TIDMGDL
RNS Number : 2012C
Greka Drilling Limited
27 September 2018
27 September 2018
Greka Drilling Limited
("Greka Drilling" or the "Company")
Interim Results 2018
Greka Drilling Limited (AIM: GDL), the largest independent and
specialized unconventional gas driller in Asia, is pleased to
announce its unaudited results for the six months ended 30 June
2018.
FINANCIAL HIGHLIGHTS
-- Revenue of US$2.3 million (H1 2017: US$3.6 million), reduction due to loss of India revenue
-- Loss of US$2.8million (H1 2017: loss of US$1.1 million),
carrying fixed costs while contracts are being concluded with
clients
OPERATIONAL HIGHLIGHTS
-- 12 wells were drilled in the first 6 months this year (all in
China) compared to 12 wells in the same period last year (5 in
China; 7 in India)
-- A total of 18,430 meters were drilled, compared to 15,625
meters in the same period last year
Randeep S. Grewal, Chairman and Chief Executive of Greka
Drilling, commented:
While activities are starting to pick up in China for the second
half, the first half of the year was quite challenging. China
activities have been consistent with a continuous drilling program
being executed with CNPC in Shanxi province. India has been at a
standstill until further tenders are won and thus has produced no
reported revenues for H1 2018. I remain very positive on the long
term prospects for Greka Drilling but expect challenges in the
short term to continue while we operate with the current limited
number of contracts.
For more information on Greka Drilling, please visit the
Company's website at www.grekadrilling.com or contact:
Smith & Williamson
Nominated Adviser and Broker
Azhic Basirov / David Jones / Ben
Jeynes +44 (0) 20 7131 4000
CHAIRMAN'S STATEMENT
The interim results show a gradual increase in workload within
China while India continues to be stagnant as we await new orders
from potential clients. Overall the business continues to be
challenged within its currently limited scale of operations.
Notwithstanding this, contracts and drilling campaigns are being
negotiated with potential clients.
In China, our continued client CNPC/PetroChina has maintained a
consistent pace in its drilling campaign where five GD75 rigs are
deployed. We expect such deployment to stay consistent over the
course of the year. Greka Drilling is routinely complimented on its
drilling execution with accolades for our drilling precision and
speed. The satisfied CNPC client expects to maintain our services
for most of its horizontal drilling campaigns going forward. The
Company is expected to be called upon to participate in the bidding
for a 149 well drilling campaign in the GCZ Block, jointly operated
by CNPC and Greka, where we expect to drill 50 of the directional
wells which should be committed to us and completed by yearend
2019.
India continues to be challenging. Essar has yet to pay our long
standing receivable and it seems likely we shall proceed with
taking legal action to recover our entitlement. Concurrently, long
term vendors are eager to collect monies owed which we intend to
schedule under a payment plan based on available funds. In an
effort to maintain our drilling team's competency, the crew is
being seconded to China so as to assist the increasing demand for
our services within Shanxi province. We expect to compete on a
tender to support Coal India needs in coal bed methane extraction
from its vast West Bengal acreage.
We are now approaching our eleventh anniversary since formation
on 1 November 2007. Of the years in operation, we have been listed
on AIM for seven years. Unfortunately, it has become evident that
the costs of such a listing are prohibitive relative to the size of
our operations and furthermore, the market capitalization of the
Company has dropped to some US$ 6m within limited daily trading
value. It seems that the cyclical oil & gas service industry
which we are in within China and India, is not favored within the
public markets. We certainly do not expect the cyclic nature of our
business to change in the near to medium term.
Accordingly, and following a thorough review of the benefits of
continuing with the current AIM listing, the Board has decided to
seek the cancellation of the admission of the Company's shares to
trading on AIM, An announcement will be made shortly with further
information relating to the timing and process of the proposed
cancellation.
Notwithstanding the currently challenging conditions, Greka
Drilling does indeed have a unique footprint within China and
India. We continue to build on our long track record of specialized
drilling excellence for coal bed methane. The established norm
among Chinese operators to allocate complex horizontal and
directional wells to Greka Drilling is a good validation of such
competency. We look forward to continuing to delivering this unique
expertise to our clients in multiple jurisdictions.
I would like to thank the public shareholders for their support
over the past seven years of our eleven years of being in
business.
Randeep S. Grewal
Chairman
27 September 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
US$'000 US$'000 US$'000
Note Unaudited Unaudited Audited
======================================= ===== ==================== =============
Revenue 3 2,259 3,590 11,585
Cost of sales (3,347) (2,896) (8,161)
======================================= ===== ==================== =============
Gross profit/(loss) (1,088) 694 3,424
Administrative expenses (1,484) (1,694) (3,936)
======================================= ===== ==================== =============
Loss from operations (2,572) (1,000) (512)
Finance income 4 356 372 393
Finance costs 5 (1,052) (692) (1,562)
======================================= ===== ==================== =============
Loss before income tax (3,268) (1,320) (1,681)
Income tax charge 6 506 175 (884)
======================================= ===== ==================== =============
Loss for the period (2,762) (1,145) (2,565)
Other comprehensive income/(expense):
Items that may be reclassified
to profit or loss:
Exchange differences
on translation of foreign
operations (1,214) 1,282 3,402
======================================= ===== ==================== =============
Total comprehensive expense
for the period (3,976) 137 837
--------------------------------------- ----- ------------------ -------------------- -------------
(Loss)/profit for the
period attributable to:
- Owners of the company (2,781) (1,206) (2,687)
- Non-controlling interests 19 61 122
======================================= ===== ==================== =============
(2,762) (1,145) (2,565)
--------------------------------------- ----- ------------------ -------------------- -------------
Total comprehensive (expense)/income
attributable to:
- Owners of the company (3,996) 105 774
- Non-controlling interests 20 32 63
======================================= ===== ==================== =============
(3,976) 137 837
--------------------------------------- ----- ------------------ -------------------- -------------
Earnings per share
- Basic and diluted (in
US$) 7 (0.0069) (0.0029) (0.0064)
======================================= ===== ================== ==================== =============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June As at 31 December
2018 2017
US$'000 US$'000
Note Unaudited Audited
=============================== ===== ==================
Assets
Non-current assets
Property, plant and equipment 8 77,998 79,040
Intangible assets 196 236
Deferred tax assets 9 376 10
Other non-current assets 471 470
=============================== ===== ==================
79,041 79,756
=============================== ===== ==================
Current assets
Inventories 10 4,889 5,309
Trade and other receivables 11 5,917 5,590
Cash and bank balances 12 4,000 649
=============================== ===== ==================
14,806 11,548
=============================== ===== ==================
Total assets 93,847 91,304
=============================== ===== ==================
Liabilities
Current liabilities
Trade and other payables 13 26,387 20,460
Loans and borrowings 14 6,348 5,681
Provisions -
=============================== ===== ==================
32, 735 26,141
=============================== ===== ==================
Non-current liabilities
Loans and borrowings 14 8,800 8,520
Financial liability 15 111 466
Deferred tax liabilities 9 -
=============================== ===== ==================
8,911 8,986
=============================== ===== ==================
Total liabilities 41,646 35,127
=============================== ===== ==================
Total net assets 52,201 56,177
=============================== ===== ==================
Capital and reserves
Share capital 4 4
Share premium 77,186 77,186
Invested capital (1,533) (1,533)
Reserve fund 917 917
Foreign exchange reserve 727 1,942
Retained (deficit) (24,960) (22,179)
=============================== ===== ==================
Total equity attributable
to owners of the Company 52,341 56,337
Non-controlling interests (140) (160)
=============================== ===== ==================
Total equity 52,201 56,177
=============================== ===== ==================
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Invested Reserve Foreign Retained deficit Equity Non-controlling Total
capital premium capital fund exchange attributable interests
reserve to owners
of the
Company
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
=================== ======== ================ ================= ============ =========== ================== ============= ================ ============
At 01 January 2017
- audited 4 77,186 (1,533) 917 (1,519) (19,492) 55,563 (223) 55,340
Loss for the
period - - - - - (1,206) (1,206) 61 (1,145)
Other
comprehensive
income:
- Exchange
difference
on translation of
foreign
operations - - - - 1,311 - 1,311 (29) 1,282
=================== ======== ================ ================= ============ =========== ================== ============= ================ ============
Total
comprehensive
income/(expense)
for the period - - - - 1,311 (1,206) 105 32 137
At 30 June 2017 -
unaudited 4 77,186 (1,533) 917 (208) (20,698) 55,668 (191) 55,477
=================== ======== ================ ================= ============ =========== ================== ============= ================ ============
At 01 January 2018
- audited 4 77,186 (1,533) 917 1,942 (22,179) 56,337 (160) 56,177
(Loss)/profit for
the period - - - - - (2,781) (2,781) 19 (2,762)
Other
comprehensive
income/(expense):
- Exchange
difference
on translation
of
foreign
operations - - - - (1,215) - (1215) 1 (1,214)
=================== ======== ================ ================= ============ =========== ================== ============= ================ ============
Total
comprehensive
income/(expense)
for the period (1,215) (2,781) (3,996) 20 (3,976)
=================== ======== ================ ================= ============ =========== ================== ============= ================ ============
At 30 June 2018 -
unaudited 4 77,186 (1,533) 917 727 (24,960) 52,341 (140) 52,201
=================== ======== ================ ================= ============ =========== ================== ============= ================ ============
CONSOLIDATED STATEMENT OF CASH FLOWS
6 months ended 6 months Year ended
30 June 2018 ended 30 31 December
June 2017 2017
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
==================================== =========== =============
Operating activities:
(Loss)/profit before income
tax (3,268) (1,320) (1,681)
Adjustments for:
Depreciation 691 1,908 2,813
Amortization of other intangible
assets 38 36 72
Loss on disposal of property,
plant and equipment - - -
Finance (loss)/gains (69) 126 355
Finance income (356) (372) (393)
Finance costs 1,121 566 1,207
===================================== =========== =============
Operating cash flows before
changes in working capital (1,843) 944 2,373
Decrease/(increase) in inventories 420 106 672
(Increase)/decrease in trade
and other receivables (327) (1,780) (1,831)
Increase/(decrease) in trade
and other payables 5,927 649 (4,203)
===================================== =========== =============
Cash generated from/(utilized
by) operations 4,177 (81) (2,989)
Income tax payment 140 (229) (54)
===================================== =========== =============
Net cash from operating activities 4,317 (310) (3,043)
===================================== =========== =============
Investing activities:
Payments for purchase of property,
plant and equipment - (8) (278)
Payments for intangible assets 1 - -
Movement in restricted cash (3,930) (2,657) -
Interest received 1 - 1
===================================== =========== =============
Net cash (used in)/from investing
activities (3,928) (2,665) (277)
===================================== =========== =============
Financing activities:
Proceeds from promissory note - - 2,500
Proceeds of short term loan 3,010 5,452 3,061
Repayment of short term loan (3,061) (3,604) (3,604)
Finance costs paid (124) (161) (240)
===================================== =========== =============
Net cash from/(used in) financing
activities (175) 1,687 1,717
===================================== =========== =============
Net increase/(decrease) in
cash and cash equivalents 214 (1,288) (1,603)
Cash and cash equivalents
at start of period 649 2,135 2,135
===================================== =========== =============
847 532
Effect of foreign exchange
rate changes (793) (783) 117
===================================== =========== =============
Cash and cash equivalents
at end of period 70 64 649
===================================== =============== =========== =============
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. GENERAL INFORMATION
The consolidated unaudited interim financial information set out
in this report is based on the consolidated financial statements of
Greka Drilling and its subsidiary companies (together referred to
as the "Group").
2. ACCOUNTING POLICIES
The condensed consolidated financial information should be read
in conjunction with the annual financial statements for the year
ended 31 December 2017, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union except for IAS 34. The financial statements of
the Group for the 6 months ended 30 June 2018 were approved and
authorized for issue by the Audit Committee and the Board on 27
September 2018.
The interim financial statements have been prepared in
accordance with the accounting policies that are consistent with
the December 2017 financial statements and the same policies are
expected to apply for the year ended 31 December 2018. The
financial information for the six months to 30 June 2018 does not
constitute audited accounts of the Company or the Group. The
comparative financial information for the year ended 31 December
2017 in this interim report does not constitute statutory accounts
for that year. The auditors' report on those accounts was
unqualified and did not draw attention to any matters by way of
emphasis.
Basis of preparation
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the half-yearly consolidated financial statements.
The Directors have prepared cash flow forecasts which show the
Company will generate positive cash flows from operations at least
for the next 12 months, these will be used to settle overdue trade
payables but will not be sufficient to repay the loan notes to
Guarantee Finance LLC and Grecap Ltd when they fall due. The loan
note holders are also significant shareholders and whilst it is
expected they will extend the repayment terms in due course there
are no legally binding agreements currently in place to do so.
These conditions indicate that a material uncertainty exists
that may cast significant doubt on the Group's ability to continue
as a going concern and therefore that the Group may be unable to
realise their assets and discharge their liabilities in the normal
course of business. The financial statements do not include the
adjustments that would result if the Company or Group was unable to
continue as a going concern. The Directors are nevertheless
confident that sufficient funds will be made available and that the
use of the going concern basis remains appropriate for the
preparation of the financial statements.
The consolidated financial information is presented in United
States dollars and all values are rounded to the nearest thousand
dollars (US$'000) except when otherwise indicated.
The consolidated financial information has been prepared in
accordance with the requirements of the AIM Rules for Companies and
in accordance with IFRS as adopted by the European Union. The
consolidated financial information has been prepared using the
accounting policies which will be applied in the Group's financial
statements for the year ended 31 December 2018.
The preparation of consolidated financial information in
conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its
judgment in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgment or
complexity or areas where assumptions and estimates are significant
to the financial information are disclosed in note 2 to the
financial information in the 31 December 2017 annual report. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimate is revised if the revision only
affects that period or in the period of revision and future periods
if the revision affects both current and future periods.
3. REVENUE AND SEGMENTALINFORMATION
The Group determines its operating segment based on the reports
reviewed by the chief operating decision-makers ("CODMs") that are
used to make strategic decisions.
The Group reports its operations as two reportable segments: the
provision of contract drilling services in the PRC and India. The
division of contract drilling operations into two reportable
segments is attributable to how the CODMs manage the business.
Drilling services revenue and management services revenue
represent the net invoiced value of contracted drilling services
and management services provided to two major customers, one in the
PRC (who is a related party) and the other in India.
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Segmental revenue
China 2,259 2,536 10,626
India - 1,054 959
===================== =============== =============== =============
2,259 3,590 11,585
As at 30 June As at 31 December
2018 2017
US$'000 US$'000
Unaudited Audited
Segmental assets
China 88,126 178,834
India 19,738 19,764
Intercompany (14,018) (106,794)
========================== ================ ==================
93,847 91,304
Segmental liabilities
China 123,397 123,126
India 4,395 4,672
Intercompany (77,356) (92,671)
========================== ================ ==================
41,646 35,127
4. FINANCE INCOME
Six months ended Six months ended Year ended 31
30 June 2018 30 June 2017 December 2017
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Change in FV of derivative 355 372 392
Bank interest 1 - 1
============================ ================= ================= ===============
356 372 393
5. FINANCE COSTS
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Interest expense on
loans (1,121) (566) (1,207)
Foreign exchange gains/(loss) 69 (126) (355)
(1,052) (692) (1,562)
6. TAXATION
Taxation for the Group's operations in the PRC is provided at
the applicable current tax rate of 25% on the estimated assessable
profits for the period. Taxation for operations in India is taxed
at 4.326% of gross revenue.
7. EARNINGS PER SHARE
Six months Six months Year ended
ended 30 June ended 30 June 31 December
2018 2017 2017
US$'000 US$'000 US$'000
Unaudited Unaudited Audited
Earnings for the purpose
of basic and diluted
loss per share (2,762) (1,145) (2,565)
========================== =============== =============== =============
Weighted average number
of ordinary shares 398,245,758 398,245,758 398,245,758
========================== =============== =============== =============
Warrants were outstanding at the end of the period that could
potentially dilute basic earnings per share in the future. However,
due to losses incurred during the current period, the impact of
these share incentives would not be dilutive.
8. PROPERTY, PLANT AND EQUIPMENT
During the period, the Group incurred US$0 on additions to plant
and equipment (31 December 2017 - US$278,000).
9. DEFERRED TAXATION
As at 30 June As at 30 June
2018 2017
US$'000 US$'000
Unaudited Unaudited
Deferred tax liabilities
Opening balance (781) (377)
Tax losses recognized (1,146) (862)
Temporary difference
charge 287 638
Foreign exchange adjustment 1,264 (180)
---------------------------------- ---- -------------- --------------
At the end of the period (376) (781)
================================== ==== ============== ==============
The Group has not offset deferred tax assets and liabilities
across different jurisdictions. Cayman Island losses of US$694,116
(2016: US$689,016) do not expire under current tax legislation. PRC
tax losses of US$1,146,577 (2017: $861,752) expire after 5
years.
10. INVENTORIES
As at 30 June As at 31 December
2018 2017
US$'000 US$'000
Unaudited Audited
Raw materials and consumables 4,889 5,309
---------------------------------- -------------- ------------------
11. TRADE AND OTHER RECEIVABLES
As at 30 June As at 31 December
2018 2017
US$'000 US$'000
Unaudited Audited
Accounts receivable 3,070 3,116
Prepayments 508 662
Other receivables 2,339 1,812
======================== ==============
5,917 5,590
======================= ============== ==================
12. CASH AND CASH EQUIVALENTS
As at 30 June As at 31 December
2018 2017
US$'000 US$'000
Unaudited Audited
Cash and Cash Equivalents
(Unrestricted) 70 649
Cash and Cash Equivalents 3,930 -
(Restricted)
================================ ==== ============== ====================
4,000 649
================= ============== ==================
The restricted bank balance represents deposits placed in
financial institutions to secure notes payable of an equivalent
amount.
13. TRADE AND OTHER PAYABLES
As at 30 June As at 31 December
2018 2017
US$'000 US$'000
Unaudited Audited
Trade payables and
others 10,722 10,011
Notes payable 3,930
Other current liabilities 5,675 3,669
Amount due to related
parties 6,060 6,780
============================== ========= ====================== ==================
26,387 20,460
14. LOANS AND BORROWINGS
Bank name Period Balance Interest Repayment New loan Balance
as at rate as at
31 Dec 30 June
2017 2018
US$'000 Date Amount Date Amount US$'000
US$'000 US$'000
-------- ---------- --------- ---------- --------- ---------
CITIC Bank 1 year 1,530 6.96% 11/5/2018 1,530 16/5/2018 1,505 1,505
--------- -------- --------- ---------- --------- ---------- --------- ---------
SPD Bank 1 year 1,530 6.96% 17/1/2018 1,530 18/1/2018 1,505 1,505
--------- -------- --------- ---------- --------- ---------- --------- ---------
Short term
loans from
above banks 3,061 3,061 3,010 3,010
-------- --------- ---------- --------- ---------- --------- ---------
Grecap Ltd. 2,620 7.00% 2,710
-------- --------- ---------- --------- ---------- --------- ---------
GIPJ 9.5% 615 628
-------- --------- ---------- --------- ---------- --------- ---------
Total for
short term
loans 5,681 3,061 3,625 6,348
-------- --------- ---------- --------- ---------- --------- ---------
Guaranty
Finance
Investors,
LLC 3 years 8,520 7.00% 8,800
--------- -------- --------- ---------- --------- ---------- --------- ---------
Total for
long term
loan 8,520 8,800
-------- --------- ---------- --------- ---------- --------- ---------
During the year 2017, Greka Drilling Limited secured US$2.5
million in loan financing from Grecap Ltd. Maturity date of the
promissory notes is 30 November 2018. The notes bear interest of 7%
per annum.
Promissory notes of US$5 million and US$3 million are repayable
to Guaranty Finance Investors, LLC on 31 March 2019 and 30
September 2019 respectively; on initial recognition, financing
costs of US$872,000 were deducted from the promissory notes.
15. FINANCIAL LIABILITY
During the year ended 31 December 2016, 35,000,000 and
21,000,000 warrants, at a subscription price of 5 pence per share,
were granted to Guaranty Finance Investors LLC as part of the
financing agreements entered into in March 2016 and September 2016
respectively. The warrants have an exercise period of 2 years from
1 April 2017 to 31 March 2019 and 30 September 2017 to 30 September
2019 respectively.
16. RELATED PARTY TRANSACTIONS
a. Amounts due from/to related parties and corresponding transactions
The related parties of the Group include companies that are
subsidiaries of G3 Exploration Ltd, Greka Manufacturing Limited and
Henan Grevino Alcohol Trading Limited. All the related parties are
under common management and control of Mr Randeep Grewal, the
Company's Chairman.
As at 30 June 2018, the Group had the following balances due to
companies under the common control of Mr Grewal:
-- Net payable to the G3 Exploration group of US$5.5 million
(2017: net payable: US$9.8 million)
-- Net payable to the Greka Manufacturing and Technology group
of US$628,182 (2017: US$518,041)
These balances are unsecured, interest-free and repayable on
demand.
In addition, at 30 June 2018 the Company owed US 2.71million to
Grecap Limited pursuant to ta loan, details of which are set out in
Note 14 above.
Related party transactions during the period comprise:
-- Drilling services provided to the Green Dragon Gas group of US$515,002 (2017: US$850,856)
-- Leasing income from the G3 Exploration group of US$246,314
(2017: US$228,260), Greka Manufacturing and Technology group of
US$51,118 (2016: US$27,422). The lease term was 1 year from 1
January 2018 to 31 December 2018 and 1 January 2017 to 31 December
2017 respectively.
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 LLFSFADIDFIT
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