Source - RNS
RNS Number : 2714L
Hague and London Oil PLC
30 September 2016
 

30 September 2016

 

 

Hague and London Oil PLC

("Company", "HALO")

 

Unaudited Interim Results for the Half-Year ended 30 June 2016

 

Hague and London Oil PLC (AIM: HNL) is pleased to announce its unaudited interim results for the half-year ended 30 June 2016.

 

Highlights

 

Strategic

·  Strategy redefined and portfolio restructured to adapt to current markets

·  Higher risk assets being spun off into 49% owned subsidiary Vermeer Exploration BV ("Vermeer") in exchange for $500,000 in funding for HALO's operations

·   MoU with ENGIE to cooperate on acquisition of development and production assets in Europe

 

Operational

·   Acquired new Western Sahara Blocks from Premier Oil (SADR); now allocated to Vermeer's portfolio

·   Farm-in to Duyung licence in Indonesia terminated

 

Financial

·    Loss before taxation of £0.48 million (1H 2015: loss £0.76 million)

·    Cash balance of £0.16 million as at 30 June 2016 (YE 2015: £0.28m)

·    Cost discipline maintained with a further reduction in admin costs.

 

Post-period and outlook

·   Negotiations and due diligence ongoing for a number of low-risk opportunities with existing or near-term production

·   Increased holding in French Guyana licence to 7.5% as part of the licence extension application process by operator Total; to be allocated to Vermeer

 

 

Andrew Cochran, Chairman and Interim CEO, commented:

 

"HALO has responded to the challenging market conditions, so far, in 2016 by re-structuring the company and placing the higher-risk, longer-term, assets into a private entity: Vermeer Exploration BV. The listed company, HALO PLC, shall subsequently focus on lower risk ventures and this has started with HALO's relationship with Engie to jointly pursue natural gas assets in Europe whereby Engie would offer funding solutions and structured finance options to support growth and acquisitions. The spin off of Vermeer creates liquidity for the company in a non-dilutive manner for shareholders. Going forward HALO is very excited about the opportunities for organic and inorganic growth within the lower risk profile it is now focused on. Vermeer represents a longer-term strategy appealing to an entirely different group of investors yet HALO maintains some exposure to that upside with its continued shareholding. We have pursued the appropriate acquisitions and partnerships for the new structure as we demonstrated with our MoU with Engie. Our cost discipline and the cash injection from a spin-off to Vermeer has enabled HALO to remain a very efficient operation through this phase of corporate transformation and growth suited to the current market conditions."

 

 

 

For further information please contact:

Hague and London Oil PLC

 

  

+44 20 7520 9268

Andrew Cochran, Chairman and Interim CEO

 

 

Natalia Erikssen, IR/PR enquiries

 

 

 

 

 

Stifel Nicolaus Europe Limited (NOMAD & Broker)

 

 +44 20 7710 7600

Callum Stewart / Ashton Clanfield

 

 

 

 

 

 

Chairman's review

This year started with a depressed market for oil & gas companies, as well as commodities in general as a global phenomenon, but the first half was a period of high activity for HALO. We saw the downturn as an opportunity to restructure, reposition and rebuild the business, not only to allow it to survive through the temporary challenges, but also to position it for growth within current conditions or an improved price cycle.

Our determination to build a strong business led to a number of tough decisions. First of all, we terminated our Duyung Farm-in Agreement. Whilst we had done all we could from our side, the delays in government approvals meant that we were running a risk of missing operational deadlines which would challenge the Company's ability to operate within safe and responsible conditions. We chose to protect HALO from this risky exposure, and instead focused on restructuring the business in a manner reflective of the global market conditions.

In May 2016, we announced a restructuring and repositioning of the Company to focus on lower cost, lower risk opportunities in Europe. As a result of this restructuring, HALO is now concentrated on pursuing the acquisition of producing, lower-risk or near-term development assets, primarily in Europe. In the current risk-averse environment, HALO's valuation and investment profile suffered from exposure to high-risk exploration, affecting our future ability to secure funding for lower-risk endeavours.

In this pursuit of a more balanced, lower risk portfolio, we signed an MoU with ENGIE, an established operator and leading European gas and power utility, to cooperate on natural gas asset acquisitions in Europe, a mature and low-risk market with an abundant opportunity set. ENGIE brings to the table its substantial footprint in European gas markets and its expertise in energy management with potential gas off-take to help structure any such asset acquisitions or offer HALO the ability to more effectively market any of its future natural gas. This MoU is a demonstration of HALO's determination and ability to build relationships with larger, well-funded entities in the market. We are currently carrying out due diligence and conducting negotiations on a number of potential acquisitions which are deemed to meet our criteria and will update the market in due course.

Whilst we acknowledge the risk-off attitude of equity capital markets, we also recognise the potential of some of our exploration assets. For this reason, we found a solution enabling HALO's investors to retain some exposure to higher risk assets, without damaging the valuation and risk profile of the listed entity nor diluting shareholders for additional liquidity. This summer we announced the creation of Vermeer Exploration B.V., a subsidiary of HALO, as the vehicle for holding such higher risk assets. HALO's equity holdings in Western Sahara have been, and French Guyana assets are in the process of, being transferred to Vermeer, which will continue to see these opportunities progress as a private entity. It has already added four additional licences in Western Sahara acquired by HALO from Premier Oil, at minimal cost. We have also announced the intention  to acquire the full interest in HALO's French Guyana joint venture, Northpet Investments Limited ("Northpet") from a subsidiary of Northern Petroleum, and subsequently increasing the equity participation to 7.5% of equity in the Guyane Maritime Permit. The licence expired earlier this year and Total, operator, has applied for an extension. This transaction would enable HALO shareholders to retain, at low cost, exposure to the existing heavy investment and high potential basin within the licence.

The spin-off of higher risk exploration assets also brought to HALO an important injection of liquidity, without diluting its shareholders. 25.5% of the share capital of Vermeer was acquired by a group of private investors (the "Vermeer investors"), including Andrew Cochran, for a consideration of $250,000. Upon completion of the acquisition of Northpet a further sum of $250,000 will be received in return for a further 25.5% of Vermeer's shares. The funding provided through this transaction, coupled with HALO's strict cost discipline, provides HALO with the necessary resources to carry on its operations through challenging times.

Throughout the remainder of the year we expect to maintain high activity levels, in major part behind the scenes, as we continue to scrutinise asset acquisition opportunities. Having restructured the business for the long term and moved on to the next phase, we are confident to deliver on our growth strategy for HALO.

 

Financial review

In the period under review, the loss before taxation was £0.48 million (1H 30 June 2015: loss £0.76 million) and loss per share stood at 2.00p (1H: loss of 3.15p). Administration costs were £482,520 (1H: £762,256).

 

As at 30 June 2016, the Company had a cash balance of £0.16 million (YE 2015: £0.28 million). The first payment of $250,000 from the Vermeer Investors was received during the period. The second payment of $250,000 is due on completion of the Northpet acquisition outlined above.

 

 

 

Project Review

 

Indonesia

In September 2015, HALO announced that it had entered into a conditional agreement with West Natuna Exploration Limited ("WNEL") to acquire 85% in the Duyung Production Sharing Contract, located in the Natuna Sea, Indonesia.

 

The transaction was subject to customary regulatory and government approvals. Since the signing of the agreement, HALO's management worked hard to complete the transaction and had secured extensions in the absence of timely progress within the approvals process. Despite HALO's and WNEL's best efforts to secure these approvals in a timely manner, within an extended "long-stop" date agreed by HALO and WNEL, none of the approvals had been received prior to the start of April 2016.

 

Therefore the decision was taken to terminate the Farm-In Agreement, with an effective date of 1 April 2016, and the Duyung licence itself will expire on 15 January 2017. The Company then announced its corporate restructuring, spin-off and new focus on lower risk ventures in more developed jurisdictions.

 

 

Western Sahara (Saharawi Arab Democratic Republic, "SADR")

Maghreb Exploration Limited (a wholly owned subsidiary of HALO) and Comet Petroleum (SADR) Limited (a wholly-owned subsidiary of Tower Resources plc) each hold a 50% interest in three licence blocks under Assurance Agreements in the SADR - Bojador, Guelta and Imlili.

On 24 June 2016, HALO announced the acquisition, via Maghreb Exploration Limited, of Premier Oil (SADR) Limited, which holds interests in five exploration licence areas in the Saharawi Arab Democratic Republic.

 

Premier SADR holds interests in the following exploration licence areas: Daora (50%), Haouza (50%), Mahbes (50%), Mijek (50%), Laguera (100%).

 

A nominal consideration of $1 was payable immediately to Premier Oil and the Seller has also been granted a gross royalty of 5% over future production revenue from the interests in the blocks held by Maghreb and 5% of the proceeds of any eventual sale of these interests in each case and in aggregate subject to an agreed cap calculated as 90% of HALO's market capitalization as at the date of the acquisition and, if it has increased, as at each calendar month thereafter. In addition, the interests held by Premier SADR are subject to a gross royalty in favour of Premier Oil of 5% over future production revenue from such interests and 5% of the proceeds of any eventual sale of such interests. There are no revenues or profits currently attributable to the assets.

 

On completion, Maghreb was transferred to Vermeer, a subsidiary of HALO.

 

HALO believes the SADR licences are a good strategic fit for Vermeer due to their risk profile associated with on-going political uncertainty, including overlapping licence claims between the SADR and Morocco, whilst the promising geology is the main attraction.

 

The licence areas lie on the Atlantic margin, which has seen encouraging drilling results over the past 12 months, particularly in Mauritania and Senegal, resulting in increased interest from larger oil companies. The political situation in Western Sahara remains complicated and, as a result, no operational activity is expected in 2016 or 2017 but newsflow from activity in the general region is expected throughout that period.

 

French Guyana

At the beginning of the period, the Group held a 44% interest in Northpet Investments Limited (Northpet). Northpet held a 2.5% interest (1.1% net to HALO) in the Guyane Maritime Permit. The remaining 56% interest in Northpet was owned by Northern Petroleum plc.

In May 2016, HALO announced an agreement, through its subsidiary Vermeer, to participate in an extension of the Guyane Maritime licence along with the new operator of the licence, Total SA. Under the new arrangements, Total will hold 92.5% of the licence and act as operator, with Northpet holding the remaining 7.5%.  The original licence period expires in June 2016 and the partnership is currently re-aligning itself with respect to a possible extension, subject to a French Government approval process.

 

HALO also announced the intention to acquire Northern's 56% interest in Northpet through its subsidiary Vermeer for a nominal consideration of £1. Following closing of the agreement, HALO's remaining 44% holding in Northpet will be transferred to Vermeer.

 

The extension would allow Vermeer to benefit, at a much higher working interest, from the significant investment (in excess of US$1bn) made to date in a proven hydrocarbon basin with significant remaining potential within an environment where drilling costs are a fraction of what they once were. The licence also has the benefit of more than US$80 million invested in 3D seismic data; all of this prior to a recent large-scale oil discovery in nearby Guyana that has served to renew interest in these basins.

 

The Netherlands

On 4 August 2016 HALO announced that it had, through its subsidiary Hague and London Oil B.V., signed a Memorandum of Understanding (MoU) with ENGIE Global Energy Management ("ENGIE") to co-operate on the acquisition by HALO of natural gas production and reserves within Europe.

 

Under the MoU, HALO will contribute its upstream and commercial capabilities to target, acquire and manage specific low risk natural gas production assets in Europe.

 

ENGIE will contribute its substantial footprint in European gas markets and its expertise in energy management to offer an innovatively structured gas off-take, designed to help HALO secure the funding of such assets whilst minimising the dilution to HALO's shareholders.

 

No decisions have been made with respect to any specific opportunity but HALO continues to review opportunities in the country and applied for an offshore exploration licence in the F5 Block in late 2015. That process remains ongoing and definitive results are expected very soon. Additionally, the Company is preparing further applications for the Dutch Continental Shelf in the coming months.

 

Philippines

The Company (through its wholly owned subsidiary HALO BV) holds a 15% interest in Service Contract SC54A in the NW Palawan Basin, offshore Philippines. The project holds a number of undeveloped oil discoveries with much remaining exploration potential. The joint venture sought, and was awarded, a three-year moratorium with respect to exploration activities in SC54A in August 2014. The Company continues to review the potential for operations there during the moratorium period should commodity prices rise or service costs fall to ensure commerciality in the future. There is no planned activity on the licence in 2016 other than desktop studies in preparation for 2018 activity.

 

United Kingdom

HALO, as Licence Administrator (i.e. Operator) of Promote Blocks 98/7b, 98/8a and 98/12 (northern part), holds a 35% interest through its wholly owned subsidiary Wessex Hydrocarbons Limited. Its partner, NWE Mirrabooka (UK) Pty. Ltd (a wholly owned subsidiary of ASX-listed Norwest Energy NL) has a 65% interest.

The Promote Period of the licence expires on 30 November 2016. Consultation between the partners is ongoing and a decision will be made before the expiry date as to whether the Company applies to extend the licence into the next phase.

Unaudited Condensed Consolidated Income Statement

for the six months ended 30 June 2016      

 

 

Notes

Six months

ended 30

June

2016

Six months

ended 30

June

2015

18 months

ended 31

December

2015

 

 

£

£

£

Continuing operations:

 

 

 

 

Revenue

 

-

-

-

Administrative expenses

 

(482,520)

(762,256)

(2,964,219)

 

 

 

 

 

Operating loss

 

(482,520)

(762,256)

(2,964,219)

 

 

 

 

 

Finance income

 

124

972

2,982

Share of losses of joint ventures

 

-

-

(3,552,591)

 

 

 

 

 

Loss before taxation

 

(482,396)

(761,284)

(6,513,828)

 

 

 

 

 

Taxation

2

-

-

-

 

 

 

 

 

Loss and total comprehensive expense for the financial period

 

(482,396)

(761,284)

(6,513,828)

 

 

 

 

 

Attributable to:

Equity shareholders of the Company

 

(482,396)

(761,284)

(6,513,828)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share (pence)

3

(2.00)

(3.15)

(28.60)

 

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Balance Sheet

as at 30 June 2016

 

 

Notes

30

June

2016

30

June

2015

 

31

December

2015

 

 

 

£

£

£

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

Intangibles

 

-

1,148,292

-

 

Property, plant and equipment

 

       19,234

19,614

19,538

 

Investments in joint ventures

 

-

    -

    -

 

 

 

19,234

1,167,906

19,538

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

Trade and other receivables

 

61,441

88,668

87,884

 

Cash and cash equivalents

 

164,203

951,533

277,924

 

 

 

225,644

1,040,201

365,808

 

 

 

 

 

 

 

Total assets

 

244,878

2,208,107

385,346

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

Capital and reserves attributable to the Company's equity shareholders:

 

 

 

 

Share capital

 

965,343

965,343

965,343

Share premium account

 

16,800,122

17,860,5122

16,800,122

Merger reserve account

 

1,060,400

-

1,060,400

Share-based payment reserve

 

1,190,755

1,159,784

1,161,952

Other reserves

 

175,809

-

-

Foreign exchange reserve

 

(73,208)

(3,935)

(66,432)

Retained earnings

 

(20,261,656)

(18,186,938)

(19,779,260)

 

 

 

 

 

Total equity

 

(142,435)

1,794,776

142,125

 

 

 

 

 

Liabilities

 

 

 

 

Trade and other payables

 

387,313

          258,513

          243,221

Deferred consideration

 

-

154,818

-

 

 

387,313

413,331

243,221

 

 

 

 

 

Total equity and liabilities

 

244,878

2,208,107

385,346

 

 

 

 

 

 

 

 

Unaudited Condensed Consolidated Cash Flow Statement

for the six months ended 30 June 2016

 

 

Notes

Six months

ended 30

June

2016

Six months

ended 30

June

2015

18 months

ended 31

December

2015

 

 

£

£

£

 

 

 

 

 

Cash outflow from operating activities

 

(282,628)

(833,024)

(2,177,393)

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

Purchase of intangible assets

 

-

(15,740)

(43,098)

Purchase of plant and equipment

 

-

(2,861)

(24,644)

Investments in joint ventures

 

-

-

(85,169)

Interest received

 

124

          972

2,982

Net cash (used in)/generated from investing activities

 

124

(17,629)

(149,929)

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

Proceeds from part disposal of subsidiary

 

175,809

-

-

Net cash from acquisition of subsidiary

 

-

-

624,360

Net cash generated from financing activities

 

175,809

-

624,360

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(106,695)

(850,653)

                 (1,702,962)

 

 

 

 

 

Impact of foreign exchange on cash balances

 

(7,026)

3,900

75,470

Cash and cash equivalents at beginning of period

 

277,924

1,798,286

1,905,416

 

 

 

 

 

Cash and cash equivalents at end of period

 

164,203

951,533

277,924

 

 

 

Notes to the Unaudited Financial Information for the six months ended 30 June 2016

 

1    Accounting Policies

 

Basis of preparation

 

These condensed Half Yearly financial statements are for the six-month period ended 30 June 2016.

 

The financial information for the six months ended 30 June 2016 and 30 June 2015 is unaudited.

 

The interim financial information in this report has been prepared on the basis of the accounting policies set out in the audited financial statements for the 18 month period ended 31 December 2015 which complied with International Financial Reporting Standards as adopted for use in the European Union ("IFRS").

 

IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and there is an ongoing process of review and endorsement by the European Commission.

 

The financial information has been prepared on the basis of IFRS that the Directors expect to be applicable for the period ended 31 December 2016.

 

Financial information contained in this document does not comprise the Group's statutory financial statements as defined in section 434 of the Companies Act 2006.

 

The statutory financial statements for the period ended 31 December 2015 have been delivered to the Registrar of Companies. The auditors reported on these financial statements: their report was unqualified, did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006, and included a going concern matter to which the auditor drew attention by way of emphasis.

 

 

 2    Taxation

 

There was no tax charge for the half yearly period due to the loss incurred (6 months ended 30 June 2015: £ nil).  A deferred tax asset in respect of trading losses and share-based payments has not been recognised due to the uncertainty over timing of future profits. The trading tax losses are recoverable against suitable future trading profits.

 

 

3    Loss per Share Attributable to the Equity Shareholders of the Company

 

Basic loss per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Given the Group's reported loss for the period, share options are not taken into account when determining the weighted average number of ordinary shares in issue during the period and therefore the basic and diluted earnings per share are the same.

 

 

 

Basic and diluted loss per share

 

 

 

 

Six months

ended

30 June

2016

Six months

ended

30 June

2015

 

Period ended

31 December

2015

 

pence

pence

pence

 

 

 

 

Loss per share from continuing operation

(2.00)

(3.15)

(28.60)

 

 

 

 

 

 

 

 

The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows:

 

 

 

 

Earnings used in the calculation of total basic and diluted earnings per share

(482,396)

(761,284)

(6,513,828)

 

 

 

 

 

 

 

 

 

 

Number of shares

Six months

ended

30 June

2016

Six months

ended

30 June

2015

Period ended

31 Dec

2015

 

 

 

 

 

 

 

 

 

Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share

24,133,586

24,133,586

22,794,698

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4      Post Balance Sheet events

 

MoU with Engie

 

On 4 August 2016 HALO announced that it had, through its subsidiary Hague and London Oil B.V., signed a Memorandum of Understanding with ENGIE Global Energy Management to co-operate on the acquisition by HALO of natural gas production and reserves within Europe.

 

Under the MoU, HALO will contribute its upstream and commercial capabilities to target, acquire and manage specific low risk natural gas production assets in Europe.

 

ENGIE will contribute its substantial footprint in European gas markets and its expertise in energy management to offer an innovatively structured gas off-take, designed to help HALO secure the funding of such assets whilst minimising the dilution to HALO's shareholders.

 

5   Copies of the Half Yearly Report

A copy of this Half Yearly Report is available on the Company's website at: www.haloil.co.uk

 

 

Glossary of terms

 

Bcf                   billion cubic feet

mcf                  thousands of standard cubic feet

mmboe            million barrels of oil equivalent

mmbtu             million British thermal units

 

 

This announcement contains inside information as defined in EU Regulation No. 596/2014 and is in accordance with the Company's obligations under Article 17 of that Regulation.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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