot.  In addition, low break-even costs (~$25/bbl Liza Phase II) continue to sustain offshore Guyana as a major investment growth area for the large incumbent players, in spite of the near term sector headwinds in the form of collapsing oil prices and poor economic growth prospects due to the Coronavirus (COVID-19) pandemic. While the major incumbent players in the Guyanese offshore sector have been guiding reduced capital investment for 2020, in response to the sudden oil price collapse, the picture so far suggests that near term discretionary exploration drilling, offshore Guyana,  may be less affected by these immediate budgetary adjustments than drilling in other regions. The main impact of COVID-19 is likely to be its potential to delay some operational activities as travel restrictions upset the international flow of offshore workers.  

 

At this stage, Westmount Energy is not experiencing any major disruption to its business model from COVID-19. While the near term oil price collapse/volatility effects market sentiment and immediate valuations, the long term valuation and return on Westmount investments will be determined by (a) drilling outcomes, (b) longer term oil pricing and (c) the exit price achievable by the investee companies (in drilling success case). The Company is very well capitalised with £2.6M cash at 31st Dec. 2019 and with a low fixed cost base. In this context, your Board remains focused on investment opportunities and deployment of capital that gives additional exposure to drilling in this prolific emerging basin.

 

Westmount's current investment portfolio offers shareholders exposure to potentially a minimum of 3 ExxonMobil operated Upper Cretaceous wells, across the Canje and Kaieteur Blocks, over the next 12 months. With independent geological risks these prospects provide some risk diversification and a portfolio effect in addition to drilling program results over a condensed timeframe. Furthermore, c urrent guidance from the various deepwater operators indicates that Westmount is likely to be the only London quoted junior player offering exposure to drilling offshore Guyana in 2020. Success in some of these wells could result in transformational value changes for the medium term and positive times ahead for shareholders.

 

GERARD WALSH

Chairman

30 March 2020 

Enquiries: -

 

David King / Anita Weaver

Westmount Energy Limited   Tel: 01534 823059

 

Nicholas Wells / Harry Hargreaves

Nomad and Broker

Cenkos Securities plc  Tel: 020 7397 8900

 

 

 

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31 DECEMBER 2019

 

 

Six months ended

31 Dec 2019

(unaudited)

£

 

Six months ended

31 Dec 2018

(unaudited)

£

 

Year ended

30 Jun 2019

(audited)

£

Net (loss) / gain on financial assets held at fair value through profit or loss

(756,794)

 

424,084

 

2,654,137

Net gain / (loss) on financial liabilities held at fair value through profit or loss

93,169

 

49,564

 

(183,753)

Impairment of intangible assets

-

 

-

 

(66,667)

Administration expenses

(200,458)

 

(107,431)

 

(203,648)

(Loss) / gain on foreign exchange

(53,038)

 

1,228

 

(25,814)

Share options expensed

(1,500)

 

(3,000)

 

(80,853)

 

 

 

 

 

 

Operating (loss) / profit

(918,621)

 

364,445

 

2,093,402

 

 

 

 

 

 

Finance charges

 

 

 

 

 

Loan interest expense

(37,189)

 

(105,024)

 

(79,987)

 

 

 

 

 

 

(Loss) / profit before tax

(955,810)

 

259,421

 

2,013,415

 

 

 

 

 

 

Tax

-

 

-

 

-

 

 

 

 

 

 

Comprehensive (loss) / income for the period / year

(955,810)

 

259,421

 

2,013,415

 

 

 

 

 

 

 

 

 

 

 

 

Basic (loss) / profit per share (pence)

(1.01)

 

0.55

 

3.83

Diluted (loss) / profit per share (pence)

(0.94)

 

0.55

 

3.51

 

 

All results are derived from continuing operations.

The Company had no items of other comprehensive income during the period / year.

 

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019

 

 

31 Dec 2019

(unaudited)

£

 

31 Dec 2018

(unaudited)

£

 

30 Jun 2019

(audited)

£

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Non-current assets

 

 

 

 

 

Intangible assets

33,333

 

100,000

 

33,333

Financial assets at fair value through profit or loss

8,644,384

 

2,718,357

 

6,745,797

 

8,677,717

 

2,818,357

 

6,779,130

 

 

 

 

 

 

Current assets

 

 

 

 

 

Other receivables

1,109

 

3,063

 

7,001

Cash and cash equivalents

2,618,986

 

1,343,190

 

63,374

 

2,620,095

 

1,346,253

 

70,375

 

 

 

 

 

 

Total assets

11,297,812

 

4,164,610

 

6,849,505

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Derivative financial instruments

113,684

 

49,500

 

221,411

Borrowings

362,651

 

598,375

 

598,375

 

476,335

 

647,875

 

819,786

Current liabilities

 

 

 

 

 

Trade and other payables

54,595

 

46,360

 

45,422

Derivative financial instruments

1,900

 

936

 

3,592

Borrowings

12,683

 

957,254

 

50,967

 

69,178

 

1,004,550

 

99,981

 

 

 

 

 

 

Total liabilities

545,513

 

1,652,425

 

919,767

 

 

 

 

 

 

EQUITY

 

 

 

 

 

Share capital

11,606,743

 

4,244,166

 

5,829,872

Share option account

446,346

 

366,993

 

444,846

Retained earnings

(1,300,790)

 

(2,098,974)

 

(344,980)

Total equity

10,752,299

 

2,512,185

 

5,929,738

 

 

 

 

 

 

Total liabilities and equity

11,297,812

 

4,164,610

 

6,849,505

 

 

 

 

 

 

 

 

 

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31 DECEMBER 2019

 

 

Share capital account

£

Share option account

£

Deficit

£

Total equity

£

As at 1 July 2018

4,244,166

363,993

(2,358,395)

2,249,764

 

Comprehensive Income

Profit for the year ended 30 June 2019

-

-

2,013,415

2,013,415

Share issue

1,585,706

-

-

1,585,706

Transactions with owners

 

 

 

 

Share options expensed

 

-

80,853

-

80,853

 

 

 

 

 

 

As at 30 June 2019

 

5,829,872

444,846

(344,980)

5,929,738

 

 

 

 

 

Comprehensive Income

 

 

 

 

 

Loss for the period ended 31 December 2019

-

-

(955,810)

(955,810)

Share issue

5,449,424

-

-

5,449,424

Transactions with owners

 

 

 

 

Loan notes converted

 

327,447

 

 

327,447

Share options expensed

 

-

1,500

-

1,500

 

 

 

 

 

 

As at 31 December 2019

 

11,606,743

446,346

(1,300,790)

10,752,299

 

 

 

Share capital account

£

Share option account

£

Deficit

£

Total equity

£

As at 1 July 2017

 

3,772,244

352,906

(2,919,475)

1,205,675

 

 

 

 

 

Comprehensive Income

 

 

 

 

Profit for the year ended 30 June 2018

-

-

561,080

561,080

Transactions with owners

Warrants converted

471,922

-

-

471,922

Share options expensed

 

-

11,087

-

11,087

 

 

 

 

 

 

As at 30 June 2018

 

4,244,166

363,993

(2,358,395)

2,249,764

 

 

 

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2019

 

 

Six months ended

31 Dec 2019

(unaudited)

£

 

Six months ended

31 Dec 2018

(unaudited)

£

 

Year ended

30 Jun 2019

(audited)

£

Cash flows from operating activities

 

 

 

 

 

Total comprehensive (loss) / income for the period / year

(955,810)

 

259,421

 

 

  2,013,415

 

Adjustments for:

 

 

 

 

 

 

Net loss / (gain) on financial assets at fair value through profit or loss

756,794

 

(424,084)

 

(2,654,137)

 

Net (gain) / loss on financial liabilities at fair value through profit or loss

(93,169)

 

(49,564)

 

183,753

 

Impairment of intangible assets

-

 

-

 

66,667

 

Interest on borrowings

37,189

 

105,024

 

79,987

 

Share options expensed

1,500

 

3,000

 

 

80,853

 

Decrease in other receivables

5,892

 

5,150

 

 

1,212

 

Increase in trade and other payables

9,173

 

3,190

 

 

2,252

 

Purchase of investments

(2,655,381)

 

(808,999)

 

 

(3,317,515)

 

Proceeds from sale of investments

-

 

142,265

 

1,499,100

 

Net cash out flow from operating activities

(2,893,812)

 

(764,597)

 

(2,044,413)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from borrowings

-

 

1,600,000

 

 

1,600,000

 

Interest and charges on borrowings

-

 

(49,395)

 

(49,395)

 

Proceeds from issue of ordinary shares

5,449,424

 

-

 

-

 

Net cash generated from financing activities

5,449,424

 

1,550,605

 

1,550,605

 

 

 

 

 

 

 

 

Net increase / (decrease) in cash and cash equivalents

2,555,612

 

786,008

 

(493,808)

 

Cash and cash equivalents at the beginning of the period / year

63,374

 

557,182

 

557,182

 

Cash and cash equivalents at the end of the period / year

2,618,986

 

1,343,190

 

63,374

 

         

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2019

 

1. Accounting Policies

Basis of accounting

The interim financial statements have been prepared in accordance with the International Accounting Standard ("IAS") 34, Interim Financial Reporting.

 

The interim financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements for the year ended 30 June 2019. The annual financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS").

 

The same accounting policies and methods of computation are followed in the interim financial statements as in the Company’s annual financial statements for the year ended 30 June 2019.

 

2. Investments

 

Six months ended

31 December 2019

 

Six months ended

31 December 2018

 

Year

ended

30 June

2019

 

(unaudited)

 

(unaudited)

 

(audited)

 

£

 

£

 

£

Argos Resources Limited, at market value

28,300

 

26,000

 

26,300

Cost, 1,000,000 shares

310,775

 

310,775

 

310,775

(31 December 2018: 1,000,000 shares, 30 June 2019: 1,000,000 shares)

 

 

 

 

 

 

 

 

 

 

 

Cataleya Energy Corporation, at market value

4,281,697

 

-

 

1,993,317

Cost, 567,185 shares

4,518,215

 

-

 

1,943,894

(31 December 2018: nil, 30 June 2019: 253,685 shares)

 

 

 

 

 

 

 

 

 

 

 

Eco Atlantic Oil & Gas Oil Limited, at market value

799,500

 

1,193,750

 

1,050,000

Cost,  1,500,000 shares

240,000

 

500,000

 

240,000

(31 December 2018: 3,125,000 shares, 30 June 2019: 1,500,000 shares)

 

 

 

 

 

 

 

 

 

 

 

JHI Associates Inc, at market value

2,577,471

 

1,121,100

 

2,662,304

Cost, 2,213,770 shares

2,009,210

 

809,840

 

2,009,210

31 December 2018: 1,110,000 shares, 30 June 2019: 2,213,770 shares)

 

 

 

 

 

 

 

 

 

 

 

Ratio Petroleum Energy Limited Partnership shares, at market value

872,306

 

377,507

 

1,013,876

Cost, 1,200,000 shares

252,144

 

245,048

 

252,144

(31 December 2018: 1,200,000 shares, 30 June 2019: 1,200,000 shares)

 

 

 

 

 

 

 

 

 

 

 

Ratio Petroleum Energy Limited Partnership warrants, at market value

85,110

 

-

 

-

Cost, 166,063 warrants

81,060

 

-

 

-

(31 December 2018: nil, 30 June 2019: nil)

 

 

 

 

 

 

 

 

 

 

 

Total market value

8,644,384

 

2,718,357

 

6,745,797

Total cost

7,411,404

 

1,865,663

 

4,756,023

 

 

 

 

 

 

Total fair value adjustment

1,232,980

 

852,694

 

1,989,774

Reverse prior year fair value adjustment

(1,989,774)

 

621,452

 

621,452

Current period fair value movement

(756,794)

 

1,474,146

 

2,611,226

 

 

 

 

 

 

Realised loss

-

 

(1,050,062)

 

42,911

Unrealised gain

(756,794)

 

1,474,146

 

2,611,226

Current period income statement impact

(756,794)

 

424,084

 

2,654,137

 

 

 

 

 

 

 

 


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