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LGO Energy PLC (CERP)

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Friday 18 September, 2015

LGO Energy PLC

Unaudited Interim Results

RNS Number : 4485Z
LGO Energy PLC
18 September 2015
 

LGO Energy PLC

("LGO" or the "Company")

 

Unaudited Interim Results for 6 month period ending 30 June 2015

 

Highlights

For 6 month Period ending 30 June 2015

 

FINANCIAL

·      Revenue for period of £6,610,000 (1H 2014 £3,230,000), an increase of over 100%

·      Gross profit for period of £2,062,000 (1H 2014 £797,000), a rise of over 150%

·      Pre-tax group loss for period of £2,525,000 (1H 2014 loss of £2,489,000)

·      Pre-tax group loss for the period excluding non-cash items was £187,000 (1H 2014 loss of £2,176,000)

 

OPERATIONAL

·      Group oil sales in the period of 208,209 barrels net to LGO, (1H 2014: 64,754 barrels), an increase year on year of over 200%

·      A total of 3 new wells were drilled at the Goudron Field by 30 June.  A further 4 wells have been drilled to their total depth at the time of issue of this report with over 20,000 feet drilled year to date

·      New reserves report issued for Goudron, updating the 2012 report, increasing oil in place over 500% to 805 million barrels (mmbbls), and 1P reserves by 110% to 1.54 mmbbls

·      Exclusivity extended to September 2016 on the Beach Oil Field Limited ("BOLT") deep rights transaction in the Cedros Peninsula. Cedros licence applications progressed significantly including the BOLT deep rights, LGO's 100% owned Cedros leases and the 50% Icacos leases held jointly with the operator

·      Agreed acquisition of  25% interest in BOLT, thereby acquiring an indirect interest in the Cedros shallow rights including the Bonasse Field

·      Spanish oil production maintained at an average of 83 bopd (1H 2014: 78 bopd), with recent well performance improving significantly, increasing production to over 170 bopd in September 2015

·      A formal application submitted to the relevant Spanish authorities for two 10-year extensions of La Lora (Ayoluengo) Concession in Spain

·      GEPL has recently received CEC approval from the Trinidad and Tobago authorities for the drilling of 30 additional wells at the Goudron Field, increasing the available approved wells, not yet drilled, from 15 to 45.

 

CORPORATE

·      In January the Company raised £1.575 million through a secondary placement of 52.5 million ordinary shares at a price of 3p to support ongoing investments

·      US$25 million pre-paid oil swap facility agreed with BNP Paribas, with US$11.78 million drawn to date including the retirement of all existing debt

·      As part of the new debt arrangements with BNP Paribas, LGO raised £6.72 million in new share equity at 2.5p per share to retire all existing debt, for working capital and to support the development of its portfolio in Trinidad

 

KEY TARGETS FOR 2H 2015

·      Complete and bring on to production all seven 2015 C-sand wells at the Goudron Field

·      Manage Goudron production for maximum long-term value, by preserving reservoir integrity and developing the necessary infrastructure to facilitate growth as needed

·      Managing the business with low operating costs to provide a platform for economic growth despite continued low oil prices

·      Progress the Cedros Peninsular interests in Trinidad to ensure medium-term growth is maintained and long-term value is created

·      Maintain the Spanish assets for value in advance of the granting of the extension of the La Lora Concession

·      Seek further opportunities to expand the portfolio within the existing strategy, to provide longer-term diversified growth

 

NOTES

 

·      All figures are net LGO unless otherwise stated

 

Neil Ritson, LGO's Chief Executive, commented:

 

"LGO has had a strong first half to 2015 with continued operational success at its flagship Goudron Field development in Trinidad. We have drilled seven new wells using the knowledge acquired from the 2014 campaign to improve our drilling technique. Our focus now is on ensuring the optimum production management strategy implemented based on the extensive well testing we have undertaken.

 

Looking ahead, we have a clear set of objectives for the second half of the year, most importantly, to continue to manage costs to ensure robust economic growth despite the low oil price environment."

 

Enquiries:

LGO Energy plc

+44 (0) 203 794 9230

Neil Ritson

Fergus Jenkins




Beaumont Cornish Limited

+44(0) 20 7628 3396

Nomad


Rosalind Hill Abrahams

Roland Cornish




FirstEnergy Capital LLP

+44(0) 20 7448 0200

Joint Broker

Jonathan Wright

David van Erp

 


Bell Pottinger

+44 (0) 20 3772 2500

Financial PR

Henry Lerwill




 

 

 

Chief Executive's Review

 

LGO Energy plc ("LGO") continues its strategy of identifying, acquiring and developing assets within the oil and gas sector that provide the opportunity to unlock significant value through a combination of financial, commercial, and technical expertise.  The Company operates a low cost and low risk portfolio of production assets in Trinidad and Spain, with significant production and reserves upside, using similar operating approaches and proven production enhancement techniques.  LGO has specifically targeted onshore assets with low cost near term production upside and follow-on exploitation potential. 

 

The Company has continued to focus on its flagship Goudron Field development with the drilling of seven new wells and the commencement of planning for an enhanced oil recovery project which we expect will access significant additional resources.   The Company's activities at the Ayoluengo Field in Spain are currently being managed in a care and maintenance mode.  The emphasis at the Ayoluengo field in Northern Spain has continued to be on production efficiency and safety, with a parallel activity in Madrid and London focussed on the La Lora Concession renewal application. That application was formally submitted in early Q3 to the relevant Spanish authorities and will be the subject of further discussion in the second half of 2015.  Recent well clean-out activity at Ayoluengo has resulted in a marked increase in production in September and it is hoped this will be maintained.

 

In March 2015 the Company drew down US$11.8 million on a US$25 million pre-paid oil swap facility with BNP Paribas and will make the first payment due under that facility in early October.  The nature of the facility makes it especially suitable for periods of falling oil price since once the price is fixed at draw down, further falls in oil price reduce the repayments due and therefore act as a natural hedge to further downward movements in oil price.  In contrast it is less attractive to draw down further on the facility when the commodity prices are low and potentially rising or highly volatile and therefore the Company currently does not envisage drawing further on the facility in 2015, although this depends on oil price and the situation will be closely monitored.

 

Commercial and new business development activities in Trinidad remain focussed on building a sustainable platform for future production growth at Goudron and on other assets with similar potential.  Whilst the severe fall in oil prices has affected the pace of the Company's activities, we intend to reinvigorate activity when economic conditions are more favourable.  By maintaining low operating overheads and managing all existing assets for value, LGO has a platform for growth even at reduced oil prices. In the prevailing oil price environment the Company is revising its medium-term Group production guidance from 2,000 to 1,500 bopd.  Additional production potential may be realised through the 2015 wells drilled to date, however, it is considered prudent to base the short-term expected cash flow for reinvestment on conservative estimates of both production and oil price realisation.

 

The Company is maintaining its focus on health, safety and environment, being responsive to all potential risks and seeking to mitigate the impact of its operations on the environment where ever practical.

 

 

Trinidad & Tobago

 

The Company, through various wholly owned subsidiaries, holds interests in two producing fields, Goudron and Icacos, and in a number of private petroleum leases where production has yet to be established.  Trinidad is currently the strategic focus of the Company's activities and represents the bulk of near-term growth and significant long-term growth potential both within existing assets and in additional assets acquired through third-party arrangements or directly from the Trinidad and Tobago State.

 

Goudron

 

LGO acquired the rights to the Goudron Field, the Incremental Production Service Contract ("IPSC"), through its wholly owned subsidiary, Goudron E&P Limited ("GEPL"), in October 2012. The Goudron Field lies in the Eastern Fields Area in south eastern onshore Trinidad.  Under the terms of the IPSC the Company acts as a service contractor to the Petroleum Company of Trinidad & Tobago ("Petrotrin") who reimburse LGO on the basis of the oil sales and realised oil price.

 

On taking over the full-time operation of the contract, GEPL carried out well work-overs and since April 2013 two work-over rigs have been deployed at the field carrying out well reactivations and optimisations. In April 2014 drilling operations commenced on new development wells, specifically targeting the under-exploited C-sand formation, and by the end of 2014 eight new wells had been successfully drilled to the C-sand target.  Based on this success a programme of at least seven wells was agreed for 2015.  Well Services Rig 70 has been used for the 2015 drilling campaign which commenced with well GY-672 on 14 April 2015.  All seven wells; GY-672 to GY-678, have now been drilled. Relevant data on the drilling of the 2015 wells is provided in Table 1 below.

 

The C-sand pay logged in GY-678 includes a previously unconfirmed deeper sand package that has excellent reservoir characteristics and has a higher oil/gas ratio than the upper sands which were successfully completed in GY-670.  The production potential of the deeper interval can only be fully established through testing, however, initial indications are that this zone will add substantial production to the field. The extent of this additional pay zone will be further evaluated during production operations, and that may lead to the booking of additional reserves in the coming year.  However, a mechanical problem in the 678 well bore, an obstruction at approximately 1,800 feet MD, below the 9 5/8-inch casing in open hole, has prevented the well from being completed and brought on to production at this time.  Due to the exceptionally good oil pay observed in the well the Company is currently assessing options to side-track the well around the obstruction so that it can be completed as previously envisaged.

 

Following the 2014 drilling campaign various improvements in the drilling technique, including using measurement and logging whilst drilling, and deploying an intermediate casing string to ensure full pressure isolation of gas sands in the upper pre-Mayaro sequence were successfully applied to the 2015 drilling campaign. During 2015 additional pressure and core data was acquired from a number of wells to assist with long-term field development plans and optimisation, including an enhanced oil recovery ("EOR") scheme.

 

LGO has adopted a conservative reservoir management strategy with the new producing wells. The wells are produced via a restricted choke at stable constrained production rates, increasing the choke size progressively over time to maintain a stable production rate where possible.  Once pressure in the well declines to zero on an open choke wells are recompleted with conventional down-hole pumps to continue production. 

 

As part of the 2015 drilling campaign GEPL has performed extensive well testing on new wells to establish, where ever possible, the optimum production management strategy, well by well.  The use of a gas separator and smaller choke sizes than had been applied in the earlier days of the field development has proved to be advantageous.

 

Table 1: Goudron 2015 Development Wells

 

Well

Name

Spud

Date

Total Depth

(MD feet)

Date Total Depth Reached

Date Placed on Initial Production

1

GY-672

14/04/15

3,608

27/04/15

17/06/15

2

GY-673

01/05/15

3,193

16/05/15

01/07/15

3

GY-674

21/05/15

3,458

05/06/15

04/07/15

4

GY-675

14/06/15

3,660

30/06/15

19/08/15

5

GY-676

05/07/15

3,545

19/07/15

22/08/15

6

GY-677

27/07/15

3,135

08/08/15

25/08/15

7

GY-678

13/08/15

4,219

04/09/15

N/A

All depths are quoted as measured depth ("MD") in feet below kelly bushing

 

Work has continued on the provision of additional infrastructure in the field to support present and future oil and water handling requirements. GEPL has approval for the installation of two new 5,000 barrel sales tanks to be constructed as needed to meet efficient operation of the field.  A lease area custody transfer ("LACT") meter is also planned as and when needed to streamline production into the Petrotrin owned pipelines that lead to the Point au Pierre refinery where the Goudron oil is processed. Petrotrin has also constructed a larger diameter pipeline from the field export facility to the main pipeline and this will be commissioned when all relevant agreements are in place with third-parties.

 

During the period April to July 2015 five legacy wells were reactivated with the use of new perforations into existing and new production zones at both the Goudron Sandstone and C-sand horizons.  This work has assisted in offsetting the production decline of the legacy wells and further candidates for improved production in legacy wells are being sought, however, the principal focus of the operations remains new wells and their successful management. 

 

Oil production has been established from all wells GY-672 to GY-677, with various production strategies being used depending on the production test results that have been obtained.  Three of the six wells drilled in 2015 have been placed on downhole pump production whilst two, GY-675 and GY-677, are natural flowing through 7/32-inch chokes from the C-sand level and well GY-672 has been recompleted in the Goudron Sandstone.  Production from the five 2015 wells which have been completed at the C-sand level has yet to be fully optimised.  Using the Company's conservative production strategies it is expected that, once steps are completed to optimise the production from these wells, initial average rates of close to 100 bopd per well may be achieved.

 

During the drilling of the 15 new C-sand wells in 2014 and 2015 the shallower Goudron Sandstone was found to be oil bearing in all wells and it is now planned to initiate a campaign of specific Goudron Sandstone drilling.  In order to provide supporting information for the Goudron sandstone programme well GY-672 at drilling Pad-4, drilled to the C-sand close to the field boundaries, has been plugged back and re-perforated at the Goudron Sandstone level.  Well GY-672 has been flowing oil naturally from a 272-foot interval of Goudron Sandstone at an initial rate of approximately 60 bopd.  This is a very positive result and indication of the potential for additional low cost production from the field and plans are being advanced to drill a series of vertical Goudron Sandstone wells to a maximum depth of 1,700 feet.  Ten locations have already been selected where individual wells could be sited close to infrastructure, but away from existing Goudron Sandstone production, and it is hoped to commence drilling on these targets in 2015. 

 

Data from the new wells, along with data from the reactivated and legacy wells, was analysed by LR Senergy in 2014 in order to construct a comprehensive new geological ("static") model of the field. That static model was subsequently used in a new reserves estimate and Competent Persons Report ("CPR") which was published in June 2015.  One key finding of the CPR was that the best estimate oil in place ("STOIIP") is five-fold larger than that previously derived in 2012 based on data available at that time.  The new STOIIP estimated at a best estimate ("P50") level by LR Senergy is 805 million barrels ("mmbbls").  This provides a very substantial resource base for LGO to develop over the next few years.  Gross proven (1P) reserves have increased by 110% to 1.54 mmbbls, and proven and probable (2P) reserves by 60% to 11.37 mmbbls.

 

The new reserves reported for the Goudron field as at 30 June 2015 are summarised in Table 2 below.

 

Table 2: Goudron Reserves Summary (million barrels of oil, mmbbls)

 

Gross (1)

1P

2P

3P

Net Attributable (2)

1P

2P

3P

Reserves

1.54

11.37

23.58


1.47

11.30

23.51

Sources: (1) LR Senergy, June 2015 and (2) LGO Energy, June 2015

 

The distribution of oil in place between different horizons and different areal zones is summarised in Table 3 below.

 

Table 3: Oil in place data (million barrels of oil)

 



Gross Oil in Place (STOIIP)

Best Estimate, P50

Historic Field Area

Goudron Sandstone only

112


C-Sands only

125


Consolidated Total

237

Well Constrained Area

Goudron Sandstone only

170


C-Sands only

320


Consolidated Total

490

Upside Area

Goudron Sandstone only

343


C-Sands only

462


Consolidated Total

805

Source: LR Senergy, June 2015

 

To assist with the anticipated enhanced oil recovery ("EOR") scheme, a 30-foot core was acquired in each of wells GY-674 and GY-678.  Analysis of the cores will be used, along with other information collected in the 15 wells drilled since April 2014, in the ongoing EOR design work which the Company anticipates could lead to an initial phase of the water flood commencing in late 2016.

 

 

Cedros Peninsula

 

Through its local subsidiary, Leni Trinidad Limited ("LTL"), LGO holds a 50% interest in the producing Icacos Oil Field in the Cedros Peninsula where production has maintained at similar levels to prior periods at roughly 35 bopd gross.  Routine maintenance is planned for 2015 and the field, which currently remains subject to an application to the Trinidad and Tobago Ministry of Energy and Energy Affairs ("MOEEA") for a new private petroleum licence ("PPL"), may be a target for additional activity following receipt of the PPL.

 

In the wider Cedros Peninsular, LGO holds a number of 100% owned private petroleum leases totalling approximately 1,750 acres and the Company is in the process of obtaining a private petroleum licence from the MOEEA in order to carry out a number of field surveys with a view to drilling exploration wells at some point in the future. 

 

LGO entered into a Letter of Intent with Beach Oilfield Limited ("BOLT") to cross-assign the interests of the two companies within the Cedros Peninsula at stratigraphic levels below 7,000 feet.  LTL will be the operator of the combined leases and will hold a 100% working interest of the deeper rights, with BOLT receiving an overriding royalty on any future production revenues. Progress continues to be made on bringing this arrangement into effect and two payments were made to BOLT in the form of LGO shares to maintain exclusivity on the prospects whilst leasing arrangements were finalised.  The share payments are refundable with a long-stop date of 30 September 2016 for completion of the necessary lease and licence assignments. On completion of this transaction LTL will hold interests in over 10,900 acres of petroleum leases in the Cedros Peninsula.  LGO has also committed to acquire a 25% interest in BOLT for a payment of US$250,000 in cash and shares.  This will additionally give LGO some ownership in the stratigraphic levels above 7,000 feet which includes the producing Bonasse Oil Field. Further details of this acquisition will be announced when completed.

 

LGO tendered, in 2013, for a Full Tensor Gravity ("FTG") survey to be flown over the entirety of southern Trinidad to assist in its ongoing operations in Cedros and Goudron, and to look for additional investment opportunities. LGO, through its wholly owned subsidy Columbus Energy Services Limited ("CESL"), provided both logistical and financial assistance to the chosen FTG contractor ARKeX Limited ("ARKeX").  The aircraft arrived in Trinidad in early January 2015 and flew a 5,700 square kilometre survey which has been processed by ARKeX at their head offices in Cambridge, UK.  Additional proprietary interpretation is now being undertaken, integrating the airborne gravity and magnetic field readings with other relevant well and seismic data.  Initial indications of data quality and utility are very good and the processed data has already been of assistance to GEPL in the Goudron field where there is no available seismic data.

 

During 2014 a surface soil geochemistry survey was conducted in collaboration with BOLT over the entirety of the Cedros peninsula with initial findings from this work published in May 2015 with further results expected to be available later in 2015.  To date the geochemistry has identified a significant number of leads, several of which are not connected with any known accumulations of oil or gas, and these leads are being further evaluated through integrating the available wells, seismic and FTG data.

 

 

Other Trinidad

 

In late 2014 LGO entered into a Sale and Purchase Agreement ("SPA") with Trinity Exploration and Production plc ("Trinity") to acquire the shares of a Trinity subsidiary Tabaquite Exploration & Production Limited ("TEPL").  LGO subsequently notified Trinity that it considered Trinity in breach of the SPA.  The parties have so far been unable to resolve this matter and are considering various courses of action designed to reach a resolution.

 

 

Spain

 

LGO holds 100% ownership through its wholly owned subsidiary, Compañia Petrolifera de Sedano ("CPS"), in the La Lora Production Concession ("La Lora") (which contains the producing Ayoluengo oilfield), and three exploration permits; Basconcillos-H, Huermeces and Valderredible, in Northern Spain.   An application for the production of oil from the Hontomin discovery in the Huermeces permit has been made and is pending award. 

 

The current 50 year La Lora concession expires in January 2017 after which, so long as the field is still producing and certain other conditions are met, the concession can be renewed for one, or perhaps two, further 10-year periods.  In August 2015 a full application for the renewal of La Lora was filed with the various relevant authorities in Spain and the management remain confident that the concession will be renewed.  Initial post-renewal work plans include the side-tracking of a number of existing wells into areas of the reservoir believed to contain unswept oil.  The combination of new well bores and unswept oil is anticipated to provide significant production uplift once the work is undertaken.

 

The Company maintains a regular well intervention programme using a combination of hot oil, xylene and acid which leads to improvements in production despite the age and condition of many of the active wells.  Action has also been taken to reactivate a number of dormant wells through mechanical as well as chemical means.  These interventions, using the Company owned Cardwell work-over rig, have continued in 1H 2015 so as to gain maximum production whilst limiting operating costs.  The recent clean out of well Ayo-37 has resulted in the marked increase in the daily production at the field. Production to date in September 2015 has averaged 174 bopd.

 

Oil sales were made exclusively to Saint-Gobain Vicasa SA ("Saint-Gobain") under a contract renewed in 2012.  Saint-Gobain uses the Ayoluengo crude oil as fuel oil in their factories within Northern Spain.  Under the terms of the contract CPS receives a price linked to Brent with discounts to adjust for the fuel oil grade and chemistry. This contract has been renegotiated in 2015 to take account of the current low energy prices and the price discount to Brent is now on a sliding scale, with the discount reducing as oil prices fall. The new terms come into effect on 22 September 2015.  CPS has also renewed its long-term contractual arrangements to supply the BP España Castellon refinery under certain conditions that are likely to be met once new investments have been made following any renewal of the La Lora concession.

 

Outlook

 

The Company continues to focus on the long-term value of the significant potential in its portfolio whilst being conscious of the need for short-term capital discipline.  Spain will continue to be managed for value and in a profitable and safe fashion pending the extension of the La Lora Concession.  Drilling of several Goudron Sandstone and the drilling of highly selective further C-sand wells at the Goudron Field will be used to manage production and improve underlying Group profitability to the extent that capital is available.  Safe and environmentally sound oilfield operations will remain central to the Company's long-term growth proposition.

    

 

Neil Ritson

Chief Executive Officer

18 September 2015

 

 

 

Qualified Person's statement:

The information contained in this document has been reviewed and approved by Neil Ritson, Executive Director for LGO Energy plc.  Mr Ritson is a member of the Society of Petroleum Engineers, a Fellow of the Geological Society and an Active Member of the American Association of Petroleum Geologists.  Mr Ritson has over 38 years of relevant experience in the oil industry.

 



 

 

GLOSSARY & NOTES

 

1P

proven reserves

2P

proven plus probable reserves

3P

proven plus probable plus possible reserves

AIM

London Stock Exchange Alternative Investment Market

API

American Petroleum Institute

ARKeX

ARKeX Limited

barrel or bbl

45 US gallons

Bbls

barrels of oil

Bcf

billion cubic feet

best estimate or P50

the most likely estimate of a parameter based on all available data, also often termed the P50 (or the value of a probability distribution of outcomes at the 50% confidence level)

BOLT

Beach Oilfield Limited

bopd

barrels of oil per day

Brent

the Brent oil price marker crude

Core

a section of subsurface rock obtained whilst drilling and recovered to surface for analysis

C-sand

Goudron field sandstone reservoirs below the pre-Mayaro unconformity and above the pre-Lower Cruse unconformity encompassing sandstones of equivalent age to both the Gros Morne and the Lower Cruse formations

CESL

Columbus Energy Services Limited

CPR

Competent Persons Report

CPS

Compañia Petrolifera de Sedano

EOR

enhanced oil recovery

FTG

Full Tensor Gravity Gradiometry. Full tensor gradiometers measure the rate of change of the gravity vector in all three perpendicular directions

GEPL

Goudron E&P Limited

Goudron Sandstone

Goudron field reservoir sands above the pre-Mayaro unconformity

gravity gradiometry

measurements of the variations in the acceleration due to gravity. The gravity gradient is the spatial rate of change of gravitational acceleration

IPSC

incremental production service contract

LACT

lease area custody transfer (meter)

La Lora

La Lora Production Concession in Spain

LTL

Leni Trinidad Limited

MD

measured depth; the depth of a well measured along the length of the borehole

MOEEA

Trinidad and Tobago Ministry of Energy and Energy Affairs

M

thousand

Mm

million

Mmbbls

million barrels of oil

net attributable

those quantities of oil that are attributed to the Company at the point of sale

Saint-Gobain

Saint-Gobain Vicasa SA

STOIIP or oil in place

stock tank oil initially in place, those quantities of oil that are estimated to be in known reservoirs prior to production commencing

Pay

reservoir or portion of a reservoir formation that contains economically producible hydrocarbons. The overall interval in which pay sections occur is the gross pay; the portion of the gross pay that meets specific criteria such as minimum porosity, permeability and hydrocarbon saturation are termed net pay

Petrotrin

Petroleum Company of Trinidad and Tobago

PPL

private petroleum rights licence

proven reserves

those quantities of petroleum, which, by analysis of geoscience and

engineering data, can be estimated with reasonable certainty to be commercially recoverable (1P), from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations

probable reserves

those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves (2P)

possible reserves

those additional reserves which analysis of geoscience and engineering data suggest are less likely to be recoverable than Probable Reserves. The total quantities ultimately recovered from the project have a low probability to exceed the sum of Proved plus Probable plus Possible (3P) Reserves, which is equivalent to the high estimate scenario

Reserves

those quantities of petroleum anticipated to be commercially recovered by application of development projects to known accumulations from a given date forward under defined conditions

side-track

an additional or replacement well bore created from an existing well bore at a depth below the surface casing

TD

total depth

TVD

true vertical depth

WTI

West Texas Intermediate; oil price market crude

 

The estimates provided in this statement are based on the Petroleum Resources Management System ("PRMS") published by the Society of Petroleum Engineers ("SPE") and are reported consistent with the SPE's 2011 guidelines.   All definitions used in the announcement have the meaning given to them in the PRMS.



 

 

FINANCIAL STATEMENTS

 

GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 



Six months to

30 June 2015
(Unaudited)

Six months to

30 June 2014
(Unaudited)

Year ended

31 December 2014

(Audited)


Notes

£ 000's

£ 000's

£ 000's






Revenue


6,610

3,230

9,211

Cost of sales *


(4,548)

(2,433)

(6,263)

Gross profit


2,062

797

2,948






Administrative expenses


(2,475)

(3,233)

(4,871)

Amortisation and depreciation


(785)

(188)

(1,480)

Share based payments


-

(125)

(824)

Loss from operations


(1,198)

(2,749)

(4,227)






Finance charges **


(1,327)

(148)

(1,293)

Finance revenue


-

1

-

Other Income


-

407

408

Loss before taxation


(2,525)

(2,489)

(5,112)






Income tax expense


(117)

(30)

(960)

Loss for the period


(2,642)

(2,519)

(6,072)






Other comprehensive income





Exchange differences on translation of foreign operations


(898)

(406)

622

Other comprehensive income for the period net of taxation


(898)

(406)

622






Total comprehensive income for the period attributable to equity holders of the parent


(3,540)

(2,925)

(5,450)






Loss per share (pence)





Basic

3

(0.09)

(0.11)

(0.24)

Diluted

3

(0.09)

(0.11)

(0.24)

 

* During the six month period ended 30 June 2015, the depreciation of specific oil and gas assets of £810,000 was recognised within cost of sales (year ended 31 December 2014: £631,000).

** During the six month period ended 30 June 2015, finance charges included an unrealised fair value loss of £730k in relation to the BNPP loan facility.   

GROUP STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2015

 



As at

30 June 2015

(Unaudited)

As at

30 June 2014

(Unaudited)

As at

31 December 2014

(Audited)


Notes

£ 000's

£ 000's

£ 000's






Assets





Non-current assets





Intangible evaluation assets

5

11,949

9,284

11,586

Goodwill

5

3,083

3,083

3,083

Oil and gas assets

6

14,221

6,777

12,173

Property, plant and equipment

6

2,377

2,704

2,322

Total non-current assets


31,630

21,848

29,164






Current assets





Inventories


426

169

303

Trade and other receivables


2,603

1,211

2,803

Cash and cash equivalents


9,468

2,152

1,583

Total current assets


12,497

3,532

4,689

Total assets


44,127

25,380

33,853






Liabilities





Current liabilities





Trade and other payables


(5,377)

(3,716)

(4,679)

Borrowings


(2,811)

(4,434)

(2,915)

Deferred consideration


(120)

(737)

(737)

Total current liabilities


(8,308)

(8,887)

(8,331)






Non-current liabilities





Borrowings


(5,850)

-

-

Deferred consideration


(1,233)

(1,233)

(1,233)

Deferred taxation


(1,096)

-

(1,020)

Provisions


(895)

(764)

(906)

Total non-current liabilities


(9,074)

(1,997)

(3,159)

Total liabilities


(17,382)

(10,884)

(11,490)

Net assets


26,745

14,496

22,363






Shareholders' equity





Called-up share capital

4

1,525

1,207

1,364

Share premium


55,185

38,045

47,437

Share based payments reserve


1,309

537

1,296

Retained earnings


(34,423)

(29,125)

(32,169)

Revaluation surplus


3,519

4,332

3,907

Foreign exchange reserve


(370)

(500)

528

Total equity attributable to equity holders of the parent


26,745

14,496

22,363



GROUP STATEMENT OF CASH FLOW
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 



Six months to

30 June 2015

(Unaudited)

Six months to

30 June 2014

(Unaudited)

Year ended 
31 December 2014
(Audited)



£ 000's

£ 000's

£ 000's






Cash outflow from operating activities





Operating (loss)/profit


(1,198)

(2,749)

(4,227)

(Increase) /decrease in trade and other receivables


200

1,027

(565)

Increase/(decrease) in trade and other payables


46

1,290

2,269

(Increase)/decrease in inventories


(123)

75

(59)

Depreciation


1,443

157

1,480

Amortisation


152

31

631

Share based payments


-

125

824

Income tax paid


-

(29)

-

Net cash inflow/(outflow) from operating activities


520

(73)

353






Cash flows from investing activities





Finance revenue


-

1

-

Proceeds from equity swap arrangement


-

907

908

Payments to acquire intangible assets


(1,192)

(561)

(1,693)

Payments to acquire tangible assets


(3,892)

(2,059)

(9,160)

Net cash (outflow) from investing activities


(5,084)

(1,712)

(9,945)






Cash flows from financing activities





Issue of ordinary share capital


8,296

1,584

11,809

Share issue costs


(387)

(12)

(688)

Finance charges paid


(132)

(68)

(1,149)

Repayment of borrowings


(3,552)

(1,200)

(4,598)

Proceeds from borrowings


8,171

3,277

5,279

Net cash inflow from financing activities


12,396

3,581

10,653






Net increase/(decrease) in cash and cash equivalents


7,832

1,796

1,061

Foreign exchange differences on translation


53

15

181

Cash and cash equivalents at beginning of period


1,583

341

341

Cash and cash equivalents at end of period


9,468

2,152

1,583



GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 


Called up share capital

Share premium reserve

Share based payments reserve

Retained earnings

Foreign exchange reserve

Revaluation surplus

Total Equity


£ 000's

£000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's









As at 31 December 2013

1,125

36,555

412

(26,606)

(94)

4,332

15,724




Loss for the period

-

-

-

(2,519)

-

-

(2,519)

Currency translation differences

-

-

Total comprehensive income

-

-

-

(2,519)

(406)

-

(2,925)

Share capital issued

82

1,502

-

-

-

-

1,584

Cost of share issue

-

(12)

-

-

-

-

(12)

Share based payments

-

-

Total contributions by and distributions to owners of the Company

1,490

-

As at 30 June 2014

38,045

4,332




As at 31 December 2013

36,555

4,332









Loss for the year

-

-

-

(6,072)

-

-

(6,072)

Revaluation surplus amortisation

-

-

-

425

-

(425)

-

Currency translation differences

-

-

Total comprehensive income

-

-

-

(5,647)

622

(425)

(5,450)

Share capital issued

239

11,570

-

-

-

-

11,809

Cost of share issue

-

(688)

-

-

-

-

(688)

Exercise of warrants

-

-

(84)

84

-

-

-

Share based payments

-

-

Total contributions by and distributions to owners of the Company

239

10,882

884

84

-

-

12,089

As at 31 December 2014

1,364

47,437

1,296

(32,169)

528

3,907

22,363









Loss for the period

-

-

-

(2,642)

-

-

(2,642)

Revaluation surplus amortisation




388


(388)

-

Currency translation differences

-

-

Total comprehensive income

-

-

-

(2,254)

(898)

(388)

(3,540)

Share capital issued

161

8,135

-

-

-

-

8,296

Cost of share issue

-

(387)

-

-

-

-

(387)

Share based payments

-

-

Total contributions by and distributions to owners of the Company

7,748

-

As at 30 June 2015

55,185

3,519



NOTES TO THE FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 

1.      Basis of preparation

 

The financial information has been prepared under the historical cost convention and on a going concern basis and in accordance with International Financial Reporting Standards and IFRIC interpretations adopted for use in the European Union ("IFRS") and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

The financial information for the period ended 30 June 2015 has not been audited or reviewed in accordance with the International Standard on Review Engagements 2410 issued by the Auditing Practices Board. The figures were prepared using applicable accounting policies and practices consistent with those adopted in the statutory accounts for the period ended 31 December 2014. The figures for the period ended 31 December 2014 have been extracted from these accounts, which have been delivered to the Registrar of Companies, and contained an unqualified audit report.

 

The financial information contained in this document does not constitute statutory accounts. In the opinion of the directors the financial information for this period fairly presents the financial position, result of operations and cash flows for this period.

 

This Interim Financial Report was approved by the Board of Directors on 17 September 2015.

 

Statement of compliance

 

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard ('IAS') 34 - Interim Financial Reporting as adopted by the European Union. Accordingly the interim financial statements do not include all of the information or disclosures required in the annual financial statements.

 

Basis of consolidation

 

The consolidated financial statements comprise the financial statements of LGO Energy Plc and its controlled entities. The financial statements of controlled entities are included in the consolidated financial statements from the date control commences until the date control ceases.

 

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

 

All inter-company balances and transactions have been eliminated in full.

 

Foreign currencies

 

The functional currency of each entity is determined after consideration of the primary economic environment of the entity. The group's presentational currency is Sterling.



NOTES TO THE FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 

2.      Segmental analysis


Corporate

Holding

Holding

Operating

Operating

Corporate

Total

Six months 1 January 2015 to

UK

Cyprus

St Lucia

Spain

Trinidad

US


30 June 2015

£'000

£'000

£'000

£'000

£'000

£'000

£'000









Operating profit/(loss) by geographical area








Revenue

-

-

-

543

6,067

-

6,610









Operating (loss)/profit *

(789)

(116)

(3)

(291)

2

(1)

(1,198)

Finance charges

(121)

-

-

-

(1,206)

-

(1,327)

Profit/(loss) before taxation

(910)

(116)

(3)

(291)

(1,204)

(1)

(2,525)









Other information








Depreciation and amortisation

(18)

-

-

(70)

(1,507)

-

(1,595)

Capital additions

273

-

-

140

4,739

-

5,152









Segment assets








Non-current assets

3,339

-

-

7,809

20,482

-

31,630

Trade and other receivables

430

-

-

247

1,926

-

2,603

Inventories

-

-

-

102

324

-

426

Cash

851

-

16

60

8,541

-

9,468

Consolidated total assets

4,620

-

16

8,218

31,273

-

44,127









Segment liabilities








Trade and other payables

(675)

-

(2)

(200)

(4,500)

-

(5,377)

Deferred taxation

-

-

-

-

(1,096)

-

(1,096)

Borrowings

-

-

-

-

(8,661)

-

(8,661)

Deferred consideration

(1,353)

-

-

-

-

-

(1,353)

Provisions

-

-

-

(673)

(222)

-

(895)

Consolidated total liabilities

(2,028)

-

(2)

(873)

(14,479)

-

(17,382)

 

* Operating (loss)/profit includes management fee income/expenses charged by the Company to its subsidiaries.

NOTES TO THE FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 

2.     Segmental analysis (continued)

 


Corporate

Holding

Holding

Operating

Operating

Corporate

Total

Six months 1 January 2014 to

UK

Cyprus

St Lucia

Spain

Trinidad

US


30 June 2014

£'000

£'000

£'000

£'000

£'000

£'000

£'000









Operating profit/(loss) by geographical area








Revenue

-

-

-

921

2,309

-

3,230









Operating (loss)/profit

(2,713)

(13)

(2)

(305)

284

-

(2,749)

Finance charges

(148)

-

-

-


-

(148)

Finance revenue

407

-

-

-

1

-

408

Profit/(loss) before taxation

(2,454)

(13)

(2)

(305)

285

-

(2,489)









Other information








Depreciation and amortisation

-

-

-

(51)

(137)

-

(188)

Capital additions

-

-

-

36

2,584

-

2,620









Segment assets








Financial assets

3,300

-

-

8,832

10,928

-

23,060

Inventories

-

-

-

29

139

-

168

Cash

1,231

-

44

140

736

1

2,152

Consolidated total assets

4,531

-

44

9,001

11,803

1

25,380









Segment liabilities








Trade and other payables

(1,491)

(1)

-

(189)

(2,016)

(3)

(3,700)

Taxation

-

(5)

-

-

(11)

-

(16)

Borrowings

(4,434)

-

-

-

-

-

(4,434)

Deferred consideration

(1,970)

-

-

-

-

-

(1,970)

Provisions

-

-

-

(764)

-

-

(764)

Consolidated total liabilities

(7,895)

(6)

-

(953)

(2,027)

(3)

(10,884)



NOTES TO THE FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 

2.     Segmental analysis (continued)


Corporate

Holding

Holding

Operating

Operating

Corporate

Total

Year ended

UK

Cyprus

St Lucia

Spain

Trinidad

US


31 December 2014

£'000

£'000

£'000

£'000

£'000

£'000

£'000









Operating profit/(loss) by geographical area








Revenue

-

-

-

1,605

7,606

-

9,211









Operating (loss)/profit *

673

(2,596)

(5)

(510)

(1,496)

(293)

(4,227)

Loan impairment

(2,902)

2,609




293

-

Finance charges

(1,293)

-

-

-

-

-

(1,293)

Finance revenue

408

-

-

-

-

-

408

Profit/(loss) before taxation

(3,114)

13

(5)

(510)

(1,496)

-

(5,112)









Other information








Depreciation and amortisation

-

-

-

(472)

(1,639)

-

(2,111)

Capital additions

1

-

-

285

10,717

-

11,003









Segment assets








Non-current assets

3,084

-

-

8,380

17,700

-

29,164

Trade and other receivables

117

-

-

116

2,570

-

2,803

Inventories

-

-

-

136

167

-

303

Cash

483

-

1

194

905

-

1,583

Consolidated total assets

3,684

-

1

8,826

21,342

-

33,853









Segment liabilities








Trade and other payables

(551)

(5)

(2)

(215)

(3,904)

(2)

(4,679)

Taxation

-

(9)

-

-

(1,011)

-

(1,020)

Borrowings

(2,915)

-

-

-

-

-

(2,915)

Deferred consideration

(1,970)

-

-

-

-

-

(1,970)

Provisions

-

-

-

(746)

(160)

-

(906)

Consolidated total liabilities

(5,436)

(14)

(2)

(961)

(5,075)

(2)

(11,490)

 

* Operating (loss)/profit includes management fee income/expenses charged by the Company to its subsidiaries.

 

3.     Loss per share

 

The calculation of loss per share is based on the loss after taxation divided by the weighted average number of share in issue during the period.


Six months to

Six months to

Year ended


30 June 2015

30 June 2014

31 December 2014


(Unaudited)

(Unaudited)

(Audited)





Loss after taxation (£000's)

(2,642)

(2,519)

(6,072)





Weighted average number of ordinary shares used in calculating basic loss per share (millions)

2,965

2,311

2,490





Weighted average number of ordinary shares used in calculating diluted loss per share (millions)

3,263

2,561

2,727





Basic loss per share (pence)

(0.09)

(0.11)

(0.24)

Diluted loss per share (pence)

(0.09)

(0.11)

(0.24)

As the inclusion of the potential issuable ordinary shares would result in a decrease in the loss per share, they are considered to be anti-dilutive and as such, a diluted earnings per share is not included.



NOTES TO THE FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 

4.      Called up share capital

 

Called up, allotted, issued and fully paid

Number of shares

Nominal value (£000's)




As at 31 December 2013

2,250,773,914

1,125

2 April 2014 as consideration at 0.88p per share

14,218,608

7

25 April 2014 for cash at 0.95p per share

144,736,842

72

17 June 2014 for cash at 2.00p per share

1,000,000

1

As at 30 June 2014

2,410,729,364

1,205

7 July 2014 for cash at average of 1.17p per share

54,265,989

27

7 July 2014 for cash at 2.00p per share

3,200,000

2

17 July 2014 for cash at 3.50p per share

200,000,000

100

30 October 2014 for cash at 4.75p per share

48,418,167

24

27 November 2014 as consideration at 4.05p per share

6,227,329

3

1 December 2014 as consideration at 0.66p per share

6,000,000

3

As at 31 December 2014

2,728,840,846

1,364

15 January 2015 for cash at 3.00p per share

52,500,000

26

23 February 2015 for cash at 2.50p per share

96,062,500

48

24 February 2015 for cash at 2.50p per share

172,760,000

87

As at 30 June 2015

3,050,163,346

1,525

 

During the period, 321.3 million shares were issued (year ended 31 December 2014: 478.1 million).

 

Total share options in issue

 

Exercise price

Vesting criteria

Expiry date

Number of options

1.00p

-

31 December 2020

56,000,000

1.00p

500 bopd

31 December 2020

49,333,333

1.00p

600 bopd

31 December 2020

49,333,333

1.00p

700 bopd

31 December 2020

49,333,334

4.00p

1,250 bopd

31 December 2020

16,250,000

4.00p

1,500 bopd

31 December 2020

45,000,000

4.00p

1,750 bopd

31 December 2020

16,250,000

As at 30 June 2015



281,500,000

 

During the period, no options were issued (year ended 31 December 2014: 77.5 million). No options were exercised (year ended 31 December 2014: nil), lapsed (year ended 31 December 2014: nil) or cancelled (year ended 31 December 2014: nil).

 

Total warrants in issue

 

Exercise price

Expiry date

Number of warrants

4.50p

25 June 2017

4,081,802

6.20p

15 October 2017

2,158,692

5.10p

22 December 2017

3,931,838

4.20p

16 January 2018

4,915,084

2.50p

23 February 2018

2,688,225

As at 30 June 2015


17,775,641

 

During the period, 7.6 million warrants were issued (year ended 31 December 2014: 36.3 million). No warrants were exercised (year ended 31 December 2014: 58.5 million), lapsed (year ended 31 December 2014: nil) or cancelled (year ended 31 December 2014: nil).

 



 

NOTES TO THE FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 

5.     Intangible evaluation assets

 


Intangible evaluation assets

Decommissioning costs

Leasehold improvements

Software

Goodwill

Total


£000's

£000's

£000's

£000's

£000's

£000's

Cost







As at 31 December 2013

10,084

796



3,083

13,963

Reclassification *

2,479

(796)



-

1,683

Additions

1,693

-



-

1,693

Foreign exchange differences on translation

(209)

-



-

(209)

As at 31 December 2014

14,047

-



3,083

17,130

Additions

999

-

160

33

-

1,192

Foreign exchange differences on translation

(880)

-

-

-

-

(880)

As at 30 June 2015

14,166

-

160

33

3,083

17,442








Amortisation and  impairment







As at 31 December 2013

1,828

15



-

1,843

Reclassification *

93

(15)



-

78

Amortisation

631

-



-

631

Foreign exchange differences on translation

(91)

-



-

(91)

As at 31 December 2014

2,461

-



-

2,461

Amortisation

140

-

11

1

-

152

Foreign exchange differences on translation

(203)

-



-

(203)

As at 30 June 2015

2,398

-

11

1

-

2,410








Net book value







As at 30 June 2015

11,768

-

149

32

3,083

15,032

As at 31 December 2014

11,586

-



3,083

14,669

* During the year ended 31 December 2014, specific assets were reclassified within non-current assets to provide greater clarity on the asset type.

NOTES TO THE FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 

6.     Property, plant and equipment

 


Oil and gas assets

Property, plant and equipment

Decommissioning costs

Total


£ 000's

£ 000's

£ 000's

£ 000's

Cost





As at 31 December 2013

7,010

1,455

-

8,465

Reclassification *

(2,479)

-

796

(1,683)

Additions

8,281

879

150

9,310

Foreign exchange differences on translation

536

69

(41)

564

As at 31 December 2014

13,348

2,403

905

16,656

Additions

3,572

320

68

3,960

Foreign exchange differences on translation

(350)

(110)

(77)

(537)

As at 30 June 2015

16,570

2,613

896

20,079






Depreciation





As at 31 December 2013

143

573

-

716

Reclassification *

(93)

-

15

(78)

Depreciation

1,076

376

28

1,480

Foreign exchange differences on translation

49

(4)

(2)

43

As at 31 December 2014

1,175

945

41

2,161

Depreciation

1,228

207

8

1,443

Foreign exchange differences on translation

(54)

(65)

(4)

(123)

As at 30 June 2015

2,349

1,087

45

3,481






Net book value





As at 30 June 2015

14,221

1,526

851

16,598

As at 31 December 2014

12,173

1,458

864

14,495

 

* During the year ended 31 December 2014, specific assets were reclassified within non-current assets to provide greater clarity on the asset type.

NOTES TO THE FINANCIAL STATEMENTS
FOR THE INTERIM PERIOD ENDED 30 JUNE 2015

 

7.     Events after the reporting date

On 9th July 2015, the Company announced the issue of 3,889,697 new ordinary shares of 0.05p each to Beach Oilfield Limited ("BOLT") as consideration in part for the acquisition of BOLT's interests in oil and gas leases with rights to deep targets below 7,000 feet.

 

8.     The financial information set out above does not constitute the Group's statutory accounts for the period ended 31 December 2014, but is derived from those accounts.

9.     A copy of this interim statement is available on the Company's website: www.lgo-energy.com.



CORPORATE INFORMATION

 

Registered number

05901339

 

Directors

Steve Horton - Chairman

Neil Ritson - Chief Executive Officer

Fergus Jenkins - Chief Operations Officer

James Thadchanamoorthy - Chief Financial Officer

Michael Douglas - Non-Executive Director

Iain Patrick - Non-Executive Director

 

Company Secretary

James Thadchanamoorthy

 

Registered Office

Suite 4B, Princes House

38 Jermyn Street

London

SW1Y 6DN

United Kingdom

 


Tel:              +44 (0)20 3794 9230

Fax:             +44 (0)20 3794 9231

Email:         [email protected]

Website:    www.lgo-energy.com

 

Auditors

Chapman Davis LLP

2 Chapel Court

London SE1 1HH

United Kingdom

 

Solicitors

Kerman & Co LLP

200 The Strand

London WC2R 1DJ

United Kingdom

 

Nominated Advisor and
Joint Broker

Beaumont Cornish Limited

2nd Floor, Bowman House

29 Wilson Street

London EC2M 2SJ

United Kingdom

 

Joint Broker

First Energy Capital LLP

85 London Wall

London EC2M 7AD

United Kingdom

 

Registrars

Share Registrars Limited

Suite E, First Floor

9 Lion and Lamb Yard

Farnham, Surrey GU9 7LL

United Kingdom

 

Principal Bankers

HSBC Bank plc

196 Oxford Street

London W1D 1NT

United Kingdom

 

Public Relations

Bell Pottinger Limited

5th Floor, Holborn Gate

London WC1V 7QB

United Kingdom

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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