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San Leon Energy PLC (SLE)

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Monday 30 September, 2013

San Leon Energy PLC

Interim Results

RNS Number : 1882P
San Leon Energy PLC
30 September 2013
 



Monday 30 September 2013

 

San Leon Energy Plc

 ("San Leon" or the "Company")

 

 

Interim Results for the six months ended 30 June 2013

 

San Leon Energy Plc ("San Leon"), the AIM listed company focused on oil and gas exploration in Europe and North Africa today announces its interim results for the six months ended 30 June 2013.

 

HIGHLIGHTS:

 

Corporate

·      Excellent progress in building a balanced portfolio offering both high impact exploration and near-term production

·      Successful merger with Aurelian Oil & Gas plc at the beginning of the year, contributing net assets of €62 million (including cash of €31.9 million) to San Leon and further increasing acreage in Poland, which remains a key focus

·      Post period end, announced the $4.0 million acquisition of 75%of Alpay Enerji AS ("Alpay") in Turkey, which has proven reserves and producing assets with immediate and significant cash flow potential

·      Simultaneously announced the placing of ordinary shares to raise gross proceeds of £31 million, subject, in part, to EGM approval, which will  allow the Company to unlock the full potential of this new project

·      Post period end announced proposed sale to Ardilaun Energy of entire Irish asset base (excluding NPI in Barryroe) for US$3 million together with shares equivalent to 20 per cent of the enlarged issued share capital of Ardilaun post-completion of the proposed transaction and prior to Ardilaun's intended listing

 

Poland

·      Regained 100% ownership of the Gdansk W and Braniewo S concessions and increased  interest to 50% in the Szczawno concession in the Baltic Basin

·      Executed successful hydraulic fractures in Lewino-1G2 (Gdansk W) and Rogity-1 (Braniewo S) wells, Poland

·      Encouraging results in the Braniewo S Concession, where oil accumulated at surface following the first frack in the Cambrian section of the Rogity-1 well

·      Signed MOU with Halliburton to develop a strategic relationship jointly exploring and developing the Carboniferous unconventional gas potential in Wschowa, Gora, and Rawicz Concessions, SW Carboniferous basin

·      Performed three Diagnostic Fracture Injection Tests across two intervals in the Carboniferous tight gas sand in Siciny-2, with  results appearing to confirm the fractured nature of the reservoir

 

Morocco

·      Moroccan authorities approved the Cairn Energy and Genel Energy farm-out agreements; both companies have contracted rigs for upcoming drilling operations

·      Signed a MOU in Morocco granting San Leon exclusive rights to the Timahdit Oil Shale Deposit

·      Recent analysis by Enefit OutotecTechnology confirmed the Timahdit oil shale has commercial potential

 

Albania

·      Signed second amendment to Petroleum Sharing Contract for the Durresi Block, offshore Albania, effective 31 July 2013; Company now has two full years to begin drilling operations

Financial

·      Revenue for the six months to 30 June 2013 was €0.54m (H1 2012: €1.16m) due to no seismic services being provided to third parties in the latter period, compared with €0.66m being generated from third party activity in the former

·      Profit before tax of €1.11m for the six months to 30 June 2013, compared with profit before tax of €0.79m in the six months to 30 June 2012.

·      Cash and cash equivalents at 30 June 2013 amounted to €11.2m (31 December 2012: €1.8m)

 

 

Oisin Fanning, Chairman of San Leon, commented:

 

"We have made excellent progress during the period in strategically building a balanced portfolio offering shareholders both high-impact exploration and near-term production. We started the year with the acquisition of Aurelian and we have made considerable progress across our core areas of operation through our drilling programme in Poland and through attracting new farm-in partners. Our acquisition in Turkey, announced post-period end, will also create significant value for shareholders through generating cashflows from 2014 and allowing us to reinvest profits across core areas of our existing portfolio. I look forward to updating shareholders further in due course in what promises to be an active and exciting period for the Company."

 

 

For further information contact:

 

San Leon Energy plc

Oisin Fanning, Executive Chairman

 

 

Tel: +353 1291 6292

Fox-Davies Capital Limited

Daniel Fox-Davies

Oliver Stansfield

Jonathan Evans

 

Tel: +44 (0) 20 3463 5000

Macquarie Capital (Europe) Limited

John Dwyer

 

Tel: +44 (0) 20 3037 2000

FirstEnergy Capital LLP

Hugh R. Sanderson

David van Erp

 

Tel: +44 (0) 20 7448 0200

Westhouse Securities Ltd

Nominated Adviser

Richard Johnson

Antonio Bossi

 

Tel: +44 (0) 207 601 6000

College Hill

Investment Relations Adviser

David Simonson

Alexandra Roper

 

Tel: +44 (0) 20 7457 2020

Vigo Communications

Financial Public Relations

Patrick d'Ancona

Chris McMahon

Tel: +44 (0) 207 016 9573

 

 

Qualified person
Joel Price, who has reviewed this update, has 19 years' experience in the oil & gas industry and is a member of the Society of Petroleum Engineers. He holds a BA in Natural Sciences from Cambridge University, an MEng from Heriot-Watt University, and an MBA from Durham University. Joel is currently the Head of Engineering for San Leon Energy and is based in San Leon's London office.

 

 

                                   



30 September 2013

 

San Leon Energy Plc

 

Interim Results for the six months ended 30th June 2013

 

Chairman's statement

 

2013 began with the successful completion of our merger with Aurelian Oil & Gas Plc, a transaction which contributed net assets of €62 million (including cash of €31.9 million) to San Leon. The Company has continued to make significant progress in its core areas of operations, through the drilling and fracking of a number of wells in Poland and by attracting new farm-in partners that help de-risk assets and accelerate work programmes across the portfolio.

 

In recent days, we have also reached agreement to add a new Turkish asset to our portfolio, through the acquisition of a 75% interest in Alpay Enerji AS, which has proven reserves and producing assets with immediate and significant cash flow potential. We believe this acquisition can transform San Leon from being an 'exploration' company to a fully-fledged exploration and production company.

 

The potential value attainable from this acquisition has been underpinned by investor support for the simultaneous placing of ordinary shares to raise gross proceeds of GBP 31.0 million (subject, in part, to EGM approval), which will allow the Company to unlock the full potential of  this new project.

 

Poland

While Turkey is a new and exciting addition, Poland remains a key focus for the Company. San Leon has regained 100% ownership of the Gdansk W and Braniewo S concessions, and increased its interest to 50% in the Szczawno concession in the Baltic Basin. It has executed successful hydraulic fractures ("frack" or "fracks") in its Lewino-1G2 (Gdansk W) and Rogity-1 (Braniewo S) wells.

 

Gas was flared at surface in our Lewino-1G2 well, which was a hydraulic fracturing operation performed in partnership with United Oilfield Services.  A new international record (excluding North America) was set for the pump rate at pressure, of 120 barrels per minute. Based on initial results, the team has finalised the design for a re-frack and an additional frack, which are planned for Q4 2014.

 

Similarly encouraging results were achieved in the Braniewo S Concession, where oil accumulated at surface following the first frack in the Cambrian section of the Rogity-1 well. Two further fracks in the Silurian and Ordivician sections are scheduled over the coming weeks.

 

The Rogity-1 well three-stage frack is part of the work programme agreed under a farm-out agreement signed with Wisent Oil & Gas Plc, under which Wisent will fully design, perform, and fund the costs of the frack programme as well as any subsequent testing in the well. Following completion of the three-stage frack, Wisent will have the option to fully fund the drilling, completion and testing of a multi-staged horizontal fractured well on Braniewo S, in return for earning a 45% interest in the Concession.

 

Significant progress was also made in the SW Carboniferous basin of Poland where San Leon signed an MOU with Halliburton to develop a strategic relationship jointly exploring and developing the Carboniferous unconventional gas potential in San Leon's Wschowa, Gora, and Rawicz Concessions.

 

Three Diagnostic Fracture Injection Tests ("DFIT"s) have since been performed across two intervals in the Carboniferous tight gas sand in Siciny-2. The results appear to confirm the fractured nature of the reservoir, and indicate effective permeability of 25 microDarcies, and frackable rock. These results are in line with highly attractive tight gas sand plays in the US.

 

Halliburton now has the option to perform and part fund a minimum two-stage vertical hydraulic fracture in the Siciny-2 well, which if completed, gives Halliburton the right to earn up to a 25% working interest in the Carboniferous and deeper sections by fully funding two vertical exploration wells.

 

San Leon Energy is continuing to see encouraging results in its Main Dolomite oil play in the SW Carboniferous Basin. Based upon the positive data obtained during the acid wash performed in May this year on Czaslaw-1, we now plan to undertake one or more additional acid fracture treatments on the well.

 

We have also announced an agreement, subject to completion, to take over the Jany C1 well. Drilling results encountered oil in the Main Dolomite over a 43-meter thick section. Given that this well was not drilled on a structural high, strong oil shows and encouraging petrophysical analysis in the Jany C1 well underscore the regional nature of the Main Dolomite play.

 

San Leon Energy also announced the signing of a Letter of Intent with Horizon General Limited, an affiliate of Aspect Energy, whereby, subject to completion, San Leon could be carried on the drilling of two exploration wells in its Torzym and Cybinka concessions in Q1 2014.

 

Morocco

The Company is very pleased with the progress being made in onshore and offshore Morocco. The Moroccan authorities approved the Cairn Energy Plc ("Cairn") and Genel Energy Plc ("Genel") farm-out agreements earlier this year and both companies have now contracted rigs for upcoming drilling operations.

 

Cairn is expected to spud a well in the Foum Draa Block in the coming weeks while Genel is planning to spud a well in the Sidi Moussa Block in H1 2014. These two wells carry significant upside potential for San Leon, where Company costs are being carried for both wells, up to a certain cap.

 

San Leon has also announced that it has signed a Memorandum of Understanding in Morocco, which grants San Leon exclusive rights to the Timahdit Oil Shale Deposit.  Timahdit's shale oil yield in the awarded area is considered to be the highest in Morocco with an average of 99 l/t in the rich layers, and has significantly less moisture content than many other international oil shale deposits (reducing the energy required for processing).

 

Recent analysis by Enefit OutotecTechnology ("Enefit") has confirmed that the Timahdit oil shale has commercial potential using surface retorting process and further raw shale oil upgrading. Enefit has existing operations in Estonia using this technology.

 

Turkey

We believe Turkey is a game changer for San Leon Energy as it adds producing assets, cash flow which we expect to ramp up quickly (and which can be used to unlock value in our existing  high impact portfolio) and significant opportunity for scaling up.

 

As detailed in our announcement dated 25 September 2013, San Leon has entered into an agreement to acquire 75 per cent of the issued share capital of Alpay Enerji AS ("Alpay").

 

Alpay is a Turkish oil and gas company which currently holds a 100 per cent participating interest in seven conventional oil and gas licences in Turkey together covering 842,094 acres. These licences have gross proved and probable gas reserves of 46.6 BCF (8 MMBOE) and the Company believes that additional gross proved and probable contingent gas resources of 140.7 BCF (24.3 MMBOE) can be unlocked with a low-risk drilling programme.

 

The agreement also provides for the transfer of a further nine additional conventional oil and gas licences into Alpay, which, if completed, will make Alpay the second largest private acreage holder in the country.

 

San Leon estimates that existing production could be increased to 10 MMCFD and 100 BOPD by the end of Q1 2014 which would generate monthly revenue of approximately US$ 3 million, and we see further upside from the 440 BCF of contingent and prospective resources estimated within the licences. The Company believes that it has the expertise to deliver on these targets and Turkey will enable the Group to achieve overall positive cash flow in 2014.

 

Albania

In the six-month period under review, San Leon confirmed the signing of the second amendment ("Amendment") to its Petroleum Sharing Contract ("PSC") for the Durresi Block, offshore Albania, where the Company holds a 100% operating interest. The Amendment became effective on 31 July 2013 following Council of Ministers' approval and publication in the country's Official Gazette.

 

This Amendment alleviates the tight timelines that existed in the original PSC and San Leon now has two full years from 31 July 2013 to begin drilling operations.

 

Ireland

Subsequent to the period to date, San Leon announced a proposed transaction with Ardilaun Energy Limited to sell its entire Irish asset base, excluding San Leon Energy's Net Profit Interest in the Barryroe Licence, which will be retained by the Company.

 

Under the terms of the proposed transaction which is subject to any necessary approvals and consents, Ardilaun has agreed to pay San Leon Energy US$3 million and issue to San Leon Energy, shares equivalent to 20 per cent of the enlarged issued share capital of Ardilaun post-completion of the proposed transaction and prior to its intended listing on an international exchange.

 

This transaction is part of San Leon's wider strategy to divest non-core assets and concentrate on the core areas of Poland, Morocco and Turkey.

 

Financial Review

Revenue for the six months to 30 June 2013 was €0.54m compared with €1.16m for the six months to 30 June 2012. The decrease is a result of no seismic services being provided to third parties in the latter period, compared with €0.66m being generated from third party activity in the former.

 

Other income in the period of €6.76m relates to the gain arising on the acquisition of Talisman Polska Sp z o.o whereby San Leon received cash and other assets as detailed in note 14 (b) of the interim financial results.

 

San Leon generated a profit before tax of €1.11m for the six months to 30 June 2013, compared with profit before tax of €0.79m in the six months to 30 June 2012. Administration costs increased for the 6 month period to €5.2m, (2012 H1: €4.7m), primarily due to non-recurring costs of approximately €0.75m associated with the Aurelian acquisition. Earnings per share for the period are 0.06 cent per share (2012 H1: earnings per share of 0.07 cent per share). 

 

Cash and cash equivalents at 30 June 2013 amounted to €11.2m (31 December 2012: €1.8m).

 

On 25 September 2013, San Leon announced a Placing of Ordinary Shares to raise gross proceeds of GBP31.0m to be completed in two tranches. The first tranche involves the issue of 110,000,000 new Ordinary Shares at GBP0.0475 to raise gross proceeds of GBP5.22m, with the shares expected to be admitted to trading on AIM on 30 September 2013. The second tranche of the Placing involves the issue of 542,631,579 new Ordinary Shares at GBP0.0475 to raise gross proceeds of GBP25.78m. The Second Placing is conditional on shareholder approval at an extraordinary general meeting to be held on the 18 October 2013 and admission to trading on AIM is expected on 21 October 2013.

 

Corporate

Dr John Buggenhagen, who joined the Company as Exploration Director four years ago, stepped down from the board during the period under review.  Dr Buggenhagen helped generate a compelling exploration and appraisal portfolio but recently decided to return to the US to pursue new opportunities. He continues to contribute to San Leon via an on-going consultancy agreement and as an advisor to the Board on strategic decisions.

 

Since period end, San Leon Energy announced that it has appointed Piotr Rozwadowski to the Board of Directors as a Non-Executive Director. Piotr has over 25 years' experience working in the energy sector in Poland and he was also a former Vice Minister of State for the Treasury in Poland where he was responsible for Energy and Telecoms.

 

Piotr brings with him a wealth of experience and his industry and regional knowledge of the energy market in Poland will be vital for the Company going forward.

 

Outlook

San Leon is strategically building a balanced portfolio that offers shareholders high impact exploration and near-term production.

 

The Company has built a very large conventional and unconventional asset base with over 12 million net acres under licence.  While our primary focus is on our core areas, we continue to advance our projects in countries such as Romania, Spain and Albania to the benefit of our shareholders. However, we equally recognise the requirement to monetise assets, either through disposal or farm outs, so that we can remain focussed on key value drivers for our shareholders

 

We believe our agreed acquisition in Turkey will create significant value for our shareholders, not just through the cash flows expected in 2014 and beyond, but by also allowing the Company to reinvest generated profits into further exploration and development across its existing portfolio. Our shareholders can look forward to some significant value catalysts over the coming months.

 

 

Qualified person

Joel Price, who has reviewed this update, has 19 years' experience in the oil & gas industry and is a member of the Society of Petroleum Engineers. He holds a BA in Natural Sciences from Cambridge University, an MEng from Heriot-Watt University, and an MBA from Durham University. Joel is currently the Head of Engineering for San Leon Energy and is based in San Leon's London office.


 

 

 

The following financial information on San Leon Energy Plc represents the Group's un-audited interim results for the 6 months ended 30 June 2013.

 

 

Consolidated income statement  

For the six months ended 30 June 2013



Un-audited

Un-audited

Audited


Notes

30/06/13

30/06/12

31/12/12



Continuing operations

 





Revenue


537,835

1,164,172

1,370,590

Cost of sales               


(362,635)

(739,104)

(816,900)

Gross profit


175,200

425,068

       553,690






Other income

2

6,764,751

5,338,951

5,339,031

Administrative expenses


(5,219,826)

(4,675,383)

(6,012,944)

Profit / (loss) from operating activities


1,720,125

1,088,636

(120,223)






Finance expense


(600,192)

(359,660)

(2,549,620)

Finance income


31,612

72,210

3,170,110

Share of loss of equity-accounted investments


(41,151)

(13,621)

(29,403)






Profit before income tax


1,110,394

787,565

470,864






Income tax expense


(7,429)

(9,691)

(10,197)






Profit for the period attributable to equity holders of the Group


 

1,102,965

 

777,874

 

460,667






 

Consolidated statement of comprehensive income 

for the six months ended 30 June 2013



Un-audited

Un-audited

Audited



30/06/13

30/06/12

31/12/12



Profit for the period


1,102,965

777,874

460,667

Foreign currency translation

differences - foreign operations


(4,973,485)

2,169,779

2,596,068

Fair value movements in available-for-sale financial assets


337,827

-

(436,721)    

Total comprehensive income for the period


(3,532,693)

2,947,653

             2,620,014











Earnings per share:





Basic earnings per ordinary share


0.06 cent

0.07 cent

0.04 cent






Diluted earnings per ordinary share


0.06 cent

0.07 cent

0.04 cent











 

 

 


 

Consolidated statement of changes in equity

For the period ended 30 June 2013

 


 

 

Share

Capital

 

Share

Premium

 

Currency Translation

Share Based Payment

 

Fair

Value Reserve

 

 

Retained Earnings

 

 

Attributable To Equity Holders

 

Non-Controlling Interest

 

Total

Equity


Period ended 30 June 2012

 









 

Balance at 1 January 2012

56,658,591

122,891,220

1,298,049

5,461,488

 

-

3,085,780

 

189,395,128

 

2,523,181

191,918,309

Total comprehensive income for period








 

Profit for the period

 

-

-

-

-

 

-

777,874

777,874

-

777,874

Other comprehensive income










Foreign currency translation differences - foreign operations

-

-

2,169,779

-

 

-

-

2,169,779

-

2,169,779

Total comprehensive income for period

-

-

2,169,779

-

 

 

-

777,874

2,947,653

-

 

2,947,653



 

 








Transactions with owners recognised directly in equity








 

Contributions by and distributions to owners







 

Share warrants exercised

8,250

17,404

-

-

-

-

25,654

-

25,654

Share based payment

-

-

-

1,994,646

-

-

1,994,646

-

1,994,646

Effect of share options lapsed

-

-

-

(574,088)

-

378,356

(195,732)

-

(195,732)

Shares issued to Realm shareholders on conversion of exchangeable shares

364,354

639,023

-

-

 

 

-

-

1,003,377

(1,003,377)

-

Total transactions with owners

372,604

656,427

-

1,420,558

 

-

378,356

2,827,945

(1,003,377)

1,824,568

Balance at 30 June 2012

57,031,195

123,547,647

3,467,828

6,882,046

 

-

4,242,010

 

195,170,726

 

1,519,804

 

196,690,530

 

 

 

 

 

 

 

 










 

 

 

 

 

 

 

 

Consolidated statement of changes in equity

For the period ended 30 June 2013

 

 

Period ended 30 June 2013

 





 


 

 

Share

Capital

 

Share

Premium

 

Currency Translation

Share Based Payment

 

Fair

Value Reserve

 

 

Retained Earnings

 

 

Attributable To Equity Holders

 

Non-Controlling Interest

 

Total

Equity


Balance at 1 January 2013

61,471,639

131,511,450

3,894,117

7,974,447

 

(436,721)

4,295,235

 

208,710,167

 

1,440,050

210,150,217

Total comprehensive income for period









 

Profit for the period

-

-

-

-

-

1,102,965

1,102,965

-

1,102,965

Other comprehensive income










Foreign currency translation differences - foreign operations

-

-

(4,973,485)

-

 

-

-

(4,973,485)

-

(4,973,485)

Fair value movements in available-for-sale financial assets

-

-

-

-

 

337,827

-

337,827

-

337,827

Total comprehensive income for period

-

-

(4,973,485)

-

 

 

337,827

1,102,965

(3,532,693)

-

(3,532,693)










 

Transactions with owners recognised directly in equity









 

Contributions by and distributions to owners

 







 

Issue of shares related to business combination

32,126,485

29,002,133

-

-

-

-

61,128,618

-

61,128,618

Share based payment

-

-

-

2,293,917

-

-

2,293,917

-

2,293,917

Effect of share options cancelled

-

-

-

(282,671)

-

-

(282,671)

-

(282,671)

Shares issued to Realm shareholders on conversion of exchangeable shares

327,643

574,638

-

-

-

-

902,281

(902,281)

-

Total transactions with owners

32,454,128

29,576,771

-

2,011,246

-

-

64,042,145

(902,281)

63,139,864

Balance at 30 June 2013

93,925,767

161,088,221

(1,079,368)

9,985,693

 

(98,894)

5,398,200

269,219,619

537,769

269,757,388

  

 

 

 

 

Consolidated statement of changes in equity

For the period ended 30 June 2012


 

 

Share

Capital

 

Share

Premium

 

Currency Translation

Share Based Payment

 

 

 

Fair

Value Reserve

 

 

Retained Earnings

 

 

 

Attributable To Equity Holders

 

 

Non-Controlling Interest

 

Total

Equity


Year to 31 December 2012







 

Balance at 1 January 2012

56,658,591

122,891,220

1,298,049

5,461,488

-

3,085,780

189,395,128

2,523,181

191,918,309

Total comprehensive income for year









 

Profit for the year

-

-

-

-

-

460,667

 

460,667

-

460,667

Other comprehensive income










Foreign currency translation differences - foreign operations

-

-

2,596,068

-

 

-

-

 

2,596,068

 

-

2,596,068

Fair value movements in available-for-sale financial assets

-

-

-

-

 

(436,721)

-

 

(436,721)

 

-

(436,721)

Total comprehensive income for year

-

-

2,596,068

-

 

(436,721)

460,667

 

2,620,014

 

-

2,620,014

Transactions with owners recognised directly in equity









 







 

Issue of shares on acquisition of equity accounted investments

4,271,283

7,610,716

-

-

 

-

-

 

11,881,999

 

-

11,881,999

Share warrants exercised

148,500

319,648

-

-

-

-

468,148

-

468,148

Share based payment

-

-

-

3,436,353

-

-

3,436,353

-

3,436,353

Effect of share options cancelled

-

-

-

(944,519)

-

748,788

(195,731)

-

(195,731)

Effect of warrants issued on loan note

-

-

-

21,125

-

-

21,125

-

21,125

Shares issued to Realm shareholders on conversion of exchangeable shares

393,265

689,866

-

-

-

-

1,083,131

(1,083,131)

-

Total transactions with owners

4,813,048

8,620,230

-

2,512,959

-

748,788

16,695,025

(1,083,131)

15,611,894

Balance at 31 December 2012

61,471,639

131,511,450

3,894,117

7,974,447

 

(436,721)

4,295,235

 

208,710,167

 

1,440,050

210,150,217

 


Consolidated statement of financial position

As at 30 June 2013

 


Notes

Un-audited

Un-audited

Audited



30/06/13

30/06/12

31/12/12



Assets





Non-current assets





Intangible assets

3

192,330,706

150,502,186

165,390,968

Equity accounted investments

4

22,135,810

3,544,232

17,178,666

Property, plant and equipment

5

10,792,225

9,575,188

9,859,676

Other non-current assets


4,627,069

812,977

2,291,660

Financial assets - Barryroe NPI

6

39,099,083

39,197,977

38,761,256



268,984,893

203,632,560

233,482,226

 

Current assets





Inventory


3,190,427

861,236

590,211

Trade and other receivables

7

9,822,984

3,839,040

6,293,870

Other financial assets

8

1,605,685

520,276

928,452

Amstel royalty disposal proceeds receivable

-

9,900,000

-

Cash and cash equivalents


11,184,623

6,214,286

1,824,799



25,803,719

21,334,838

9,637,332

 

Total assets


294,788,612

224,967,398

 

243,119,558

 

Equity and liabilities





Equity





Called up share capital

13

93,925,767

57,031,195

61,471,639

Share premium account

13

161,088,221

123,547,647

131,511,450

Share based payments reserve


9,985,693

6,882,046

7,974,447

Currency translation reserve


(1,079,368)

3,467,828

3,894,117

Fair value reserve


(98,894)

-

(436,721)

Retained profit


5,398,200

4,242,010

4,295,235

Attributable to equity holders of the Group


269,219,619

195,170,726

 

208,710,167

Non-controlling interest


537,769

1,519,804

1,440,050

Total equity


269,757,388

196,690,530

210,150,217






Non-current liabilities





Derivative


1,884,251

-

1,884,251

Provisions


5,345,211

5,345,211

5,345,211

Loans and borrowings

12

-

579,416

-

Deferred tax liabilities


9,329,447

9,329,447

9,329,447



16,558,909

15,254,074

16,558,909






Current liabilities





Trade and other payables

9

4,258,598

6,438,317

7,732,906

Loans and borrowings

10

2,719,130

4,992,000

7,117,293

Provisions

11

1,494,587

1,592,477

1,560,233



8,472,315

13,022,794

16,410,432






Total liabilities


25,031,224

28,276,868

32,969,341

 

Total equity and liabilities


294,788,612

224,967,398

 

        243,119,558

 

 

Consolidated statement of cash flows

For the six months ended 30 June 2013

 



Un-audited

Un-audited

Audited



30/06/13

30/06/12

31/12/12



 

Cash flows from operating activities





Profit for the period before taxation


1,110,394

787,565

470,864

Adjustments for:





Depletion and depreciation


74,054

102,535

135,930

Finance expense


600,192

359,660

2,549,620

Finance income


(31,612)

(72,210)

(3,170,110)

Share based payments charge


199,923

205,074

765,909

Foreign exchange


(2,216,061)

650,595

1,431,437

Gain on acquisition of Talisman Polska Sp. z o.o.


(6,764,751)

-

-

Gain on disposal of Amstel Royalty interest


-

(5,338,798)

(5,336,923)

Increase in other non-current assets


(2,335,410)

-

(1,478,683)

(Increase) / decrease in stocks


(129,350)

(103,567)

167,458

Decrease in trade and other receivables


345,976

4,251,407

2,888,703

(Decrease) in trade and other payables


(5,895,806)

(5,733,608)

(2,209,583)

Share of loss of equity-accounted investments


41,151

13,621

29,403

Tax (paid) / repaid


(12,676)

-

31,970

 

Net cash flows used in operating activities


(15,013,976)

(4,877,726)

 

(3,724,005)

 

Cash flows from investing activities





Expenditure on exploration and evaluation assets


(7,560,191)

(12,405,504)

(26,459,867)

Joint venture partner share of exploration costs


982,765

491,233

719,951

Purchases of property, plant and equipment


(1,548,508)

(200,349)

(1,086,639)

Proceeds of Offshore Morocco farm-out


1,210,217

-

-

Net cash acquired on acquisition of subsidiaries (note 14)


35,846,819

-

-

Interest received


28,525

46,161

128,868

(Increase) of restricted cash


(765,862)

-

(533,956)

Acquisition of equity-accounted investments


-

-

(1,872,778)

Repayment from / (advances) to equity-accounted investments


82,788

(530,988)

(571,507)

Proceeds of Amstel Royalty disposal


-

-

9,898,125

 

Net cash generated from / (used) in         investing activities


28,276,553

 

(12,599,447)

(19,777,803)

 

Cash flows from financing activities





Proceeds from issue of share capital, net of costs


-

15,184

279,688

Proceeds from drawdown of other loans


-

-

3,186,024

Repayment of other loans


(3,955,964)

(2,418,532)

(3,918,569)

Interest paid


(23,911)

(300,909)

(572,113)

Net cash (used) in financing activities


(3,979,875)

(2,704,257)

(1,024,970)

 

Net increase / (decrease) in cash and cash equivalents


9,282,702

(20,181,430)

 

(24,526,778)

Effect of foreign exchange fluctuation on cash and cash equivalents


77,122

197,753

153,614

Cash and cash equivalents at start of period


1,824,799

26,197,963

26,197,963

 

Cash and cash equivalents at end of period


11,184,623

6,214,286

1,824,799

 

 

 

 

 

 



Notes to the Interim Financial Information

 

1.         Basis of preparation and accounting policies

 

The Group interim financial information has been prepared in accordance with International Financial Reporting Standards and the accounting policies adopted are consistent with those followed in the preparation of the Group's financial statements for the year ended 31 December 2012. The interim financial information was approved by the Board of Directors on 28 September 2013.

 

The interim consolidated financial statements do not constitute statutory financial statements and therefore do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2012 which are available on the Group's website www.sanleonenergy.com.

 

The interim consolidated financial statements are presented in Euro ("€").

 

2.         Other income


Un-audited

Un-audited

Audited


30/06/13

30/06/12

31/12/12


 

Gain on disposal of Amstel Royalty interest

-

5,338,798

5,336,923

Gain arising on acquisition of Talisman Polska Sp. z o.o

6,764,751

-

-

Other

-

153

2,108


6,764,751

5,338,951

5,339,031

 

 

3.         Intangible assets

 

Cost and net book value

Exploration and evaluation assets

 

Royalty interests

 

 

Total


At 1 January 2012

135,702,074

4,561,202

140,263,276

Additions

29,030,660

-

29,030,660

Exchange rate adjustment

658,234

-

658,234

Disposal of Royalty Interest

-

(4,561,202)

(4,561,202)

At 31 December 2012

165,390,968

-

165,390,968

Acquisitions (note 14)

22,860,065

-

22,860,065

Additions

8,044,451

-

8,044,451

Disposals

(1,210,217)

-

(1,210,217)

Exchange rate adjustment

(2,754,561)

-

(2,754,561)

 

At 30 June 2013

192,330,706

-

192,330,706

 

An analysis of exploration assets by geographical area is set out below:

 


30/06/2013


Poland

119,010,300


Morocco

40,290,252


Ireland

18,742,145


Albania

5,862,645


Romania

5,848,661


Other areas

2,576,703


Total

192,330,706


 

The Directors have considered the licence, exploration and appraisal costs capitalised in respect of its exploration and evaluation assets, which are carried at historical cost. Those assets have been assessed for impairment and in particular with regard to remaining licence terms, likelihood of licence renewal, likelihood of further expenditures and on-going appraisals for each year. The directors are satisfied that there are no current indications of impairment, but recognise that the future realisation of these exploration and evaluation assets is dependent on future successful exploration and appraisal activities and the subsequent economic production of oil and gas reserves.

 

4.         Equity accounted investments 


Un-audited

Un-audited

Audited


30/06/13

30/06/12

31/12/12


 

Opening balance  

 

17,178,666

 

3,026,864

 

3,026,864

Acquisitions through business combinations (note 14)

5,080,327

-

13,754,775

Exchange adjustment and advances to entities

(82,032)

530,989

426,430

Share of loss of equity-accounted investments

(41,151)

(13,621)

(29,403)





Closing balance

22,135,810

3,544,232

17,178,666

 

 

 

5.         Property, plant and equipment

 


Plant & equipment

Asset under construction

Office equipment

Motor vehicles

Total

Cost

At 1 January 2012

3,387,110

5,895,647

371,428

225,371

9,879,556

Additions

444,560

365,446

384,666

109,856

1,304,528

Exchange rate adjustment

310,026

-

22,867

21,242

354,135

 

At 31 December 2012

4,141,696

6,261,093

778,961

356,469

11,538,219

Additions

1,446,181

106,151

332,313

95,236

1,979,881

Exchange rate adjustment

(248,392)

-

(22,610)

(21,663)

(292,665)

 

At 30 June 2013

5,339,485

6,367,244

1,088,664

430,042

13,225,435







Depreciation






At 1 January 2012

401,944

-

177,557

21,447

600,948

Exchange rate adjustment

28,655

-

10,028

2,022

40,705

Charge for period

816,033

-

155,738

65,119

1,036,890

 

At 31 December 2012

1,246,632

-

343,323

88,588

1,678,543

Exchange rate adjustment

(72,456)

-

(11,381)

(5,384)

(89,221)

Charge for period

592,121

-

215,670

36,097

843,888

 

At 30 June 2013

1,766,297

-

547,612

119,301

2,433,210







Net book value






At 30 June 2013

3,573,188

6,367,244

541,052

310,741

10,792,225

 

At 31 Dec 2012

2,895,064

6,261,093

435,638

267,881

9,859,676

 

 

Asset under construction relates to the Company's Oil Shale Project in Morocco.

 

 

 

6.         Financial assets - Barryroe Net Profit Interest

 



Un-audited

Un-audited

Audited



30/06/13

30/06/12

31/12/12



Barryroe 4.5% Net Profit Interest

Opening balance


 

38,761,256

 

39,197,977

 

39,197,977

Exchange rate adjustment


337,827

-

(436,721)



39,099,083

39,197,977

38,761,256

 

In December 2011, San Leon Energy assigned its 30% working interest in Standard Exploration Licence 1/11 ("Licence" or "Barryroe") in the Celtic Sea, Ireland  to Providence Resources Plc ("Providence")  in exchange for a 4.5% Net profit interest ("NPI")  in the full field. Under the terms of the arrangement, San Leon Energy will not pay any further appraisal or development costs on the Licence. The Directors have estimated the fair value of this NPI based on a technical evaluation of the licence area and with reference to a third party evaluation report prepared by RPS Energy in February 2011 for Lansdowne Oil & Gas plc, which estimated the net present value of 100% of the licence at USD 1.14 billion on a P50 case and NPV at a 10% discount rate.

 

The Directors note that Providence announced an update on the Barryroe licence area in April 2013 which stated " Following acquisition and interpretation of the new 2011 3D seismic data together with the subsequent drilling and testing of the 48/24-10z Barryroe appraisal well in 2012, Providence retained the services of Netherland Sewell & Associates Inc. (NSAI) to carry out a third party contingent resource audit (CPR) of the in place hydrocarbon and recoverable resources for the Basal Wealden oil reservoir. NSAI have reported that the Basal Wealden oil reservoir has a 2C in-place gross on-block volume of 761 MMBO with recoverable resources of 266 MMBO and 187 BCF of associated gas, based on a 35% oil recovery factor. A third party (CPR) audit of the overlying Middle Wealden, which was carried out by RPS Energy (RPS) in 2011, reported a 2C in-place gross on-block volume of 287 MMBO with technically recoverable resources of 45 MMBO and 21 BCF of associated gas, based on a 16% oil recovery factor. The total combined audited gross on block 2C recoverable resources at Barryroe therefore amount to 346 MMBOE, comprising 311 MMBO and 207 BCF. " The full text of the Providence announcement is set out on our website.

 

Notwithstanding the increased resource estimates set out by the licence operator, no further information has been made available regarding the revised development plan or development costs which are key inputs into the valuation model. On that basis the RPS report valuation remains the best estimate of fair value at year end. However having considered all available data and announcements made by the operator, in the opinion of the Directors, the recoverable amount of the NPI is not less than this estimated fair value.

 

 

7.         Trade and other receivables



Un-audited

Un-audited

Audited



30/06/13

30/06/12

31/12/12



Amounts falling due within one year:

Trade receivables from joint operating partners


 

680,709

 

853,084

 

202,088

VAT and other taxes refundable


4,619,445

815,796

1,693,244

Other debtors


4,072,188

1,763,932

2,984,013

Prepayments and accrued income


450,642

406,228

1,414,525



9,822,984

3,839,040

6,293,870

 

8.         Other financial assets



Un-audited

Un-audited

Audited



30/06/13

30/06/12

31/12/12



 

 Restricted cash at bank


 

1,605,685

 

520,276

 

928,452



1,605,685

520,276

928,452

 

Restricted cash at bank relates to deposit accounts held in support of bank guarantees required under the Moroccan exploration licences held by the group.

 

 

 

9.         Trade and other payables



Un-audited

Un-audited

Audited



30/06/13

30/06/12

31/12/11



Current





Trade payables


1,588,651

2,437,732

4,975,802

PAYE / PRSI


542,200

212,232

640,330

Other creditors


340,838

39,134

132,740

Contingent liabilities on warrant holders


-

2,261,910

-

Accruals and deferred income


1,786,909

1,487,309

1,984,034



4,258,598

6,438,317

7,732,906

 

10.       Loans and borrowings



Un-audited

Un-audited

Audited



30/06/13

30/06/12

31/12/12



Current





Other loans


2,548,420

-

3,251,326

Delta Hydrocarbons B.V.


170,710

4,992,000

3,865,967



2,719,130

4,922,000

7,117,293

 

11.       Provisions

Certain Realm Energy International Corporation shareholders exercised rights of dissent under Canadian law not to accept the terms of acquisition. Under Canadian law, these dissenting shareholders are eligible to receive a cash payment equal to the fair value of their shareholding at acquisition. The provision represents the directors' estimate of the cash consideration to be paid to those shareholders taking account of the market price of the Realm shares at acquisition.

 

 

12.       Loans and borrowings



Un-audited

Un-audited

Audited



30/06/13

30/06/12

31/12/12



Non-current





Delta Hydrocarbons B.V.


-

579,416

-



-

579,416

-

 

13.       Share capital

Un-audited

Un-audited

30/06/13

30/06/12

 

Authorised

2,500,000,000 (2012: 1,500,000,000) Ordinary shares of €0.05 each

125,000,000

75,000,000


 

 

Issued share capital

No. Ordinary Shares

Share  capital

Share   premium

At 1 Jan 2012

1,133,171,813

56,658,591

122,891,220

Issue of shares to non-controlling interest

7,865,318

393,265

689,866

Issue of shares on exercise of warrants

2,970,000

148,500

319,648

Issue of shares on acquisition of interests in equity accounted assets

85,425,654

4,271,283

7,610,716

At 31 December 2012

1,229,432,785

61,471,639

131,511,450

 

Issue of shares related to business combination

 

642,529,685

 

32,126,485

 

29,002,133

Issue of shares to non-controlling interest

6,552,863

327,643

574,638

 

At 30 June 2013

 

1,878,515,333

 

93,925,767

 

161,088,221

 

 

 

 

14.     (a) Acquisition of Aurelian Oil and Gas Plc

 

San Leon acquired the entire issued and to be issued share capital of Aurelian Oil and Gas Limited (formerly Aurelian Oil & Gas PLC) ("Aurelian") by means of a Court-sanctioned scheme of arrangement under Part 26 of the UK Companies Act 2006, effective on 25 January 2013, for €62 million. Prior to the acquisition, Aurelian was listed on the AIM, with exploration assets based predominantly in Poland and Romania.

 

Under the terms of the acquisition, each Aurelian shareholder received 1.3 San Leon shares for each Aurelian share.

The fair values of the assets and liabilities acquired as detailed below have been calculated on a provisional basis and any amendment to these acquisition fair values within the twelve month period post acquisition in accordance with the provisions of IFRS3: Business Combinations.

 


Acquisition

Fair value

Acquisition


book value

adjustment

fair value


Exploration and evaluation assets

22,860,065

-

22,860,065

Property, plant and equipment

698,297

(444,638)

253,659

Equity accounted investments

5,080,327

-

5,080,327

Current assets excluding cash and cash equivalents

4,268,231

-

4,268,231

Cash and cash equivalents

31,897,712

-

31,897,712

Trade and other payables

(2,032,458)

(262,500)

(2,294,958)

Net assets acquired

62,772,174

(707,138)

62,065,036

 

Consideration paid:




Issue of Ordinary shares of San Leon Energy



61,128,617

Contingent consideration on the fair value of Aurelian share option



obligations assumed by San Leon (ii)

936,419

Total consideration (i)



62,065,036





 

(i)         Excludes acquisition costs

 

(ii) Under the terms of the acquisition, San Leon agreed to grant Aurelian option-holders, and Aurelian staff with pending awards, replacement share options over San Leon shares, on certain terms no less favourable than under the historical Aurelian unapproved share option plan. The fair value is calculated using the Black Scholes model and assumptions consistent with those used in calculating the fair value of share based payments by the Company. The fair value charge recognised as part of the consideration reflects the extent to which the options awarded reflect past service by the relevant individuals. The portion of the fair value charge for options granted by San Leon that is related to future service requirement in accordance with the vesting terms of the options will be recognised as a post-acquisition charge in accordance with the requirements of IFRS 3.




Net cash flow arising on acquisition




Cash acquired with subsidiary



31,897,712

 

 

14 (b) Acquisition of Talisman Energy Polska Sp. z o.o.

In May 2013, San Leon signed a share purchase agreement with Talisman, whereby San Leon Energy B.V. acquired the entire issued share capital of Talisman's Polish subsidiary, Talisman Energy Polska Sp. z o.o. ("Talisman Polska").  In consideration, San Leon Energy B.V. assumed all assets and obligations of Talisman Polska.  As a result of this transaction, San Leon has now regained 100% ownership of the Gdansk W and Braniewo S concessions and increased its interest to 50% on the Szczawno concession.

 

In February 2010, Talisman signed a farm-in agreement to earn a 30% working interest in the three concessions in return for performing certain commitments, including drilling one well in each concession, with the option to increase its interest to 60% by drilling a further well in each concession.

 

Prior to the completion of the transaction, Talisman had drilled one vertical well in each concession at a combined cost of approximately €27.8 million as detailed on the table below.  Talisman had carried San Leon on all expenses related to the drilling of these three wells. 

 

A summary of the book value of assets and liabilities acquired at the date of the transaction and the gain recognised by San Leon on the transaction is set out below:






Book value at Transaction Date

 

Asset value  recognised by SLE




Exploration and evaluation assets

27,863,672

-


Inventory of drilling equipment, tubing and casing

2,344,090

2,344,090


Cash and cash equivalents

50,612

50,612


Trade and other receivables

603,344

603,344


Trade and other payables

(131,790)

(131,790)


 

Net assets acquired in Talisman Polska

30,729,928

 

2,866,256






Cash received by San Leon


3,898,495






Gain arising on acquisition


6,764,751


 

 

The Directors have considered the appropriate IFRS accounting treatment to be applied to the above transaction and have formed a preliminary view that the acquisition of Talisman Polska does not fulfil the criteria to be treated as a business combination in accordance with IFRS 3: Business Combinations. Accordingly we are precluded from recognising any asset value on the acquisition in respect of the Exploration and evaluation assets received on the transaction. This is due to the Group's existing policy whereby Exploration and Evaluation Assets are initially recognised at cost to the Group, with the cost deemed to be nil on this transaction as no consideration is payable by San Leon on the takeover of Talisman Polska.

 

 

 


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