TIDMCAB
RNS Number : 2603C
Cabot Energy PLC
28 September 2018
28 September 2018
Cabot Energy plc
("Cabot Energy", "the Group" or "the Company")
Interim Results
Cabot Energy, the AIM quoted oil company focusing on production
led growth with high impact exploration upside, announces its
unaudited consolidated interim results for the six months ended 30
June 2018 (the "Period"). All financial values are stated in United
States Dollars ("$") unless otherwise indicated.
Financial highlights
-- Revenue increased to $7.5 million (H1 2017: $1.8 million)
-- Gross profit increased to $0.8 million (H1 2017: $0.3 million
gross loss)
-- EBITDA of $1.4 million (H1 2017: $0.8 million loss) stated
before net exceptional costs of $3.6 million (H1 2017: $1.6 million
exceptional gain)
-- Net loss of $4.2 million (H1 2017: $0.8 million net profit)
including net exceptional costs of $3.6 million
-- Group cash balance as at 30 June 2018 of $6.2 million (31
December 2017: $1.8 million)
Operational highlights
-- Appointment of new executive management team in June 2018
-- Bought out minority interest to take 100% control and benefit
of Canadian asset ownership in January 2018
-- Crude sales increased to an average of 767 barrels of oil per
day ("bopd") for the Period (H1 2017: 233 bopd)
-- Production rates for the 6 new horizontal well portfolio
consistent with expected performance
Post-Period highlights
-- Strategic, operational and financial review conducted by new
executive management team
-- Farm-out negotiations commenced over Adriatic and Sicily
Channel prospects
Scott Aitken, Chief Executive Officer, commented: "When I joined
the Group in June I made it a priority to significantly improve the
financial planning, reporting and controls processes in order to
improve cost control and shareholder returns.
We are encouraged by the record positive cashflow from our
Canadian operations despite the net loss for the Period after $3.6
million of non-recurring items. We anticipate continued predictable
production and cashflow growth from the Company's 100% owned and
operated Canadian land position, where there is significant
potential for incremental production increases at a low operating
cost.
The potential for future shareholder returns is further
amplified through creating three high-impact exploration events
from the Company's licence position in Italy, where we have already
secured drilling funding from Shell for one well and are in
negotiations to fund drilling of two additional prospects.
The focus for the remainder of the year is to conclude the
operational and financial capacity planning and execution to
extract the optimum value from our portfolio."
For further information please contact:
+44 (0)20 7469
Cabot Energy Plc 2900
Scott Aitken, CEO
Petro Mychalkiw, CFO
+44 (0)20 3470
SP Angel Corporate Finance LLP 0470
Nominated Adviser and Joint Broker
Richard Morrison, Richard Hail, Stephen Wong
+44 (0)20 7448
GMP FirstEnergy 0200
Joint Broker
Jonathan Wright, David van Erp
+44 (0)20 7618
Luther Pendragon 9100
Financial PR
Harry Chathli, Alexis Gore
Note to Editors:
Cabot Energy is an oil and gas company focused on production led
growth. The Company is undertaking a redevelopment and production
project in north west Alberta (where it owns a 100 per cent.
interest in the Rainbow and Virgo assets) and has a broader
portfolio of exploration and appraisal opportunities in countries
of relatively low political risk, primarily Italy. Comprehensive
information on Cabot Energy and its oil and gas operations,
including press releases, annual reports and interim reports are
available from Cabot Energy's website: www.cabot-energy.com
Operational Review
The operational and financial review concluded that the
fundamentals of the underlying portfolio of assets remained highly
attractive but that a more robust approach was required to be taken
in the areas of operational planning, reporting and cost controls
to eliminate budget over-runs, which are further detailed in the
financial review.
The new management team has identified key areas that needed to
be improved and has implemented significant changes. The management
team has:
-- Implemented better defined and managed work streams in
subsurface and operational planning
-- Initiated a forensic assessment of the Group's balance sheet
and reservoir performance
-- Improved the financial controls and reporting processes
-- Increased focus on the integration, co-ordination and
communication between technical, and management teams in different
geographies
Canada Operations
Oil production during the Period averaged 761 bopd, an increase
of over 100% on the same period in 2017 (359 bopd).
102/10-32- 100/06-08- 100/10-06- 100/15-31- 100/03-07-
100/16-05-112-05W6/02 111-05W6/03 112-05W6/02 112-05W6/03 111-05W6/02 112-05W6/02 Average
IP30 bopd 112 100 131 108 36 125 102
------ ---------------------- ------------- ------------- ------------- ------------- ------------- --------
First Oct-17 Jan-18 Feb-18 Mar-18 Mar-18 Apr-18
Month
of Production
---------------------- ------------- ------------- ------------- ------------- ------------- --------
Months
Online 12 9 8 7 7 6 8
---------------------- ------------- ------------- ------------- ------------- ------------- --------
August
Production bopd 44 20 97 57 30 48 49
------ ---------------------- ------------- ------------- ------------- ------------- ------------- --------
The variability observed in of the first 6 horizontal wells
drilled in Keg River carbonate reefs is consistent with pre-drill
expectations, and the overall average performance is in line with
the type curves developed for the area. However, a basin-wide
development process is now being undertaken targeting the creation
of up to 100 well inventory of potential targets from the existing
land position from which future well locations will be high-graded,
with designs optimised around subsurface risk, drilling complexity
and royalty burden.
The new management team recognises subsurface analysis and
planning as a being a core strength area going forward, which will
receive appropriate human and financial resource investment.
Workflows and management of deliverables have been an area of focus
with Campbell Airlie, Chief Technical Officer and the subsurface
team leader, appointed in the Period. Gating and peer review
processes have been enabled with external geological play expert
resources. Software tools have been upgraded at zero net cost
increase. Previous budgets included purchasing of the 3-D seismic
for Canada well location, however this was not implemented. The
purchase of this critical 3-D seismic has now commenced on an
affordability basis.
By the end of Q1 the Company had completed its Internal Line
Inspections of key in-field pipelines connected to the 13-36 and
09-25 Batteries. The results of the inspection were generally
positive with only one section of pipeline requiring precautionary
repairs. This work has given the Company important data on pipeline
integrity and provides valuable baseline data on the condition of
this important infrastructure.
As part of the Group's strategic, operational and financial
review, management undertook a comprehensive cost analysis of its
Canadian operations and moved to a zero-based budgeting structure
for new operating and capital expenditures. This analysis
identified a significant operating and capital expenditure over-run
in comparison with the approved budget, and poor planning for the
subsequent work programmes. The Summer Work Programme was therefore
restricted to only essential expenditure necessary to maintain
production at existing levels and on non-discretionary safety or
environmentally related activities.
Production in July and August averaged 727 bopd, slightly lower
than the H1 average mainly due to early trucking bans coming into
effect during the second half of August after an unseasonably wet
month.
The Company has commissioned a third party to conduct an
independent facilities capacity review for all its main batteries
in the Rainbow area. This review will both confirm the available
spare capacity for each of the batteries and identify any
opportunities for increasing the capacity of the plants to ensure
long term growth opportunities can be delivered as expected and
without delay.
Project costs for the forthcoming winter work programme have
been extensively reviewed and re-forecast. A new purchase-to-pay
management system and supply chain manager has been introduced to
both secure beneficial supply chain terms and cost savings, and to
better manage expenditure commitments and reporting across all
areas of the business.
Looking forward, the Company will be targeting a new horizontal
well drilling and workover programme from Q1 2019, subject to
financing.
The Company has commissioned a new independent Competent
Person's Reserve Report which will be published during October.
Italy
Reflecting the importance of the Italian portfolio upside to
shareholders, the Board strengthened the Company's operations with
a newly created position of Business Development Director,
appointing Hugo d'Apice. Mr d'Apice will focus on advancing the
Company's Italian portfolio opportunities. The Company is pleased
to announce that it is in discussions with a private exploration
company regarding a farm-in proposal in respect of the Adriatic and
Sicily Channel assets and will keep shareholders updated of further
progress.
Civita: The Falkland Islands Government has signed the release
of the Rockhopper Civita assets for transfer to Cabot Energy.
Engagement continues with the Italian Ministry of Economic
Development ahead of the 1 December 2018 transaction long stop
date. The Aglavizza pipeline has now been repaired and returned to
previous daily production rates following 6 months of lost
production. The economic benefit for production has been accrued to
Cabot Energy since 1 January 2017 as part of the working capital
balance which will be paid to Cabot Energy upon deal completion in
addition to the closing payment of $1.6 million.
Adriatic: The Environmental Impact Assessment (EIA) approval has
been received to conduct a 3-D seismic programme over the licence
areas. A positive opinion has been received on the pre-seismic
ante-operum work subsequently undertaken. One data recorder remains
to be recovered. Failure to do so may require the repeat collection
of some data but will not prevent the processing of all
documentation with a view to enabling a seismic programme in Q1
2019. A joint-tender process for a combined programme with an
adjacent operator is being undertaken to eliminate cost overlap
with tender results anticipated during October 2018.
Sicily Channel: The Environment Impact Assessment (EIA) and
drilling permit have now been received for the Vesta oil
prospect.
Po Valley Cascina Alberto: The operator, Shell Italia, has made
systematic planning progress engaging with over 100 local
communities in advance of the 500 line-km 2-D seismic acquisition
programme. Cabot Energy has a 20% carried licence interest on the
EUR54mn seismic and exploration drilling programme.
Australia
PEL 629
The current management visited the S Australia regulator of
5,500 km2 onshore Otway basin permit, following the encouraging
discovery by Beach Energy in the adjacent licence. Management were
successful in securing a 6 month suspension of the work programme
period to February 2019 to allow the Company develop a
forward-looking work programme acceptable to the regulator.
Corporate
The organisational structure of the Group has been strengthened
in order to generate operational efficiencies. This has focused on
integrating the technical and management teams and improving
communications between different geographies.
Board and management appointments:
A new executive management team was appointed on 18 June 2018
with significant prior experience of working together in
operational and senior executive roles in the oil and gas industry.
The Group appointed Scott Aitken as Chief Executive Officer, Petro
Mychalkiw as Chief Financial Officer and Campbell Airlie as Chief
Technical Officer.
The Group appointed James Dewar as interim independent
non-executive Chairman on 27 July 2018. Mr Dewar has over 35 years
of experience in oil & gas as a former divisional CFO of BP plc
and ex group CFO of Dana Gas PJSC. He initially chairs the
Remuneration, Nominations and Audit Committees and has overseen,
with Petro Mychalkiw, the review of the Company's finances and
reporting processes.
Two search processes led by the interim independent
non-executive Chairman, are nearing completion for the appointment
of a permanent independent non-executive Chairman and an additional
independent non-executive director whose appointments the Company
hopes to announce imminently. Whilst this process concludes, the
Company announces that it has been agreed that the temporary
suspension of some aspects of the relationship agreement dated 15
December 2017 between High Power Petroleum LLC ("H2P"), SP Angel
Corporate Finance LLP ("SP Angel") and Cabot Energy as announced on
27 July 2018 has been extended for a further month.
In addition, Hugo d'Apice as (a non-Board) Business Development
Director has been appointed to increase the Italian focus and
strengthen government relationships. Hugo has a wealth of
experience within the industry and operating in Italy and is fluent
in Italian and Spanish. He has spent 15 years in the oil and gas
industry in senior management positions with an emphasis on country
entry, enterprise risk management and operations in complex
environments. Mr d'Apice will focus on advancing the Company's
Italian portfolio opportunities, which the Board views as a key
pillar of its future growth prospects.
Financial Review
The Company raised gross equity proceeds of $15.5 million ($15.3
million net of costs) in January 2018, which included a $12.0
million subscription by H2P. The Company also acquired H2P's 25%
interest in the Canadian assets for share consideration and $1.75
million deferred cash consideration, resulting in H2P becoming the
Company's controlling shareholder (currently holding 56.8% of the
Company's issued share capital). The Canadian asset acquisition
constituted a business combination in accordance with IFRS 3,
Business Combinations, and has been accounted for accordingly using
provisional fair values which can be finalized up to 12 months
after the transaction date.
As part of its strategic review, the Company has tested the
completeness of the Group's liabilities as at 30 June 2018 and
assessed the tangible and intangible asset carrying values for
impairment risk, which resulted in a Canadian asset impairment loss
of $0.6 million. The Company is also currently completing a
detailed review of the Company's cash flow movements during the
Period to comprehensively analyse the January fundraise use of
funds, which included the partial settlement of 2017 and 2018 work
programme significant budget cost overruns of approximately 40%.
This work is ongoing and will be completed by the year end. Unpaid
work programme creditors account for approximately 50% of the trade
and other payables balance of $10.7 million as at 30 June 2018.
The Company's Board of Directors have reviewed the Group's cash
flow forecasts for the period to 30 September 2019 and, whilst
there is positive forecast operating cash flows from its Canada
producing assets, the Group will require additional external equity
funding by the end of 2018 in order to settle its creditors, fund
its corporate costs and deliver Canada production growth. Whilst
the Company has been successful in raising equity funding in the
past and the directors are optimistic that the Company will raise
additional equity funding, no new equity funding has been committed
to date and it is not wholly within the Group's control. As such,
this represents a material uncertainty which casts a significant
doubt upon the Group's continued ability to operate as a going
concern and it may be unable to realise its assets and discharge
its liabilities in the normal course of business.
Revenue of $7.5 million for the Period predominately reflects
crude sales of 139,632 bbls (H1 2017: 42,450 bbls), at an average
achieved price of $52.83/bbl.
Gross profit increased to $0.8 million for the Period (H1 2017:
$0.3 million gross loss) due to the Company's increased ownership,
increased sales volumes and improved average sales price achieved.
The increase in the depletion charge from $0.4 million in H1 2017
to $2.2 million for the Period reflects the increased production
from reserves and the increase in the oil and gas asset carrying
values to be depleted.
The Company's net loss for the Period includes net exceptional
costs of $3.6 million, composed mainly of the share-based payment
expense of $0.7 million, environmental remediation costs of $1.1
million, restructuring costs of $0.9 million, business acquisition
expenses of $0.1m and an impairment loss of $0.6 million.
Management has been conducting a forensic review of the balance
sheet to ensure the integrity of the Group's asset carrying values,
whilst also implementing best practice cost controls, financial
forecasting and financial reporting systems and processes.
Critically, the data collection, analysis, reporting and capital
expenditure control functions have been upgraded, to provide the
Board and shareholders with greater confidence in the
forward-looking targets.
Outlook
Cabot Energy seeks to deliver shareholder value growth through a
portfolio approach to low-risk production growth and high impact
exploration. Predictable production and cashflow growth is
generated from the Company's existing 100% owned and operated
Canadian land position.
Shareholder returns potential are further amplified through
creating high-impact exploration events in the Company's leading
licence position in Italy with 1 Bn bbls identified prospects,
generated over a 10 year exploration effort. Seismic and
Exploration drilling funding has been secured for the Po Valley
exploration licence via a farm-in from Shell Italia, whilst farm-in
offers are being developed for the 100% owned and operated Adriatic
and Sicily Channel oil prospects. This highly unique
country-leading exploration portfolio of three multi-hundred
million barrel exploration prospects offers the opportunity for
further swaps to expand the number of high-impact value events for
shareholders.
Average production rate for 2018 is forecast to be 711 bopd,
which provides a strong foundation for a new horizontal well and
workover programme in Canada in 2019, subject to raising
capital.
Condensed Consolidated Statement of Profit or Loss
for the six months ended 30 June 2018
6 months 6 months ended
ended
30 June 2018 30 June 2017
Notes (Unaudited) (Unaudited)
$'000 $'000
=================================== ====== ============= ===============
Revenue 7,491 1,796
=================================== ====== ============= ===============
Production costs (4,510) (1,662)
Depletion and amortisation (2,152) (399)
=================================== ====== ============= ===============
Cost of sales (6,662) (2,061)
=================================== ====== ============= ===============
Gross profit / (loss) 829 (265)
Pre-licence costs (7) (12)
Administrative expenses 2 (2,396) (931)
Other operating costs 2 (1,923) (99)
Gain on step acquisition 6 2,025 -
Gain on bargain purchase - 1,627
Loss on termination of option 6 (2,178) -
Impairment loss 4, 5 (620) -
=================================== ====== ============= ===============
(Loss) / profit from operations (4,270) 320
Finance income 29 12
Finance costs (29) (132)
=================================== ====== ============= ===============
(Loss) / profit before tax (4,270) 200
Tax credit 87 560
=================================== ====== ============= ===============
(Loss) / profit for the period (4,183) 760
=================================== ====== ============= ===============
Attributable to:
Owners of the Company (4,183) 768
Non-controlling interests - (8)
=================================== ====== ============= ===============
(4,183) 760
=================================== ====== ============= ===============
(Loss)/earnings per share
Basic (loss)/earnings per share 3 (0.7 cents) 0.2 cents
=================================== ====== ============= ===============
Diluted (loss)/earnings per share 3 (0.7 cents) 0.2 cents
=================================== ====== ============= ===============
All results are from continuing activities.
Notes 1 to 9 form an integral part of this report.
Condensed Consolidated Statement of Profit or Loss and Other
Comprehensive Income
for the six months ended 30 June 2018
6 months 6 months
ended ended
30 June 2018 30 June 2017
(Unaudited) (Unaudited)
$'000 $'000
================================================================ ============= =============
(Loss) / profit for the period (4,183) 760
================================================================ ============= =============
Other comprehensive (loss) / profit:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (2,302) 1,634
================================================================ ============= =============
Other comprehensive (loss) /profit for the period (net of tax) (2,302) 1,634
Total comprehensive (loss) / profit for the period (6,485) 2,394
================================================================ ============= =============
Attributable to:
Owners of the Company (6,485) 2,402
Non-controlling interests - (8)
================================================================ ============= =============
(6,485) 2,394
================================================================ ============= =============
Notes 1 to 9 form an integral part of this report.
Condensed Consolidated Statement of Financial Position
at 30 June 2018
At 30 June 2018 At 31 December 2017
(Unaudited) (Audited)
Notes $'000 $'000
================================================== ====== ================ ====================
Assets
Non-current assets
Intangible assets 4 25,608 28,470
Property, plant and equipment 5 42,487 22,252
Deferred tax asset 3,760 5,665
================================================== ====== ================ ====================
71,855 56,387
Current assets
Inventories 193 296
Trade and other receivables 1,464 2,340
Cash and cash equivalents 6,240 1,775
================================================== ====== ================ ====================
7,897 4,411
================================================== ====== ================ ====================
Total assets 79,752 60,798
================================================== ====== ================ ====================
Liabilities
Current liabilities
Trade and other payables 10,686 10,290
Provisions 417 438
================================================== ====== ================ ====================
11,103 10,728
Non-current liabilities
Trade and other payables 31 29
Provisions 10,595 8,430
Deferred tax liabilities 2,597 2,674
================================================== ====== ================ ====================
13,223 11,133
================================================== ====== ================ ====================
Total liabilities 24,326 21,861
================================================== ====== ================ ====================
Net assets 55,426 38,937
================================================== ====== ================ ====================
Capital and reserves
Share capital 15,669 11,110
Share premium 41,441 23,655
Merger reserve 14,190 14,190
Share incentive plan reserve 568 335
Foreign currency translation reserve (7,464) (5,162)
Retained losses and other distributable reserves (8,980) (5,191)
================================================== ====== ================ ====================
Equity attributable to owners of the Company 55,424 38,937
================================================== ====== ================ ====================
Non-controlling interests 2 -
================================================== ====== ================ ====================
Total equity 55,426 38,937
================================================== ====== ================ ====================
Notes 1 to 9 form an integral part of this report.
Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2018
6 months 6 months
ended ended
30 June 2018 30 June 2017
(Unaudited) (Unaudited)
Notes $'000 $'000
====================================================== ====== ============= =============
cash flows from operating activities
(Loss) / profit before taxation (4,270) 200
Depletion, depreciation and amortisation 2,172 415
Impairment loss 620 -
Decommissioning and abandonment expenditure (501) (828)
Business acquisition expenses 2 115 -
Gain on step acquisition 6 (2,025) -
Loss on termination of option 6 2,178 -
Gain on bargain purchase - (1,627)
Foreign exchange (gain) / loss (10) 10
Share-based payments 2 669 99
Other adjustments 28 122
====================================================== ====== ============= =============
Net cash outflow before movements in working capital (1,024) (1,609)
====================================================== ====== ============= =============
Decrease / (increase) in inventories 243 (77)
Decrease in trade and other receivables 297 3
Increase in trade and other payables 283 1,354
====================================================== ====== ============= =============
Net cash inflow from changes in working capital 823 1,280
====================================================== ====== ============= =============
Taxes paid - -
Net cash outflow from operating activities (201) (329)
====================================================== ====== ============= =============
Cash flows from investing activities
Investments in property, plant and equipment (8,768) (2,645)
Expenditure on exploration and evaluation assets (575) (257)
Business acquisitions including acquisition costs 6 (1,115) -
Increase in trade and other capital payable 78 -
====================================================== ====== ============= =============
Net cash outflow from investing activities (10,380) (2,902)
====================================================== ====== ============= =============
Cash flows from financing activities
Issue of ordinary shares 15,544 1,813
Share issue expenses (281) (27)
Capital contributions from non-controlling interests 2 7
Net cash inflow from financing activities 15,265 1,793
------------------------------------------------------ ------ ------------- -------------
Net increase/(decrease) in cash and cash equivalents 4,684 (1,438)
Cash and cash equivalents at start of period 1,775 6,584
Effect of exchange rate movements (219) 21
------------------------------------------------------ ------ ------------- -------------
Cash and cash equivalents at end of period 6,240 5,167
------------------------------------------------------ ------ ------------- -------------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2018
Retained
Share Foreign losses
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
2018 11,110 23,655 14,190 335 (5,162) (5,191) 38,937 - 38,937
================= ======== ======== ======== ========== ============ ============== ======== ============ ========
Total
comprehensive
income for the
period (2,302) (4,183) (6,485) - (6,485)
================= ======== ======== ======== ========== ============ ============== ======== ============ ========
Contributions by and distributions to owners of the Company
Issue of shares
during the
period 4,559 18,067 - - - - 22,626 - 22,626
Costs and fees
associated with
share issue - (281) - - - - (281) - (281)
Equity share
warrants
exercised - - - (436) - 394 (42) - (42)
Share-based
payments - - - 669 - - 669 - 669
================= ======== ======== ======== ========== ============ ============== ======== ============ ========
Total
contributions
by and
distributions
to owners of
the Company 4,559 17,786 - 233 - 394 22,972 - 22,972
================= ======== ======== ======== ========== ============ ============== ======== ============ ========
Changes in ownership interests in subsidiaries
Capital
contributions
from
non-controlling
interests - - - - - - - 2 2
================= ======== ======== ======== ========== ============ ============== ======== ============ ========
Total changes in
ownership
interests in
subsidiaries - - - - - - - 2 2
================= ======== ======== ======== ========== ============ ============== ======== ============ ========
At 30 June 2018 15,669 41,441 14,190 568 (7,464) (8,980) 55,424 2 55,426
================= ======== ======== ======== ========== ============ ============== ======== ============ ========
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2017
Retained
Share Foreign losses
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
2017 10,575 22,390 14,190 377 (8,978) (2,306) 36,248 (42) 36,206
================= ======== ======== ======== ========== ============ ============== ======= ============ =======
Total
comprehensive
income for the
period - - - - 1,634 768 2,402 (8) 2,394
================= ======== ======== ======== ========== ============ ============== ======= ============ =======
Contributions by and distributions to owners of the Company
Issue of shares
during the
period 521 1,292 - - - - 1,813 - 1,813
Costs and fees
associated with
share issue - (27) - - - - (27) - (27)
Equity share
warrants lapsed
or cancelled - - - (8) - 8 - - -
Share-based
payments - - - 99 - - 99 - 99
================= ======== ======== ======== ========== ============ ============== ======= ============ =======
Total
contributions
by and
distributions
to owners of
the Company 521 1,265 - 91 - 8 1,885 - 1,885
================= ======== ======== ======== ========== ============ ============== ======= ============ =======
Changes in ownership interests in subsidiaries
Capital
contributions
from
non-controlling
interests - - - - - - - 7 7
================= ======== ======== ======== ========== ============ ============== ======= ============ =======
Total changes in
ownership
interests in
subsidiaries - - - - - - - 7 7
================= ======== ======== ======== ========== ============ ============== ======= ============ =======
At 30 June 2017 11,096 23,655 14,190 468 (7,344) (1,530) 40,535 (43) 40,492
================= ======== ======== ======== ========== ============ ============== ======= ============ =======
Notes to the Condensed Consolidated Interim Financial
Statements
for the six months ended 30 June 2018
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 and
Accounts for the year ended 31 December 2017 ("Annual Report"),
except for the new and revised standards noted below. The Annual
Report is available on the Company's website (www.cabot-energy.com)
or by application to the Company's registered office.
Material uncertainty relating to going concern
The interim unaudited financial statements have been prepared on
a going concern basis which assumes that the Group will be able to
realise its assets and settle its obligations in the normal course
of business. The financial statements do not reflect adjustments to
the carrying values and classification of assets and liabilities
that may be necessary should the Group be unable to continue as a
going concern. Such adjustments may be material.
The Company's Board of Directors have reviewed the Group's cash
flow forecasts for the period to 30 September 2019 and whilst there
is positive forecast operating cash flows from its Canada producing
assets, the Group will require additional external debt or equity
funding by the end of 2018 in order to settle its creditors, fund
its corporate costs and deliver Canada production growth. Whilst
the Company has been successful in raising equity funding in the
past and the directors are optimistic that the Company will raise
additional equity funding, no new equity funding has been committed
to date and it is not wholly within the Group's control. As such,
this represents a material uncertainty which casts a significant
doubt upon the Group's continued ability to operate as a going
concern and it may be unable to realise its assets and discharge
its liabilities in the normal course of business.
Adoption of new and revised standards
The Group adopted IFRS 9 "Financial Instruments" and IFRS 15
"Revenue from Contracts with Customers" at the start of the period.
A number of amendments to existing standards and new
interpretations were applicable from 1 January 2018. The adoption
of these standards, amendments and interpretations did not have a
material impact on the Group's condensed financial statements for
the half-year ended 30 June 2018.
2. Administrative expenses and other operating expenses
Administrative expenses
Administrative expenses of $2,396,000 includes $859,000 of
restructuring costs including costs associated with the early
termination of employee and director employment agreements during
the period.
Other operating expenses
6 months ended 6 months ended
30 June 2018 30 June 2017
(Unaudited) (Unaudited)
$'000 $'000
======================================== =============== ===============
Share-based payments 669 99
Environmental remediation costs 1,139 -
Business acquisition expenses (note 6) 115 -
======================================== =============== ===============
1,923 99
======================================== =============== ===============
In accordance with IFRS 2 "Share-based payments", the Group
reflects the economic cost of awarding share options to employees
and Directors by recording an expense in the Statement of Profit or
Loss equal to the fair value of the benefit awarded. The expense is
recognised in the Statement of Profit or Loss over the vesting
period of the award. Following the change of control on 5 January
2018, all options in issue vested immediately and the remaining
charge to be recognised as an expense over the vesting period of
the awards was recognised in full.
Environmental remediation costs of $945,000 were incurred as a
consequence of the pipeline leak in the Rainbow area reported in
2017. In addition, the Group incurred $194,000 expenses to
remediate and clean up two oil spills and to extinguish a fire on
one of the Rainbow area leases
3. (Loss)/earnings per share
Basic (loss)/earnings per share amounts are calculated by
dividing loss or profit for the period attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the period.
Diluted (loss)/earnings per share amounts are calculated by
dividing loss or profit for the period attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the period, 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 or options with exercise prices below the average share
trading price for each period.
6 months ended 6 months ended
30 June 2018 30 June 2017
(Unaudited) (Unaudited)
$'000 $'000
=================================================== =============== ===============
Basic and diluted
Net (loss) / profit attributable to equity owners (4,183) 768
==================================================== =============== ===============
Number 000s Number 000s
=================================================== =============== ===============
Basic weighted average number of shares 633,255 312,366
Dilutive potential of ordinary shares:
Options exercisable under Company schemes - 3,259
==================================================== =============== ===============
Diluted weighted average number of shares 633,255 315,625
==================================================== =============== ===============
As the Group made a loss in the period to 30 June 2018 there is
no dilution in the year from potential ordinary shares. At 30 June
2017, there were 3,259,005 options and no warrants with exercise
prices below the average share trading price for the period, hence
the number of potential dilutive ordinary shares is 3,259,000.
6 months ended 6 months ended
30 June 2018 30 June 2017
(Unaudited) (Unaudited)
$ $
========================== =============== ===============
Basic and diluted
(Loss)/earnings per share (0.7 cents) 0.2 cents
4. Intangible assets
At 30 June 2018 At 31 December 2017
(Unaudited) (Audited)
Notes $'000 $'000
=================================== ====== ================ ====================
Exploration and evaluation assets 24,516 28,428
Goodwill 6 1,056 -
Computer software 36 42
=================================== ====== ================ ====================
25,608 28,470
=================================== ====== ================ ====================
An impairment loss of $13,000 has been recognised against the
costs capitalised in respect of the Australian PEL629 licence,
which is currently in suspension.
The carrying value of Canadian exploration and evaluation assets
at 5 January 2018 was adjusted to a fair value of nil following the
acquisition of High Power Petroleum Canada Limited ("H2P Canada"),
see note 6 below.
5. Property, plant and equipment
At 30 June 2018 At 31 December 2017
(Unaudited) (Audited)
$'000 $'000
=============================== ================ ====================
Oil and gas assets 42,439 22,202
Computer and office equipment 48 50
=============================== ================ ====================
42,487 22,252
=============================== ================ ====================
The net increase of $20,237,000 in the carrying value of oil and
gas assets from 31 December 2017 to 30 June 2018 includes a fair
value uplift of $6,520,000 on existing Canada assets and
recognition of $9,597,000 of Canada assets acquired from H2P, see
note 6. The balance of $4,120,000 relates to the cost recognised in
relation to capital expenditure incurred during the period offset
by depletion and impairment.
An impairment loss of $564,000 has been recognised in respect of
three wells on which capital expenditure was incurred, without a
subsequent increase in reserves, resulting in the carrying value of
the wells exceeding the recoverable value.
Four wells which are in the process of being abandoned and have
no reserves were further impaired by $43,000 as a result of
increases in their carrying value brought about as a result of the
changes in estimates for abandonment.
6. Business acquisitions - Provisional acquisition
accounting
Pursuant to a Share Purchase Agreement (the "SPA") dated 19
December 2017 between H2P and the Company, the satisfaction of all
conditions precedent and the approval by the Company shareholders
on 5 January 2018, the Company acquired 100% of the common shares
of High Power Petroleum (NOP) UK Limited ("H2P UK") and its
wholly-owned subsidiary High Power Petroleum Canada Limited ("H2P
Canada") (the "Acquisition"). Prior to completion of the
Acquisition, H2P Canada held a 25% interest in the Canadian assets
and an option to acquire a further 25% interest for $4,000,000
consideration (the "H2P Option"), acquired in December 2016.
The consideration for the Acquisition was a total of $8,790,000,
equivalent to H2P's 50% share of the pre-tax net present value of
the Canadian oil & gas proven reserves as at 30 September 2017,
as calculated by McDaniel & Associates Ltd less the H2P Option
cost, settled by the issue of 103,796,081 new ordinary shares, at a
price of GBP0.05 per share and deferred cash consideration of
$1,750,000 million payable in monthly instalments between February
2018 and January 2019. Under the SPA, the H2P Option was terminated
on completion of the Acquisition. The consideration has therefore
been allocated between the cost of the H2P Option termination and
the cost of the business combination.
Following the completion of the Acquisition, the Group's working
interest in the Canadian assets increased from 75% to 100% and the
Group obtained control over the previously held joint
operation.
The Acquisition has been accounted for as a business combination
under IFRS3, Business Combinations. Having acquired a controlling
interest, 100% of the financial results of the Canada operations
have been consolidated in the Company's consolidated financial
statements from the SPA economic effective date of 1 January 2018.
The assets and liabilities assumed as at January 5, 2018 have been
recognised at their respective fair values as shown in the table
below. As control was achieved in stages, assets and liabilities
recognised as part of the previously held 75% interest have also
been remeasured at fair value.
Under IFRS3 "Business Combinations", an acquirer has up to 12
months post completion of a transaction to finalise the acquisition
balance sheet and as at the date of this report the fair values
remain provisional.
Consideration:
5 January 2018
$'000
======== ====================
Cash 1,750
Shares 7,040
======== ====================
8,790
======== ====================
Consideration split between business combination and loss on
option termination:
5 January 2018
$'000
============================================ ====================
Consideration for the business combination 6,612
Loss on termination of option 2,178
============================================ ====================
8,790
============================================ ====================
Identifiable assets acquired, and liabilities assumed:
5 January 2018
Recognised
values on acquisition
$'000
================================================== ============================
Property, plant and equipment - oil & gas assets 9,597
Provisions - asset retirement obligation (2,985)
Deferred tax liability (1,081)
Inventories 152
Trade and other receivables 2
Trade and other payables (192)
Goodwill recognised on acquisition 1,119
========================================================= =======================
Consideration for the business combination 6,612
========================================================= =======================
Remeasurement of previously held interest at fair value:
5 January 2018
Recognised
adjustments to carrying values at remeasurement
$'000
================================================== ======================================================
Property, plant and equipment - oil & gas assets 6,520
Intangible assets (3,746)
Deferred tax liability (749)
Gain on step acquisition 2,025
========================================================= =================================================
Acquisition costs of $115,000 have been incurred and expensed in
the period, see note 3. Of the $1,750,000 deferred cash
consideration, $1,000,000, had been settled at 30 June 2018.
The revenue generated, and expenses incurred by the re-acquired
25% of the operation since the date of acquisition (5 January 2018)
were $1,831,000 and $1,884,000 respectively. Of the $1,884,000
expenses, $1,098,000 relates to production costs, $526,000 relates
to depletion and amortisation of plant property and equipment,
$260,000 relates to other operating expenses and $3,000 relates to
finance costs for the unwinding of discount on decommissioning
provisions. Cash outflow from the operation post acquisition was
$2,186,000 and comprised net revenue and investments in oil and gas
assets.
7. Post balance sheet events
Between the balance sheet date of 30 June 2018 and the date that
this 2018 financial information has been published, no developments
have been announced which have a material impact on, or the
understanding of, this financial information.
8. Approval by directors
The interim results for the six months ended 30 June 2018 were
approved by the Directors on 28 September 2018.
9. Availability of interim report
The interim report will be made available in electronic format
on the Company's website, www.cabot-energy.com. Further copies will
be available on request by application to the Company Secretary at
the Company's administrative office, being 93-95 Gloucester Place
London W1 6JQ.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UWRARWUAKURR
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