TIDMNOP
RNS Number : 1392L
Northern Petroleum PLC
29 September 2016
Northern Petroleum Plc
("Northern Petroleum", "the Group" or "the Company")
Operational update
Interim Results for six months ended 30 June 2016
Northern Petroleum, the AIM quoted oil company focusing on
production led growth, provides the following update on operations
and announces its unaudited interim results for the six months
ended 30 June 2016.
Operational update
-- Current production of approximately 390 barrels of oil per
day ("bopd")
-- Planned summer work programme completed with five wells
brought into production
- three workover wells on production from mid September
- two waterflood wells recently started with oil rate expected to build in October
-- One well currently suspended through August and September due
to pipeline repair and forecast to be back on production in October
at approximately 50 bopd
-- Evaluating opportunity with a local power generation company
concerning a joint venture to produce shut-in gas within the
Company's leases to generate power both for operations and to sell
into the local grid
- material operating cost savings possible
-- $1.2 million of abandonment deposit returned from Alberta
Energy Regulator as a result of increased production
- remaining $0.2 million forecast to be returned in October
-- Cash balance as at 28 September 2016 is approximately $1
million
-- Winter work programme planned to double production to more
than 800 bopd
-- Shell, as operator in Cascina Alberto onshore northern Italy,
is progressing through the planned exploration programme with a 2D
seismic acquisition programme now being considered
-- Legal appeals process against the approved environmental
impact assessments for both the 3D seismic acquisition and five
exploration permit applications in the southern Adriatic now
completed with all appeals rejected
- planning for the 3D seismic acquisition programme will now continue
Keith Bush, Chief Executive Officer, commented:
"Through assiduous planning and execution over the last nine
months, we have stabilised the Company with a solid production
base, while continuing to work in a challenging industry
environment. Importantly, we now have an asset base in Canada with
which to produce meaningful growth in production and cashflow. This
asset base, in conjunction with the ability to progress our Italian
exploration and appraisal portfolio, provides an attractive upside
for the Company."
Interim Highlights
Operations
-- Completion of production asset acquisition in the Rainbow
area, Alberta
-- Successful planning and execution of a multi well workover
programme
-- Significant increase in production from approximately 150
bopd to over 400 bopd
-- Restart of second production facility in the Rainbow area
-- Restart of production in the Virgo area, Alberta
-- Average production for the first six months of the year was
approximately 300 bopd
Finance
-- Revenue of $1.5 million for the first six months of the
year
-- Gross profit of $0.4 million before depletion and
amortisation
-- Successful cashflow management while $1.4 million on deposit
with the regulator in Alberta
Corporate
-- Administrative costs reduced by 55 per cent. when compared to
the first six months of 2015
-- Annual Group general and administrative costs below $3.0
million
For further information please contact:
Northern Petroleum Plc Tel: +44 (0)20 7469 2900
Keith Bush, Chief Executive Officer
Nick Morgan, Finance Director
Stockdale Securities Limited (Nominated Adviser and Joint
Broker) Tel: +44 (0)20 7601 6100
Antonio Bossi
Robert Finlay
David Coaten
FirstEnergy Capital LLP (Joint Broker) Tel: +44 (0)20 7448
0200
Jonathan Wright
Interim Report Management Statement
The first half of 2016 has been positive for the Group despite
the continuing poor macro environment. The Group completed an asset
acquisition in the Rainbow area of Alberta near the existing Virgo
operations and executed a well workover programme. Growth in
production was achieved through a programme of repairs and
maintenance to wells and facilities. These operations more than
doubled the production from the asset and despite a turbulent
market, where the West Texas Intermediate benchmark crude price
("WTI") dropped to less than $30 per barrel during February, the
Group exited the period with a gross profit. Subsequently, work has
started to position the Group to again double production and
provide free cashflow for further investment in Canada and support
for other areas of the business, particularly the Italian
assets.
Operations
During January, the Group acquired assets which at the time were
producing approximately 150 barrels of oil per day and contained
1.1 million barrels ("mmbbls") of proven plus probable oil
reserves, close to the Group's Virgo assets in the Rainbow area.
The acquisition included a number of wells, pipeline infrastructure
and two production facilities with a direct tie-in to the national
pipeline network. A small, low cost work programme of well and
facility repairs was conducted through the remainder of winter and
into spring, initially increasing the production to over 400
bopd.
Production continued throughout the second quarter, with some
downtime due to torrential rains during May and June which affected
the wells not tied in to the pipeline infrastructure due to
trucking restrictions. With the increase in production during the
second quarter and despite the poor weather conditions, the Group
still averaged approximately 300 bopd for the first half of 2016.
The Group has also secured contracts from local operators to
process and ship their crude, generating additional income from the
facilities.
In Italy, progress continued with the development of an
environmental impact assessment for the drilling of the Giove
appraisal well, which is planned to be submitted before the end of
the year. Onshore in the Po Valley, Shell continued to evaluate the
Cascina Alberto exploration permit in order to develop the
additional seismic programme required to more thoroughly review the
previously identified 300 mmbbls prospect. The Group is carried by
Shell for a 20 per cent. share of the Cascina Alberto permit
including seismic acquisition up to $4 million and an exploration
well up to $50 million.
Corporate
The focus of the Group has continued to be on cost reduction and
ensuring that the organisation is fit for purpose. Staff and
infrastructure reductions were made, including the implementation
of a cost effective accounting system designed for the Canadian
market. This further reduced the overall corporate general and
administration cost to below $3 million on an annualised basis.
Financial
Following the completion of the asset acquisition in the Rainbow
area and the subsequent successful workover programme, total
revenue for the first six months of the year was $1.5 million,
reflecting an average production rate of approximately 300 bopd.
Even with the oil price for WTI averaging approximately $39 per
barrel for the period, a gross profit before depletion and
amortisation of $405,000 was generated.
The Group maintained a strict focus on costs, which resulted in
a 55 per cent. reduction in the administrative expenses for the
first six months of the year.
The biggest cash movement in the period was an abandonment
deposit of approximately $1.2 million with the Alberta Energy
Regulator required to complete the asset acquisition in Rainbow.
Approximately $0.2 million was already on deposit with the
regulator from the prior year. Following the increase in production
$1.2 million was returned after the period end in September.
Outlook
With production at the current level of approximately 400 bopd,
the Group can sustain its financial position with a WTI oil price
of approximately $50 per barrel. As production grows, the Rainbow
asset's fixed cost base does not increase significantly, therefore
the operating cost increase per additional production barrel is
less than $10. This makes incremental production from this point
forward economically attractive, and something that is achievable
and relatively low cost.
The Group is now developing a winter work programme to double
production again to 800 bopd which will then provide free cashflow
for investment. This will enable the Group to fund activities in
Alberta and other areas such as the 3D seismic programme in the
southern Adriatic. Funding for this programme will be achieved
through a combination of working capital, debt, a farmout and
equity as is considered most appropriate at the time.
The work conducted in the first half of 2016 has enabled the
Group to survive in these extreme market conditions and helped
establish the platform for further growth. This work is continuing
in order to generate strong positive cash flow and core value for
shareholders.
Condensed Consolidated Statement of Profit or Loss
for the six months ended 30 June 2016
6 months 6 months
ended ended
30 June 30 June
2016 2015
Notes (Unaudited) (Unaudited)
$'000 $'000
---------------------------------------------- ------ ------------ --------------------
Revenue 1,453 223
Production costs (1,048) (520)
Depletion and amortisation - plant, property
and equipment (310) (64)
---------------------------------------------- ------ ------------ --------------------
Gross profit / (loss) 95 (361)
Pre-licence costs (7) (4)
Exploration costs (62) -
Administrative expenses (1,116) (2,462)
Loss on disposal of assets - (44)
Other operating income - 814
---------------------------------------------- ------ ------------ --------------------
Loss from operations (1,090) (2,057)
Finance costs 2 (135) (508)
---------------------------------------------- ------ ------------ --------------------
Loss before tax (1,225) (2,565)
Tax credit - -
---------------------------------------------- ------ ------------ --------------------
Loss for the period (1,225) (2,565)
---------------------------------------------- ------ ------------ --------------------
Attributable to
Equity shareholders of the Company (1,177) (2,575)
Non-controlling interests (48) 10
---------------------------------------------- ------ ------------ --------------------
(1,225) (2,565)
---------------------------------------------- ------ ------------ --------------------
Earnings per share
Basic earnings per share on loss for the 3
year (0.8) cents (2.7) cents
---------------------------------------------- ------ ------------ --------------------
All results are from continuing activities. As the Group is loss
making, there is no dilution of earnings from potential ordinary
shares and diluted earnings per share has not been presented.
Condensed Consolidated Statement of Profit or Loss and Other
Comprehensive Income
for the six months ended June 2016
6 months 6 months
ended ended
30 June 30 June
2016 2015
(Unaudited) (Unaudited)
$'000 $'000
--------------------------------------------------------------------- ------------ ------------
Loss for the period (1,225) (2,565)
--------------------------------------------------------------------- ------------ ------------
Other comprehensive profit / (loss)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 578 (2,274)
--------------------------------------------------------------------- ------------ ------------
Other comprehensive profit / (loss) for the year, net of income tax 578 (2,274)
Total comprehensive loss for the period (647) (4,839)
--------------------------------------------------------------------- ------------ ------------
Attributable to:
Equity shareholders of the Company (599) (4,849)
Non-controlling interests (48) 10
--------------------------------------------------------------------- ------------ ------------
(647) (4,839)
--------------------------------------------------------------------- ------------ ------------
Condensed Consolidated Statement of Financial Position
at June 30 2016
At 30 June At 31 December
2016 2015
(Unaudited) (Audited)
Notes $'000 $'000
---------------------------------------------------- ------ ------------ ---------------
Assets
Non-current assets
Intangible assets 26,299 25,749
Property, plant and equipment 4 12,154 4,045
---------------------------------------------------- ------ ------------ ---------------
38,453 29,794
---------------------------------------------------- ------ ------------ ---------------
Current assets
Inventories 42 13
Trade and other receivables 2,079 658
Cash and cash equivalents 511 2,417
---------------------------------------------------- ------ ------------ ---------------
2,632 3,088
---------------------------------------------------- ------ ------------ ---------------
Total assets 41,085 32,882
---------------------------------------------------- ------ ------------ ---------------
Liabilities
Current liabilities
Trade and other payables 2,514 974
---------------------------------------------------- ------ ------------ ---------------
2,514 974
---------------------------------------------------- ------ ------------ ---------------
Non-current liabilities
Trade and other payables 589 553
Provisions 8,524 1,297
Deferred tax liabilities 2,099 2,066
---------------------------------------------------- ------ ------------ ---------------
11,212 3,916
---------------------------------------------------- ------ ------------ ---------------
Total liabilities 13,726 4,890
---------------------------------------------------- ------ ------------ ---------------
Net assets 27,359 27,992
---------------------------------------------------- ------ ------------ ---------------
Capital and reserves
Share capital 9,034 9,034
Share premium 18,833 18,833
Merger reserve 14,190 14,190
Share incentive plan reserve 332 349
Foreign currency translation reserve (8,348) (8,926)
Retained earnings and other distributable reserves (6,639) (5,493)
---------------------------------------------------- ------ ------------ ---------------
Equity attributable to owners of the parent 27,402 27,987
---------------------------------------------------- ------ ------------ ---------------
Non-controlling interests (43) 5
---------------------------------------------------- ------ ------------ ---------------
Total equity 27,359 27,992
---------------------------------------------------- ------ ------------ ---------------
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2016
6 months ended 6 months
ended
30 June 2016 30 June 2015
(Unaudited) (Unaudited)
$'000 $'000
------------------------------------------- --------------- -------------
Cash flows from operating activities
Loss for the period (1,225) (2,565)
Tax credit - -
Depletion and amortisation 310 64
Depreciation - non-oil and gas
property, plant and equipment 93 371
Loss on disposal of property, plant
and equipment - 44
Foreign exchange loss 2 429
Finance costs 133 79
Share-based payments 14 1
------------------------------------------- --------------- -------------
Net cash outflow before movements
in working capital (673) (1,577)
------------------------------------------- --------------- -------------
Increase in inventories (27) -
(Increase) / decrease in trade
and other receivables (145) 1,017
Increase / (decrease) in trade
and other payables 1,501 (3,951)
------------------------------------------- --------------- -------------
Net cash inflow/ (outflow) from
changes in working capital 1,329 (2,934)
------------------------------------------- --------------- -------------
Taxes paid - -
------------------------------------------- --------------- -------------
Net cash inflow/ (outflow) from
operating activities 656 (4,511)
------------------------------------------- --------------- -------------
Cash flows from investing activities
Interest paid - (1)
Investments in property, plant
and equipment (863) (3,946)
Expenditure on exploration and
evaluation assets (224) (560)
Acquisition of Canadian business (360) -
(note 5)
Canadian decommissioning deposit (1,165) -
Sale of property, plant and equipment - 7
------------------------------------------- --------------- -------------
Net cash outflow from investing
activities (2,612) (4,500)
------------------------------------------- --------------- -------------
Net decrease in cash and cash equivalents (1,956) (9,011)
Cash and cash equivalents at start
of period 2,417 12,143
Effect of exchange rate movements 50 (139)
------------------------------------------- --------------- -------------
Cash and cash equivalents at end
of period 511 2,993
------------------------------------------- --------------- -------------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2016
Retained
Share Foreign earnings
Share incentive currency and other Non -
Share premium Merger plan translation distributable controlling Total
capital account reserve reserve reserve reserves Total interests equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------- -------- -------- -------- ---------- ------------ -------------- ------- ------------ -------
At 1 January
2016 9,034 18,833 14,190 349 (8,926) (5,493) 27,987 5 27,992
--------------- -------- -------- -------- ---------- ------------ -------------- ------- ------------ -------
Total
comprehensive
income for
the period - - - - 578 (1,177) (599) (48) (647)
--------------- -------- -------- -------- ---------- ------------ -------------- ------- ------------ -------
Contributions by and distributions to owners of the Company
Equity share
warrants
lapsed or
cancelled - - - (31) - 31 - - -
Share-based
payments - - - 14 - - 14 - 14
--------------- -------- -------- -------- ---------- ------------ -------------- ------- ------------ -------
Total contributions by and distributions to owners of the Company
- - - (17) - 31 14 - 14
--------------- -------- -------- -------- ---------- ------------ -------------- ------- ------------ -------
At 30 June
2016 9,034 18,833 14,190 332 (8,348) (6,639) 27,402 (43) 27,359
--------------- -------- -------- -------- ---------- ------------ -------------- ------- ------------ -------
Retained
Share Foreign earnings
Share incentive currency and other Non -
Share premium Merger plan translation distributable controlling Total
capital account reserve reserve reserve reserves Total interests equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
--------------- -------- -------- -------- ---------- ------------ -------------- -------- ------------ --------
At 1 January
2015 8,225 17,312 14,190 484 (5,026) 4,489 39,674 (7) 39,667
--------------- -------- -------- -------- ---------- ------------ -------------- -------- ------------ --------
Total
comprehensive
income for
the period - - - - (2,274) (2,575) (4,849) 10 (4,839)
--------------- -------- -------- -------- ---------- ------------ -------------- -------- ------------ --------
Contributions by and distributions to owners of the Company
Equity share
warrants
lapsed or
cancelled - - - (93) - 93 - - -
Share-based
payments - - - 1 - - 1 - 1
--------------- -------- -------- -------- ---------- ------------ -------------- -------- ------------ --------
Total contributions by and distributions to owners of the Company
- - - (92) - 93 1 - 1
--------------- -------- -------- -------- ---------- ------------ -------------- -------- ------------ --------
At 30 June
2015 8,225 17,312 14,190 392 (7,300) 2,007 34,826 3 34,829
--------------- -------- -------- -------- ---------- ------------ -------------- -------- ------------ --------
Notes to the Condensed Consolidated Interim Financial
Statements
for the six months ended 30 June 2016
1. Basis of preparation
This unaudited condensed consolidated interim financial
information has been prepared using the recognition and measurement
principles of International Accounting Standards, International
Financial Reporting Standards and Interpretations adopted for use
in the European Union (collectively EU IFRSs). The principal
accounting policies used in preparing the interim results are
unchanged from those disclosed in the Group's Annual Report for the
year ended 31 December 2015. These statutory accounts are available
on the Company's website (www.northernpetroleum.com) or by
application to the Company's registered office.
The financial information for the six months ended 30 June 2016
and 30 June 2015 is unaudited and does not constitute statutory
financial statements of Northern Petroleum Plc and its
subsidiaries. The comparative financial information for the full
year ended 31 December 2015 has been derived from the statutory
financial statements for that period. A copy of those statutory
financial statements has been delivered to the Registrar of
Companies. The auditor reported on those accounts; the report was
unqualified and did not contain any statement under section 498(2)
or 498(3) of the Companies Act 2006. However, an emphasis of matter
with regards to a material uncertainty in the application of the
going concern basis of accounting was included in the audit
report.
Adoption of new and revised standards
A number of new standards, amendments to existing standards and
interpretations were applicable from 1 January 2016. The adoption
of these new standards and amendments did not have a material
impact on the Group's condensed financial statements for the
half-year ended 30 June 2016.
2. Finance costs and income
6 months ended 6 months ended
30 June 30 June
2016 2015
(Unaudited) (Unaudited)
$'000 $'000
---------------------------------------------------------------------- --------------- ---------------
Finance costs
Other interest payable (3) (4)
Foreign exchange losses (2) (429)
Unwinding of discount on decommissioning provisions (84) (16)
Unwinding of discount on below market interest rate government loans (46) (59)
---------------------------------------------------------------------- --------------- ---------------
(135) (508)
---------------------------------------------------------------------- --------------- ---------------
3. Earnings per share
Basic earnings per share amounts are calculated by dividing
profit or loss for the period attributable to ordinary equity
holders of the parent by the weighted average number of ordinary
shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares
outstanding during the year, plus the weighted average number of
shares that would be issued on the conversion of dilutive potential
ordinary shares into ordinary shares. The calculation of the
dilutive potential ordinary shares related to employee and director
share option plans includes only those warrants with exercise
prices below the average share trading price for each period.
6 months ended 6 months ended
30 June 30 June
2016 2015
(Unaudited) (Unaudited)
$'000 $'000
---------------------------------------------------------------------- ----------------- -----------------
Net loss attributable to equity holders used in basic calculation 1,177 2,575
----------------------------------------------------------------------- ----------------- -----------------
Net loss attributable to equity holders used in dilutive calculation 1,177 2,575
----------------------------------------------------------------------- ----------------- -----------------
No.'000s No.'000s
---------------------------------------------------------------------- ----------------- -----------------
Basic weighted average number of shares 148,545 95,366
Dilutive potential of ordinary shares:
Warrants exercisable under Company schemes - -
---------------------------------------------------------------------- ----------------- -----------------
Diluted weighted average number of shares 148,545 95,366
----------------------------------------------------------------------- ----------------- -----------------
At 30 June 2016 there were 666,706 options and no warrants with
exercise prices below the average share trading price for those
years, (2015: nil), hence the number of potential dilutive ordinary
shares is 666,706 (2015: nil).
6 months ended 6 months ended
30 June 30 June
2016 2015
(Unaudited) (Unaudited)
$ $
------------------------------------------------ --------------- ---------------
Earnings per share
Basic earnings per share on loss for the year (0.8) cents (2.7) cents
Diluted earnings per share on loss for the year (0.8) cents (2.7) cents
------------------------------------------------ --------------- ---------------
4. Property, Plant and Equipment
30 June 31 December
2016 2015
(Unaudited) (Audited)
$'000 $'000
---------------------------------------------------------- ------------- ------------
Oil and gas assets 12,041 3,840
Computer and office equipment and leasehold improvements 113 205
---------------------------------------------------------- ------------- ------------
12,154 4,045
---------------------------------------------------------- ------------- ------------
The increase in oil and gas assets in the period includes the
assets acquired in Alberta, Canada, see note 5 below.
5. Canadian acquisition
On 12 November 2015 the Group announced it had agreed an
acquisition of production and reserves in Alberta, Canada,
conditional on financing. The Group successfully raised new equity
finance and on 15 December signed a sale and purchase agreement and
paid an initial consideration. On 21 January 2016 the Alberta
Energy Regulator ("AER") transferred a number of Rainbow area
leases in Alberta, Canada to the Group's Canadian subsidiary, Ouro
Preto Resources Inc. ("OP") following the deposit by OP with the
AER of US$1,165,000. The payment of the abandonment deposit to the
AER was the final step in the regulatory approval of the
acquisition of the leases. The acquisition of the Rainbow leases
has enabled the Group to substantially increase its asset base in
Alberta. The Rainbow Assets include a total of 117 operated and 41
non-operated wells, of which approximately one third are either
currently in production or are believed by the Directors to have
the potential of being brought back into production. The remaining
wells are either suspended or already abandoned and will be
reviewed for future production potential.
The acquisition consideration below is considered equal to the
aggregate of the provisional fair values of the assets and
liabilities acquired, with no goodwill arising, and these have been
recorded as shown further below. The liabilities include the
provisions for future abandonment of the wells and facilities. OP
has commissioned a new reserves report for the assets acquired from
a leading independent Calgary reserves auditor. The new reserves
report will be used to reassess the fair valuations of the assets
acquired which will form the basis of the final acquisition
accounting to be reported in the 31 December 2016 Group
consolidated accounts.
Consideration:
21 January
2016
$'000
------ --------------------
Cash 360
------ --------------------
The Canadian Dollar consideration was settled for $513,000 which
equates to US $360,000 at the prevailing exchange rate of $1.4244
Canadian Dollars to $1 US Dollar on 21 January 2016.
Identifiable assets acquired and liabilities assumed:
21 January
2016
Recognised
values on acquisition
$'000
-------------------------------------------------- -----------------------
Property, plant and equipment - oil & gas assets 7,616
Trade and other receivables - prepayments 56
Provisions - decommissioning (7,312)
-------------------------------------------------- -----------------------
360
-------------------------------------------------- -----------------------
No goodwill has been recognised as a result of the acquisition
and no significant acquisition related costs have been incurred at
30 June 2016.
The revenue generated and expenses incurred by this operation
since the date of acquisition (21 January 2016 to 30 June 2016)
were $1,269,000 and $1,260,000 respectively. Of the $1,260,000
expenses, $809,000 relates to production costs, $102,000 relates to
administration and management time recharged by Northern Petroleum
Plc, $269,000 relates to depletion and amortisation of plant
property and equipment and $80,000 relates to finance costs for the
unwinding of discount on decommissioning provisions. Cash outflow
in the period comprised net revenue and investments in oil and gas
assets. If the acquisition had occurred on 1 January 2016,
management estimates that consolidated revenue for the first half
year would have been $64,000 higher and the consolidated costs for
the period would have been $111,000 higher.
6. Approval by directors
The interim results for the six months ended 30 June 2016 were
approved by the Directors on 28 September 2016.
7. Availability of interim report
The Interim Report will be made available in electronic format
on the Company's website, www.northernpetroleum.com. Further copies
will be available on request by application to the Company
Secretary at the Company's registered office, being Chester House,
Unit 3.01, Kennington Park, London SW9 6DE.
In Accordance with the AIM Rules - Guidance for Mining and Oil
& Gas Companies, the information contained in this announcement
has been reviewed and signed off by the CEO of Northern Petroleum,
Mr Keith Bush, who has 25 years' experience as a petroleum
engineer. He has read and approved the technical disclosures in
this regulatory announcement. The technical disclosure in this
announcement complies with the SPE/WPC standard.
Note to Editors
Northern Petroleum is an oil and gas company focused on
production led growth. The Company is undertaking a redevelopment
and production project in Alberta and has a broader portfolio of
exploration and appraisal opportunities in countries of relatively
low political risk, primarily Italy. Comprehensive information on
Northern Petroleum and its oil and gas operations, including press
releases, annual reports and interim reports are available from
Northern Petroleum's website: www.northernpetroleum.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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