PRESS
RELEASE
28 March 2018
Wentworth
Resources Limited
("Wentworth" or
the "Company")
2017 Annual
Financial Statements and MD&A
Wentworth Resources Limited, the
Oslo Stock Exchange (OSE: WRL) and London Stock Exchange (AIM: WRL)
listed independent, East Africa-focused oil & gas company,
today announces its results for the calendar year 2017.
Operations
Tanzania (Mnazi
Bay)
-
Increased average gross daily gas production of
49.1 MMscf/d (2016: 43.0 MMscf/d). Gross gas sales volumes
increased by 14 percent in 2017.
-
Exit daily gas production rate of 73.4
MMscf/d
-
The Company received total cash payments of
$18.57 million relating to gas sales and recovery of the long-term
government receivable during 2017.
-
During the course of 2017, gas sales receivables
from the main purchaser of gas increased from two to four months in
arrears. Regular payments have been received since Q2 2017. The
Company continues to proactively manage working capital, by
matching settlement obligations with gas sales payment
timing.
Mozambique
(Tembo)
-
Completed an integrated technical evaluation of
the Wentworth operated Rovuma Onshore Appraisal Block, post the
Tembo-1 well (2014), including reprocessing existing 2-D seismic
data.
-
Commenced well planning for a Tembo gas
discovery appraisal, including optimising well design and costs,
selecting a location, obtaining necessary environmental permits and
initiating long lead time equipment procurement activities.
-
Launched a farm-out process to secure an
industry partner to participate in the joint venture, in advance of
planned drilling.
-
The Company has formally requested a one-year
extension of the Appraisal License and continues to advance
pre-drilling planning activities.
Corporate
-
Wentworth's share of Tanzanian Proved + Probable
(2P) reserves are US$159.6 million NPV (10%) after tax at 31
December 2017, as independently valued by RPS Canada.
-
Mnazi Bay gas fields net 2P reserves were 115.1
Bscf (19.2 Mmboe) at December 31, 2017.
-
Completed a private placement on 23 May 2017
issuing 16,953,496 new common shares for total gross proceeds of
$5.53 million.
-
Improved principal payment timing on existing
$20.0 million credit facility and secured new $2.5 million
overdraft facility for working capital purposes.
-
Initiated relocation of executive management and
head office from Calgary, Canada to London, UK.
Financial
-
Increased Mnazi Bay gas sales revenue to $13.44
million, up 14 percent from 2016, due to gas-fired Kinyerezi-1 and
Ubungo-II power stations operating at near full capacity during the
second half of 2017, Kinyerezi-2 gas-fired power station commencing
commissioning during Q4 2017 and lower quantities of gas supplied
by industry competitors.
-
Net loss of $0.71 million (2016: $5.09 million
net loss).
-
Incurred exploration capital expenditures of
$2.38 million to advance the appraisal of the Tembo Appraisal
License and development capital expenditures of $1.06 million on
field infrastructure (tie-in) improvements in the Mnazi Bay
Concession in Tanzania.
-
Cash and cash equivalents on hand of $3.75
million (2016: $0.98 million) as at December 31, 2017.
-
Working capital of $15.48 million (2016: $4.96
million).
-
Ongoing focus on capital discipline with 15%
reduction in G&A expenses to $4.61 million.
Reduced outstanding long-term
loans by $5.35 million of principal repayments during 2017.
Carrying value of long-term loans at year-end was $15.15
million.
In compliance with both reporting
obligations as a public company, commencing in 2018, the Company
will now release a Half Yearly Financial Report and an Annual
Financial Report. The Company will no longer publish first quarter
and third quarter financial statements and management discussion
and analyses as these are no longer mandatory filing
obligations.
Geoff Bury,
Managing Director, commented:
"2017 was a very positive year for
Wentworth where we benefited from an increase in production to an
average of 62 MMscf/d in Q4 and reached an exit rate of 73 MMScf/d,
resulting in continued strengthening of our Company.
Wentworth enters 2018 in a strong and stable financial position
enabling us to continue to grow the Company and to enhance
shareholder value. With the relocation of the head office to
London I will soon be stepping down as Managing Director, so I
would like to take this opportunity to thank our shareholders for
their support and thank Wentworth's Board, management and staff for
their hard work and dedication."
A conference call for investors,
analysts and other interested parties will be held today at 08.00
MDT (Calgary) / 15.00 BST (London) / 16.00 CEST (Oslo).
Dial in numbers:
Please dial in 5-10 minutes prior to the start
time and join the call by referencing "Wentworth
Resources Annual 2017 Results".
Participant Dial in Numbers:
All locations: + 44 20 3936 2999
United Kingdom (Local): 020 3936 2999
United States (Local): +1 845 709 8568
Canada (Toll Free): +1 833 2942 546
Norway (Toll Free): 800 24 973
Participant code - 171600
-Ends-
Enquiries:
Wentworth |
Lance
Mierendorf
Chief Financial Officer |
lance.mierendorf@wentworthresources.com
+1 403 680 8773
|
|
Katherine
Roe
Vice President Corporate Development & Investor
Relations
|
katherine.roe@wentworthresources.com
+44 7841 087 230 |
Stifel Nicolaus Europe Limited |
AIM Nominated Adviser and Broker (UK)
Callum Stewart
Ashton Clanfield |
+44 (0)
20 7710 7600 |
GMP FirstEnergy |
Broker (UK)
Hugh Sanderson
David van Erp |
+44 (0)
20 7448 0200 |
Peel Hunt LLP
|
Broker (UK)
Richard Crichton
Ross Allister |
+44 (0)
20 7418 8900
|
FTI Consulting |
Investor Relations Adviser (UK)
Edward Westropp
Kim Camilleri |
wentworth@fticonsulting.com
+44 (0) 20 3727 1000 |
Key extracts of the 2017
Management Discussion and Analysis are set out below and should be
read in conjunction with the complete 2017 Management Discussion
and Analysis which is available on the Company's updated website at
http://www.wentworthresources.com.
Operations
Overview
Corporate
During Q4 2017, the Company
initiated a restructuring process to better align its corporate and
management governance model with its shareholders and African asset
base, to increase management efficiencies and reduce certain
operational and overhead costs.
As part of this process the
Company is relocating its executive management team and head office
from Calgary to London. Managing Director Geoff Bury is
unable to relocate to London and will therefore be leaving the
Company. In January 2018, the Company announced that Mr.
Eskil Jersing has agreed to join Wentworth as Chief Executive
Officer ("CEO"). Mr. Jersing will join the Company and Board of
Directors in Q2 2018 following an orderly transition from his
current role as CEO of Sterling Energy Plc. Mr. Bury has agreed to
remain in his current role for a period of time to allow a smooth
transition of responsibilities to Mr. Jersing.
Mrs. Katherine Roe has been
promoted to Chief Financial Officer ("CFO") based in London
effective April 1, 2018. Mrs. Roe has been Vice President Corporate
Development & Investor Relations for the Company since 2014 and
has over 15 years of senior corporate and capital markets
experience. Mr. Lance Mierendorf is unable to relocate to
London and will remain in the CFO role until March 31, 2018 and
coordinate an efficient and orderly handover to Mrs. Roe.
In line with the head office
relocation and given that the Company has few Canadian registered
shareholders and very limited operational connections to Canada,
the Board is planning to re-domicile the public Canadian legal
entity listed on the Oslo Stock Exchange (ticker: WRL) and the AIM
market of the London Stock Exchange (ticker: WRL) from Canada to
the British Isles. Following implementation, this initiative is
primarily expected to optimise and further build shareholder
engagement, reduce costs and decrease corporate complexity. The
Company will consult and update shareholders, when appropriate, as
to the progress on the corporate redomicile process.
In compliance with both reporting
obligations as a public company, commencing in 2018, the Company
will now release a Half Yearly Financial Report and an Annual
Financial Report. The Company will no longer publish first quarter
and third quarter financial statements and management discussion
and analyses as these are no longer mandatory filing
obligations.
Mnazi Bay Concession, Tanzania
Production Operations
Mnazi Bay gas sold to Tanzania Petroleum Development Corporation
("TPDC") is primarily utilized by Tanzania Electricity Supply
Company Limited ("TANESCO") as a fuel source to power its
electrical generation plants serving the National Electricity Grid
in Tanzania. During year 2017, Mnazi Bay gas was used to fuel
three TANESCO-owned power stations located within the city of Dar
es Salaam: Kinyerezi-I, Kinyerezi-II and Ubungo-II.
In December 2017, the first gas
turbine (40MW) of the 240MW Kinyerezi-II power station, was
commissioned, taking up to 7 MMscf/d of gas during the month. As at
March 20, 2018, four of the six gas turbines at Kinyerezi-II had
been commissioned. Demand for Mnazi Bay gas in order to power this
facility is expected to reach 36 MMscf/d when all six gas turbines
become operational. Commissioning of the 185 MW Kinyerezi-I
Extension is expected to commence during Q4 2018 and, once fully
operational in 2019, is expected to utilize an additional 35
MMscf/d of gas to generate electrical power.
During Q4 2017, the Mnazi Bay gas
fields delivered 62.2 MMscf/d compared to 39.4 MMscf/d during Q4
2016. Both the Kinyerezi-I and Ubungo-II power stations
operated at near full capacity during the second half of 2017.
Additionally, the Kinyerezi-II power station started the
commissioning process during December 2017, a few months earlier
than anticipated. During Q2 2017, TPDC commenced
delivery of Mnazi Bay gas to its first industrial customer, a newly
constructed $100 million roofing tile factory, Goodwill
Ceramics. During 2017, gas deliveries to Goodwill Ceramics
ranged between 4 MMscf/d to 7 MMscf/d.
Full year 2017 production from the
Mnazi Bay gas field in Tanzania averaged 49.1 MMscf/d, compared to
43.0 MMscf/d during 2016, which was at the high end of Management's
2017 guidance of between 40 - 50 MMscf/d.
Production from Mnazi Bay peaked
at over 80 MMscf/d (13,300 boepd) in February 2018 and averaged
72.5 MMscf/d during the first two months of 2018. Additional
gas demand in the industrial sector is expected to be realized in
H1 2018. TPDC concluded a commercial arrangement to supply
gas to the Mtwara Dangote cement plant, the largest in Tanzania;
for power generation and firing its clinker kilns used in the
production of cement. A new gas pipeline connecting the
temporary power generation unit to the TPDC owned 36-inch
transnational pipeline is currently in the process of being
installed. The installation of a 35MW power generation unit and
associated power supply to the Dangote plant is expected to be
commissioned during April 2018. Dangote also announced a plan
to eliminate coal and convert the entire plant to gas, including
the kiln furnaces, envisaging a permanent combined cycle power
plant being built on the premises of the factory.
Initial gas demand for temporary power generation is expected to be
between 5 and 7 MMscf/d. The kilns are expected to be fired by
natural gas commencing in Q3 2018 and will require an additional 8
and 10 MMscf/d of natural gas, increasing to between 20 MMscf/d and
25 MMscf/d in 2019. The temporary 35MW gas fired plant is planned
to be replaced by the combined cycle plant using steam turbines in
Q1 2019.
On a smaller scale, Mnazi Bay gas
is also currently sold directly to TANESCO for electrical power
generation at an 18MW power plant at Mtwara. The power station
provides electricity to an isolated grid serving the region and
includes the towns of Mtwara, Madimba, Lindi, Msassi and
Newala. Gas quantities of between 2 and 2.5 MMscf/d are being
supplied to the power plant through an 8-inch pipeline, owned by
the Mnazi Bay joint venture.
Development capital works
During 2017, engineering works were undertaken on the expansion of
the Mnazi Bay Joint Venture owned processing facilities at
Msimbati. Primary processing of Mnazi Bay produced gas is
required at Msimbati to remove free liquids before the gas enters a
sub-marine pipeline that connects into the Madimba Gas Processing
Facility. Expansion of the processing facilities, together
with tying-in of all 5 producing wells, completes the necessary
field infrastructure work to enable delivery of gas volumes in
excess of 100 MMscf/d to the TPDC owned pipeline to Dar es Salaam.
Commissioning of these facilities is expected in Q1 2018.
With the completion of these works it is anticipated that there
will not be a need for significant additional capital expenditure
until the average daily demand from the Msimbati facility exceeds
100 MMscf/d.
Rovuma Onshore Block, Mozambique
Appraisal activities
An extension of the Rovuma Onshore Exploration Concession to
conduct an appraisal of the Tembo-1 gas discovery was granted to
Wentworth by the Government on June 15, 2016. On that same date,
Wentworth was approved as the operator of the concession and now
holds an 85 percent participation interest, with the Government
holding the remaining 15 percent. Activities to date have included
the reprocessing of existing 2D seismic data, re-evaluation of the
Tembo-1 drilling results, 2D seismic survey program planning,
obtaining environment permits and licenses, establishing both a
field camp within the Concession and a field office in Maputo,
Mozambique along with pre-drilling planning activities.
A 2D seismic acquisition program
of approximately 500-700 kilometers was considered for the second
half of 2017, with a tendering process completed in Q2 2017. Based
on the reprocessing and re-interpretation of legacy seismic data,
extensive analysis of the Tembo-1 drilling results and further
subsurface studies, Wentworth has concluded that sufficient data
and information exists, to support drilling an appraisal well
confirming the commercial potential of Tembo, without the need to
acquire new seismic and therefore this seismic acquisition program
has been postponed. Wentworth's technical team is focused on
identifying a suitable drilling location for a Tembo appraisal well
and associated well planning activities. The government of
Mozambique is supportive of postponing the acquisition of new
seismic until after an appraisal well is drilled.
A planned Tembo-2 appraisal well
will appraise the discovery made at Tembo-1 Well in December 2014.
The appraisal well is designed to reach a total depth of 3,200
metres and planned as a vertical well to the Lower
Cretaceous. Wentworth has started a process to procure the
drilling rig and long lead items for the well. Expressions of
interest (EOI) have been prepared for supply of the drilling rig
and casing and tubing. The Company has identified several rigs
currently located within the region which are capable of drilling
the well. EOIs were published in the local Mozambican press in
during Q4 2017. These have subsequently been evaluated and a short
list of preferred bidders has been selected and will be invited to
tender.
Surveying of the well location and
associated civil works have been delayed due to a deteriorating
security situation in and around the Macimboa da Praia region,
adjacent to the Company's Concession area. Clashes between
police and extremists which began in early October have continued
into 2018, preventing safe access to the area for Wentworth staff
and contractors. Wentworth is monitoring the security
situation closely and is in close liaison with the Mozambican
Authorities, the Canadian High Commission, and other companies
operating in the region and local security and risk management
companies.
Farm-out and license extension
In July 2017, a formal farm-out process was initiated in order to
secure one or more industry partners for third party validation and
help de-risk the appraisal drilling of the Tembo discovery.
The farm-out exercise is ongoing, and Wentworth anticipates
securing an industry partner prior to commencing drilling
operations, pending successful extension discussions with the
Government of Mozambique.
Subsequent to year-end, as a
result of the lack of a safe above-ground operating environment
within the Concession area, certain pre-drill operations such as
surveying, road construction, and well site preparation have been
delayed until after the rainy season and improvements in the
security situation for Wentworth personnel operating in the
field. As a result, the Company has formally requested the
Government grant an extension of the Appraisal License and is
currently awaiting a response.
Financial
Overview
Revenue
Gas sales to
TPDC
The Company recorded 2017 net sales to TPDC of 4,063,124 MMBtu, an
increase of 14% from 2016. A more stable level of gas demand from
gas fired electrical power facilities was experienced in 2017 as
many of the start-up, commissioning, repairs to power plants and
problems with Government owned electrical power transmission and
distribution infrastructure experienced during 2016 were
resolved.
The gas sales price was
$3.04/MMBtu (2016: $3.01/MMBtu) for revenue of $12.35 million
(2016: $10.68 million) for the year-ended December 31,
2017.
Gas sales to
TANESCO
Gas sales to an 18 MW gas-fired power plant in Mtwara, Tanzania,
during 2017 were 199,868 MMBtu (2016: 200,259 MMBtu) while the gas
price remained fixed and unchanged at $5.36/MMBtu. The Mtwara power
plant generally operates below capacity and consumes on average
between 2.0 and 2.5 MMscf/d. Total revenue earned during 2017 was
$1.09 million (2016: $1.07 million).
Production and operating expense
Production costs within the Mnazi Bay Concession comprise the
Company's share of field operating costs, Operator's administration
and Operator's overhead required to manage production
operations. Management expects that, on a per Mscf basis,
production costs will generally reduce as gas volumes increase, due
to most operating costs being fixed in nature. For 2017,
production averaged 49.1 MMscf/d in 2017 compared to 43.0 MMscf/d
during 2016. Production and operating expenses were $3.48 million
(2016: $3.37 million). For 2017, operating expenses were
$0.84 per Mcf compared to $0.92 per Mcf for the same period in
2016.
General and administrative ("G&A")
expense
During 2017, G&A expenses were $4.61 million compared to $5.40
million, a reduction of 15%. Cost saving initiatives and
capitalization of costs for Mozambique operations, following the
Company becoming the operator in Q3 2016, have contributed to a
reduction in ongoing expenses. A continued focus on
optimizing G&A will be undertaken in 2018, through corporate
structure simplification and re-domicile activities. The table
below shows the breakdown of G&A expenses:
|
Year ended
December 31, |
(Figures in
$000's) |
2017 |
2016 |
Employee salaries and benefits |
2,026 |
2,392 |
Contractors and consultants |
510 |
705 |
Travel and accommodation |
329 |
515 |
Professional, legal and advisory |
713 |
582 |
Office and administration |
529 |
684 |
Corporate and public company costs |
507 |
519 |
|
4,614 |
5,397 |
The Company maintains offices in
Calgary, Canada, Dar es Salaam, Tanzania and Maputo, Mozambique and
is listed on the public stock exchanges in both Oslo, Norway (Oslo
Stock Exchange) and London, UK (AIM). Many G&A expenditures are
fixed in nature and include such items as corporate and public
company costs (exchange listing, transfer agent and directors'
fees), legal fees supporting the compliance with corporate and
public obligations (Canada, UK and Norway) and professional
advisory (external audit, resources engineering and Nomad for our
AIM listing). The Company has undertaken to relocate its head
office and executive team from Calgary, Canada to London, UK to
streamline operations and reduce costs.
The redomicile process commenced
during 2017 with $0.19 million (2016: $nil) of professional, legal
and advisory having been incurred. Additional one-time costs
associated with the redomicile process are expected to be incurred
during 2018.
In June 2016, following the
appointment as Operator of the Rovuma Onshore Block in Mozambique,
the Company established an operational presence in Mozambique;
directly attributable costs relating to all operational activities
within the Rovuma Onshore Block are being capitalized.
Directly attributable costs during 2017 totaling $0.97 million
(2016: $1.08 million) were capitalized.
Share based compensation
For 2017, $0.22 million was recognised compared to $0.59 million
during the same period in year 2016.
During 2017, no options were
granted, exercised or forfeited (during 2016: 1,350,000 options
were forfeited, and no options were granted or exercised). A total
of 10,600,000 stock options were outstanding at December 31, 2017
with 9,333,338 vested and exercisable with an average exercise
price per share of NOK 4.33 ($0.53).
Depreciation and depletion
Depreciation and depletion of gas producing assets for 2017
totalled $4.09 million (2016:- $3.86 million) or $0.98/Mscf (2016:
$0.99/Mscf). At December 31, 2017, the net book value of
natural gas property, plant and equipment was $90.34 million
(December 31, 2016: $93.37 million).
Finance income and costs
Finance income and costs that are settled in cash are interest
income, interest expense and realized foreign exchange gain/ (loss)
on current transactions. All other finance income and costs
are non-cash in nature.
For 2017, interest expense was
$1.66 million (2016: $2.19 million). During 2017, non-cash
accretion of the TPDC receivable of $2.08 million (2016: $4.17
million) was recorded in finance income. The Company revised the
accounting estimates used to determine the expected amounts and
timing of future revenue streams to determine collection of the
TPDC receivable resulting from revised gas demand estimates for
future periods obtained from industry sources. This resulted
in $0.87 million being charged to finance costs during the year
(2016: $2.57 million).
Non-cash accretion of the
Tanzanian Government receivable (Umoja/power) of $0.31 million
(2016: $0.47 million) was recorded in finance income during
2017. Similar to the determination of the TPDC receivable,
the Company revised the accounting estimates resulting in an amount
of $0.83 million being charged to finance cost (2016: $0.05 million
finance income).
Deferred tax expense/recovery
At December 31, 2017, the deferred tax asset of $30.75 million
reflects the estimated future tax benefit of accumulated tax losses
within the Tanzanian operations. The commencement of commercial
production and sales of gas under the long-term Gas Sales Agreement
("GSA") allowed for the recognition of deferred tax asset on the
accumulated tax losses estimated to be utilized in the
future. A non-cash deferred tax expense of $0.39 million
(2016: expense of $3.20 million) has been recorded in
2017.
Receivables from gas delivered to TANESCO
The Company's ongoing exposure to receivables from TANESCO is
associated with gas sales from the Mnazi Bay Concession to the 18
MW gas-fired power plant, located in Mtwara, Tanzania. At
December 31, 2017, the Mnazi Bay joint venture partners were owed
seven months of gas sales, with $1.14 million owed to Wentworth.
Subsequent to year-end, TANESCO has paid two months of invoices
relating to the outstanding balance at December 31, 2017 totaling
$0.33 million (inclusive of the Company's share of the TPDC
receivable amount relating to this gas sale).
Receivables from gas delivered to TPDC
An amount of $12.01 million is owed to Wentworth at December 31,
2017, of which approximately 4 months were past due. Subsequent to
year-end, TPDC has paid $4.12 million net to Wentworth (inclusive
of the Company's share of the TPDC receivable amount relating to
this gas sale) for the November and December 2017 gas sales
invoices. At December 31, 2016, two months' worth of invoices were
outstanding. TPDC's ability to settle gas sales invoices to the
Mnazi Bay joint venture in a timely manner is directly impacted by
the timeliness of TPDC receiving payment for gas it sales to the
TANESCO owned electrical power generation plants. Recently, TANESCO
has been inconsistent with paying TPDC in a timely manner for the
gas that TANESCO purchases. This has a direct impact on the
free cash flows of the Mnazi Bay joint venture partners. Wentworth
and Maurel et Prom, the operator of the Mnazi Bay Concession,
continue to engage with both TPDC and TANESCO to find ways to
improve the timeliness of the settlement of its obligations.
Long-term receivable - TPDC
In terms of the Joint Operating
Agreement entered into between TPDC, Wentworth and Maurel et Prom,
entered into in 2006, TPDC is a 20 percent participating interest
partner in the Mnazi Bay Concession. The Company has a receivable
from TPDC, for their (TPDC's) share of past development and
operating costs that were paid by the Company prior to June 30,
2009. In addition, the Company has been paying its proportionate
share of TPDC's share of development and operating costs incurred
subsequent to June 30, 2009, the value of which has been added to
the TPDC receivable balance. The Company will recover this
receivable from an agreed percentage of TPDC's share of current and
future revenue from the Mnazi Bay Concession. The
undiscounted face value of the TPDC receivable at December 31, 2017
is $17.33 million (December 31, 2016: $27.15 million). The
TPDC receivable has been discounted to $15.55 million (December 31,
2016: $24.84 million). With the passage of time and as gas
sales are realized, the carried amount of the TPDC receivable is
accreted up to the face value with a corresponding credit to
finance income.
Based on the Company's internal
estimates of potential gas sales volumes, the $17.33 million
receivable as at December 31, 2017 is expected to be fully
recovered by the end of 2018. The recovery of the TPDC
receivable is expected to provide a significant source of cash flow
to the Company during 2018. As gas sales are realized, the
current portion of the long-term receivable is transferred to
accounts receivable and settled at the time cash payments are
received from purchasers of Mnazi Bay gas.
At December 31, 2017, the current
portion of the TPDC receivable is $15.55 million compared to $12.28
million at December 31, 2016. During 2017, $11.63 million was
recovered from TPDC's share of gas sales. The receivable is
updated at each reporting period and is calculated taking into
consideration the estimated timing and amounts of future gas
sales.
Long-term receivable - Tanzanian Government
(Umoja/power)
The Company has an agreement with
the Government of Tanzania (TANESCO, TPDC and the Ministry of
Energy and Mines ("MEM")) to be reimbursed, at cost, for past
project development costs associated with transmission and
distribution ("T&D") expenditures. An audit of the Mtwara
Energy Project ("MEP") development expenditures was completed in
November 2012 and costs of approximately $8.12 million were
verified to be reimbursable. After deducting costs associated with
the Tariff Equalization Fund and VAT input credits associated with
the MEP totaling $1.61 million, the amount agreed to be reimbursed
was $6.51 million. The receivable is considered long-term in
nature and has been discounted to reflect the anticipated timing of
collection. The undiscounted face value of the Tanzanian Government
receivable (Umoja/power) at December 31, 2017 is $6.51 million
(December 31, 2016: $6.51 million) while the discounted value,
taking into consideration the anticipated time of collection, is
$4.96 million (December 31, 2016: $5.48 million). Management
continues to work with the Government of Tanzania on agreeing a
mechanism to settle the outstanding balance and anticipates
recovering the amounts from the Government's share of revenue
generated from the Mnazi Bay Concession. Timing of reaching an
agreement on the reimbursement procedure is indeterminable. The
Government initiated a second audit of the costs to verify the
balance owing, the results of which are expected to be communicated
to the Company during 2018.
Capital expenditures
During 2017, capital activities
were focused on field infrastructure and development capital
activities within the Mnazi Bay gas field location and Tembo
appraisal activities in Mozambique.
|
|
|
(Figures in
$000's) |
Year ended
December 31, |
|
2017 |
2016 |
Exploration and evaluation
assets |
|
|
Mozambique |
|
|
Seismic reprocessing and
interpretation
and analysis of Tembo-1 well results |
696 |
109 |
Drilling preparation and planning |
525 |
- |
Exploration drilling |
- |
951 |
Operator and indirect overhead |
1,162 |
1,310 |
|
2,383 |
2,370 |
Tanzania |
|
|
Seismic acquisition, processing
and interpretation |
- |
27 |
Property, plant and equipment |
|
|
Tanzania |
|
|
Field infrastructure |
549 |
2,019 |
Asset retirement obligation |
- |
(388) |
Other field development capital |
508 |
404 |
|
1,057 |
2,035 |
Canada and United Kingdom |
|
|
IT and office assets |
4 |
27 |
|
|
|
|
3,444 |
4,459 |
External debt
facilities
Medium term $20
million credit facility
The principal balance outstanding
on the $20.0 million credit facility at December 31, 2017 was
$13.32 million. During 2017, principal payments of $3.35
million were made.
During the second quarter of 2017,
the Company executed amendments to the credit facility agreement
which include the restructuring of principal loan payments and the
addition of the following new provisions:
-
the interest rate changed six-month LIBOR rate
plus 750 basis points subject to a minimum (floor) of 8.5% p.a. and
no maximum (ceiling);
-
the addition of a Debt Service Coverage Ratio
and Loan Life Coverage Ratio as financial covenants;
-
a requirement to maintain a minimum cash
balance;
-
a cash flow waterfall procedure to ensure
certain cash proceeds from gas sales are used in settling
obligations in priority; and
-
in the event the Company decides to accelerate
principal payments using funds not generated internally, a
prepayment fee of 25 percent of interest forgone is required.
The Company and the lender are in
ongoing discussions on agreeing the details and processes relating
to implementing and monitoring the new provisions.
Principal repayments on the credit
facility are set out in the following table.
Principal repayment date |
Repayment amount
(Figures in $000's) |
April 30, 2018 |
1,665 |
July 30, 2018 |
1,665 |
October 30, 2018 |
1,665 |
January 30, 2019 |
1,666 |
April 30, 2019 |
1,665 |
July 30, 2019 |
1,666 |
October 30, 2019 |
1,665 |
January 30, 2020 |
1,664 |
|
13,321 |
Medium term $6
million credit facility
At December 31, 2017, the
principal amount outstanding on this facility was $2.0
million. During 2017, principal payments of $2.0 million were
made.
All provisions of the $6.0 million
credit facility remain unchanged from the original loan agreement
executed in December 2014. Interest is paid on a semi-annual basis,
in arrears, on the principal repayment date. The 2018
principal repayment dates are as follows:
Principal repayment date |
Repayment amount
(Figures in $000's) |
June 8, 2018 |
1,000 |
December 8, 2018 |
1,000 |
|
2,000 |
Overdraft $2.5
million credit facility
During 2017, the Company secured
$2.5 million overdraft credit facility with a TIB Corporate Bank
("TIB Corp"). The overdraft facility has an interest rate of the
lender's base lending rate minus 1% per annum to be paid
monthly. At December 31, 2017, the lender's base lending rate
was 9%. The full amount of the overdraft credit facility was drawn
during the fourth quarter of 2017.
Security provided to the lender
includes a debenture over the fixed and floating assets of the
Company's Tanzanian assets and a deed of assignment equivalent to
approximately 20% of the revenue/cash flow from sales of natural
gas from the Tanzanian assets. During the second half of 2017, the
Company drew on the full amount of the facility and used the funds
for short-term working capital purposes.
The one-year term of the overdraft
credit facility expires on April 6, 2018. The Company has
requested a one-year extension of the credit facility and has
provided all information requested by the lender to support the
renewal application. The lender has expressed its intention to
renew the overdraft credit facility for an additional one year
commencing April 6, 2018 and the Company is waiting for completion
of the review and approval process.
Shares, share
capital and dividends
On May 23, 2017, the Company completed a private placement and
issued 16,953,496 new common shares, for cash consideration of
$0.326 (GBP0.25 or NOK2.73) per share for total gross proceeds of
$5.53 million (GBP4.2 million or NOK46.3 million).
Following the private placement
offering the Company had 186,488,465 common shares issued and
outstanding. All outstanding shares at December 31, 2017 are
of the same class and with equal voting and dividend rights. The
Company's ordinary shares are listed on the Oslo Stock Exchange
(ticker: WRL) and denominated in Norwegian Kroner. The Company's
shares are also traded on the Alternative Investment Market of the
London Stock Exchange (ticker: WRL) and denominated in British
Pounds.
As the Company is in the early
stage of its production and revenue generating operations, it does
not have a formal dividend policy. No dividends have ever been
declared or paid by the Company. There are no restrictions on
dividend distributions. At the Annual General Meeting in
2017, the Board of Directors did not propose dividends to be paid
for the year-ended December 31, 2017. Proposals for dividend
distribution in future years will be subject to assessment of
business performance, operating environment, and growth
opportunities in determining the appropriate level in any specific
year.
Related party
transactions
There were no related party transactions during 2017.
Financial
Condition and Liquidity
At December 31, 2017, Wentworth
had cash and cash equivalents of $3.75 million and trade and other
receivables, prepayments and deposits, and a current portion of the
long-term receivable from TPDC of $29.06 million. At current gas
sales volumes, the Company is collecting substantial amounts of
this long-term receivable from TPDC. Outstanding receivables for
gas sales sold to TPDC and TANESCO total $13.15 million at December
31, 2017. A total of $4.45 million of the outstanding gas sales
receivables has been settled subsequent to December 31, 2017.
During May of 2017, the Company
raised gross proceeds of $5.53 million through the issuance of 10%
of the Company's share capital. These additional funds
provide the Company with required funding for working capital and
the ongoing Mozambique appraisal activities.
Current liabilities include
outstanding cash calls issued by the Operator of the Mnazi Bay
Concession for 2017 operating costs of $3.55 million. Subsequent to
year-end, the Company has settled $2.35 and expects to settle the
remainder during Q1 2018.
Current liabilities also include
the principal repayment obligations on external credit facilities
and the anticipated settlement of other liabilities also due within
the next 12 months. During Q1 2017, the Company reached
agreement with its main corporate lender to enhance short-term
liquidity by deferring payment of the January 28, 2017 principal
payment of $3.33 million to Q2/Q3 2017, deferring the July 28, 2017
and January 28, 2018 principal payments and extending the term of
the credit facility by one year. Principal payments totaling
$6.99 million are scheduled to be made within the next 12
months.
The Company is working closely
with the Operator of the Mnazi Bay Concession and external lenders
to match settlement of obligations with the receipt of cash from
gas purchasers for settlement of gas sales invoices. To date,
the cooperation amongst all parties has allowed the company to
effectively manage working capital. Existing gas sales receivables
at December 31, 2017 of $13.15 million exceed the immediate
obligations to the Operator of the Mnazi Bay Concession and to
external lenders, allowing for certain flexibility in the precise
timing of settling obligations.
During 2018, the Company expects
to have no significant capital commitments relating to exploration
and development activities in Tanzania. Anticipated
development capital spending is limited to approximately $0.8
million for general field development maintenance activities. In
Mozambique, spending on appraisal activities is expected to be
limited to completing the necessary work to support drilling of an
appraisal well, costs associated with securing a farm-in partner
and administrative and support costs for managing operations under
the Rovuma Onshore Block in country.
Outlook
Realized gas sales during Q4 2017
were the highest quarterly sales volumes in the Company's history
and the Company expects gas demand to continue to grow in the
coming months with the ongoing commissioning and start-up of the
Kinyerezi-II power station and imminent commencement of delivery of
gas to the Dangote cement plant in southern Tanzania. Wentworth is
well positioned to meet this growing demand with sufficient gas
reserves and in place infrastructure allowing for immediate
delivery of up to approximately 100 MMscf/d (16,660 boepd). The
Company expects gross gas sales from the Mnazi Bay asset to average
between 65 and 75 MMscf/d throughout 2018 and anticipates nominal
capital spending in Tanzania during this period.
The Company continues to carry
significant receivables from TPDC and TANESCO but regular monthly
payments have been made during the past several months into
2018. With each monthly cash settlement, the Company
continues to strengthen its balance sheet by deleveraging of its
credit facilities and settling accumulated working capital
obligations.
With the support of the Government
of Mozambique, the Company plans to secure an industry partner to
participate in appraisal drilling of the Tembo discovery on the
Rovuma Onshore Block. The Company expects a positive response
from the Government on the Company's request to obtain an extension
of the appraisal license beyond the June 16, 2018 expiry
date.
With a new London based executive management team expected to be in
place in the near future, the Company will examine various
strategic alternatives to grow the Company, reduce overheads and
drive value throughout the Company and through to shareholders.
About Wentworth
Resources
Wentworth Resources is a publicly
traded (OSE:WRL, AIM:WRL), independent oil & gas company with:
natural gas production; exploration and appraisal opportunities;
and large-scale gas monetisation initiatives, all in the Rovuma
Delta Basin of coastal southern Tanzania and northern
Mozambique.
Inside
Information
The information contained within
this announcement is deemed by Wentworth to constitute inside
information as stipulated under the Market Abuse Regulation (EU)
no. 596/2014 ("MAR"). On the publication of this announcement via a
Regulatory Information Service ("RIS"), this inside information is
now considered to be in the public domain.
Cautionary note
regarding forward-looking statements
This press release may contain
certain forward-looking information. The words "expect",
"anticipate", believe", "estimate", "may", "will", "should",
"intend", "forecast", "plan", and similar expressions are used to
identify forward looking information.
The forward-looking statements
contained in this press release are based on management's beliefs,
estimates and opinions on the date the statements are made in light
of management's experience, current conditions and expected future
development in the areas in which Wentworth is currently active and
other factors management believes are appropriate in the
circumstances. Wentworth undertakes no obligation to update
publicly or revise any forward-looking statements or information,
whether as a result of new information, future events or otherwise,
unless required by applicable law.
Readers are cautioned not to place
undue reliance on forward-looking information. By their nature,
forward-looking statements are subject to numerous assumptions,
risks and uncertainties that contribute to the possibility that the
predicted outcome will not occur, including some of which are
beyond Wentworth's control. These assumptions and risks
include, but are not limited to: the risks associated with the oil
and gas industry in general such as operational risks in
exploration, development and production, delays or changes in plans
with respect to exploration or development projects or capital
expenditures, the imprecision of resource and reserve estimates,
assumptions regarding the timing and costs relating to production
and development as well as the availability and price of labour and
equipment, volatility of and assumptions regarding commodity prices
and exchange rates, marketing and transportation risks,
environmental risks, competition, the ability to access sufficient
capital from internal and external sources and changes in
applicable law. Additionally, there are economic, political,
social and other risks inherent in carrying on business in Tanzania
and Mozambique. There can be no assurance that forward-looking
statements will prove to be accurate as actual results and future
events could vary or differ materially from those anticipated in
such statements. See Wentworth's Management's Discussion and
Analysis for the year ended December 31, 2017, available on
Wentworth's website, for further description of the risks and
uncertainties associated with Wentworth's business.
Notice
Neither the Oslo Stock Exchange nor the AIM Market of the London
Stock Exchange has reviewed this press release and neither accepts
responsibility for the adequacy or accuracy of this press
release.
This information is subject of the
disclosure requirements pursuant to section 5-12 of the Norwegian
Securities Trading Act.
2017 Report on Corporate
Governance
Annual 2017 MDA
Annual 2017 Financial Statements
180328 Press Release
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Wentworth Resources Limited via Globenewswire
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