TIDMVOG
RNS Number : 0455O
Victoria Oil & Gas PLC
30 September 2019
30 September 2019
Victoria Oil & Gas Plc
("VOG", "Group" or the "Company")
INTERIM FINANCIAL REPORT FOR THE SIX MONTHSED 30 JUNE 2019
Victoria Oil & Gas Plc, the integrated natural gas producing
utility, today announces its unaudited interim results for the six
months ended 30 June 2019.
Operational Highlights
-- Average daily Logbaba field gross production rate increased
by 190% to 9.9mmscfd (six months to 30 June 2018: 3.4mmscfd)
-- 1,785mmscf of gross gas sold from Logbaba (six months to 30 June 2018: 650mmscf)
-- Gas consumption by grid power customer ENEO Cameroon SA ("ENEO"), throughout the period
-- Two additional industrial customers consumed gas during the
period (with a further two commissioned post period)
-- 18% increase in industrial customer gas consumption for thermal use compared to H1 18
-- 61% increase in industrial customer gas for power usage compared to H1 18
-- International Organization for Standardization compliance
("ISO") 9001, 14001 & 45001 audits successfully completed,
emphasising the Company's commitment to international standards in
its management systems
Financial Highlights
-- $10.7 million Revenue (six months to 30 June 2018: $5.0 million)
-- $3.7 million Adjusted EBITDA (six months to 30 June 2018: $0.03 million)
-- $4.2 million cash generated from operating activities prior
to movements in working capital (six months to 30 June 2018:
utilised cash of $1.3 million)
-- $5.9 million Net Debt position (at 31 December 2018: $17.4 million)
Corporate Highlights
-- The Company raised $17.0 million net proceeds via a fundraise
on 4 April 2019 to strengthen the Company's financial position and
provide a stable growth platform for the business
-- Completion of board changes effective 3 April 2019:
Ø Kevin Foo stepped down as Director and Executive Chairman
Ø Roger Kennedy assumed the role of Executive Chairman.
Ø Appointment of John Daniel and John Knight as Independent
Non-Executive Directors
Subsequent Events
-- GDC signed a non-binding term sheet with Aksa Enerji Uretim
A.S. ("Aksa Energy") to supply Aksa Energy with up to 25mmscfd of
gas to Aksa Energy's planned 150MW power station
-- John Bryant resigned as Independent Non-Executive Director on 8 July 2019
-- Retrieval of the tool string on the La-108 remediation programme, which is ongoing
This announcement contains inside information.
For further information, please visit www.victoriaoilandgas.com
or contact:
Victoria Oil & Gas Plc
Ahmet Dik / Kate Baldwin Tel: +44 (0) 20 7921 8820
Strand Hanson Limited (Nominated and Financial Adviser)
Rory Murphy / James Dance / Jack Botros Tel: +44 (0) 20 7409
3494
Shore Capital Stockbrokers Limited (Joint Broker)
Mark Percy / Toby Gibbs (corporate finance) Tel: +44 (0) 207 408
4090
Jerry Keen (corporate broking)
FirstEnergy Capital LLP (Joint Broker)
Jonathan Wright / Hugh Sanderson Tel: +44 (0) 207 448 0200
Camarco (Financial PR)
Billy Clegg Tel: +44 (0) 203 757 4983
Nick Hennis Tel: +44 (0) 203 781 8330
Victoria Oil & Gas Plc
Unaudited Interim Condensed Consolidated Financial
Statements
For the six months to 30 June 2019
CHAIRMAN'S LETTER
Dear Shareholder,
On behalf of the Board, I set out below our unaudited interim
results for the six months to 30 June 2019 ("H1 19"or "reporting
period") and update you on the Company's progress.
Victoria Oil & Gas Plc ("VOG", the "Company" or the "Group")
currently generates revenue through its 57% participating interest
in the Logbaba Project in Douala, Cameroon, which is held by its
100% owned subsidiary Gaz du Cameroun S.A. ("GDC").
Logbaba Operations Update
The sales figures from the Logbaba Project in Cameroon are as
follows:
For the six-month period ended 30 June 2019 30 June 2018
mmscf mmscf
---------------------------------------- ----------------------------------- ------------------------------------
Gross gas sales - Logbaba
Thermal 731 619
Industrial power 50 31
Grid power 1,004 -
---------------------------------------- ----------------------------------- ------------------------------------
Total 1,785 650
---------------------------------------- ----------------------------------- ------------------------------------
Attributable gas sales - Logbaba 1,018 372
Average daily gas production
(mmscf/d) 9.9 3.4
Condensate sales (bbls) - Gross 12,765 5,807
Condensate sales (bbls) - Attributable 7,276 3,311
---------------------------------------- ----------------------------------- ------------------------------------
The table refers to gross Logbaba Project sales, unless
specified as attributable to GDC representing its 57% interest in
the project.
Gas was produced and delivered to customers in Douala on an
uninterrupted basis during the reporting period without any
significant safety incidents, underlining our commitment to operate
in a safe and environmentally friendly manner.
Grid Power
During the reporting period ENEO, consumed gas continuously at
its Logbaba Power Station. Work on the fully termed agreements with
ENEO is progressing and we expect these to be finalised
shortly.
The Company continued to pursue other large grid power gas
offtake opportunities in H1 19 which culminated in the announcement
on 29 July 2019 of GDC having signed a non-binding term sheet with
Aksa Energy ("Term Sheet") to supply Aksa Energy's planned 150MW
power station with up to 25mmscfd of gas. The Term Sheet is subject
to various conditions precedent, including government approvals and
the signing of a Power Purchase Agreement by Aksa Energy with ENEO
or "Sonatrel" (the Cameroon Government owned manager of the
national electricity network). The key commercial terms between
Aksa Energy and GdC include a gas price of US$6.75 per mmbtu, a
term of 25 years with an option to extend for an additional 5
years, and a 70% take or pay component. Aksa Energy is one of the
largest independent power producers in Turkey, selling 14 TWh/year
of energy globally. The location of the proposed power plant is
expected to be near the Bekoko substation, near to GDC's existing
gas pipeline network. The parties have commenced relevant project
planning. This project is an important milestone for the Company
and helps to underpin the commerciality of further development of
the Logbaba and Matanda Projects.
Industrial Customers
The focus continues to be to improve our customer type
diversification. Four customers will have commenced consuming gas
by end of September 2019 (during the reporting period two customers
commenced, post reporting period two additional customers were
commissioned). The efforts of the last 18 months on industrial
customer growth are now positively impacting our results with an
18% increase in thermal gas consumption compared to H1 18, reaching
731mmscf gross gas sales during the reporting period, and a 61%
increase in gas for power usage with gross gas sales of
50mmscf.
La-108 Remediation Work Update
With increased gas demand and the improved position of the
Company compared to 2018, the Company has progressed the La-108
well remediation. The La-108 well was drilled in 2017. The
remediation project objective is to recover the wire and tool
string that remains in the well, clean out the liquids and solids
in the 4 1/2 " tubing, the 7" liner and the 4 1/2 " liner to
restore access to the entire cased wellbore. Upon completion, the
plan is to perforate the Upper Logbaba sands and complete the well,
including well testing, and tie-back the wellhead to the existing
production flowline. During the reporting period, service provider
tendering was carried out and contracts put in place. Preparations
on site were carried out and long lead items ordered. This work
commenced in August and at the time of writing, the tool string and
a large proportion of the wire have been retrieved and operations
are continuing to retrieve the remaining wire.
Process Plant Enhancements
The objective of the planned enhancements at the Logbaba Process
Plant is to maximise hydrocarbon recovery from existing and future
wells by lowering the minimum gas inlet pressure to the plant.
Modifications made to the Logbaba Process Plant since its
commissioning in 2012 have resulted in the two process trains
having different configurations and capabilities. The configuration
of both trains need to be optimised to ensure maximum production
availability, which in turn should increase recovery of
hydrocarbons.
The project will include the installation of a feed gas chilling
system to ensure continued gas and condensate export at lower
wellhead pressures, whilst maximising recovery from all wells. It
should also provide operational flexibility and increased
reliability by enabling both high-pressure and low-pressure wells
to be produced concurrently, thereby potentially extending the life
of the wells at the Logbaba field.
The project is being delivered in two stages. Stage 1, which was
completed in September 2019, comprised the following Front-End
Engineering Design (FEED) work: engineering design, cost estimation
and execution planning for implementation of the selected process
configuration; and Stage 2, focuses on execution, which is expected
to commence in Q4 19, and will include detailed engineering,
design, equipment and materials specification, procurement,
fabrication, shipping, construction and commissioning.
Logbaba Subsurface
Following on from the internal re-evaluation of the remaining
reserves in the Logbaba field in H2 18, it was determined that
acquisition of seismic data using modern technology and methods
over the Logbaba field/C38 would de-risk the block and identify
prospective drill hole locations. A feasibility study was carried
out in the downtown Douala/C38 area by a seismic specialist in
April 2019 to ascertain whether a seismic survey could be acquired
in an urban area. It was concluded that a full-fold 3D survey over
the C38 block would be possible with suitable equipment and
crew.
Matanda Subsurface
The evaluation of Area 2 of the Matanda block (between Logbaba
and North Matanda fields) has been completed and several Tertiary
and Cretaceous prospects/features have been identified. This work
concluded Phase One of the Work Programme and the evaluation of the
Matanda block's prospectivity.
Phase Two of the Matanda Work Programme commenced in early June
2019 with a risk mitigation workflow. The initial stages of this
work flow include an analysis of the gathered data over each
prospect. The aim of this work is to refine the understanding of
the risk of the identified prospects which will lead into the next
phase of the work flow: detailed well planning to geological
prognosis.
Alongside the above workstreams, a Matanda ESIA scope is being
finalised to ensure that all aspects of risks to the environment
and social factors have been assessed and necessary precautions
taken, in accordance with the requisite rules and regulations, to
ensure there is minimal impact on the environment ahead of drilling
preparation.
ISO Compliance
In Q1 19 GDC completed the International Organization for
Standardization compliance ("ISO") audit process for ISO 9001:2015,
ISO 14001:2015 and ISO 45001:2018. The certifications have now been
received confirming that GDC's Quality, Environmental and
Occupational Safety and Health management systems conform to
international ISO standards.
Financial Results
Two significant events have shaped the financial position of the
Group during the reporting period. The first was the renewal of the
grid power gas sales agreement with ENEO, which has resulted in
revenue for the reporting period increasing from $5.0 million in
the six-month period ended 30 June 2018 to $10.7 million. Second,
was the support from new and existing shareholders, where the
Company raised $17.0 million in April 2019. This injection of cash
enabled the Group to conclude settlement agreements with the two
remaining drilling suppliers as announced on 4 June 2019, and has
positioned the Company to remediate well La-108 and expand the
existing operations to new customers.
The renewal of the ENEO gas sales agreement has resulted in
increased revenues, and a return to positive operating cashflow for
the Company prior to working capital adjustments. However,
collections have been outside of agreed payment terms. I can report
that the parties are in dialogue and working closely to resolve the
situation. This is a position which the Board is watching
closely.
CHL Royalty
GDC has ceased to make payments to Cameroon Holdings Limited
("CHL") under the Royalty Agreement. As a result, in June 2019, CHL
commenced proceedings against both GDC and the Company with regard
to payments CHL believes it is entitled to under the Royalty
Agreement including potential damages. The Company proposes to
vigorously defend such claim and is currently preparing its
defense. There is no definitive timetable for such litigation
proceedings. The Company has not accrued for CHL royalties during
H1 19 and has fully impaired this investment, resulting in an
impairment charge of $5.6 million during H1 19. In the event that
the legal proceedings result in GDC being obliged to continue
paying royalty payments, the Group's liability at 30 June 2019
would be $1.7 million, less an anticipated dividend from CHL
amounting to $0.6 million.
Going Concern
The Directors have given careful consideration to the
appropriateness of the going concern basis in the preparation of
the unaudited interim condensed consolidated financial statements.
Further details of our current financial position and uncertainties
which may affect the Company's ability to continue operating as a
going concern are to be found in the Financial Review and in Note 3
of the unaudited interim condensed consolidated financial
statements set out below.
Corporate
During the reporting period the following board changes were
affected:
-- On 3 April 2019 Kevin Foo stepped down as Director and
Executive Chairman at the conclusion of the General Meeting. Roger
Kennedy, formerly Independent Director, assumed the role of
Executive Chairman.
-- On 3 April John Daniel and John Knight were appointed as
independent non-executive directors.
-- On 8 July 2019 John Bryant resigned as an independent non-executive director.
Final Word
I am pleased with the progress to date and the extra effort
management is putting toward continued growth for the company.
Signing of the term sheet with Aksa Energy is very positive and
bringing that to fruition alongside additional increasing
production with thermal customers will be the focus over the coming
twelve months. We look forward to updating the shareholders as the
events mentioned above unfold.
Roger Kennedy
Executive Chairman
28 September 2019
Financial Review
The interim report for the six-month period ended 30 June 2019
("reporting period" or "H1 19") is compared to the six-month period
ended 30 June 2018 ("prior period" or "H1 18") as required by
International Financial Reporting Standards ("IFRS").
The renewal of the grid power gas sales agreement at the end of
December 2018 has had a significant impact on the revenues and
operating results generated by the Group in H1 19. The Company
completed a fundraise of $17.0 million in April 2019 to strengthen
the Company's financial position and provide a stable growth
platform for the business. We wish to thank our existing and new
shareholders for their support and faith in this Company.
The net proceeds of the fundraising have enabled the Company
to:
-- maintain and expand its existing operations in Cameroon, with
a focus on securing new customers and increasing revenue;
-- initiate the remediation project on well La-108 at Logbaba;
-- fund the ongoing planning of the Matanda project;
-- continue to implement its cost reduction programme in both
the London and Cameroon operations; and
-- fund its working capital requirements, in particular the
settlement of the remaining supplier obligations from the La-107
and La-108 drilling programme.
Revenue and Results
For the six-month period ended 30 June 2019 30 June 2018
$000 $000
---------------------------------- ------------- -----------------
Performance
Revenue 10,682 5,014
Operating loss (6,798) (2,746)
Depreciation 4,918 2,773
Impairment of investment in -
associate 5,556
---------------------------------- ------------- -----------------
Underlying EBITDA 3,676 27
---------------------------------- ------------- -----------------
Loss per share - basic & diluted
(cents) (3.68) (2.28)
As at 30 June 2019 31 December 2018
$000 $000
---------------------------------- ------------- -----------------
Financial Position
Trade and other receivables 13,385 8,666
Cash and cash equivalents 14,380 3,467
Trade and other payables 6,235 10,800
Borrowings 20,316 20,907
Net debt (5,936) (17,440)
---------------------------------- ------------- -----------------
Performance
The Group's revenue for the reporting period was $10.7 million,
approximately $5.7 million higher than the prior period (H1 18:
$5.0 million) primarily as a result of the ENEO sales being
re-established. Revenue is derived entirely from the Logbaba
Project in Cameroon. Gas is sold to customers for thermal energy
production and electricity generation, with revenue also generated
from the sale of condensate, a by-product from gas production and
processing.
On 24 December 2018 the Company announced the renewal of the
long-term gas supply contract with ENEO. Under the revised terms,
gas will be supplied to ENEO's 30MW Logbaba Power Station. The peak
quantity requirement equates to 6.1mmscf/d gas consumption from
GDC. The initial gas sale price of $6.75 per MMBtu will increase
over the three-year term of the agreement by $0.10/MMBtu on each
anniversary of the effective date of the agreement. The take or pay
element of the contract has been amended to a minimum base load
level of 80% throughout the entire year, which equates to a minimum
gas supply of 4.88mmscf/d. The amended take or pay element will
remove the seasonal impact on the Group's revenues experienced
during the previous contract. Grid power sales in H1 19 equate to
56% of the Group's sales by volume, and 40% of revenue.
The parties are working diligently to finalise and execute fully
termed agreements and the provision of the required payment
security guarantee.
The Group is also pleased with the growth in thermal and
industrial power revenue during H1 19, reflecting the ongoing
efforts to expand the existing operations in Cameroon and to
diversify the customer portfolio.
Since January 2019 the Company has ceased to make payments under
the CHL Royalty Agreement. CHL has commenced proceedings against
both GDC and the Company with regard to payments CHL believes it is
entitled to under the Royalty Agreement. The Company proposes to
vigorously defend such claim and is currently preparing its
defense. The Company has not accrued for CHL royalties during H1 19
and has reversed the accrual relating to the royalty from 31
December 2018 of $0.3 million this being the unpaid amount at 31
December 2018. Furthermore, as the investment in associate relates
to the Groups 35% interest in CHL, the Company has fully impaired
this investment, resulting in an impairment charge of $5.6 million
during H1 19.
Depreciation is a variable cost associated with the gross
volumes of gas produced during the period. The increase in the
Logbaba reserves during 2018 has resulted in the depreciation for
the period being lower than the proportional increase in gas
volumes sold during the period.
Underlying EBITDA, a non-IFRS measure which excludes
depreciation and impairment charges from operating profit prior to
financing charges and tax, reflects earnings of $3.7 million (H1
18: $0.03 million). The loss after taxation of the Group for the
six months to 30 June 2019, which incorporates the $5.6 million
impairment charge, amounted to $7.3 million (H1 18: $3.3 million).
Loss per share for the reporting period was 3.68 cents (H1 18: 2.28
cents).
Financial Position
Trade and other receivables
Trade receivables have increased $4.7 million to $13.4 million
as at 30 June 2019 due to the increase in activity and delays in
ENEO settling their outstanding receivables. As announced, during
H1 19 the Group received payment on the January and February
invoices from ENEO, and during H2 19 has received payment of the
March invoice. As at 30 June 2019 an amount of $4.2 million was
outstanding from ENEO. At the reporting date there is an amount of
$4.8 million outstanding. Management continues to engage with ENEO
to ensure consistent and prompt payment and to finalize the bank
guarantee to mitigate future payment delays.
Other receivables include amounts due from partners on the
Logbaba and Matanda projects, including Société Nationale des
Hydrocarbures ("SNH") receivable following their participation on
Logbaba.
Cash and cash equivalents
Available cash at 30 June 2019 was $14.4 million (31 December
2018: $3.5 million) following the fundraising in April 2019 which
raised $17.0 million.
Trade and other payables
Trade and other payables have decreased by $4.6 million from 31
December 2018 to $6.2 million as the remaining drilling contractors
were paid. Trade payables includes the land compensation obligation
of $1.2 million (31 December 2018: $1.5 million). Other payables
includes the reserves bonus settlement obligation of $2.6 million
(31 December 2018: $3.0 million).
Borrowings
Total borrowings of $20.3 million compares to $20.9 million at
31 December 2018. Following the restructuring of the BGFI Bank
facility in 2018 the Group has enjoyed a principal repayment
holiday from July 2018 to June 2019. Full principal and interest
repayments commenced in July 2019.
Net Debt
The Group was in a net debt position of $5.9 million at 30 June
2019 (31 December 2018: $17.4 million). The reduced net debt
position is a result of the funding raised during the reporting
period.
Cash Flow
Operating activities
The Group generated cash from operating activities of $4.2
million during the reporting period (H1 18: utilised cash of $1.3
million). Working capital increased by $7.9 million (H1 18: $2.1
million), due to an increase in trade receivables and the reduction
of trade payables. Net cash utilised in operating activities was
$4.7 million (H1 18: $4.2 million).
Financing activities
$17.0 million was raised, net of issuance costs, in the
fundraise in April 2019. $1.4 million was paid in interest and
capital repayments (H1 18: $3.1 million). The Group does not have
any further available credit facilities.
Commitments
The Logbaba Concession does not contain any work programme
obligations. The Company is currently in progress with the
remediation of La-108 to retrieve the stuck tool string and wire,
and complete the well.
On 17 December 2018 the Group received the Presidential Decree
formalizing the assignment of a 75% participation in the Matanda
Block. The work program for the Matanda Block consists of
reprocessing and reinterpretation of existing seismic data and
drilling of one onshore well. The Group's share of the minimum work
program obligation is estimated to be $11.25 million.
Subsequent Events
On 29 July 2019, the Company announced the signing of a
non-binding term sheet with Aksa Energy ("Term Sheet") to supply
Aksa Energy with up to 25mmscfd of gas to Aksa Energy's planned
150MW power station, to be located in Bekoko, Douala, Cameroon. The
Term Sheet is subject to various conditions precedent, including
government approvals and the signing of a Power Purchase Agreement
by Aksa Energy with ENEO or "Sonatrel" (the Cameroon Government
owned manager of the national electricity network). The key
commercial terms between Aksa Energy and GdC include:
-- Gas Price: US$6.75 per mmbtu;
-- Term: 25 years, plus option to extend for an additional 5 years; and
-- 70% Take or pay component.
On 5 August 2019 the Company announced the adoption of a
long-term incentive programme ("LTIP") for Directors, management
and employees. Pursuant to the LTIP, the Company issued share
options totaling 13 million Ordinary Shares (or 5.1% of issued
share capital of the Company) to Directors and employees with an
exercise price of 14p. All share options have exercise periods of 5
years following vesting dates.
On 9 August 2019, 433,735 Ordinary Shares were issued to a
Director on exercise of share options.
Contingent liabilities
The Groups royalty obligations, and contingent obligations, are
unchanged from those disclosed in the Group's Annual Report &
Accounts to 31 December 2018.
As noted above, CHL has commenced proceedings against both GDC
and the Company with regard to payments CHL believes it is entitled
to under the Royalty Agreement. The Company proposes to vigorously
defend such claim and has ceased to make payments under the CHL
Royalty Agreement since January 2019. In the event that the legal
proceedings result in GDC being obliged to continue paying royalty
payments, the Groups liability at 30 June 2019 would be $1.7
million, less an anticipated dividend from CHL amounting to $0.6
million.
Our partners in the Logbaba project, RSM and SNH, are both
conducting audits on costs relating to years prior to the balance
sheet date. At the date of signing these Interim Financial
Statements the outcome of these audits are unknown, however any
findings from the audits could have an impact on the results.
Going Concern
The Directors have given careful consideration to the
appropriateness of the going concern basis in the preparation of
the Interim Financial Statements. There are a number of
uncertainties which may affect the Group's ability to continue
operating as a going concern, these are disclosed in Note 3 of the
Interim Financial Statements.
The Company successfully raised $17.0 million net proceeds in an
equity placement in April 2019. The Directors have reviewed
operating and cash forecasts in respect of the operating activities
and planned work programmes of the Group's assets and believe that
the available funds are sufficient to enable the Company to
continue meeting its obligations and develop operations for a
period of at least twelve months from the date of approval of these
Interim Financial Statements.
On this basis, the Directors have concluded that it is
appropriate to prepare the Interim Financial Statements on a going
concern basis. Accordingly, these Interim Financial Statements do
not include any adjustments to the carrying amount or
classifications of assets and liabilities that may arise if the
Group was unable to continue as a going concern.
Principal Risks and Uncertainties
The Board determines the key risks for the Group and monitors
mitigation plans and performance on a monthly basis. The principal
risks the Group has identified for the next six months are
summarised as follows:
-- Operational risk: Inability to complete fully termed
agreements and secure a payment guarantee with ENEO. Inability to
recover outstanding receivables from customers. Technical risks or
significant cost overruns during the La-108 remediation and
completion resulting in the well being inoperable or
sub-economic.
-- Other operational risks: HSE and security incidents, title and licence risks, well/process plant/pipeline integrity risks, reliance on key customer risk
-- Financial risk: Ability to fund the Company with available
funds, debt, operational cash flows and other sources. Inability to
secure funding from partners to complete operational work
scopes.
-- External risks: Capital constraints, global economic
volatility, commodity price risk, legal compliance regulatory or
litigation risk, adverse market sentiment, political and country
risk
-- Strategic risks: Investment decisions, inadequate resources and reliance on key personnel
-- Other financial risks: Funding risk, counterparty credit
risk, management of costs and capital spending, tax risk
A more detailed listing of risks and uncertainties facing the
Group's business is listed on page 24 of the Report & Accounts
to 31 December 2018, which is available on the Victoria Oil &
Gas Plc website: www.victoriaoilandgas.com.
Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge the
unaudited interim condensed consolidated fFinancial statements have
been prepared in accordance with IAS 34 'Interim Financial
Reporting'.
Changes in Directors during the period is discussed in the
Corporate section of the Chairman's letter. A list of the current
Directors is available on the Company's website:
www.victoriaoilandgas.com.
Andrew Diamond
Finance Director
28 September 2019
Condensed Consolidated Income Statement
For the six-month period ended 30 June 2019 30 June
2018
Unaudited Unaudited
Note $000 $000
-------------------------------------- ---- ------------ ---------
Continuing operations
Revenue 10,682 5,014
Cost of sales (4,801) (5,990)
-------------------------------------- ---- ------------ ---------
Gross profit/loss 5,881 (976)
Administrative expenses (6,703) (3,164)
Other (losses)/gains (420) 1,135
Share of profit of associate - 259
Impairment of investment in associate (5,556) -
Operating loss (6,798) (2,746)
Finance costs (959) (1,082)
-------------------------------------- ---- ------------ ---------
Loss before tax (7,757) (3,828)
Tax 414 531
-------------------------------------- ---- ------------ ---------
Loss for the period - attributable
to shareholders of the parent (7,343) (3,297)
-------------------------------------- ---- ------------ ---------
Cents Cents
-------------------------------------- ---- ------------ ---------
Loss per share - basic & diluted 5 (3.68) (2.28)
-------------------------------------- ---- ------------ ---------
Condensed Consolidated Statement of Comprehensive Income
For the six-month period ended 30 June 2019 30 June 2018
Unaudited Unaudited
$000 $000
-------------------------------------------- ------------ ------------
Loss for the period (7,343) (3,297)
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translation
of foreign operations (8) 40
--------------------------------------------- ------------ ------------
Total comprehensive loss for the period
- attributable to shareholders of
the parent (7,351) (3,257)
--------------------------------------------- ------------ ------------
Condensed Consolidated Statement of Financial Position
As at 30 June 2019 31 December 2018
Unaudited Audited
Notes $000 $000
------------------------------ ----- ------------------------------ ----------------
Assets:
Non-current assets
Intangible assets 6 29,673 30,445
Property, plant and equipment 7 86,337 91,087
Investment in associate 8 - 5,556
116,010 127,088
------------------------------ ----- ------------------------------ ----------------
Current assets
Inventories 16 18
Trade and other receivables 9 13,385 8,666
Cash and cash equivalents 13 14,380 3,467
27,781 12,151
------------------------------ ----- ------------------------------ ----------------
Total assets 143,791 139,239
------------------------------ ----- ------------------------------ ----------------
Liabilities:
Current liabilities
Trade and other payables 10 6,235 10,800
Provisions 11 279 199
Borrowings 12,13 5,847 4,109
------------------------------ ----- ------------------------------ ----------------
12,361 15,108
------------------------------ ----- ------------------------------ ----------------
Net current assets 15,420 (2,957)
------------------------------ ----- ------------------------------ ----------------
Non-current liabilities
Borrowings 12,13 14,469 16,798
Deferred tax liabilities 1,497 2,030
Provisions 11 2,126 1,651
18,092 20,479
------------------------------ ----- ------------------------------ ----------------
Net assets 113,338 103,652
------------------------------ ----- ------------------------------ ----------------
Equity:
Called-up share capital 1,823 1,130
Share premium 42,623 26,254
ESOP Trust reserve - (4)
Translation reserve (17,642) (17,634)
Other reserve 291 401
Retained earnings 86,243 93,505
------------------------------ ----- ------------------------------ ----------------
Total equity 113,338 103,652
------------------------------ ----- ------------------------------ ----------------
Condensed Consolidated Statement of Changes in Equity
Retained
Share Share ESOP Trust Translation Other earnings/
capital premium reserve reserve reserves (deficit) Total
$000 $000 $000 $000 $000 $000 $000
------------------------- ------- ------- ---------- ----------- -------- --------- -------
For the six months ended
30 June 2018 (Unaudited)
At 31 December 2017 1,095 24,218 (4) (17,712) 248 102,005 109,850
Share-based payments - - - - 89 - 89
Warrants expired - - - - (21) 21 -
Total comprehensive loss
for the period - - - 40 - (3,297) (3,257)
------------------------- ------- ------- ---------- ----------- -------- --------- -------
At 30 June 2018 1,095 24,218 (4) (17,672) 316 98,729 106,682
------------------------- ------- ------- ---------- ----------- -------- --------- -------
For the six months ended
30 June 2019 (Unaudited)
At 31 December 2018 1,130 26,254 (4) (17,634) 401 93,505 103,652
Shares issued 693 16,369 - - (110) - 16,952
Shares granted to ESOP
members - - 4 - - 81 85
Total comprehensive loss
for the period - - - (8) - (7,343) (7,351)
------------------------- ------- ------- ---------- ----------- -------- --------- -------
At 30 June 2019 1,823 42,623 - (17,642) 291 86,243 113,338
------------------------- ------- ------- ---------- ----------- -------- --------- -------
Condensed Consolidated Cash Flow Statement
For the six-month period ended 30 June 2019 30 June 2018
Unaudited Unaudited
$000 $000
--------------------------------------------------- ------------ ------------
Cash flows from operating activities
Loss for the period (7,343) (3,297)
Adjustments for non-cash and other items:
Tax (414) (531)
Share of profit in associate - (259)
Impairment of investment in associate 5,556 -
Finance costs 959 1,082
Depreciation and amortisation 4,918 2,773
Other losses/(gains) 420 (1,135)
Shares vested by ESOP Trust 81 -
Share-based payments - 89
--------------------------------------------------- ------------ ------------
4,177 (1,278)
Movements in working capital
(Increase)/decrease in trade and other receivables (4,686) 2,898
Decrease/(increase) in inventories 2 (2)
Decrease in trade and other payables and
provisions (3,167) (4,953)
--------------------------------------------------- ------------ ------------
Net movements in working capital (7,851) (2,057)
Tax paid (119) -
Interest paid (902) (846)
Net cash used in operating activities (4,695) (4,181)
Cash flows from investing activities
Payments for intangible assets (320) (1,893)
Payments for property, plant and equipment (488) (529)
Proceeds from disposal of property, plant
and equipment 388 16
Dividends received from associate - 243
Net cash used in investing activities (420) (2,163)
Cash flows from financing activities
Repayments of borrowings (474) (2,233)
Net cash generated from equity raise 16,956 -
--------------------------------------------------- ------------ ------------
Net cash generated / (used) from financing
activities 16,482 (2,233)
--------------------------------------------------- ------------ ------------
Net increase / (decrease) in cash and cash
equivalents 11,367 (8,577)
--------------------------------------------------- ------------ ------------
Cash and cash equivalents - beginning of
period 3,467 11,476
Effects of exchange rate changes on the
balance of cash held in foreign currencies (454) 332
--------------------------------------------------- ------------ ------------
Cash and cash equivalents - end of period 14,380 3,231
--------------------------------------------------- ------------ ------------
Notes to the Unaudited Interim Condensed Consolidated Financial
Statements
1. GENERAL INFORMATION AND BASIS OF PREPARATION
The unaudited interim condensed consolidated financial
statements ("Interim Financial Statements") of Victoria Oil &
Gas Plc and its subsidiaries ("the Group") for the six months ended
30 June 2019 have been prepared in accordance with International
Financial Reporting Standards ("IFRS") and in accordance with
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 Group's
consolidated financial statements for the year ended 31 December
2018. The Group's presentation currency is the US Dollar and
amounts are rounded to the nearest thousand dollars ($000) except
as otherwise indicated.
The unaudited interim condensed consolidated financial
statements have been prepared on a going concern basis, under the
historical cost convention, except for the revaluation of certain
financial instruments.
2. ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the
Interim Financial Statements are consistent with those followed in
the preparation of the Group's consolidated financial statements
for the year ended 31 December 2018 except as set out below.
New amended standards adopted by the group
The Group adopted IFRS 16 which came into effect with effective
date 1 January 2019. Given the limited number of leases there has
been no material impact on the Interim Financial Statements due to
implementation of the standard as the majority of the Group leases
are short-term in nature.
The following Standards and Interpretations which are effective
since 1 January 2019 for the Group are not expected to have a
material effect on the results or financial position of the
Group:
-- IFRS 17 - Insurance Contracts
-- Amendments to IFRS 9 - Prepayment Features with Negative Compensation
-- Amendments to IAS 28 - Long-term Interests in Associates and Joint Ventures
-- Annual Improvements to IFRS Standards 2015-2017 Cycle -
Amendments to IFRS 3 Business Combinations, IFRS 11 Joint
Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs
-- Amendments to IAS 19 Employee Benefits-Plan Amendment, Curtailment or Settlement
-- IFRS 10 Consolidated Financial Statements and IAS 28
(amendments) - Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture
-- IFRIC 23 - Uncertainty over Income Tax Treatments
Critical Accounting Judgements
In the process of applying the Group's accounting policies,
management has made the following judgements that have the most
significant effect on the amounts recognised in the Interim
Financial Statements.
Going concern
The assessment of the Group's ability to execute its strategy by
funding future working capital requirements involves judgement.
The Directors monitor future cash requirements and are confident
that the Group is able to continue as a going concern and no
adjustment is required to the Interim Financial Statements. Further
information regarding going concern is outlined in Note 3.
As part of the assessment, management reviewed budgets and cash
flow forecasts and compared the requirements to available
resources, existing funding facilities and potential sources of
additional funds.
Unit-of-production depreciation method
The Group's policy is to use the unit-of-production method of
depreciation based on proved developed reserves for depreciation
and amortisation of its oil and gas assets. These calculations
require the use of estimates and assumptions and significant
judgement is required in assessing the amount of estimated
reserves. Estimates of oil and gas reserves are inherently
imprecise, require the application of judgement and are subject to
future revision. Changes in proved developed reserves will
prospectively affect the unit-of-production depreciation charges to
the Income Statement. Proved developed reserves used in the
calculation of unit-of-production depreciation were 68.2 billion
cubic feet ("bcf") (prior period: 21.1bcf) in the Logbaba Field.
The unit-of-production depreciation charged to the Income
Statement, which was calculated, based on these reserves, was $4.3
million (prior period: $2.3 million). If the reserves were to vary
by plus 10%, the unit-of-production depreciation for the reporting
period would have decreased by $0.5 million and if they were to
vary by minus 10% the unit-of-production depreciation for the
reporting period would have increased by $0.4 million.
Accounting for joint operations
During 2017, Société Nationale des Hydrocarbures ("SNH")
exercised its right to participate in the Concession Contract
governing the Logbaba Project, namely 5% of the Upstream operations
of the Logbaba Project. This participation is retrospective and
therefore SNH are deemed to have participated from the date of the
issue of the exploitation license, namely 29 April 2011. The net
share of this venture that has been included in these Interim
Financial Statements is 57% of the upstream operations and 60% of
the downstream operations.
The unaudited interim condensed consolidated financial
statements are prepared on the basis that downstream operations
charge cost plus 15% to the upstream operations as a fee for
transportation of the gas. Shared services have been allocated
between upstream and downstream operations based on the activity
during the period. Negotiations for the completion of the
participation are ongoing.
Impairment of investment in associate
Since January 2019, the Company has ceased to make payments
under the CHL Royalty Agreement. CHL has commenced proceedings
against both Gaz du Cameroun S.A. ("GDC") and Victoria Oil and Gas
Plc ("the Company") with regard to payments CHL believes it is
entitled to under the Royalty Agreement. The Company proposes to
vigorously defend such claim and is currently preparing its
defense. The Company has not accrued for CHL royalties during H1 19
and has reversed the accrual relating to the royalty from 31
December 2018. Furthermore, as the investment in associate relates
to the Groups 35% interest in CHL, the Company has fully impaired
this investment, resulting in an impairment charge of $5.6 million
during the period.
Key Sources of Estimation Uncertainty
The preparation of unaudited Interim Financial Statements
requires management to make estimates and assumptions that affect
the amounts reported for assets and liabilities as at the Balance
Sheet date and the amounts reported for revenues and expenses
during the period. The nature of estimation means that actual
outcomes could differ from those estimates. The key sources of
estimation uncertainty that have a significant risk of causing
material adjustment to the carrying amounts of assets and
liabilities within the next financial period are consistent with
those disclosed in the Group's consolidated financial statements
for the year ended 31 December 2018, namely the potential effects
of the risks associated with operating in Cameroon, Russia and
Kazakhstan; the uncertainties surrounding the determination of
various provisions; and considerations regarding the impairment of
the Group's assets.
3. GOING CONCERN
The Directors are required to give careful consideration to the
appropriateness of the going concern basis in the preparation of
the unaudited Interim Financial Statements.
Revenue in the reporting period was $10.7 million (prior period:
$5.0 million). The increase relates to the renewal of the ENEO
Cameroon S.A. ("ENEO") gas sale agreement in December 2018.
Underlying EBITDA for the reporting period of $3.7 million (prior
period: $0.03 million) reflects the increase in revenues. Having
raised $17.0 million in a fundraise in April 2019, the Group
consumed cash of $5.6 million during the reporting period (prior
period: $8.6 million). At 30 June 2019, the Group has $14.4 million
of cash and cash equivalents (31 December 2018: $3.5 million), and
$5.9 million net debt (31 December 2018: $17.4 million)
In their consideration of the appropriateness of applying the
going concern assumption the Directors have considered the
following factors, estimates and assumptions which are considered
to be relevant. Future outcomes may differ from these
estimates.
Availability of funding
On 5 April 2019, the Company issued 104,627,488 new Ordinary
Shares at a subscription price of 13 pence per share which
generated net proceeds of $17.0 million. The fundraise enabled the
settlement of residual drilling contractor payables and will allow
the payment of the land claim, reserve bonus obligation and
remediation works required on well La-108, as well as funding
further ongoing operations.
The Group does not have available funding under existing debt
facilities.
ENEO
On 21 December 2018, GDC and ENEO signed a new binding Term
Sheet for the consumption of gas for a three-year period and on 22
December 2018, ENEO resumed consuming gas from the 30MW power
station in Douala. As with the initial agreement with ENEO, the
binding Term Sheet contains minimum take or pay clauses set at 80%
of the contracted 30MW of power generation. The new binding Term
Sheet is no longer seasonally affected.
The parties are working diligently to finalise and execute fully
termed agreements and the provision of the required payment
security guarantee.
Remediation of well LA-108
GDC has commenced with the remediation of well La-108, which
aims to remove the stuck tool string and wire, and to perforate
additional horizons in the well. A failure to successfully complete
the remediation, or significant cost increases in performing the
programme may result in the Project not being able to monetise
available resources, or in a manner that is not profitable.
Conclusion
The Directors have reviewed operating and cash forecasts in
respect of the operating activities and planned work programmes of
the Group's assets. The expected operating cash flows, plus
available funding following the fundraise in 2019, after allowing
for funds required for administration and development costs,
working capital improvement and debt servicing, are expected to
cover these activities. The Directors are of the view that the
Group is sufficiently funded for the twelve-month period from the
date of approval of these Interim Financial Statements.
On this basis the Directors have concluded that it is
appropriate to prepare the Interim Financial Statements on a going
concern basis. Accordingly, these Interim Financial Statements do
not include any adjustments to the carrying amount and
classification of assets and liabilities that may arise if the
Group was unable to continue as a going concern.
4. SEGMENTAL ANALYSIS
IFRS 8 Operating Segments requires operating segments to be
identified on the basis of internal reports about the Group that
are regularly reviewed by the chief operating decision maker. The
Board is deemed the chief operating decision maker within the
Group. The Group has one class of business: oil and gas
exploration, development and production and the sale of
hydrocarbons and related activities. This is analysed on a location
basis. Only the Cameroon segment is generating revenue, which is
from the sale of hydrocarbons. For the purposes of segmental
reporting, the Russia and Kazakhstan segments have been combined as
the assets of these segments have both been fully impaired. The
accounting policies of the reportable segments are the same as the
Group's accounting policies.
The following tables present revenue, loss and certain asset and
liability information regarding the Group's business segments:
Russia and
Cameroon Kazakhstan Corporate Total
Six months to 30 June 2019 (Unaudited) $000 $000 $000 $000
--------------------------------------- -------- ---------- --------- --------
Revenue
Gas Sales - thermal power 5,591 - - 5,591
Gas Sales - industrial power 324 - - 324
Gas sales - grid power 4,298 - - 4,298
--------------------------------------- -------- ---------- --------- --------
Gas Revenue 10,213 - - 10,213
Condensate sales 469 - - 469
--------------------------------------- -------- ---------- --------- --------
Total Revenue 10,682 - - 10,682
--------------------------------------- -------- ---------- --------- --------
Segment result 1,632 177 (3,051) (1,242)
Impairment of investment in associate - - (5,556) (5,556)
Finance costs (881) (5) (73) (959)
--------------------------------------- -------- ---------- --------- --------
Loss before tax 751 172 (8,680) (7,757)
Tax 414 - - 414
--------------------------------------- -------- ---------- --------- --------
Loss for the period 1,165 172 (8,680) (7,343)
--------------------------------------- -------- ---------- --------- --------
Total assets 131,746 105 11,940 143,791
Total liabilities (28,172) (316) (1,965) (30,453)
Other segment information
Capital expenditure:
Intangible assets 320 - - 320
Property, plant and equipment 486 - 2 488
Depreciation and amortisation 4,903 - 15 4,918
Russia and
Cameroon Kazakhstan Corporate Total
Six months to 30 June 2018 (Unaudited) $000 $000 $000 $000
--------------------------------------- -------- ---------- --------- --------
Revenue
Gas Sales - thermal power 4,607 - - 4,607
Gas Sales - industrial power 155 - - 155
Gas sales - grid power - - - -
--------------------------------------- -------- ---------- --------- --------
Gas Revenue 4,762 - - 4,762
Condensate sales 252 - - 252
--------------------------------------- -------- ---------- --------- --------
Total Revenue 5,014 - - 5,014
--------------------------------------- -------- ---------- --------- --------
Segment result (1,555) (238) (953) (2,746)
Finance costs (991) (21) (70) (1,082)
--------------------------------------- -------- ---------- --------- --------
Loss before tax (2,546) (259) (1,023) (3,828)
Tax (55) - 586 531
--------------------------------------- -------- ---------- --------- --------
Loss for the period (2,601) (259) (437) (3,297)
--------------------------------------- -------- ---------- --------- --------
Total assets 137,934 80 7,532 145,546
Total liabilities (36,366) (488) (2,010) (38,864)
Other segment information
Capital expenditure:
Intangible assets 2,580 - - 2,580
Property, plant and equipment 529 - - 529
Depreciation and amortisation 2,743 - 30 2,773
5. LOSS PER SHARE
Basic loss per share is computed by dividing the loss after tax
for the period available to ordinary shareholders by the weighted
average number of ordinary shares in issue and ranking for dividend
during the period, excluding treasury shares held by the ESOP
Trust. Diluted loss per share is computed by dividing the profit or
loss after tax for the period by the weighted average number of
ordinary shares in issue, each adjusted for the effect of all
dilutive potential ordinary shares that were outstanding during the
period. If potential ordinary shares are anti-dilutive, they are
excluded from the diluted loss per share calculation.
The following table sets forth the computation for basic and
diluted loss per share.
For the six-month period ended 30 June 2019 30 June 2018
Unaudited Unaudited
$000 $000
----------------------------------------------- ------------ ------------
Loss for the period 7,343 3,297
----------------------------------------------- ------------ ------------
Number Number
----------------------------------------------- ------------ ------------
Weighted number of ordinary shares - basic and
diluted 199,802,376 144,497,228
----------------------------------------------- ------------ ------------
Cents Cents
----------------------------------------------- ------------ ------------
Loss per share - basic and diluted (3.68) (2.28)
----------------------------------------------- ------------ ------------
The loss for the six months to 30 June 2019, which incorporates
the $5.6 million impairment charge of the CHL investment, amounted
to $7.3 million (six months to 30 June 2018: $3.3 million). Basic
and diluted loss per share are the same in the current period, as
the effect of any potential shares is anti-dilutive, and it
therefore excluded.
6. INTANGIBLE ASSETS
Exploration and
evaluation assets Software Total
Six months to 30 June 2019
(Unaudited) $000 $000 $000
------------------------------- ----------------- -------- -------
Cost
Opening balance 102,279 383 102,662
Additions 320 - 320
Disposal - (97) (97)
Other movements (1,016) (1,016)
Effects of movement in foreign
exchange 1,728 - 1,728
------------------------------- ----------------- -------- -------
Closing balance 103,311 286 103,597
------------------------------- ----------------- -------- -------
Accumulated amortisation
Opening balance 72,026 191 72,217
Disposal - (72) (72)
Charge for the period - 51 51
Effects of movement in foreign
exchange 1,728 - 1,728
------------------------------- ----------------- -------- -------
Closing balance 73,754 170 73,924
------------------------------- ----------------- -------- -------
Carrying amount 30 June 2019 29,557 116 29,673
------------------------------- ----------------- -------- -------
Exploration and
evaluation assets Software Total
Twelve months to 31 December
2018 (Audited) $000 $000 $000
--------------------------------- ----------------- -------- --------
Cost
Opening balance 129,412 371 129,783
Additions 2,161 12 2,173
Effects of change in discounting
rate (192) - (192)
Transfer to property, plant
and equipment (25,683) - (25,683)
Effects of movement in foreign
exchange (3,419) - (3,419)
--------------------------------- ----------------- -------- --------
Closing balance 102,279 383 102,662
--------------------------------- ----------------- -------- --------
Accumulated amortisation
Opening balance 75,445 115 75,560
Charge for the period - 76 76
Effects of movement in foreign
exchange (3,419) - (3,419)
--------------------------------- ----------------- -------- --------
Closing balance 72,026 191 72,217
--------------------------------- ----------------- -------- --------
Carrying amount 31 December
2018 30,253 192 30,445
--------------------------------- ----------------- -------- --------
Other movements relate to reduction of costs associated with the
drilling programme following settlement with suppliers. The
remaining exploration and evaluation assets relate to the Logbaba
drilling programme.
Recoverability of exploration and evaluation assets is dependent
on the successful development of reserves, which is subject to a
number of uncertainties including the ability of the Group to
access financial resources to develop the projects and bring the
assets to economic maturity and profitability.
7. PROPERTY, PLANT AND EQUIPMENT
Plant and Oil and gas Assets under
equipment interest construction Total
Six months to 30 June 2019 (Unaudited) $000 $000 $000 $000
--------------------------------------- --------- ----------- ------------ -------
Cost
Opening balance 46,080 95,467 3,609 145,156
Additions 49 - 439 488
Transfers 233 104 (337) -
Disposals (132) - (357) (489)
--------------------------------------- --------- ----------- ------------ -------
Closing balance 46,230 95,571 3,354 145,155
--------------------------------------- --------- ----------- ------------ -------
Accumulated Depreciation
Opening balance 6,617 47,452 - 54,069
Disposals (118) - - (118)
Charge for the period 926 3,941 - 4,867
--------------------------------------- --------- ----------- ------------ -------
Closing balance 7,425 51,393 - 58,818
--------------------------------------- --------- ----------- ------------ -------
Carrying amount 30 June 2019 38,805 44,178 3,354 86,337
--------------------------------------- --------- ----------- ------------ -------
Plant and Oil and gas Assets under
equipment interest construction Total
Twelve months to 31 December
2018 (Audited) $000 $000 $000 $000
--------------------------------- --------- ----------- ------------ -------
Cost
Opening balance 40,829 72,213 6,589 119,631
Additions 265 285 1,209 1,759
Effect of change in discounting
rate (961) (577) - (1,538)
Transfers from intangible assets 6,289 23,546 (4,152) 25,683
Disposals (342) - (37) (379)
Closing balance 46,080 95,467 3,609 145,156
--------------------------------- --------- ----------- ------------ -------
Accumulated Depreciation
Opening balance 5,426 43,294 - 48,720
Disposals (382) - - (382)
Charge for the period 1,573 4,158 - 5,731
Closing balance 6,617 47,452 - 54,069
--------------------------------- --------- ----------- ------------ -------
Carrying amount 31 December
2018 39,463 48,015 3,609 91,087
--------------------------------- --------- ----------- ------------ -------
Production wells, which are included in oil and gas assets, are
depreciated on a unit-of-production basis.
Assets under construction comprise mainly of expenditure on the
uncompleted sections of the pipeline network and pipeline purchased
in advance of network development in Douala, Cameroon.
The realisation of property, plant and equipment of $86.3
million is dependent on the continued successful development of
economic reserves, which is subject to a number of uncertainties
including the Group's ability to access financial resources to
continue to successfully generate revenue from the assets.
8. INVESTMENT IN ASSOCIATE
The Company has a 35% interest in Cameroon Holdings Limited
("CHL"). Details of the investment are as follows:
Proportion ownership
interest and voting
power
Company Principal activity Place of incorporation held by the Group
and operation
------------------ --------------------- ----------------------- --------------------
Cameroon Holdings
Limited Oil and gas services Guernsey 35%
------------------ --------------------- ----------------------- --------------------
CHL is equity accounted in the Group financial statements as
follows:
30 June 31 December
2019 2018
Unaudited Audited
$'000 $'000
-------------------------------------- ---------- -----------
Opening balance 5,556 5,429
Share of profit of associate - 530
Dividends received - (403)
Impairment of investment in associate (5,556) -
-------------------------------------- ---------- -----------
Investment in associate - 5,556
-------------------------------------- ---------- -----------
Since January 2019 the Company has ceased to make payments under
the CHL Royalty Agreement. CHL has commenced proceedings against
both GDC and the Company with regard to payments CHL believes it is
entitled to under the Royalty Agreement. The CHL royalty paid by
GDC is the only source of revenue for CHL. Consequently, the
Company has fully impaired this investment, resulting in an
impairment charge of $5.6 million during H1 19.
9. TRADE AND OTHER RECEIVABLES
30 June 2019 31 December
2018
Unaudited Audited
$000 $000
----------------------------- -------------------------- ---------------------------
Amounts due within one year:
Trade receivables 7,222 2,677
Taxes recoverable 973 2,254
Prepayments 301 98
Other receivables 4,889 3,637
----------------------------- -------------------------- ---------------------------
13,385 8,666
----------------------------- -------------------------- ---------------------------
Other receivables includes amounts due from joint ventures
partners (RSM, SNH and AFEX) of $4.1 million (31 December 2018:
$2.5 million).
During the current period an additional doubtful debt provision
of $0.8 million was raised (31 December 2018: reduction of $0.7
million).
The carrying value of trade and other receivables approximates
to fair value.
10. TRADE AND OTHER PAYABLES
30 June 2019 31 December
2018
Unaudited Audited
$000 $000
-------------------------------- -------------------------- -----------------------
Amounts due within one year:
Trade payables 1,349 4,753
Taxes and social security costs 631 612
Accruals 1,613 2,423
Other payables 2,642 3,012
-------------------------------- -------------------------- -----------------------
6,235 10,800
-------------------------------- -------------------------- -----------------------
Other payables include an amount of $2.6 million (31 December
2018: $3.0m) due under the reserve bonus settlement.
The carrying value of trade and other payables approximates to
fair value.
11. PROVISIONS
30 June 2019 31 December 2018
Unaudited Audited
$000 $000
---------------------------------------------- -------------------------- ----------------
Decommissioning and rehabilitation provisions 964 909
Production bonus provision 475 451
Provision for legal matters 478 199
Other 488 291
---------------------------------------------- -------------------------- ----------------
2,405 1,850
---------------------------------------------- -------------------------- ----------------
12. BORROWINGS
30 June 2019 31 December 2018
Unaudited Audited
Amounts due within one year: $000 $000
----------------------------- ------------------------- ------------------------
Loans 5,847 4,109
----------------------------- ------------------------- ------------------------
5,847 4,109
----------------------------- ------------------------- ------------------------
Amounts due in more than one year but less
than five years:
------------------------------------------- ------------------------ -----------------------
Loans 14,469 16,798
------------------------------------------- ------------------------ -----------------------
14,469 16,798
------------------------------------------- ------------------------ -----------------------
Total borrowings 20,316 20,907
----------------- ------------------------ -----------------------
The outstanding balance on the BGFI Bank loan facility at 30
June 2019 was $18.8 million (31 December 2018: $19.4 million). The
loan has a remaining term of four years at 30 June 2019, and an
unchanged interest rate of 7.15%. The loan is secured by a pledge
over the revenue of certain customers, a pledge over attributable
gas production volumes equivalent to the monthly installments and
the ceding of GDC's rights in relation to proceeds from an event
resulting in an insurance claim for the tenor of the loan.
13. NET DEBT
As at 30 June 2019 31 December 2018
Unaudited Audited
$000 $000
------------------------------------ ------------------------ ------------------------
Cash and cash equivalents 14,380 3,467
Borrowings: Current liabilities (5,847) (4,109)
Borrowings: Non-current liabilities (14,469) (16,798)
------------------------------------ ------------------------ ------------------------
(5,936) (17,440)
------------------------------------ ------------------------ ------------------------
14. RELATED PARTY TRANSACTIONS
An advance of directors fees in the amount of $107,715 was made
to Roger Kennedy, Executive Chairman, in June 2019. At the date of
issuing these Interim Financial Statements an amount of $53,858
remained outstanding.
No further related party transactions have taken place during
the six-month period ended 30 June 2019 which have materially
affected the financial position or the performance of the Group
during that period.
15. COMMITMENTS
On 17 December 2018 the Group received the Presidential Decree
formalizing the assignment of a 75% participation in the Matanda
Block. The work program for the Matanda Block consists of
reprocessing and reinterpretation of existing seismic data and
drilling of one onshore well. The Group's share of the minimum work
program obligation is estimated to be $11.3 million, to be spent
within two years of the date of the Presidential decree.
16. CONTINGENT LIABILITIES
Royalty Obligations
The Group has certain royalty obligations in respect of the
Logbaba Project. The royalties and related expenses are as
follows:
-- 8% of gas production to the Cameroon State as provided by the
Concession Contract. The royalty will become payable after recovery
of Petroleum Costs, being defined as exploration costs, development
costs, exploitation costs, construction costs and general overhead
costs. At the Balance Sheet date, the Company had not accrued or
paid any royalty to the Cameroon State as Petroleum Costs exceed
gas revenue. The Group's interpretation as to the recoverability of
Petroleum Costs has not been formally agreed to by the Cameroon
State. Should the Group's interpretation prove incorrect and the 8%
royalty be payable on all gas production without recovery of
Petroleum Costs or separation into upstream and downstream
components, the Group's liability at 30 June 2019 would be $8.8
million (31 December 2018: $8.0 million);
-- Sliding scale production royalty to CHL ranging from 0-15% of
GDC revenue from the Logbaba Project for the life of the Logbaba
field (0% up to $30.0 million of cumulative GDC revenue from the
Logbaba Project; 15% of cumulative revenue greater than $30.0
million up to $240.0 million; 6% of cumulative revenues in excess
of $240.0 million). All royalty payments are subject to 15%
withholding tax in Cameroon. The Company has a 35% interest in CHL.
Since January 2019 the Company has ceased to make payments under
the CHL Royalty Agreement. CHL has commenced proceedings against
both GDC and the Company with regard to payments CHL believes it is
entitled to under the Royalty Agreement. In the event that the
legal proceedings result in GDC being obliged to continue paying
royalty payments, the Groups liability at 30 June 2019 would be
$1.7 million, less an anticipated dividend from CHL amounting to
$0.6 million.
Other Contingent Liabilities
The Group's partners in the Logbaba Project, RSM and SNH, are
both conducting audits on costs relating to years prior to the
Balance Sheet date. At the date of signing these Interim Financial
Statements the outcome of these audits is unknown however any
findings from the audits could have an impact on the results.
17. POST BALANCE SHEET EVENTS
The Group has signed a non-binding term sheet with Aksa Energy
to supply Aksa Energy with up to 25mmscfd of gas to Aksa Energy's
planned 150MW power station.
John Bryant resigned as an Independent Non-Executive Director on
8 July 2019.
On 9 August 2019, 433,735 Ordinary Shares were issued to a
Director on exercise of share options.
18. SEASONALITY
Revenues and operating profits for all customers are evenly
spread between the two half years.
19. APPROVAL OF INTERIM FINANCIAL STATEMENTS
The unaudited interim condensed consolidated financial
statements were approved by the Board of Directors on 28 September
2019.
Copies of the Interim report are available by download from the
Company's website at: www.victoriaoilandgas.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFVDARIAFIA
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Victoria Oil & Gas (LSE:VOG)
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From Apr 2023 to Apr 2024
