Half Yearly Report

RNS Number : 0576P
Sound Oil PLC
27 September 2013
 



 

27 September 2013

 

Sound Oil plc

("Sound Oil" or "the Company")

 

2013 Interim Results

 

Sound Oil, the European / Mediterranean focused upstream oil and gas company, announces its unaudited interim results for the six months ended 30 June 2013.

 

Highlights

 

·     Recently announced successful drilling of the onshore Nervesa discovery in Northern Italy with increased estimated gas volume (24Bcf, €51m NPV10, 100% WI) positions the Company for material cash flows from 2015 and provides funding alternatives

·     Company preparing for drilling of Badile prospect (175 Bcf, €302m NPV10, 100% WI) in 2014

·     Preparations underway for drilling of Laura discovery (30 Bcf, €66m NPV10, 100% WI) in 2014

·     First production achieved at onshore Rapagnano gas field

 

Andrew Hockey, Sound Oil's Chairman, commented:

 

"As we predicted at the start of the year, 2013 to date has been a productive period for the Company and I am pleased to say that there is more to come in 2014. The highlight has been the successful drilling and completion of Nervesa, the first of our four planned high impact wells in Italy. Furthermore, I am delighted that the operations team in Milan has brought our first producing asset on-stream with the onshore Rapagnano gas field providing the Company's first revenue.

 

We are now pressing ahead with an ambitious exploration and appraisal programme in 2014."

 

For further information please contact:

 

Sound Oil

James Parsons, Chief Executive Officer

 

j.parsons@soundoil.co.uk

 

Smith & Williamson - Nominated Adviser

Azhic Basirov

David Jones

 

Tel: +44 (0)20 7131 4000

Peel Hunt - Broker

Richard Crichton

Charles Batten

 

Tel: +44 (0)20 7418 8900

 

 

Chairman's Statement

 

As we predicted at the start of the year, 2013 to date has been a productive period for your Company and I am pleased to say that there is more to come in 2014.

 

The highlight has been the successful drilling and completion of the first of our four planned high impact wells in Italy. The onshore Nervesa well has confirmed a gas discovery, achieving a stabilised total flow rate of 2.7mm scf/day from a dual string completion. The results of this well enabled the Company to revise its subsurface model for the full Nervesa field, leading to an increase in mid case recoverable resources from 21 to 24 Bcf with an estimated NPV10 circa €50m.

 

With this first Nervesa well, the Company has demonstrated to all its stakeholders (investors, the Italian authorities and the local Italian communities where it operates) that it can secure permits in Italy and safely and successfully execute complex drilling programmes. We will now commence development planning to move the Nervesa project into production with first gas expected in the second quarter of 2015.

 

Furthermore, I am delighted that the operations team in Milan has brought our first producing asset on-stream with the onshore Rapagnano gas field providing the Company's first revenue.

 

We are now pressing ahead with an ambitious exploration and appraisal programme in 2014 with plans to appraise Laura (30 Bscf, €66 million NPV), a significant offshore discovery, and to de-risk our exciting onshore exploration prospect Badile (175 Bscf, €302 million NPV). Badile and Laura, together with income from Nervesa, will give a solid platform for growth in Europe and around the Mediterranean from which to deliver our objective of significant total shareholder return.

 

To achieve this growth we have expanded our Executive Team, under CEO James Parsons. In the past few months, we have welcomed Stuart Joyner as Chief Financial Officer in London and Leonardo Spicci to supervise the Badile project in Milan, working alongside Luca Maddedu, Managing Director of our Italian operation.

 

Loss for the period at £1 million was 35% lower than in the previous period and, for the first time, it included a small gross profit from the start of Rapagnano production. In the Balance Sheet, expenditure on exploration assets was £2.9million mainly incurred on preparation for appraisal drilling on the first Nervesa well; £0.6 million was invested in production facilities at Rapagnano.

 

At end June, we had a cash balance of £6.4m. Your Board remains focused on increasing shareholder value, taking a prudent view of financing and maintaining a strong balance sheet.

 

In all of our activities, our prime concern is the protection of the environment in which we operate and the health and safety of our employees, contractors and stakeholders. I am proud to say that during a very active 2013 we have not incurred a single lost time incident. The Company remains committed to working with local communities and the authorities wherever we operate to ensure that Sound Oil continues to develop as a professional, responsible operator.

 

In closing, the Board and I would like to thank all of our shareholders for their continued support as always.

 

Andrew Hockey

Chairman

26 September 2013

 

Condensed Interim Consolidated

Income Statement

For the six months ended 30 June 2013

 



Six months
ended 30 June
2013
Unaudited

Six months
ended 30 June
2012
Unaudited

Year ended
31 December
2012
Audited


Notes

£'000

£'000

£'000

Revenue


106

-

-

Operating costs


(35)

-

-

Exploration and development costs


(15)

(49)

(1,455)

Gross profit / (loss)


56

(49)

(1,455)

Administrative expenses


(1,032)

(1,398)

(3,176)

Group trading loss from continuing operations


(976)

(1,447)

(4,631)

Finance revenue


5

8

11

Foreign exchange gain / (loss)


73

(112)

(174)

External interest costs (1)


(103)

-

(10)

Loss before income tax


(1,001)

(1,551)

(4,804)

Income tax


-

-

-

Loss for the period attributable to continuing operations


(1,001)

(1,551)

(4,804)

Loss on disposal from discontinued operations



-

(8,934)

Loss for the period attributable to owners of the parent


(1,001)

(1,551)

(13,738)

Other comprehensive income/(loss):





Foreign currency translation income/(loss)


586

(579)

427

Total comprehensive loss for the period attributable to owners of the parent


(415)

(2,130)

(13,311)

Loss per share (basic) from continuing operations (2)


(0.35)

(0.80)

(2.00)

Loss per share (diluted) from discontinued operations


-

-

(3.70)

 

(1):-               the monies funded from CSTI as part of their funding contract are accounted for as loans. Therefore there is an external interest charge

(2):-               prior period comparatives restated for the impact of the share consolidation completed in January 2013

 

 

Condensed Interim Consolidated

Balance Sheet

At 30 June 2013

 


Notes

30 June
2013
Unaudited
£'000

30 June
2012
Unaudited
£'000

31 December

2012

Audited

£'000

Non-current assets





Property, plant and equipment

6

1,556

1,125

853

Intangible assets


2,209

3,508

2,126

Exploration and evaluation assets

7

15,737

25,649

12,420

Other debtors


-

742

-



19,502

31,024

15,399

Current assets





Other debtors


1,472

1,436

2,774

Prepayments


120

24

38

Cash and short term deposits


6,399

5,149

6,909



7,991

6,609

9,721

Total assets


27,493

37,633

25,120

Current liabilities





Trade and other payables


2,036

2,039

719

Loans repayable in under one year


318

-

82



2,354

2,039

801

Non-current liabilities





Deferred tax liabilities


2,207

3,507

2,125

Loans due in over one year


1,062

-

-

Provisions


735

356

680



4,004

3,863

2,805

Total liabilities


6,358

5,902

3,606

Net assets


21,135

31,731

21,514

Capital and reserves attributable to equity holders of the company





Issued equity share capital and share premium


63,085

58,676

63,083

Accumulated deficit


(43,240)

(30,134)

(42,273)

Foreign currency reserve


1,290

3,189

704

Total equity


21,135

31,731

21,514

 

 

 

Condensed Interim Consolidated Statement

Of Changes in Equity

For the six months ended 30 June 2013

 


Share capital £'000

Share
premium
£'000

Accumulated deficit

 £'000

Foreign currency reserves

£'000

Total equity £'000

At 1 January 2013

2,870

60,213

(42,273)

704

21,514

Total loss for the period

-

-

(1,001)

-

(1,001)

Other comprehensive income

-

-

-

586

586

Total comprehensive income/(loss)

-

-

(1,001)

586

(415)

Issue of share capital

6

43

-

-

49

Transaction costs

-

(47)

-

-

(47)

Share based payments

-

-

34

-

34

At 30 June 2013 (unaudited)

2,876

60,209

(43,240)

1,290

21,135

 





Foreign



Share

Share

Accumulated

currency

Total


capital

premium

deficit

reserves

equity


£'000

£'000

£'000

£'000

£'000

At 1 January 2012

1,833

52,871

(28,606)

3,768

29,866

Total loss for the period

-

-

(1,551)

-

(1,551)

Other comprehensive income gain/(loss)

-

-

-

(579)

(579)

Total comprehensive income/(loss)

-

-

(1,551)

(579)

(2,130)

Issue of share capital

263

3,737

-

-

4,000

Share issue costs

-

(28)

-

-

(28)

Share based payments

-

-

23

-

23

At 30 June 2012 (unaudited)

2,096

56,580

(30,134)

3,189

31,731

 





Foreign



Share

Share

Accumulated

currency

Total


capital

premium

deficit

reserves

equity


£'000

£'000

£'000

£'000

£'000

At 1 January 2012

1,833

52,871

(28,606)

3,768

29,866

Total loss for the period excluding

exchange gain recycled to the income statement

-

-

(17,229)

-

(17,229)

Transfer from foreign currency reserve on disposal

-

-

3,491

(3,491)

-

Other comprehensive gain/(loss)

-

-

-

427

427

Total comprehensive income/(loss)

-

-

(13,738)

(3,064)

(16,802)

Issue of share capital

1,037

8,589

-

-

9,626

Transaction costs

-

(1,247)

-

-

(1,247)

Share based payments

-

-

71

-

71

At 31 December 2012

2,870

60,213

(42,273)

704

21,514

 

 

Condensed Interim Consolidated

Cash Flow

For the six months ended 30 June 2013

 


Six months
ended 30 June
2013
Unaudited
£'000

Six months
ended 30 June
2012
Unaudited
£'000

Year ended
31 December
2012
Audited
£'000

Cash flow from operating activities




Cash flow from operations

(979)

(1,715)

(4,327)

Interest received

5

8

11

Net cash flow from operating activities

(974)

(1,707)

(4,316)

Cash flow from investing activities




Capital expenditure and disposals

(14)

(10)

(80)

Exploration expenditure

(2,222)

(3,344)

(3,913)

Net cash inflow on disposal of subsidiary

-

-

2,515

Net cash flow from investing activities

(2,236)

(3,354)

(1,478)

Proceeds from CSTI funding contract

1,208

-

-

Net proceeds from equity issue

1,576

3,972

6,804

Net cash flow from financing activities

2,784

3,972

6,804

Net increase/(decrease) in cash and cash equivalents

(426)

(1,089)

1,010

Net foreign exchange difference

(84)

(48)

(387)

Cash and cash equivalents at the beginning of the period

6,909

6,286

6,286

Cash and cash equivalents at the end of the period

6,399

5,149

6,909

 

Notes to cash flow





Six months

Six months

Year ended


ended 30 June

ended 30 June

31 December


2013

2012

2012


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Cash flow from operations reconciliation




Loss before tax

(1,001)

(1,551)

(13,738)

Payroll bonuses paid in shares

-

-

-

Finance revenue

(5)

(8)

(11)

Foreign exchange (gain)/loss

-

-


Accrued interest charges

103

-

-

Exploration expenditure written off

15

49

13,538

Amortisation and depreciation

17

5

24

Share based payments charge

34

23

71

Increase in long term provisions

49

(1)

(20)

Decrease/(increase)in long term debtors

-

(81)

668

Decrease/(increase) in short term debtors

(356)

1

393

(Decrease)/increase in trade and other payables

165

(152)

(1,432)

(Profit)/loss on disposal of subsidiaries

-

-

(3,820)

Cash flow from operations

(979)

(1,715)

(4,327)

 


Six months

Six months

Year ended


ended 30 June

ended 30 June

31 December


2013

2012

2012


Unaudited

Unaudited

Audited

Cash flow from discontinued operations




Cashflow from investing activities

-

-

(2,184)

Cashflow from operating activities

-

-

(805)

Total cash outflow from discontinued operation

-

-

(2,989)

 

 

Notes to the Condensed Interim Consolidated

Financial Statements

 

1.            Basis of preparation

The condensed interim consolidated financial statements were approved for issue by the directors on 26 September 2013. They do not represent statutory accounts within the meaning of section 435 of the Companies Act 2006. The comparative financial information is based on the statutory accounts for the year ended 31 December 2012. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

 

The condensed interim financial information is unaudited and has been prepared on the basis of the accounting policies set out in the Group's 2012 statutory accounts in accordance with IAS 34 Interim Financial Reporting.

 

The seasonality or cyclicality of operations does not impact on the interim financial statements.

 

2.            Segment information

The Group categorises its operations into two business segments based on exploration and appraisal and development and production. The Group's exploration and appraisal activities are carried out in Italy under various licenses and permits.

 

The Group's reportable 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.

 

In the first half of 2013, the Group recognised its first revenue from the Rapagnano license. All sales and operating costs relate to production from that license. Details regarding each of the operations of each reportable segment is included in the following tables:

 

The segment results for the period ended 30 June 2013 are as follows:

 


Corporate

Development & production

Exploration & appraisal

Total


£'000

£'000

£'000

£'000

Sales and other operating revenues

-

106

-

106

Operating costs

-

(35)

-

(35)

Exploration costs

-

-

(15)

(15)

Administration expenses

(1,032)

-

-

(1,032)

Operating loss segment result

(1,032)

71

(15)

(976)

Interest receivable

5

-

-

5

Finance costs

(30)

-

-

(30)

Loss for the period before taxation

(1,057)

71

(15)

(1,001)

 

 

The segments' assets and liabilities at 30 June 2013 are as follows:

 


Corporate

£'000

Development &
production
£'000

Exploration &
appraisal
£'000

Total

£'000

Non-current assets

119

1,093

18,290

19,502

Current assets

7,991

-

-

7,991

Total liabilities

(6,358)

-

-

(6,358)

 

The segments' results for the period ended 30 June 2012 were as follows:



Development &

Exploration &



Corporate

production

appraisal

Total


£'000

£'000

£'000

£'000

Sales and other operating revenues

-

-

-

-

Other income/(loss)

-

-

-

-

Exploration costs

-

-

(49)

(49)

Impairment of exploration and evaluation assets

-

-

-

-

Administration expenses

(1,398)

-

-

(1,398)

Operating loss segment result

(1,398)

-

(49)

(1,447)

Interest receivable

8

-

-

8

Finance costs

(112)

-

-

(112)

Cost of acquiring subsidiaries

-

-

-

-

Loss on farmout disposals

-

-

-

-

Loss for the period before taxation

(1,502)

-

(49)

(1,551)

 

The segments' assets and liabilities at 30 June 2012 were as follows:



Development &

Exploration &



Corporate

production

appraisal

Total


£'000

£'000

£'000

£'000

Non-current assets

37

1,088

29,157

30,282

Current assets

7,351

-

-

7,351

Total liabilities

(5,902)

-

-

(5,902)

 

 

The segment results for the period ended 31 December 2012 were as follows:

 


Corporate

£'000

Development &
production
£'000

Exploration &
appraisal
£'000

Total

£'000

Sales and other operating revenues

-

-

-

-

Other income/(loss)

-

-

-

-

Exploration costs

-

-

-

-

Impairment of exploration and evaluation assets

-

(1,455)

-

(1,455)

Administration expenses

(3,176)

-

-

(3,176)

Operating loss segment result

(3,176)

(1,455)

-

(4,631)

Interest receivable

11

-

-

11

Interest payable

(10)

-

-

(10)

Finance costs

(174)

-

-

(174)

Gain on disposal of subsidiary

-

-

-

3,820

Loss for the period before taxation

(3,349)

(1,455)

-

(4,804)

 

The segments assets and liabilities at 31 December 2012 were as follows:



Development &

Exploration &



Corporate

production

appraisal

Total


£'000

£'000

£'000

£'000

Non-current assets

89

764

14,546

15,399

Current assets

9,721

-

-

9,721

Total liabilities

(3,606)

-

-

(3,606)

 

The geographical split of non-current assets were as follows:




UK

Italy




£'000

£'000

Development and production assets



-

765

Fixtures, fittings and office equipment



7

81

Goodwill



-

2,126

Exploration and evaluation assets



-

12,420

Total



7

15,392

 

3              Share based payments

 

No share options were awarded during the first half of 2013. The charge of £34,000 recognises the impact of the amortisation of the vesting period of previously made awards.

 

4.            Related party transactions

 

On 16th February 2013, the Group sold its 100% interest in its Indonesian subsidiary Mitra Energia Limited to a former non-executive director for $1. The company had no assets on disposal.

 

Apart from the above, there were no sales or purchases to or from related parties, no guarantees provided or received for any related party receivables or payables and no other transactions with related parties, directors' loans and other directors' interests.

 

5.            Loss per share

 

The calculations of basic loss per ordinary share is based on the loss after tax and on the weighted average number of ordinary shares in issue during the period. Basic loss per share is calculated as follows:

 


Loss after tax

Weighted average number of shares

Loss per share


June

June

December

June

June

December

June

June

December

December


2013

2012

2012

2013

2012

2012

2013

2012

2012

2012


£'000

£'000

£'000

million

million

million

pence

pence

pence

pence








Continuing

Continuing

Continuing

Discontinuing

Basic

(1,001)

(1,551)

(4,804)

288

204

242

(0.35)

(0.80)

(2.00)

(3.70)

 

Diluted loss per share has not been disclosed as inclusion of unexercised options would be anti-dilutive.

 

6.            Property, plant and equipment

 


30 June
2013
Unaudited
£'000

30 June
2012
Unaudited
£'000

31 December

2012

Audited

£'000

Development and production assets




Costs




At start of period

2,218

1,246

1,246

Additions

627

-

-

Decommissioning provisions

16

-

341

Disposals

-

-

(1,246)

Transfers (1)

-

-

1,877

Exchange adjustments

43

(158)

-

At end of period

2,904

1,088

2,218

Amortisation and depreciation




At start of period

1,453

-

-

Charge for the period

13

-

-

Disposals

-

-

-

Transfers (1)

-

-

1,453

Exchange adjustments

-

-

-

At end of period

1,466

-

1,453

Net book amount at end of period

1,438

1,088

765

 

Fixtures, fittings and office equipment




Costs




At start of period

191

204

204

Additions

14

10

80

Disposals

-

1

(88)

Transfers (1)

-

-

-

Exchange adjustments

5

(4)

(5)

At end of period

210

211

191

Depreciation




At start of period

88

172

172

Charge for the period

4

5

24

Disposals

-

1

(88)

Transfers (1)

-

-

-

Exchange adjustments

-

(4)

(5)

At end of period

92

174

103

Net book amount at end of period

118

37

88

Total net book amount at end of period

1,556

1,125

853

.




(1) Transfers represents the reclassification of assets from exploration and evaluation assets

7.            Exploration and evaluation assets


30 June

30 June

31 December


2013

2012

2012


Unaudited

Unaudited

Audited


£'000

£'000

£'000

Costs




At start of period

13,494

26,856

26,856

Additions

2,925

3,381

4,247

Disposals

-

-

(15,970)

Transfers (1)

-

-

(1,879)

Exchange adjustments

394

(585)

240

At end of period

16,813

29,652

13,494

Impairment




At start of period

(1,076)

(4,131)

(4,131)

Additions

-

(49)

(1,455)

Disposals

-

-

3,055

Transfers (1)

-

-

1,455

Exchange adjustments

-

177

-

At end of period

(1,076)

(4,003)

(1,076)

Net book amount at end of period

15,737

25,649

12,420

 

(1) Transfers represents the reclassification of assets to property, plant and equipment.

 

8.            Share Issues

 

On 4 January 2013, Sound Oil held a general meeting to approve the previously announced 1 for every 10 share consolidation. The consolidation was approved and consequently, Sound Oil shares were re-admitted to the AIM market with 287,012,882 shares in circulation.

 

On the 22 March 2013, Sound Oil announced the results of its Open Offer which had been announced on 24 January 2013 with an offer price of 8.073 pence per New Ordinary Share. The Offer was not underwritten. The Company received valid acceptances in respect of 605,662 Open Offer Shares from eligible shareholders. Consequently, the Company now has 287,618,544 Ordinary Shares in issue.

 

9.            Post Balance Sheet events

 

Appraisal drilling commenced in the Carita permit addressing the Nervesa discovery on 7 June 2013. The well was successfully drilled and the well test achieved a stabilised total gas flow rate of 2.7 MMscfd from multiple sandstone intervals in the Upper Miocene San Dona Formation using a dual string completion. Following a revision of the reservoir model for the full field, the P50 estimate of recoverable gas resources at Nervesa has increased to 24 Bscf.

 

In December 2012, at the request of the Italian Ministry for Economic Development, a bank guarantee was raised for €500,000 to cover any potential decommissioning liability relating to the Rapagnano license. The bank guarantee has now been returned by the Ministry and the guarantee has been cancelled.

On 4th September, the Company entered into an asset backed bridge loan facility for £2.5m with a syndicate of private investors. The bridge loan matures in February 2015 and carries a coupon of 10% per annum with an average annual fee of 9%. It is the Company's intention to draw down the bridge loan as required and to repay the loan with a portion of the proceeds from a Reserve Based Lending facility once secured.


This information is provided by RNS
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