TIDMARG
RNS Number : 1996N
Argos Resources Ltd
23 September 2019
23 September 2019
ARGOS RESOURCES LIMITED
("Argos" or "the Company")
2019 Interim Financial Results
Argos Resources Limited (AIM: ARG.L), the Falkland Islands based
company focused on the North Falkland Basin, is pleased to announce
its interim financial results for the six months ended 30 June
2019.
Highlights
-- $176 thousand loss for the period (H1 2018: profit of $37 thousand);
-- $784 thousand cash reserves at 30 June 2019 (YE 2018: $788 thousand);
-- The Working Interest in the Licence was transferred back to Argos in February 2019;
-- The Group continues to receive quarterly cash payments from
Noble and Edison of GBP75,000 per quarter, for a period of 450 days
after the notice to withdraw, until 27 December 2019;
-- The current Second Phase of the Licence expires in November
2019. Discussions about the licence term beyond that date are
underway with the Falkland Islands Government.
For further information:
Argos Resources Limited (+500 22685) Cenkos Securities plc
(Nomad & Broker)
www.argosresources.com Derrick Lee (+44 131 220 9100)
Ian Thomson, Chairman Neil McDonald (+44 131 220 6939)
John Hogan, Managing Director
Chairman's Statement
In October 2018 Noble Energy Falklands Limited ("Noble") and
Edison International S.p.A ("Edison") served notice of their
intention to withdraw from Production Licence PL001 (the Licence)
in the North Falkland Basin, in which Argos held a 5% Overriding
Royalty Interest under a Participation Agreement. The Licence
covers an area of approximately 1,126 square kilometres in the
North Falkland Basin.
On receipt of the notice Argos exercised the option under the
Participation Agreement to have the Licence reassigned to it, which
effectively terminated the Participation Agreement. Although the
Participation Agreement has now terminated, under the terms of that
agreement the Group will continue to receive quarterly cash
payments from Noble and Edison of GBP75,000 per quarter, for a
period of 450 days after the notice to withdraw. These payments,
together with current cash balances of $784,000 at 30 June 2019,
leave the Group adequately financed for at least twelve months
beyond sign-off.
The current Second Phase of the Licence expires in November 2019
and discussions about the licence term beyond that date are
underway with the Falkland Islands Government. The Working Interest
in the Licence was transferred back to Argos in February 2019 and
the Company will seek to secure other partners to participate in
its development.
Financial overview
The Group loss for the six months to 30 June 2019 was $176
thousand (2018: profit of $37 thousand) giving an undiluted loss
per share of 0.08 cents (2018: profit of 0.02 cents per share).
Administrative expenses were $175 thousand compared to $155
thousand for the same period in 2018.
Net assets of $29.7 million reflect a decrease of $176 thousand
since December 2018 as a result of the loss for the period.
Financial outlook
The cash balance of $784,000 at the end of June 2019 means that
the Group is adequately financed for at least twelve months beyond
sign-off.
Ian Thomson OBE
Chairman
Consolidated statement of comprehensive income
Period ended 30 June 2019
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
unaudited unaudited audited
Note $'000 $'000 $'000
Other income - 209 784
Administrative expenses (175) (155) (334)
Finance income 2 2 4
Foreign exchange (losses) (3) (19) (48)
------------------------------- ------ ----------- ----------- -------------
(Loss)/profit from operations
attributable to owners of
the parent (176) 37 406
------------------------------- ------ ----------- ----------- -------------
Total comprehensive income
for the period
attributable to owners of
the parent (176) 37 406
------------------------------- ------ ----------- ----------- -------------
(Loss)/earnings per share
(cents):
Basic and diluted 2 (0.08) 0.02 0.18
------------------------------- ------ ----------- ----------- -------------
Consolidated statement of financial position
As at 30 June 2019
As at As at As at
30 June 30 June 31 December
2019 2018 2018
unaudited unaudited audited
Note $'000 $'000 $'000
Assets
Non-current assets
Capitalised exploration expenditure 28,752 28,749 28,749
Current assets
Other receivables 195 13 392
Cash and cash equivalents 784 884 788
---------------------------------------------- ----------- ----------- -------------
Total current assets 979 897 1,180
---------------------------------------------- ----------- ----------- -------------
Total assets 29,731 29,646 29,929
---------------------------------------------- ----------- ----------- -------------
Liabilities
Total and current liabilities
Other payables (39) (147) (61)
Total net assets 29,692 29,499 29,868
---------------------------------------------- ----------- ----------- -------------
Capital and reserves attributable
to equity holders of the
company
Share capital 6,696 6,696 6,696
Share premium 30,071 30,071 30,071
Retained losses (7,075) (7,268) (6,899)
---------------------------------------------- ----------- ----------- -------------
Total shareholders' equity 29,692 29,499 29,868
---------------------------------------------- ----------- ----------- -------------
Consolidated statement of cash flows
Period ended 30 June 2019
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
unaudited unaudited audited
$'000 $'000 $'000
Cash flows from operating activities
(Loss)/profit for period (176) 37 406
Adjustments for:
Finance income (2) (2) (4)
Foreign exchange 2 21 50
Net cash (outflow)/inflow from
operating activities
before changes in working capital (176) 56 452
Decrease/(increase) in other receivables 197 - (378)
(Decrease)/increase in other payables (22) 89 2
------------------------------------------ ----------- ----------- -------------
Net cash (outflow)/inflow
from operating activities (1) 145 76
------------------------------------------ ----------- ----------- -------------
Investing activities
Interest received 2 2 4
Exploration and development expenditure (3) - -
Net cash (outflow)/inflow
from investment activities (1) 2 4
------------------------------------------ ----------- ----------- -------------
Net (decrease)/increase in cash
and cash equivalents (2) 147 80
Cash and cash equivalents at beginning
of period 788 758 758
Exchange (losses) on cash and cash
equivalents (2) (21) (50)
------------------------------------------ ----------- ----------- -------------
Cash and cash equivalents at end
of period 784 884 788
------------------------------------------ ----------- ----------- -------------
Consolidated statement of changes in equity - unaudited
Period ended 30 June 2019
Retained
Share earnings/ Total
Share
capital premium (deficit) equity
$'000 $'000 $'000 $'000
At 1 January 2018 6,696 30,071 (7,305) 29,462
Total comprehensive
income for period to
30 June 2018 - - 37 37
At 30 June 2018 6,696 30,071 (7,268) 29,499
----------------------------- ---------- --------- ------------ ---------
Total comprehensive
income for period to
31 December 2018 - - 369 369
At 31 December 2018 6,696 30,071 (6,899) 29,868
----------------------------- ---------- --------- ------------ ---------
Total comprehensive
income for period to
30 June 2019 - - (176) (176)
At 30 June 2019 6,696 30,071 (7,075) 29,692
----------------------------- ---------- --------- ------------ ---------
Notes to the interim report - unaudited
Period ended 30 June 2019
1 Accounting policies
General information
Argos Resources Limited is a limited liability company
incorporated and domiciled in the Falkland Islands under
registration number 10605. The address of its registered office is
Argos House, H Jones Road, Stanley, Falkland Islands.
This consolidated interim report was approved for issue by the
directors on 20 September 2019.
Basis of preparation
The financial information included within this interim report
has not been reviewed nor audited and is based on the consolidated
financial statements of Argos Resources Limited and its subsidiary
Argos Exploration Limited ("the Group"). The consolidated financial
statements are prepared in compliance with the recognition and
measurement requirements of International Financial Reporting
Standards as adopted by the European Union (IFRSs) and
interpretations of those standards as issued by the International
Accounting Standards Board (IASB). They do not include all
disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the
2018 annual report. These accounts have been prepared in accordance
with the accounting policies that are expected to be applied in the
report and accounts of Argos Resources Limited for the year ending
31 December 2019.
The comparative financial information for the year ended 31
December 2018 has been derived from the full statutory financial
statements for that period which were prepared in compliance with
IFRSs. The Independent Auditors' Report on the annual report and
financial statements for 2018 was unqualified and did not draw
attention to any matters by way of emphasis.
The IASB has issued some new and revised standards, amendments
and interpretations to existing standards, which are effective for
the financial year ending 31 December 2019. The directors have made
an assessment of the impact of these standards and they are not
expected to have a material impact on the financial statements.
Going concern
Following the withdrawal of Noble and Edison the Licence was
re-assigned in February 2019.
Although the Participation Agreement has now terminated the
Group will continue to receive quarterly cash payments of GBP75,000
per quarter for a period of 450 days after the notice to
withdraw.
The directors consider that the Group's available financial
resources are adequate to provide working capital for the
foreseeable future, being at least 12 months from the date on which
the interim report was approved. The financial statements have
therefore been prepared on a going concern basis.
Notes to the interim report - unaudited
Period ended 30 June 2019
1 Accounting policies (continued)
Significant accounting judgements, estimates and assumptions
The Group makes certain estimates and assumptions regarding the
future in relation to intangible assets and impairment of these
assets. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed as follows:
Intangible assets - capitalised exploration expenditure,
impairment and royalty interests
Evaluation and exploration (E&E) expenditure
As part of the 2015 farmout transaction the Group retained an
ORRI of 5% of gross revenues from all hydrocarbon discoveries
developed within the Licence area and the accumulated historical
E&E cost was reclassified as "royalty interests". The Group
therefore believes that the most appropriate method of accounting
for the Noble and Edison withdrawal is to reclassify the ORRI to
E&E asset accounting for it using the method, as permitted
under IFRS 6 whereby all historic costs associated with oil
exploration are capitalised as intangible assets, pending
determination of feasibility of the project.
As an initial fair value could not be reliably determined the
E&E asset was measured at cost, which was the carrying amount
of the ORRI, with no gain or loss. The E&E asset is therefore
presented as an intangible asset and carried at cost less
accumulated amortisation and any impairment provision.
Costs incurred include appropriate technical and administrative
expenses but not general overheads. If an exploration project is
successful, the related expenditures are transferred to tangible
assets and amortised over the estimated life of the commercial
reserves. Where a licence is relinquished, a project is abandoned,
or is considered to be of no further value to the Group, the
related costs are written off.
Impairment
E&E assets are assessed for impairment when facts and
circumstances suggest that the carrying amount may exceed the
recoverable amount.
In accordance with IFRS 6 the Group firstly considers the
following facts and circumstances in their assessment of whether
the Group's exploration and evaluation assets may be impaired:
-- whether the period for which the Group has the right to
explore in a specific area has expired during the period or will
expire in the near future, and is not expected to be renewed;
-- whether substantive expenditure on further exploration for
and evaluation of mineral resources in a specific area is neither
budgeted nor planned;
-- whether exploration for and evaluation of hydrocarbons in a
specific area have not led to the discovery of commercially viable
quantities of hydrocarbons and the Group has decided to discontinue
such activities in the specific area; and,
Notes to the interim report - unaudited
Period ended 30 June 2019
1 Accounting policies (continued)
-- whether sufficient data exists to indicate that although a
development in a specific area is likely to proceed, the carrying
amount of the exploration and evaluation assets is unlikely to be
recovered in full from successful development or by sale
If any such facts or circumstances are noted the Group must
perform an impairment test in accordance with the provisions of IAS
36, assessing the recoverable amount of the E&E assets together
with all development and production assets, as a single cash
generating unit (CGU). The aggregate carrying value is compared
against the expected recoverable amount of the CGU. The recoverable
amount is the higher of value in use and the fair value less costs
to sell.
Any E&E impairment loss would be recognised in the income
statement and separately disclosed.
Overriding royalty interest (ORRI)
In October 2018 Noble and Edison served notice of their
intention to withdraw from the Licence in which the Group retained
an ORRI entitling them to 5% of all oil and gas produced from all
hydrocarbon discoveries developed within the Licence area. The
Participation Agreement was terminated in October 2018 when Argos
exercised the option to have the Licence reassigned to them and the
Working Interest in the Licence was transferred back to Argos in
February 2019.
The Group considered that the ORRI was similar in economic terms
to holding a direct interest in the underlying licence as there was
only a right to receive benefit from the ORRI on production and
many of the risks faced by the Group were the same as those faced
by the owner of the licence. These risks were seen as:
-- Existence risk - whether oil is found in commercially
extractable quantities;
-- Production risk - whether the operator is able to get any
discovery to commercial production;
-- Timing risk - commencement and quantity as determined by the
operator; and,
-- Price risk - determined by future commodity supply and
demand.
Other income
Prior to termination the income from the Participation Agreement
was recognised each quarter on receipt. The termination clause of
the Participation agreement requires Noble & Edison to continue
to pay Argos the income from the Participation Agreement for a
period of 450 days after notice has been given. The full amount of
income remaining under the agreement has been recognised, as Argos
are contractually entitled to the income under the termination
clause of the agreement. The remaining income will be received over
quarterly payments until 27 December 2019.
2 Earnings/(loss) per share
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
unaudited unaudited audited
Number Number Number
Shares in issue brought forward
(2 pence shares) 220,713,205 220,713,205 220,713,205
Shares in issue carried forward
(2 pence shares) 220,713,205 220,713,205 220,713,205
-------------------------------------- ------------- ------------- -------------
Options not exercised 8,080,818 8,080,818 8,080,818
-------------------------------------- ------------- ------------- -------------
Weighted average number of ordinary
shares that would have been
outstanding assuming the conversion
of all dilutive potential ordinary
shares 228,794,023 228,794,023 228,794,023
-------------------------------------- ------------- ------------- -------------
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2019 2018 2018
unaudited unaudited audited
(Loss)/profit for the period
($'000) (176) 37 406
(Loss)/earnings per ordinary
share (cents)
Basic and diluted (0.08) 0.02 0.18
-------------------------------------- ------------- ------------- -------------
Basic earnings per share has been computed by dividing the
earnings by the weighted average number of shares in issue during
the period. Diluted earnings per share is calculated by dividing
the earnings by the weighted average number of shares, plus the
weighted average number of dilutive securities in issue during the
period but not converted.
3 Events after the reporting date
There were no reportable events occurring after the balance
sheet date.
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END
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