Interim Report

RNS Number : 5212F

Independent Resources PLC

18 June 2012

 



Independent Resources PLC
Interim report
Six months ended 31 March 2012
Highlights
Rivara Gas Storage:	Regional Earthquake creates uncertain timing for the project
Ribolla Gas Basin:	Geochemical operations demonstrate coal-derived thermogenic gas is also present in the basin underlying the southern block
Ksar Hadada Shale Oil:	Block subject to ongoing farm-out discussions, shallow 500,000 acre Silurian oil-shale play under review.
Business Development:	Sibilla CCS - Significant low-cost CO2 storage site now exclusive
	S.G. Gas production concession - pending award subject to competition
Strategy Review:	Major strategy review accelerated in light of Rivara's challenges
·	Net cash at 31 March 2012: £1.65 million
·	Interim loss before taxation: £980,000 (2011: £467,000)
·	Loss per share for the interim period: 2.1 p (2011: 1.0p)
Chairman's Statement
The October-March period progressed very well. We made fundamental progress on our key natural gas storage project, reached primary project milestones, and commenced a process of partially realizing its value. The Ksar Hadada onshore oil-prone Tunisian block attracted interest from prospective partners and these discussions continue. On the other hand, we were not able however to reach our stated objective of involving a credible partner in our Ribolla gas basin project. The Ribolla resource may therefore have to be proven through our own efforts.
After the period end however, an earthquake struck the area in which the Rivara project is situated. We were already in the midst of a strategy review when this happened and we are now taking stock of the challenging new situation for Rivara.
Let me briefly explain the likely consequences of these events and the steps we will be taking over the next few months.
Rivara
In arguably the most important development since our Company's admission to AIM, Italy's Ministry of Environment cleared the project to proceed by way of decree. Whilst we awaited a compromise agreement between the Ministry of Industry and the Emilia Romagna regional government, the Company intended to capitalize on this momentum by realizing some value from a partial sale of the project to a major European gas company and raising funds for its first phase of operations.
To assist in this regard, the Company announced that it had received the Subsurface Peer Review Report it had commissioned from Geostock, the Paris-based international engineering group and a key technical player in the underground storage of natural gas. The Peer Review is positive and confirms the attractive features of the project and adds to the Company's plans for the next phase of operations. A top-ranked international investment bank was mandated to manage the transaction and this was progressing well.
However, on May 20th an earthquake followed by similar magnitude aftershocks hit Italy's northern Emilia Romagna region where the Rivara underground gas storage project is situated. The seismicity covers an extensive area, is relatively deep, and is consistent with the Company's analysis of the geologic stress regime that is present in this area. The Company recently commented on the events.
There are a number of existing natural gas fields and storage facilities in proximity of the affected area and these remain unaffected and in operation. Heavily regulated gas storage facilities are engineered to account for these sorts of risks. The Company's planned operations prior to construction of the Rivara gas storage project include extensive in-situ measurements and geo-mechanical modelling. In parallel, the Company has planned extensive geochemical and seismic monitoring during the life of the project.

The tragic events that have affected Emilia Romagna are the subject of intense study by the competent authorities and will require time to interpret and verify for consistency with the models. The Company has already made all its data and studies available to the authorities to assist with this analysis, and has committed to contribute more going forward.

Amidst emotionally-charged politicians and the general public, attention has been focused on the safety of natural gas storage sites in Italy, whether existing or planned. Far worse, however has been allegations of some connection between general subsurface E&P operations and induced seismicity - as if these operations could or indeed had caused a magnitude 6 earthquake with multiple epicentres 10km beneath the surface. These irrational fears have taken hold and the authorities are struggling to manage the situation. The industry is alarmed and we are all bearing the consequences. There has been a lot of negative press and irresponsible political declarations as a consequence. The Company is trying to manage this difficult situation but will ensure its rights are protected. At this juncture the only certainty is that it will take time to sort this out in the interests of shareholders. The national government is aware of the danger to Italy's increasingly poor reputation as a destination for foreign investment. Time will tell if the government acts responsibly in this case.

Ribolla

We have already commented extensively about this major resource that was reviewed by Degolyer and MacNaughton. Original gas in place and gross prospective gas resources (mean estimates) for the main coal seam, together with associated low-grade coal and organic matter-rich shale are, respectively,15.2 and 4.5 billion cubic metres (537 and 160 billion cubic feet). An additional and promising 40-50m thick organic rich section has also been identified.

Farm-out negotiations have not yielded a suitable partner and we believe that this due in large part to the industry's challenges with unconventional plays in Europe which require well stimulation to become economically attractive. These challenges are related to uninformed but very vocal opposition on environmental grounds, but also higher than average operational costs related to the poor distribution of well-service assets in Europe. These tend to be concentrated in Poland where a relatively benign operational environment has evolved, despite the evident exploration risks.

Technical work progressed, and results became available in March. Geochemical and isotopic analyses of natural gas dissolved in deep-sourced spring water in the Casoni area confirmed the presence of coal-derived thermogenic methane. This confirms the presence of gas-bearing coal in the southern licence area.

The Company has developed a gradual multi-well test programme, using the best available techniques, having thoroughly analyzed the science that was learned from past operations. Our real challenge with Ribolla is that the Board decided that it would make more sense to bring in third party resource and expertise to manage such a programme, rather than expanding its own team. In the absence of such third party interest, that decision needs to be revisited. The Company has not yet decided how Ribolla would fit chronologically into the overall corporate development programme we are currently reviewing but it seems likely that this resource will have to be unlocked by our own team after all.

Ksar Hadada

The permit's Operator, PetroAsian Energy (Tunisia) Ltd, has a 78.03% Working Interest and IRG holds an 18.97% Working Interest. The JV has been focusing on a new reservoir compartment of the Sidi-Toui Cambro-Ordovician prospect, that is structurally higher relative to locations involving past operations. This new location was previously not available as it was in an area considered off-limits under the previous Tunisian regime. In the meantime, ETAP, the Tunisian national oil company, has been reviewing its production-sharing mechanism in the context of a potentially huge new oil frontier involving the oil-bearing Silurian Hot Shale. This tight source rock is pervasive and effectively underlies the entire residual area of the permit at relatively shallow depth. The permit has been the object of interest both by parties operating within Tunisia as well as without. The Company would prefer to be working alongside an investor interested in the unconventional oil potential.

Business Development

The Company has invested considerable effort into securing a so-called marginal gas field in Italy which is the object of an ongoing technically-driven competition. The discovery well was drilled by Italy's dominant oil & gas company and the field's owner was awarded a long-term production concession. Earlier in the year, Italy's Ministry of Industry invited a short-listed group to submit applications for its re-award as a production concession requiring investment in only gas treatment and the marketing of the resource. Should the field be awarded to the Company, we will go into further detail about the merits of the project. Success would bring short-term development, production, and cash flow. A decision is expected in July this year.

The Company has secured exclusivity for its Sibilla project, situated in the Adriatic. This CO2 storage application involves a very large offshore fractured carbonate aquifer and it is associated with a multi-client business plan to permanently store a minimum 400 million tonnes of CO2 over its lifetime, making it not only the lowest-unit-cost carbon capture and storage (CCS) facility, but one far from any anthropological interference, and subject only to centralized permitting. The Company is already active in seeking a partnership relationship with potential beneficiaries of carbon emission abatement.
CCS is a technique for trapping carbon dioxide as it is emitted from large point sources, compressing it, and transporting it to a suitable storage site where it is injected into the ground. The technology of carbon capture and storage has significant potential as a mitigation technique for climate change.
From 2013, under the next phase of the EU Emissions Trading Scheme (ETS), companies that invest in CCS will be able to earn credits for each tonne of carbon they store, in the same way companies currently earn credits for every tonne they prevent from entering the atmosphere. Many are even pushing for a double-credit system to help the first CCS projects, until the carbon price rises and the cost of the technologies gets cheaper.
Outlook
The set-back with Rivara is very unfortunate, particularly in light of the forward momentum we had established. The Company however is not satisfied with waiting for results there or elsewhere in our portfolio. We are actively working on a  revised strategy that recognizes some of the weaknesses in our Italo-centric and promote-oriented strategy. With banks and liquidity retrenching in a crisis-consumed world, environmental myths becoming conventional wisdom, and misguided and market-disrupting energy policies swaying politics in the wrong direction, our business environment was already evolving. We will be articulating this strategy over the months ahead whilst we seek to monetize in the short term some of our efforts to date. We cannot change nor could we have influenced Rivara's set-back but we remain hugely motivated and aligned with our investors in seeking a significant return on our investments.
For further information, please visit www.ir-plc.com or contact:
Grayson Nash	Independent Resources plc	[phone]
Allan Piper	Tavistock Communications	020 7920 3150
Simon Hudson		020 7920 3150
Jonathan Wright/ Stewart Dickson	Seymour Pierce Limited	020 7107 8000
(Corporate Finance)
Richard Redmayne/David Banks
(Corporate Broking)

Independent Resources PLC
Consolidated statement of comprehensive income
Six months ended 31 March 2012
		Unaudited		Unaudited
	1 October 2011 to		1 October 2010 to
	Notes	31 March 2012		31 March 2011
Continuing operations		£		£
Revenue	2	-		20,663
Cost of sales		-		-
Gross profit		-		20,663
Administrative expenses		(666,618)		(626,234)
Operating loss		(666,618)		(605,571)
Financial income	5	2,456		138,147
Financial expense	5	(315,512)		-
Loss on ordinary activities before taxation		(979,674)		(467,424)
Taxation	3	-		-
Loss for the period		(979,674)		(467,424)
Other comprehensive income:
Exchange difference on translating foreign operations		(486,964)		358,139
Total comprehensive loss for the period		(1,466,638)		(109,285)
Loss attributable to:
Owners of the parent		(959,637)		(455,220)
Non-controlling interests		(20,037)		(12,204)
		(979,674)		(467,424)
Total comprehensive loss attributable to:
Owners of the parent		(1,399,953)		(129,897)
Non-controlling interests		(66,685)		20,612
		(1,466,638)		(109,285)
Loss per share (pence)	4
From continuing operations:
Basic		(2.1)		(1.0)
Diluted		(2.1)		(1.0)

Independent Resources PLC
Consolidated statement of financial position
As at 31 March 2012
	Unaudited	Audited	Unaudited
	31 March	30 September	31 March
	2012	2011	2011
	£	£	£
Non-current assets
Property, plant and equipment	37,222	51,232	63,330
Goodwill	450,766	450,766	450,766
Other intangible assets	9,490,201	9,315,485	8,885,715
	9,978,189	9,817,483	9,399,811
Current assets
Other receivables	3,887,388	4,524,726	5,313,900
Current taxation assets	-	-	88,582
Cash and cash equivalents	1,653,763	2,501,605	2,831,000
	5,541,151	7,026,331	8,233,482
Current liabilities
Trade and other payables	(828,578)	(763,892)	(645,273)
	(828,578)	(763,892)	(645,273)
Net current assets	4,712,573	6,262,439	7,588,209
Net assets	14,690,762	16,079,922	16,988,020
Equity attributable to equity holders of the parent
Share capital	458,369	458,369	458,369
Share premium	15,287,351	15,287,351	15,287,351
Share option reserve	187,239	109,761	32,283
Foreign currency translation reserve	455,674	895,990	1,155,618
Retained earnings	(2,944,177)	(1,984,540)	(1,306,433)
	13,444,456	14,766,931	15,627,188
Non-controlling interests	1,246,306	1,312,991	1,360,832
Total equity	14,690,762	16,079,922	16,988,020

Independent Resources PLC
Consolidated statement of changes in equity
Six months ended 31 March 2012
					Foreign
				Share	currency		Non-
	Retained	Share	Share	option	translation		controlling	Total
	earnings	capital	premium	reserve	reserve	Total	interests	equity
	£	£	£	£	£	£	£	£
1 October 2010	(1,241,057)	458,369	15,287,351	389,844	830,295	15,724,802	1,340,220	17,065,022
Loss for the period	(455,220)	-	-	-	-	(455,220)	(12,204)	(467,424)
Exchange differences	-	-	-	-	325,323	325,323	32,816	358,139
Total comprehensive loss
for the period	(455,220)	-	-	-	325,323	(129,897)	20,612	(109,285)
Share-based payments	-	-	-	32,283	-	32,283	-	32,283
Share options lapsed
in the period	389,844	-	-	(389,844)	-	-	-	-
31 March 2011	(1,306,433)	458,369	15,287,351	32,283	1,155,618	15,627,188	1,360,832	16,988,020
1 October 2011	(1,984,540)	458,369	15,287,351	109,761	895,990	14,766,931	1,312,991	16,079,922
Loss for the period	(959,637)	-	-	-	-	(959,637)	(20,037)	(979,674)
Exchange differences	-	-	-	-	(440,316)	(440,316)	(46,648)	(486,964)
Total comprehensive loss
for the period	(959,637)	-	-	-	(440,316)	(1,399,953)	(66,685)	(1,466,638)
Share-based payments	-	-	-	77,478	-	77,478	-	77,478
Share options lapsed
in the period	-	-	-	-	-	-	-	-
31 March 2012	(2,944,177)	458,369	15,287,351	187,239	455,674	13,444,456	1,246,306	14,690,762

Independent Resources PLC
Consolidated statement of cash flows
Six months ended 31 March 2012
		Unaudited		Unaudited
		1 October 2011 to	1 October 2010 to
		31 March 2012		31 March 2011
		£		£
Cash flows from operating activities
Loss before taxation		(979,674)		(467,424)
Adjustments for:
	Depreciation of property, plant and equipment	12,175		14,623
	Financial income	(2,456)		(138,147)
	Financial expense	315,512		-
		(654,443)		(590,948)
Decrease in other receivables		327,338		251,881
Increase/(decrease) in trade and other payables		64,686		(247,044)
Share-based payments		77,478		32,283
Exchange rate difference on investments		(156,949)		161,103
Cash used in operations		(341,890)		(392,725)
Income taxes received		-		6
Net cash used in operating activities		(341,890)		(392,719)
Cash flows used in investing activities
Interest received		2,456		30,147
Interest paid		(5,512)		-
Purchase of intangible assets		(502,896)		(700,374)
Purchase of property, plant and equipment		-		(364)
Net cash used in investing activities		(505,952)		(670,591)
Net decrease in cash and cash equivalents		(847,842)		(1,063,310)
Cash and cash equivalents at beginning of the period		2,501,605		3,894,310
Cash and cash equivalents at end of the period		1,653,763		2,831,000

Independent Resources PLC
Notes to the interim financial information
Six months ended 31 March 2012
1.	Accounting policies
	General information
	The interim financial information is for Independent Resources plc ("the company") and subsidiary undertakings (together, the "Group"). The company is registered in England and Wales and incorporated under the Companies Act 2006. The consolidated financial information is presented in GBP ("£") unless otherwise stated.
	Basis of preparation
	The interim financial information, for the period from 1 October 2011 to 31 March 2012, has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards and International Accounting Standards as adopted by the European Union, and on the going concern basis.  They are in accordance with the accounting policies set out in the statutory accounts for the year ended 30 September 2011.
	The Interim Report is unaudited and does not constitute statutory financial statements.  The financial information for the year ended 30 September 2011 does not constitute statutory accounts, as defined in section 435 of the Companies Act 2006 but is based on those statutory financial statements.  Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies.
	The interim consolidated financial statements for the six months ended 31 March 2012 have been prepared in accordance with IAS 34, Interim Financial Reporting.
	The operations of Independent Resources Plc are not affected by seasonal variations.
	The directors do not propose a dividend for the period (2011: nil).
	The Interim Report for the six months ended 31 March 2012 was approved by the Directors on 14 June 2012.
	Copies of the Interim Report are available from the Company's website www.ir-plc.com.
2.	Business segments
	The group has adopted IFRS 8 Operating segments from 1 October 2009. Per IFRS 8, operating segments are based on internal reports about components of the group, which are regularly reviewed and used by the Board of Directors being the Chief Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance. The group's reportable operating segments are as follows:
	a.	Parent company
	b.	Rivara
	c.	Ribolla Basin CBM & Shale Gas Assets
	d.	Ksar Hadada
	The CODM monitors the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. Performance is based on assessing progress made on projects and the management of resources used. Segment assets and liabilities are presented inclusive of inter-segment balances.
	The group did not generate any revenue during the year to 30 September 2011 nor in the period to 31 March 2012.

Independent Resources PLC
Notes to the interim financial information
Six months ended 31 March 2012
2.	Business segments
				Ribolla Basin
		Parent		CBM & Shale
		company	Rivara	Gas Assets	Ksar Hadada	Consolidation	Total
		£	£	£	£	£	£
	Six months to 31 March 2012
	Interest revenue	2,450	3	3	-	-	2,456
	Interest expense	-	(315,512)	-	-	-	(315,512)
	Depreciation	-	1,678	10,497	-	-	12,175
	Impairment of
	intangible assets	-	-	-	-	-	-
	Income tax	-	-	-	-	-	-
	Loss for the period
	before taxation	(486,229)	(446,558)	(288,053)	(17,784)	258,950	(979,674)
	Assets	12,736,211	9,284,889	4,407,735	191,641	(11,101,136)	15,519,340
	Liabilities	(46,056)	(4,064,598)	(3,982,124)	(514,452)	7,778,652	(828,578)
	Six months to 31 March 2011
	Interest revenue	28,860	109,282	5	-	-	138,147
	Interest expense	-	-	-	-	-	-
	Depreciation	-	1,464	13,159	-	-	14,623
	Impairment of
	intangible assets	-	-	-	-	-	-
	Income tax	-	-	-	-	-	-
	Loss for the period
	before taxation	41,330	12,972	(230,336)	(91,573)	(199,817)	(467,424)
	Assets	13,213,220	10,034,474	4,703,744	130,226	(10,448,371)	17,633,293
	Liabilities	(57,533)	(3,689,244)	(4,628,316)	(433,232)	8,163,052	(645,273)

Independent Resources PLC
Notes to the interim financial information
Six months ended 31 March 2012
2.	Business segments
	The geographical split of non-current assets arises as follows:
		United
		Kingdom	Overseas	Total
		£	£	£
	31 March 2012
	Intangible assets	-	9,490,201	9,490,201
	Goodwill	-	450,766	450,766
	Property, plant and equipment	-	37,222	37,222
	31 March 2011
	Intangible assets	-	8,885,715	8,885,715
	Goodwill	-	450,766	450,766
	Property, plant and equipment	-	63,330	63,330
3.	Taxation
	The group has tax losses available to be carried forward in certain subsidiaries and the parent. With anticipated substantial lead times for the group's projects, and the possibility that these may therefore expire before their use, it is not considered appropriate to anticipate an asset value for them.
4.	Loss per share
	The calculation of basic and diluted loss per share at 31 March 2012 was based on the loss attributable to ordinary shareholders of £959,637. The weighted average number of ordinary shares outstanding during the period ending 31 March 2012 and the effect of dilutive ordinary shares to be issued are shown below.
	Contingently issuable shares such as included within the share option scheme have not been treated as dilutive as the market conditions have not been met at 31 March 2012.
		31 March 2012	31 March 2011
		£		£
	Net loss for the period	(959,637)		(455,220)
	Basic weighted average ordinary shares
	in issue during the period	45,836,867		45,836,867
	Diluted weighted average ordinary shares
	in issue during the period	45,836,867		45,836,867

Independent Resources PLC
Notes to the interim financial information
Six months ended 31 March 2012
5.	Net financial expense
	Net financial expense includes £310,000 (Period to 31 March 2011 - £108,000 income) relating to the decrease (Period to 31 March 2011 - increase) in the net present value of receivables which are measured at amortised cost due to the unwinding of the effective interest implicit in the discounting calculations. The charge for the period, rather than the more normal credit, arises from the expected deferral of the Rivara appraisal programme.
Registered office
Independent Resources plc
Tower Bridge House, St. Katharine's Way, London E1W 1DD
Email: [e-mail]
Commercial office
Piazza Mondadori 3, 20122 Milano, Italy
Telephone: [phone]
Fax: [phone]
Email: [e-mail]
Technical office
Viale Liegi 41,  00198 Rome, Italy
Telephone: [phone]
Fax: [phone]
Email: [e-mail]

 

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