TIDMCORO
RNS Number : 8115Z
Coro Energy PLC
05 September 2018
5 September 2018
Coro Energy Plc
("Coro" or the "Company")
Interim Results
Coro Energy plc (AIM: CORO), the pan Euro-Asian gas explorer, is
pleased to announce its interim results for the six months ended 30
June 2018.
A copy of these interim financial statements is also available
on the Company's website
https://www.coroenergyplc.com/investors/
Highlights
South East Asia
-- Recognised an industrial need & gap in the market for
regional small - mid cap upstream players. Developed strategy for
building a business focussed on SE Asian E&P
-- Established Business Development team in the region
-- Presented technical and operational credentials to relevant host government bodies
-- Developed a strong pipeline of business development opportunities
-- Post period of review, entered South East Asia E&P market
with 42.5% interest in Bulu PSC, Indonesia
-- Continuing data-room evaluation and commercial assessment of high-graded opportunities
-- Coro well positioned in deal flow - for M&A as well as organic opportunities
Italy
-- Following shareholder approval on 29 March, Coro Energy
acquired Sound Energy Holdings Italy Limited ("SEHIL")
significantly enhancing the company's Italian portfolio
-- Coro Energy now has 5 production concessions, 4 exploration
permits and 4 exploration permit applications in Italy
-- Combined Production from all 4 fields for the first six
months of the year was 203 MMscf resulting in an average of 1.3
MMscf/day
-- Total revenue for the first 6 months was EUR1.1 MM
-- Gas prices in Italy were strong averaging EUR6/Mcf for the period
Corporate
-- Completed merger of SEHIL and Saffron Energy, integrating teams and assets under Coro Energy
-- Raised EUR16.1 million in support of business build in SE Asia
-- Reconfigured Board of Directors
-- Appointed new CEO & CFO
-- Opened London office
James Menzies, Chief Executive Officer, commented "With the
first transaction now signed, we are continuing to build momentum,
with a pipeline of accretive deals continuing to be developed
."
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain
For further information please contact:
James Menzies, Chief Executive j.menzies@coroenergyplc.com
Officer
Sara Edmonson, Deputy Chief s.edmonson@coroenergyplc.com
Executive Officer
Grant Thornton UK LLP (Financial and Nominated Adviser)
Colin Aaronson Tel: +44 (0)20 383 5100
Jen Clarke
Harrison J Clarke
Seamus Fricker
Turner Pope Investments (TPI) Ltd (Broker)
Ben Turner Tel: +44 (0)20 3621 4120
James Pope info@turnerpope.com
CHAIRMAN'S STATEMENT
The first half of 2018 has been a busy and exciting time for
Coro. We have seen senior personnel changes, corporate
consolidation allowing us to achieve scale in our European
business, and a re-branding to become Coro Energy plc. However,
management's focus was dominated by the initiation of our new,
ambitious strategy directed at unlocking latent value in South East
Asia, a strategy which was supported by an oversubscribed equity
issue raising gross proceeds of EUR16.1 million. This initiative
yielded results in the post-period announcement of our first
transaction, providing entry into the Indonesian upstream gas
sector through the acquisition of a 42.5% interest in the Lengo gas
field, offshore East Java.
The group made a loss before tax of EUR2.4m for the period (30
June 2017: EUR0.9m), which was primarily driven by costs associated
with the acquisition of Sound Energy Holdings Italy Limited
("SEHIL") and the AIM readmission process.
Execution of Strategy Leads to Debut Deal in SE Asia
The Company's new growth strategy, around developing a business
focused on finding and commercialising oil and gas resources in
South East Asia was initiated during the period. We believe the
region possesses some of the world's fastest developing economies
where demand for gas currently significantly outstrips supply.
This, combined with increasing GDP rates, commensurate growth in
energy demand and the increasing shortage of gas in the major
markets, provides a compelling investment proposition for
investors.
This growth strategy is focused on high-graded countries, such
as Indonesia, Malaysia and Vietnam where we see significant 'yet to
find' hydrocarbon resources as well as numerous fallow discoveries
which represent opportunities for commercialisation and development
for independent players such as Coro. While we have a preference
for gas over oil assets, we are continuing to evaluate asset
opportunities for both products. We see shareholder value being
created through: i) exploration stage assets - where value can be
added through technical de-risking and the drill bit; ii) appraisal
stage assets - where we see low technical risk and potential for
smart, low cost development options; and iii) production stage
assets - where it facilitates exploration and appraisal upside and
has financial synergies with the wider business.
On 3 September 2018, we announced our maiden deal in the region:
the acquisition of a 42.5% interest in the Bulu PSC, Indonesia,
which contains the Lengo gas field.
Lengo Gas Field, Bulu PSC, Indonesia - A Transformational Step
for Coro
The Lengo field contains certified 2C resources of 359 Bcf (152
Bcf net to Coro) and is forecast to produce at a plateau rate of c.
70 MMscfd (c. 30 MMscfd net to Coro) when it comes on-stream. The
deal marks a highly significant step for the Company, with reserves
and resources, production and cash flow potential showing step
changes in magnitude.
With a $12 MM outlay in cash and shares to be paid in
consideration for the asset, Coro has acquired these resources at a
price of $0.1/MMbtu. And with the East Java gas market pricing
typically between $5.50 - $8/MMbtu, we see this deal as being both
strongly value accretive for shareholders as well as physically
transformational for the Company.
Board & Management Team Re-Structured
In re-focussing its activities on South East Asia, the Board
appointed a new CEO, James Menzies, with existing CEO Sara Edmonson
taking up the position of Deputy-CEO. James is a geologist by
training and a seasoned oil and gas executive who possesses
extensive working knowledge of South East Asia having previously
founded Salamander Energy before exiting in a trade sale to Ophir
Energy in 2015. The Company also announced the appointment of a new
CFO, Andrew Dennan, who has a background in investment management
and corporate finance and brings with him a wealth of capital
markets and corporate transaction experience.
European Business Consolidation Provides The Platform
The initial step in our transformation saw the expansion of our
position in Italy through the acquisition of Sound Energy Holding
Italy Limited, following shareholder approval on 29 March 2018.
Coro now has a significant portfolio of production and development
assets in Italy, operating five production concessions, four
exploration permits and four exploration permit applications in the
country. In addition to a wider asset footprint, this acquisition
resulted in an enlarged operational and management team with
extensive oil and gas experience in Italy and wider
territories.
Outlook: Positioned to Build Further on SE Asian Position
The Company is now well poised to accelerate growth in
shareholder value having: i) consolidated a gas production business
in Italy with a strong balance sheet and access to capital, ii)
recruited the right people with an enviable track record of value
creation and deep regional expertise, and iii) identified a new
market to grow into with strong and attractive fundamental drivers
and where we believe we have advantages in experience, network and
capability. With the first transaction now signed, we are
continuing to build momentum, with a pipeline of accretive deals
being developed.
Update post period end
As referred to above, Coro Energy has entered the South East
Asian upstream sector with acquisition of 42.5% interest in Bulu
PSC situated in the shallow waters of the East Java Sea, Indonesia.
This is a transformational transaction which adds scale in terms of
reserves, resources, production and cash generation capability for
the Company, providing Coro with a strong initial platform on which
to progress our South East Asia growth strategy;
-- Bulu PSC contains the Lengo gas field with independently
certified gross 2C resources of 359 Bcf of recoverable dry gas with
gross 3C resources of 420 Bcf representing additional upside
-- The field development plan has been approved by the
Indonesian authorities. Marketing efforts targeting the Tuban
industrial complex in East Java are underway and an MOU was signed
with a gas buyer earlier this year
-- Transaction results in Coro acquiring over 152 Bcf of
discovered, appraised and certified net 2C gas resources, with an
upside of over 26 Bcf of net additional 3C gas resources
-- Total acquisition cost of $12 million comprising
consideration of $10.96 million ($6.96 million in cash and up to $4
million in Coro shares) plus cost re-imbursements of approximately
$1.04 million
-- Low acquisition price of $0.10/MMbtu
-- Favourable regional gas prices currently in the range of $5.50MMbtu - $8MMbtu
-- Attractive economics enhanced by an existing gross cost pool
of approximately $100 million, to be recovered from production
revenues by the field partners
-- Approved plan of development in place includes an initial
four wells from a small unmanned platform, with a pipeline back to
an onshore receiving facility and processing plant
-- Production from the field is envisaged to plateau at circa 70 MMscf/d
-- Bulu PSC has a term of 30 years, due to expire in October
2033 and is located 65 km offshore in shallow water depths of 60
metres
Condensed Consolidated Balance Sheet
As at 30 June 2018
31 December
30 June 2017
2018 Restated
Note EUR'000 EUR'000
------------------------------- ----- --------- ------------
Non-Current Assets
Inventory 283 252
Other financial assets 566 -
Trade and other receivables 458 72
Deferred tax assets 1,995 1,995
Property, plant & equipment 6 5,158 2,307
Intangible assets 7 12,557 1,745
------------------------------- ----- --------- ------------
Total non-current assets 21,017 6,371
------------------------------- ----- --------- ------------
Current Assets
Cash and cash equivalents 14,144 365
Trade and other receivables 3,765 664
Asset held for sale 8 1,800 -
------------------------------- ----- --------- ------------
Total current assets 19,709 1,029
------------------------------- ----- --------- ------------
Total assets 40,726 7,400
------------------------------- ----- --------- ------------
Liability and equity
Current Liabilities
Trade and other payables 7,255 2,100
Provisions 9 1,728 38
------------------------------- ----- --------- ------------
Total current liabilities 8,983 2,138
------------------------------- ----- --------- ------------
Non-Current Liabilities
Trade and other payables 504 -
Provisions 9 7,416 4,802
Deferred tax liabilities 1,462 -
------------------------------- ----- --------- ------------
Total non-current liabilities 9,382 4,802
------------------------------- ----- --------- ------------
Total Liabilities 18,365 6,940
------------------------------- ----- --------- ------------
Equity
Share capital 10 829 217
Share premium 10 36,950 13,748
Merger reserve 11 9,128 9,128
Other reserves 12 467 -
Accumulated losses (25,013) (22,633)
------------------------------- ----- --------- ------------
Total equity 22,361 460
------------------------------- ----- --------- ------------
Total equity and liabilities 40,726 7,400
------------------------------- ----- --------- ------------
The above condensed consolidated balance sheet should be read in
conjunction with the accompanying notes. Due to changes in the
presentation of certain items during the period, the comparative
condensed consolidated balance sheet as at 31 December 2017 been
restated to ensure comparability, as outlined in the notes to these
financial statements.
Condensed Consolidated Statement of Comprehensive Income
For the Six Months Ended 30 June 2018
30 June
30 June 2017
2018 Restated
Note EUR'000 EUR'000
--------------------------------------------------- ----- --------- ----------
Revenue 1,120 560
Operating costs (651) (307)
Depreciation and amortisation expense (166) (102)
--------------------------------------------------- ----- --------- ----------
Gross profit 303 151
Other income 59 7
General and administrative expenses 4 (2,530) (952)
Depreciation expense (12) (4)
Exploration costs expensed - (4)
Rehabilitation costs expensed (96) -
--------------------------------------------------- ----- --------- ----------
Loss from operating activities (2,276) (802)
Finance income - -
Finance expense (115) (114)
--------------------------------------------------- ----- --------- ----------
Net finance expense (115) (114)
--------------------------------------------------- ----- --------- ----------
Loss before income tax expense (2,391) (916)
Income tax benefit / (expense) 4 11
--------------------------------------------------- ----- --------- ----------
Loss for the period (2,380) (916)
Other comprehensive income / loss
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign
operations (213) -
--------------------------------------------------- ----- --------- ----------
Total comprehensive loss for the period (2,593) (916)
--------------------------------------------------- ----- --------- ----------
Loss attributable to:
Owners of the company (2,593) (916)
--------------------------------------------------- ----- --------- ----------
Total comprehensive loss attributable to:
Owners of the company (2,593) (916)
--------------------------------------------------- ----- --------- ----------
Basic loss per share (EUR) 5 (0.0055) (0.0068)
--------------------------------------------------- ----- --------- ----------
The above condensed consolidated statement of comprehensive
income should be read in conjunction with the accompanying
notes.
Due to changes in the presentation of certain items during the
period, the comparative condensed consolidated statement of
comprehensive income has been restated to ensure comparability.
Condensed Consolidated Statement of Changes in Equity
For the Six Months Ended 30 June 2017
Share Share Merger Other Accumulated
capital Premium Reserve Reserves Losses Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------------------- --------- --------- --------- ---------- ------------ ---------
Balance at 1 January 2017 19,128 - - - (16,408) 2,720
Total comprehensive loss
for the period:
Loss for the period - - - - (916) (916)
Total comprehensive loss
for the period - - - - (916) (916)
------------------------------- --------- --------- --------- ---------- ------------ ---------
Transactions with owners
recorded directly in equity:
Contributions by owners - - - - 802 802
Group reorganisation (19,128) - 9,128 - - (10,000)
Issue of share capital 177 12,826 - - - 13,003
Share based payments for
services rendered (non-cash) 4 210 - - - 214
Transaction costs relating
to issue of shares - (639) - - - (639)
------------------------------- --------- --------- --------- ---------- ------------ ---------
Balance at 30 June 2017 181 12,397 9,128 - (16,522) 5,184
------------------------------- --------- --------- --------- ---------- ------------ ---------
Condensed Consolidated Statement of Changes in Equity
For the Six Months Ended 30 June 2018
Share Share Merger Other Accumulated
capital Premium Reserve Reserves Losses Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------------------- --------- --------- --------- ---------- ------------ ---------
Balance at 1 January 2018 217 13,748 9,128 - (22,633) 460
Total comprehensive loss
for the period:
Loss for the period - - - - (2,380) (2,380)
Other comprehensive income - - - (213) - (213)
------------------------------- --------- --------- --------- ---------- ------------ ---------
Total comprehensive loss
for the period - - - (213) (2,380) (2,593)
------------------------------- --------- --------- --------- ---------- ------------ ---------
Transactions with owners
recorded directly in equity:
Issue of share capital 581 24,836 - - - 25,417
Share based payments for
services rendered (non-cash) 31 1,330 - - - 1,361
Issue of options and warrants - - - 680 - 680
Transaction costs relating
to issue of shares - (2,964) - - - (2,964)
------------------------------- --------- --------- --------- ---------- ------------ ---------
Balance at 30 June 2018 829 36,950 9,128 467 (25,013) 22,361
------------------------------- --------- --------- --------- ---------- ------------ ---------
The above condensed consolidated statement of changes in equity
should be read in conjunction with the accompanying notes.
Condensed Consolidated Statement of Cash Flows
For the Six Months Ended 30 June 2018
30 June 30 June
2018 2017
EUR'000 EUR'000
------------------------------------------------ --------- ---------
Cash flows from operating activities
Receipts from customers 921 441
Payments to suppliers and employees (3,740) (1,574)
Interest paid - (12)
------------------------------------------------ --------- ---------
Net cash used in operating activities (2,819) (1,145)
------------------------------------------------ --------- ---------
Cash flows from investing activities
Payments for property, plant and equipment (694) (186)
Payments for exploration and evaluation assets (130) (27)
Cash acquired in business combination 2,429 -
------------------------------------------------ --------- ---------
Net cash from/(used in) investing activities 1,605 (213)
------------------------------------------------ --------- ---------
Cash flows from financing activities
Proceeds from issues of shares 16,068 2,944
Share issue costs paid in cash (1,075) (582)
Proceeds from borrowings - 678
Repayment of borrowings - (1,267)
------------------------------------------------ --------- ---------
Net cash provided by financing activities 14,993 1,773
------------------------------------------------ --------- ---------
Net increase in cash and cash equivalents 13,779 415
------------------------------------------------ --------- ---------
Cash and cash equivalents brought forward 365 107
------------------------------------------------ --------- ---------
Cash and cash equivalents carried forward 14,144 522
------------------------------------------------ --------- ---------
Notes to the Condensed Consolidated Financial Statements
For the Six Months Ended 30 June 2018
Note 1: Basis of preparation of the interim financial
statements
The condensed consolidated interim financial statements for the
half-year reporting period ended 30 June 2018 have been prepared in
accordance with Accounting Standard IAS 34 Interim Financial
Reporting.
The interim report does not include all the notes of the type
normally included in an annual financial report. Accordingly, this
report is to be read in conjunction with the annual report for the
year ended 31 December 2017, which was prepared under International
Financial Reporting Standards (IFRS) as adopted by the European
Union (EU), and any public announcements made by Coro Energy plc
during the interim reporting period. The business is not subject to
season variations.
The condensed consolidated interim financial statements have not
been audited nor have they been reviewed under ISRE 2410 of the
Auditing Practices Board. These condensed consolidated interim
financial statements do not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006. The Group's
statutory financial statements for the year ended 31 December 2017
prepared under IFRS have been filed with the Registrar of
Companies. The auditor's report on those financial statements was
unqualified and did not contain a statement under Section 498(2) of
the Companies Act 2006.
The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except as set out below.
a) New and amended standards adopted by the group
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts
with Customers became applicable to the current reporting period.
The adoption of these standards did not require any restatement of
prior year comparatives as the application of these standards did
not have a material impact on the financial report.
b) New accounting policies adopted by the group
During the period the group adopted the following new accounting
policies:
Business combinations
Business combinations are accounted for using the acquisition
method. The consideration transferred for the acquisition of a
subsidiary comprises the:
-- Fair value of assets transferred;
-- Liabilities incurred to the former owners of the acquired business;
-- Equity instruments issued by the group;
-- Fair value of any asset or liability resulting from a
contingent consideration arrangement; and
-- Fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date. The group recognises any non-controlling interest
in the acquired entity on an acquisition-by-acquisition basis
either at fair value or at the non-controlling interest's
proportionate share of the acquired entity's net identifiable
assets. Acquisition related costs are expensed as incurred.
The excess of the consideration transferred, amount of any
non-controlling interest and fair value of pre-existing equity
interest over the fair value of net identifiable assets acquired is
recorded as goodwill. If those amounts are less than the fair value
of the net identifiable assets acquired, the difference is
recognised immediately in profit or loss as a gain on bargain
purchase.
Goodwill
Goodwill arising on acquisitions of subsidiaries is included in
intangible assets. Goodwill is not amortised but it is tested for
impairment annually, or more frequently if events or changes in
circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose.
Non-current assets held for sale
Non-current assets (or disposal groups) are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use and a
sale is considered highly probable. They are measured at the lower
of their carrying amount and fair value less costs to sell, except
for assets such as deferred tax assets, assets arising from
employee benefits, financial assets and investment property that
are carried at fair value and contractual rights under insurance
contracts, which are specifically exempt from this requirement.
c) Change in functional currency of Coro Energy plc
Effective 1 January 2018, the directors have determined that the
functional currency of Coro Energy plc (the parent company) should
be changed from Euros to United Kingdom pounds sterling ("GBP").
This is due to a number of factors including a significant
fundraising which took place during the period, where funds were
raised in GBP, as well as the increasing amount of expenses
incurred by the company in GBP. The presentation currency of the
Coro Energy plc group remains Euros.
Note 2: Significant Changes
The financial position and performance of the group was
particularly affected by the following events and transactions
during the six months to 30 June 2018:
-- the acquisition of Sound Energy Holdings Italy Limited and
its wholly owned subsidiary, Apennine Energy SpA (refer Note 13);
and
-- the completion of a significant capital raising through the
issue of ordinary shares to institutional investors (refer note
10).
For further discussion of the group's performance and financial
position refer to the Chairman and Chief Executive Officer's
Statement on pages 10 to 13.
Note 3: Segment Information
The group's reportable segments as described below are the
group's strategic business units. The strategic business units
comprise two operational business units, classified by licence
areas and the stage of development of these licence areas. The
Exploration and Development and Production business units are
wholly based in Italy. All revenues were generated from three
customers (2017: one). In addition, a Corporate business unit has
been identified representing the group's administrative function,
including assets and liabilities not directly associated with oil
& gas operations. For each strategic business unit, the CEO
reviews internal management reports on a monthly basis.
Development and
Exploration Production Corporate Total
30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
2018 2017 2018 2017 2018 2017 2018 2017
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------- ---------- --------- --------- --------- --------- --------- --------- ---------
External
revenues - - 1,120 560 - - 1,120 560
Segment loss
before tax - (4) 207 121 (2,598) (1,033) (2,391) (916)
Depreciation
and amortisation - - (166) (102) (12) (4) (178) (106)
------------------- ---------- --------- --------- --------- --------- --------- --------- ---------
30 June 31 December 30 June 31 December 30 June 31 December 30 June 31 December
2018 2017 2018 2017 2018 2017 2018 2017
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------ --------- ------------ --------- ------------ --------- ------------ --------- ------------
Segment assets 8,702 1,745 6,100 2,819 25,924 2,836 40,726 7,400
Segment
liabilities (995) (1,156) (8,834) (4,897) (8,536) (886) (18,365) (6,940)
------------------ --------- ------------ --------- ------------ --------- ------------ --------- ------------
Note 4: Profit and Loss Information
4 (a) Significant items
The Income Statement includes the following significant items of
expenditure:
30 June 30 June
2018 2017
EUR'000 EUR'000
-------------------------------------------- --------- ---------
Employee benefits expense 936 322
Professional fees 615 264
Rent and office costs 123 64
Share based payments (refer note 14) 187 58
Acquisition costs for business combination 246 -
-------------------------------------------- --------- ---------
4 (b) Income Tax
Income tax expense is recognised based on management's
estimation of the weighted average effective annual income tax rate
expected for the full financial year. The estimated average annual
tax rate used for the six months to 30 June 2018 is 24%, compared
to 24% for the six months ended 30 June 2017.
A deferred tax asset has not been recognised in respect of tax
losses for the first six months based on management's assessment of
future taxable profit that will be available against which the
group can utilise these losses.
Note 5: Loss per share
30 June 30 June
2018 2017
------------------------------ --------- ---------
Basic loss per share (EUR) (0.0055) (0.0068)
Diluted loss per share (EUR) (0.0055) (0.0068)
------------------------------ --------- ---------
The calculation of basic loss per share was based on the loss
attributable to shareholders of EUR2,380,000 (30 June 2017:
EUR916,000) and a weighted average number of ordinary shares
outstanding during the half year of 435,908,868 (30 June 2017:
134,165,967).
Dilutive loss per ordinary share equals basic loss per ordinary
share as, due to the losses incurred in the six months to 30 June
2018, and six months to 30 June 2017 and the twelve months to 31
December 2017, there is no dilutive effect from the subsisting
share options.
Note 6: Property, Plant & Equipment
31 December
30 June 2017
2018 Restated
EUR'000 EUR'000
------------------------------ --------- ------------
Office Furniture & Equipment 184 7
Oil and Gas assets 4,974 2,300
------------------------------ --------- ------------
5,158 2,307
------------------------------ --------- ------------
31 December
30 June 2017
2018 Restated
EUR'000 EUR'000
---------------------------------------------------------- --------- ------------
Reconciliations:
Reconciliation of the carrying amounts for each class of
Plant & equipment are set out below:
Office Furniture & Equipment:
Carrying amount at beginning of period 7 11
Assets acquired in business combination (refer note 13) 178 -
Additions 11 2
Depreciation expense (12) (6)
---------------------------------------------------------- --------- ------------
Carrying amount at end of period 184 7
---------------------------------------------------------- --------- ------------
Oil and Gas assets:
Carrying amount at beginning of period 2,300 2,924
Assets acquired in business combination 2,377 -
(refer note 13)
Additions 463 788
Depreciation expense (166) (256)
Transferred from exploration and evaluation assets - 2,524
Changes in estimates of rehabilitation costs - (86)
Impairment losses - (3,594)
---------------------------------------------------------- --------- ------------
Carrying amount at end of period 4,974 2,300
---------------------------------------------------------- --------- ------------
5,158 2,307
---------------------------------------------------------- --------- ------------
Included in Oil and Gas assets are gas production field assets
of EUR159,000 that were previously disclosed as resource property
costs in the annual report of the group for the year ended 31
December 2017. Fixed assets associated with producing oil and gas
fields are now disclosed as one asset class within property, plant
& equipment: Oil and Gas assets. This constitutes a change in
presentation only, with no change to the group's accounting policy
for these assets. No indicators of impairment of property, plant
& equipment were identified as at 30 June 2018.
Note 7: Intangible Assets
31 December
30 June 2017
2018 Restated
EUR'000 EUR'000
--------------------------------------------------------- --------- ------------
Exploration and evaluation assets 8,702 1,745
Goodwill (refer note 13) 3,855 -
--------------------------------------------------------- --------- ------------
12,557 1,745
--------------------------------------------------------- --------- ------------
Reconciliation of carrying amount of exploration
and evaluation assets:
Carrying amount at beginning of period 1,745 5,003
Assets acquired in business combination (refer note 13) 6,922 -
Additions 35 165
Transfer to Production phase - (2,524)
Change in estimate of rehabilitation costs - (131)
Exploration expenditure written off - (768)
--------------------------------------------------------- --------- ------------
Carrying amount at end of period 8,702 1,745
--------------------------------------------------------- --------- ------------
Exploration and evaluation assets were reported as resource
property costs in the annual report of the group for the year ended
31 December 2017. Assets associated with oil & gas fields in
the exploration and evaluation phase are now disclosed as one asset
class within intangible assets: exploration and evaluation assets.
This constitutes a change in presentation only, with no change to
the group's accounting policy for these assets.
Exploration and evaluation assets represent projects in the
exploration phase that have not yet reached a stage which permits a
reasonable assessment of the existence of, or otherwise,
economically recoverable reserves. The ultimate recoupment of
exploration and evaluation assets is dependent upon the successful
development and exploitation, or alternatively sale, of the
respective areas of interest at an amount greater than or equal to
the carrying value. The directors have not identified any
indicators of impairment of exploration and evaluation assets as at
30 June 2018.
Note 8: Asset held for sale
30 June 31 December
2018 2017
EUR'000 EUR'000
----- --------- ------------
Land 1,800 -
----- --------- ------------
As detailed in note 13, the group acquired land on which the
Badile licence is located as part of a business combination during
the interim period. The company is actively marketing the land for
sale as required by the terms of the Sale & Purchase Agreement
("SPA") governing the acquisition of Sound Energy Holdings Italy
Limited. Under the terms of the SPA, all proceeds from the sale of
the Badile land will be remitted to the vendor, net of any
transaction costs incurred by Coro. Accordingly a EUR1.8m payable
is recorded within the acquisition date fair value of trade and
other payables representing the amount owing to the vendor. There
are no separately identifiable income or expenditures associated
with the Badile licence that should be presented as discontinued
operations.
Note 9: Provisions
30 June 31 December
2018 2017
EUR'000 EUR'000
---------------------------------------------------------- --------- ------------
Current:
Employee leave entitlements 41 38
Other provisions 354 -
Rehabilitation provisions 1,333 -
---------------------------------------------------------- --------- ------------
1,728 38
---------------------------------------------------------- --------- ------------
Non-Current:
Other provisions 566 -
Rehabilitation provisions 6,850 4,802
---------------------------------------------------------- --------- ------------
7,416 4,802
---------------------------------------------------------- --------- ------------
Reconciliation of non-current rehabilitation provisions:
Opening balance 4,802 4,962
Acquired in business combinations 3,552 -
Increase in provision from unwind of discount 49 57
Changes in provision due to revised estimates - (217)
Provision utilised during the period (220) -
Provision reclassified to current liabilities (1,333) -
---------------------------------------------------------- --------- ------------
Closing balance 6,850 4,802
---------------------------------------------------------- --------- ------------
Current rehabilitation provisions includes costs to be incurred
in decommissioning activities on the Casa Tonetto and Badile
licences in the 12 months to 30 June 2019. EUR687,000 of these
costs relate to the Badile licence. As outlined in note 13, these
costs are to be reimbursed to the group by the former owner of the
licence, and as such a receivable for the same amount is included
within trade and other receivables in the group balance sheet.
Included within other non-current provisions is an amount of
EUR566,000 representing funds which will be used to undertake
community development projects in the Municipality of San Giacomo,
located in the Lombardy region of Italy. An equal amount is held as
restricted deposits with a bank, and recorded as other financial
assets in the group balance sheet.
Note 10: Share Capital and Share Premium
30 June 30 June
2018 Nominal Share 2018
Number value Premium Total
000's EUR'000 EUR'000 EUR'000
------------------------------- -------- --------- --------- ---------
As at 1 January 2018 185,908 217 13,748 13,965
------------------------------- -------- --------- --------- ---------
Shares issued during the period:
Issued for the acquisition
of subsidiary 185,908 213 9,134 9,347
Issued for cash consideration 319,634 368 15,702 16,070
Issued for services rendered 27,072 31 1,330 1,361
Share issue costs - - (2,964) (2,964)
------------------------------- -------- --------- --------- ---------
Closing balance -
30 June 2018 718,522 829 36,950 37,779
------------------------------- -------- --------- --------- ---------
31 December 31 December
2017 Nominal Share 2017
Number value Premium Total
000's EUR'000 EUR'000 EUR'000
------------------------------------------ ------------ --------- --------- ------------
As at 1 January 2017 36,785 19,128 - 19,128
Issued on incorporation 50,000 60 - 60
Issued for the acquisition of subsidiary 50,000 58 9,942 10,000
Group restructure (36,785) (19,128) - (19,128)
Issued for services rendered 4,658 5 252 257
Issued for cash consideration 81,250 94 4,268 4,362
Share issue costs - (714) (714)
------------------------------------------ ------------ --------- --------- ------------
Closing balance -
31 December 2017 185,908 217 13,748 13,965
------------------------------------------ ------------ --------- --------- ------------
All ordinary shares are fully paid and carry one vote per share
and the right to dividends. In the event of winding up the company,
ordinary shareholders rank after creditors. Ordinary shares have a
par value of GBP0.001 per share. Share premium represents the issue
price of shares issued above their nominal value.
No dividends were paid or declared during the current
period.
Note 11: Merger Reserve
The Merger reserve of EUR9,128,000 relates to the reorganisation
of ownership of Northsun Italia S.p.A which occurred in the first
half of 2017; being the difference between the value of shares
issued and the nominal value of the subsidiary's shares
received.
Note 12: Other Reserves
Share based payment reserve
Included within share based payments reserve is the current
period charge relating to options issued to directors and
management of the company, as well as the cost of warrants issued
to certain shareholders as an incentive to subscribe for ordinary
shares in the company. Refer to note 14.
Functional currency translation reserve
The translation reserve comprises all foreign currency
differences arising from translation of the financial position and
performance of the parent company from GBP functional currency into
the group's Euro presentational currency.
Note 13: Business Combination
Summary of acquisition
On 9 April 2018, the company acquired the entire issued capital
of Sound Energy Holdings Italy Limited ("SEHIL") and its wholly
owned subsidiary, Apennine Energy S.p.A ("Apennine"). While SEHIL
does not trade, Apennine is engaged in the discovery and
exploitation of hydrocarbons in Italy. The acquisition provided the
group with additional reserves through the acquisition of the
operating Rapagnano and Casa Tiberi gas fields, as well as a
portfolio of exploration assets. The group also acquired
experienced technical and operational staff with a proven ability
to explore, appraise, develop and operate oil & gas assets,
which will support the group's expansion into South East Asia. An
effective date for accounting purposes of 31 March 2018 has been
used for the acquisition, given the level of transactions between
this date and the legal acquisition date of 9 April 2018 were
immaterial.
Consideration for the acquisition
Details of the purchase consideration, the net assets acquired,
and goodwill are as follows:
EUR'000's
----------------------------- ----------
Purchase consideration:
Ordinary shares issued 9,347
Contingent consideration 504
Payment for working capital 1,798
----------------------------- ----------
11,649
----------------------------- ----------
The fair value of the 185,907,500 consideration shares issued to
the shareholders of Sound Energy plc (EUR9.3m) was based on the
published share price of the company on acquisition date of 4.38p
per share.
The vendor is entitled to 5% of gross sales proceeds from the
D.R 74.AP licence (the Laura field). In order to calculate the
present value of this contingent consideration, the company has
estimated gross future sales revenue from the Laura field and
applied a 10% chance of success factor to this revenue to take into
account the regulatory framework in Italy which currently prohibits
the development of Laura, discussed further below. The resulting
estimate of contingent consideration has been discounted to present
value at a rate of 2%, representing an approximation of the time
value of money. The contingent consideration is recognised as a
non-current payable in the group balance sheet.
A further cash payment of EUR1.8m was made to the vendor in July
2018 for the working capital in Apennine on acquisition date. This
amount is recorded within trade and other payables in the 30 June
2018 balance sheet.
Fair value of assets and liabilities acquired
The assets and liabilities of Apennine recognised as a result of
the acquisition are as follows:
Fair value
EUR'000
---------------------------------- -----------
Cash and cash equivalents 2,429
Trade and other receivables 3,179
Inventories 150
Intangible assets 6,922
Property plant & equipment 2,555
Land 1,800
Trade and other payables (4,216)
Rehabilitation provisions (3,552)
Deferred tax liabilities (1,473)
---------------------------------- -----------
Net identifiable assets acquired 7,794
Add: goodwill 3,855
---------------------------------- -----------
11,649
---------------------------------- -----------
The goodwill is largely attributable to unrecognised tax losses
in Apennine for which no deferred tax asset has been recognised at
acquisition date. Apennine has gross carried forward tax losses of
EUR45m however there is unlikely to be sufficient taxable profits
generated from the group's current operations against which to
utilise these losses. The ability of the group to utilise these tax
losses depends on successful development of additional licence
areas in Italy.
The identifiable assets and liabilities stated above includes
the following:
-- Badile land (EUR1.8m): Under the terms of the Sale &
Purchase Agreement ("SPA"), all proceeds from the sale of the
Badile land will be remitted to the vendor, net of any transaction
costs incurred by Coro. Accordingly a EUR1.8m payable is recorded
within the acquisition date fair value of trade and other payables
above representing the amount owing to the vendor.
-- Badile VAT receivable (EUR0.8m): Under the terms of the SPA,
any VAT refunds received by Apennine in respect of a drilling
campaign on the Badile licence will be remitted to the vendor. A
EUR0.8m payable is recorded within the acquisition date fair value
of trade and other payables to reflect this.
-- Badile rehabilitation provision (EUR1.0m): Under the terms of
the SPA, any expenditures incurred by Apennine on rehabilitating
the Badile licence will be reimbursed by the vendor. The
acquisition date fair value of the rehabilitation provision for
Badile is EUR1.0m. As such a EUR1.0m receivable is included in the
acquisition date fair values to reflect this amount which will be
collected from the vendor.
The significant estimates and judgments relevant to the
valuation of Apennine's assets were as follows:
1. Apennine has two producing gas fields, Rapagnano and Casa
Tiberi, which were valued using a discounted cash flow ("DCF")
model. Production and cost forecasts were based on a Competent
Person's Report prepared by CGG Associates. Gas prices were assumed
at EUR0.24/scm in 2018, and inflated at 2% per annum thereafter. A
10% increase in the annual gas price assumption would have resulted
in an increase of EUR0.6m in the acquisition date fair value of
property, plant & equipment. A 10% decrease in gas price would
lower the fair value by EUR0.5m. A discount rate of 7% was applied
to future cash flows, based on the group's weighted average cost of
capital. A 1% increase in the discount rate adopted would have
decreased the fair value of property, plant & equipment by
EUR0.1m. A decrease of 1% in the discount rate would have increased
fair value by EUR0.2m. The remaining oil & gas assets acquired
primarily relates to a gas plant & associated equipment used on
the Casa Tonetto field, which have been valued by an external
valuer.
2. Two exploration assets were also valued using a DCF
methodology, the Laura and Santa Maria Goretti fields. Key
assumptions such as gas price and discount rate were consistent
with those used for producing gas fields. Production estimates were
prepared internally, and total production estimates are comparable
to those reported in the most recent CPR. Cost estimates were
determined internally, based on our knowledge of other similar
fields developed by the group. The key estimate made by the company
is the chance of success factors applied to the calculated net
present values of the two fields:
a. Laura (10% chance of success): In December 2015, a new Budget
law was passed in Italy which prevents any exploitation of oil
& gas licences within 12 nautical miles of the coast. The Laura
field is approximately 4km offshore, and hence the licence is
currently suspended pending a change to current regulation which
would allow the field development to progress. Management estimate
there is a 10% chance of regulatory change occurring.
b. Santa Maria Goretti (40%): A chance of success of 40% has
been applied to this field, which takes into account the
comparatively early stage of exploration and appraisal of the
licence. While management are confident the field contains
commercial quantities of hydrocarbons, further appraisal of the
licence is required to derisk any future development.
Revenue and profit contribution
The acquired business contributed revenues of EUR184,000 and a
net loss of EUR321,000 to the group in the period from 1 April 2018
to 30 June 2018
Note 14: Share Based Payments
The company issued the following equity instruments in lieu of
payments for services rendered:
No of
equity Value
instruments of Service
'000s EUR'000
--------------------------------------------------------------------- ------------- ------------
Recognised in the condensed consolidated statement of comprehensive
income:
Ordinary shares issued in lieu of directors' fees 86 4
Ordinary shares issued for professional services provided 685 35
Options issued to directors and management 92,000 131
Warrants issued in exchange for general services 5,000 17
Recognised as share issue costs in the condensed consolidated
statement of changes in equity:
Ordinary shares issued in lieu of commissions on placement 24,589 1,236
Ordinary shares issued for professional services related
to placement 1,712 87
Warrants issued on placement 159,817 532
--------------------------------------------------------------------- ------------- ------------
The company granted the following equity settled share based
payments during the period:
No. of Contractual
options Expiry life
Date of grant '000s date Purpose of option
-------------- --------- ----------- ---------------------- ------------
9 April 2018 67,000 9 April As part of 5 years
2023 overall compensation
to directors
/ management
1 May 2018 25,000 1 May 2023 As part of 5 years
overall compensation
to directors
/ management
-------------- --------- ----------- ---------------------- ------------
The fair value of services rendered in return for share options
is based on the fair value of share options granted measured using
the Black-Scholes model.
The following inputs were used in the measurement of the fair
values at grant date of the options granted.
9 April 1 May
2018 2018
5-year 5-year
option option
---------------------------------------------------------- --------- -----------
Fair value at grant date 1.86 p 1.53p
Share price at grant date 4.3p 3.825p
Exercise price 4.38p 4.38p
Expected volatility 50% 50%
Option life 5 years 5 years
Risk-free interest rate (based on yield on 5-year gilts) 1% 1%
Expiry date 9 April 1 May 2023
2023
---------------------------------------------------------- --------- -----------
p - British pence
The fair value of the options granted are spread over the
vesting period. The amount recognised in the income statement for
the period to 30 June 2018, represents the amount of the fair value
vested for this period and amounts to EUR131,000 (GBP115,000).
In addition to the options granted above, the company issued
159m warrants to new shareholders as an incentive to subscribe for
new shares in the company. A further 5m warrants were granted to
service providers in lieu of cash compensation.
The warrants granted during the period were as follows:
No. of Contractual
Date of warrants Expiry life
grant '000s date Purpose of warrant
-------- ---------- -------- ---------------- ------------
9 April 159,817 9 April As an 1 year
2018 2019 incentive
to subscribe
for new
shares
in the
company
9 April 5,000 9 April As compensation 1 year
2018 2019 for services
in lieu
of cash
-------- ---------- -------- ---------------- ------------
The fair value of the share warrants issued is measured using
the Black-Scholes model.
The following inputs were used in the measurement of the fair
values at grant date of the warrants granted.
Fair value at grant date 0.29p
Share price at grant date 4.3p
Exercise price 6.57p
Expected volatility 50%
Life of warrants 1 year
Risk-free interest rate (based on yield on 1-year gilts) 0.7%
Expiry date 9 April
2019
---------------------------------------------------------- --------
p - British pence
The amount recognised in the income statement for the period to
30 June 2018, represents the amount of the fair value of warrants
issued for services rendered of EUR17,000 (GBP15,000)
The amount recognised in equity as a cost directly attributable
to the issue of shares, represents the amount of the fair value of
warrants issued to new shareholders of EUR532,000 (GBP463,000)
Note 15: Events after the reporting period
On 3 September 2018 the company announced its entry into the
South East Asian upstream sector with the acquisition of a 42.5%
interest in the Bulu Production Sharing Contract ("PSC") situated
in the shallow waters of the East Java Sea, Indonesia. Completion
of the transaction is conditional on, inter alia, joint venture
partner pre-emption and regulatory government approvals. Further
details are provided in the Chairman and Chief Executive Officer's
Statement on page 10.
The interim financial statements have been prepared assuming the
group will continue as a going concern after taking into account
all available information for the foreseeable future, and in
particular 12 months from the date of approval of the Interim
Financial Statements. This includes management prepared cashflow
projections, flexibility in respect of discretionary expenditures,
and consideration of the funding options available to management.
As at the date of approval of these interim financial statements
the Directors are satisfied that the group has adequate resources
to continue in operational existence and thus they continue to
adopt the going concern basis of accounting in preparing the
interim results.
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 LAMFTMBMMMRP
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September 05, 2018 02:20 ET (06:20 GMT)
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