Source - RNS
RNS Number : 4220L
Circle Oil PLC
30 September 2016
 

 

 

 

 

 

 

 

30 September 2016

CIRCLE OIL PLC

("Circle" or the "Company" or "Group")

 

2016 INTERIM RESULTS - UNAUDITED

 

Circle Oil plc (AIM: COP), the international oil and gas exploration, development and production company, announces its results for the six month period ended 30 June 2016.

 

SUMMARY

 

Strategic Review

In March 2016, Circle announced it was to undertake a Strategic Review of the Group's business and assets with options being considered including, a debt restructuring, a sale of one or more of the Group's existing assets, a corporate transaction such as a merger with a third party, the sale of the entire issued, and to be issued, share capital of the Group and the raising of capital in the form of a subscription for new ordinary shares in the Group.

 

On 29 June 2016, the Company provided an update to the market that it believed that no value will be attributable to Circle Oil plc equity holders.  At the Company's request, the Company's shares were suspended from trading on the AIM market with immediate effect. This position remains unchanged. In the event the suspension is not lifted, the listing will be cancelled after six months as set out in the AIM rules.

 

The Company has received a number of offers from interested parties for different combinations of the Group's assets and corporate entities. Presently, the Company is in an advanced stage of negotiations with a shortlist of parties.

 

The Company has a reserve based lending facility (the "Facility") with the International Finance Corporation (IFC), a member of the World Bank Group and other syndicate members ("B Lenders").  The IFC remains the principal lender on the Facility. Since July 2015, the Company and IFC (on behalf of itself and the B Lenders) have agreed numerous temporary waivers in respect of the Facility.

 

The current waiver expires on 30 September 2016. To date, IFC, as facility agent, has been unable to obtain authorisation from one of the B Lenders on a further waiver extension. Notwithstanding this, the Company is also in detailed discussion with IFC for additional funding in order to finance the Strategic Review process through to conclusion.

 

Negotiations with IFC (and B Lenders) are ongoing and the Company is hopeful that a way forward can be identified in the very near future that will allow the Company to complete the Strategic Review process mentioned above.

 

There is, therefore, currently a material uncertainty as to the outcome of discussions regarding the Facility and any additional funding. Therefore, the Directors do not consider the going concern basis of accounting to be appropriate in preparing the interim accounts, given the requirement for the Company to publish accounts today.

 

The effect of this on the consolidated financial statements is that all Group assets and liabilities have been restated to their estimated recoverable value as at 30 June 2016.

 

Financial Summary

Operating loss for the period was US$0.9 million compared to an operating profit of US$5.5 million for H1 2015. Revenue for the period was US$14.1 million (H1 2015: US$22.3 million). Impairments and write-offs to assets as a result of preparation of accounts on a basis other the going concern is US$148.4 million. The overall loss for the period was US$149.8 million.

 

 

 

FOR THE SIX MONTHS ENDED 30 JUNE 2016 - UNAUDITED

 

Table of Contents                                                                                                             Page

Chief Executive Officers Statement                                                                                         3

Condensed Consolidated Income statement                                                                              5

Condensed Consolidated Statement of Financial Position                                                           6

Condensed Consolidated Cashflow Statement                                                                          7

Consolidated Statement of Changes in Equity                                                                           8

Notes to the Financial Statements                                                                                            9

 

 

 

 

 

 

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

 

OPERATIONS

 

Morocco

In our operated onshore blocks in Morocco we have seen a steady performance in early 2016. We continue with a streamlined team in Rabat overseeing fulfilment of the two major gas supply contracts. Efforts to maintain a safe, efficient and low cost operation are the main focus, and increased utilisation of our operated pipeline is the prime objective. A significant new customer is progressing plans for a new spur line to their factory from our existing 8" line which could also permit further branch connections in future. Discussions continue with both existing customers and potential new industrial partners moving into the Kenitra region regarding gas sales contracts. 

The cumulative production from Circle operated wells in the Sebou Permit through to the end of June 2016 was 11.34 Bcf. Sebou average daily gas sales were 5.99 MMcf/d during the first half of 2016.  Gas demand in-country remains buoyant and Circle has been somewhat shielded from falling commodity prices due to attractive fiscal terms and fixed price gas contracts (average price realised during the period of US$8.64/Mcf). There is potential for a further improvement on current pricing levels as new contracts are negotiated.  Production during the year has been fed from nine wells, these are utilised at periods and rates most appropriate for maximisation of efficient recovery over the lifetime of the anticipated contracts. 

On 27 June an earth movement near to the town of Kenitra in northern Morocco resulted in the temporary closure of the Office National des Hydrocarbures et des Mines (ONHYM) owned and operated 4" gas pipeline spur to the CMCP factory. There were no injuries associated with the incident and the pipeline was closed as a precaution while the situation was assessed and repairs were implemented.  As of the date of this report, repairs are complete and gas supplies have been restored.

Our ongoing technical analysis has identified and re-prioritised a series of untapped resources. These have been assessed in the light of the performance of all wells to date and have upgraded parameters which take account of all wells drilled, including results from Lalla Mimouna. 

In partnership with ONHYM, and subject to the outcome of the Strategic Review, the Sebou and Lalla Mimouna work programmes for 2017 will be confirmed over the next months and may include drilling of two commitment wells on the Lalla Mimouna permit where new targets exist independent of earlier drilling. 

Egypt

During the first half of 2016 the operator successfully drilled 2 new production wells.  Both wells required side-tracks and involved a rapid collaborative effort to ensure these were successfully targeted.  AASE-23 encountered the top of the reservoirs at a depth of 9,590 ft MD, and flowed at over 4,000 bopd on test.  It commenced long-term production at 740 bopd in February. AASE-24 also encountered the reservoirs at 9,486 ft MD flowing at over 1,700 bopd on test. Long-term production commenced at 490 bopd in May. 

At the end of June 2016, thirteen wells in the Al Amir SE field (AASE) and three wells in the Geyad field were on production, with a combined average gross production rate of 7,235 boepd for the first half year period. Water injection through seven wells in AASE and one well in the Geyad field is providing continuing pressure support and quantities are adjusted to maximise recovery efficiency and optimise production levels.  Water production has averaged 3,357 bwpd and is being comfortably managed with existing production and disposal facilities. 

Five workovers have been conducted up to 30 June 2016, three on AASE and two on Geyad field. These were directed at maintaining production from existing zones and have had the combined effect of restoring approximately 650 bopd of production that would have been lost without artificial lift. The export gas line to the SUCO facility at Zeit Bay is currently flowing at approximately 7.5 MMcf/d with a total delivered to the terminal of 11.2 Bcf at the end of June 2016. Valuable condensate and natural gas liquids are stripped out of the gas and sold to EGPC with gross average daily rates of about 55 bbls of condensate and 12 tonnes of LPG. 

An active well management work programme and selective investment continues to sustain field performance. Expenditure is budgeted during the second half of the year for further well workovers, if needed.  Discussions on field unitisation are at an advanced stage and await final submissions from both sides with EGPC and GANOPE both keen to promote a resolution for the benefit of enhanced total resource management in coming years.

 

 

 

Tunisia

The offshore Mahdia permit (Circle Oil 100%) contains the El Mediouni structure which was tested by Circle's EMD-1 well in August 2014 and is a potentially large discovery. A farmout process begun in 2015 was suspended when the overall Strategic Review commenced in March. 

At Ras Marmour onshore, Circle Oil and the operator, Exxoil, await clarification of permit status and the approvals to drill the onshore Sedouikech-1 well which targets a productive sand in the Early Cretaceous Meloussi formation. This is the proven reservoir in the adjacent Robbana field. 

At Beni Khalled, Circle continues to evaluate its commitments in the current price environment for seismic and drilling services. The operator Exxoil continues to review tenders in respect of the necessary 3D seismic with a view to future appraisal of the existing gas discovery and its suspected oil rim.

 

Mitch Flegg

Chief Executive Officer

30 September 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

circle Oil PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2016 - UNAUDITED

 

 

Notes

6 months to

           30 June 2016

 

6 months to

  30 June 2015

 

Year ended 31 December 2015

                  

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

Revenue

3

14,129

 

        22,290

 

38,945

 

 

 

 

 

 

 

 

 

Cost of sales

 

(11,266)

 

   (12,608)

 

(34,642)

 

 

 

 

 

 

 

 

 

Gross profit

 

2,863

 

            9,682

 

4,303

 

 

 

 

 

 

 

 

 

Administrative expenses

 

(3,171)

 

(3,106)

 

(7,224)

 

 

 

 

 

 

 

 

 

Share option expense

 

(578)

 

 (706)

 

(598)

 

 

 

 

 

 

 

 

 

Exploration write-off

 

(63,879)

 

(271)

 

(41,149)

 

 

 

 

 

 

 

 

 

Impairment

 

(80,947)

 

-

 

(67,667)

 

 

 

 

 

 

 

 

 

Foreign exchange loss

 

22

 

            (149)

 

(319)

 

 

 

 

 

 

 

 

 

Operating (loss)/profit

 

(145,690)

 

            5,450

 

(112,654)

 

 

 

 

 

 

 

 

 

Finance revenue

6

1

 

              603

 

805

 

 

 

 

 

 

 

 

 

Finance costs

7

(4,073)

 

         (3,267)

 

(8,348)

 

 

 

 

 

 

 

 

 

(Loss)/profit before taxation

 

(149,762)

 

           2,786

 

(120,197)

 

 

 

 

 

 

 

 

 

Taxation

 

-

 

                  -

 

(79)

 

 

 

 

 

 

 

 

 

(Loss)/profit for the financial period

 

(149,762)

 

            2,786

 

(120,276)

 

 

 

 

 

 

 

 

 

Basic (loss)/earnings per share

2

(26.47)c

 

0.49c

 

(21.26)c

 

 

 

 

 

 

 

 

 

Diluted (loss)/earnings per share

2

(26.47)c

 

0.31c

 

(21.26)c

               

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2016 - UNAUDITED

 

 

 

6 months to

 30 June 2016

 

6 months to

  30 June 2015

 

Year ended 31 December 2015

 

 

US$000

 

US$000

 

 

US$000

 

(Loss)/profit for the financial period

 

(149,762)

 

2,786

 

(120,276)

 

 

 

 

 

 

 

Total income and expense recognised in other comprehensive income

 

               

                        -

 

                                   -

 

 

                        -

 

 

 

 

 

 

 

Total comprehensive (loss)/income for the period - entirely attributable to equity holders

 

 

(149,762)

 

 

2,786

 

 

(120,276)

                                                                       

 

Circle Oil PLC

CONDENSED CONSOLIDATED statement of financial position

AT 30 JUNE 2016 - UNAUDITED

                                                                          

 

Notes

30 June

2016

 

30 June

2015

 

31 December 2015

 

 

US$000

 

US$000

 

US$000 

 

Assets

Non-current assets

 

 

 

 

 

 

Exploration and evaluation assets

4

-

 

100,895

 

63,552

Production and development assets

5

-

 

150,115

 

78,063

Property, plant and equipment

 

-

 

214

 

164

 

 

-

 

251,224

 

141,779

Current assets

 

 

 

 

 

 

Production and development assets

     5

6,904

 

-

 

-

Inventories

 

-

 

30

 

23

Trade and other receivables

 

12,548

 

25,334

 

27,461

Cash and cash equivalents

8

7,291

 

17,145

 

10,028

 

 

26,743

 

42,509

 

37,512

 

 

 

 

 

 

 

Total assets

 

26,743

 

293,733

 

179,291

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

Capital and reserves

 

 

 

 

 

 

Share capital

 

8,125

 

8,125

 

8,125

Share premium

 

167,953

 

 167,953

 

167,953

Other reserves

 

-

 

2,498

 

1,571

(Accumulated deficit)/retained earnings

 

(253,034)

 

17,679

 

(104,654)

 

 

 

 

 

 

 

Total equity

 

(76,956)

 

196,255

 

73,085

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Trade and other payables

 

-

 

670

 

359

Reserve based loan facility

 

-

 

55,251

 

-

Convertible loan - debt portion

 

-

 

16,946

 

-

Derivative financial instruments

 

-

 

2,610

 

-

Decommissioning provision

 

-

 

1,211

 

3,478

 

 

 

 

 

 

 

Total non-current liabilities

 

-

 

76,688

 

3,837

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

 

26,171

 

16,783

 

24,790

Reserve based loan facility

9

57,500

 

-

 

57,500

Convertible loan - debt portion

 

20,000

 

4,000

 

20,000

          Current tax

 

28

 

7

 

79

 

 

 

 

 

 

 

Total current liabilities

 

103,699

 

20,790

 

102,369

 

 

 

 

 

 

 

Total liabilities

 

103,699

 

97,478

 

106,206

 

 

 

 

 

 

 

Total equity and liabilities

 

26,743

 

293,733

 

179,291

 

 

 

 

 

Circle Oil PLC

CONDENSED CONSOLIDATED cash flow statement

FOR THE SIX MONTHS ENDED 30 JUNE 2016 - UNAUDITED

                                                                                

                                                                                

 

Notes

6 months to

30 June

2016

 

6 months to

30 June

2015

 

Year ended

31 December 2015

 

Operating activities

 

US$000

 

US$000 

 

 

US$000 

 

Net cash generated from operations

10

5,858

 

17,789

 

26,808

Taxes paid

 

(46)

 

-

 

(16)

 

 

 

 

 

 

 

Net cash inflow from operating activities

 

5,812

 

17,789

 

26,792

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Investments in exploration and evaluation assets

 

(244)

 

(15,959)

 

(21,118)

Investments in production and development assets

 

(4,453)

 

(24,258)

 

(28,183)

Payments to acquire property, plant and equipment

 

(18)

 

  (10)

 

(28)

Interest received

 

1

 

                1

 

2

 

 

 

 

 

 

 

Net cash used in investing activities

 

(4,714)

 

(40,226)

 

(49,327)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Convertible loan repayment

 

-

 

(6,000)

 

(10,000)

Reserve based lending facility - amounts drawn down

 

-

 

12,500

 

45,000

Loan transaction costs paid

 

(1,350)

 

(960)

 

(1,079)

Interest paid

 

(2,547)

 

(2,261)

 

(4,862)

 

 

 

 

 

 

 

Net cash (outflow)/inflow from financing activities

 

(3,897)

 

         3,279

 

(3,441)

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

(2,799)

 

(19,158)

 

(25,976)

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

10,028

 

        36,308

 

36,308

 

 

 

 

 

 

 

Effect of foreign exchange rate changes

 

62

 

             (5)

 

(304)

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

7,291

 

        17,145

 

10,028

 

 

 

 

 

 

 

               

 

    

 

 

 

 

 

  

 

Circle Oil PLC

consolidated STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2016 - UNAUDITED

 

 

 

 

 

Share capital

US$000

 

 

 

 

 

Share premium US$000

 

 

 

 

Share-based payment

reserves

US$000

 

 

 

 

Convertible loan - equity portion

US$000

 

 

 

 

 

Translation reserve

US$000

 

 

Retained

earnings/ (accumulated deficit)

US$000

 

 

 

 

 

 

 

Total

US$000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2015

8,125

 

167,953

 

1,795

 

6,259

 

(3)

 

8,634

 

192,763

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share option expense

-

 

-

 

706

 

-

 

-

 

-

 

706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reserve transfer

-

 

-

 

-

 

(6,259)

 

-

 

6,259

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net profit for period

-

 

-

 

-

 

-

 

-

 

2,786

 

2,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2015

8,125

 

167,953

 

2,501

 

-

 

(3)

 

17,679

 

196,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share option expense

-

 

-

 

(108)

 

  -

 

  -

 

-

 

(108)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reserve transfer

-

 

-

 

(819)

 

-

 

-

 

819

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for period

-

 

-

 

     -

 

-

 

-

 

(123,062)

 

(123,062)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2015

8,125

 

167,953

 

1,574

 

-

 

(3)

 

(104,564)

 

73,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share option expense

-

 

-

 

578

 

-

 

-

 

-

 

578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior period adjustment

-

 

-

 

-

 

-

 

-

 

(857)

 

   (857)

 

 

 

Reserve transfer

-

 

-

 

(2,152)

 

-

 

3

 

2,149

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for period

-

 

-

 

-

 

-

 

-

 

(149,762)

 

(149,762)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2016

8,125

 

167,953

 

 

-

 

-

 

(253,034)

 

(76,956)

                                 

 

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016 

 

1.   Basis of preparation

 

The condensed consolidated financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

 

In March 2016, Circle announced it was to undertake a Strategic Review of the Group's business and assets with options being considered including, a debt restructuring, a sale of one or more of the Group's existing assets, a corporate transaction such as a merger with a third party, the sale of the entire issued, and to be issued, share capital of the Group and the raising of capital in the form of a subscription for new ordinary shares in the Group.

 

On 29 June 2016, the Company provided an update to the market that it believed that no value will be attributable to Circle Oil plc equity holders.  At the Company's request, the Company's shares were suspended from trading on the AIM market with immediate effect. This position remains unchanged. In the event the suspension is not lifted, the listing will be cancelled after six months as set out in the AIM rules.

 

The Company has received a number of offers from interested parties for different combinations of the Group's assets and corporate entities.  Presently, the Company is in an advanced stage of negotiations with a shortlist of parties.

 

The Company has a reserve based lending facility (the "Facility") with the International Finance Corporation (IFC), a member of the World Bank Group and other syndicate members ("B Lenders").  The IFC remains the principal lender on the Facility. Since July 2015, the Company and IFC (on behalf of itself and the B Lenders) have agreed numerous temporary waivers in respect of the Facility.

 

The current waiver expires on 30 September 2016. To date, IFC, as facility agent, has been unable to obtain authorisation from one of the B Lenders on a further waiver extension. Notwithstanding this, the Company is also in detailed discussion with IFC for additional funding in order to finance the Strategic Review process through to conclusion.

 

Negotiations with IFC (and B Lenders) are ongoing and the Company is hopeful that a way forward can be identified in the very near future that will allow the Company to complete the Strategic Review process mentioned above.

 

There is, therefore, currently a material uncertainty as to the outcome of discussions regarding the Facility and any additional funding. Therefore, the Directors do not consider the going concern basis of accounting to be appropriate in preparing the interim accounts, given the requirement for the Company to publish accounts today.

 

The effect of this on the consolidated financial statements is that all Group assets and liabilities have been restated to their estimated recoverable value as at 30 June 2016:

 

·     At that date all assets are considered as realisable as current assets within one year;

·     cash and other liquid assets have been measured at fair value at 30 June 2016 and are considered as realisable as current assets within one year;

·     capitalised costs and other assets where a reduced value or no value is expected to be recovered have been impaired or written-off as follows:

-     production and development assets have been impaired to what the Directors believe reflects the net realisable value of these assets under a liquidation or similar process.

-     exploration and evaluation assets have been written-off in full as no value is expected to be recovered for these assets

-     trade receivables for oil and gas have been impaired to reflect what Directors believe is recoverable taking current market environment into consideration.

-     property, plant and equipment value has been written-off in full as no value is expected to be recovered for these assets;

 

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

 

·     liabilities are only recognised if an obligation exists at the balance sheet date; and

·     reserves relating to value attributed to employee Long Term Incentive Plan, which have been deemed to no longer have any value at 30 June 2016, have been transferred to retained losses

 

These estimated recoverable values are substantially below the range of values recently evidenced in the Strategic Review process, but are a direct consequence of the Company being required to prepare the accounts on a basis other than going concern.

 

   Adoption of new and revised Standards

 

The following new and revised Standards have been mandatorily adopted by the Group during the period. Their adoption is not expected to have any material impact on the Group.

 

IFRS 14 Regulatory Deferral Accounts (effective for accounting periods beginning on or after 1 January 2016)

IFRS 11 (amendments) Accounting for Acquisitions of Interests in Joint Operations (effective for accounting periods beginning on or after 1 January 2016)

IFRS 10, IFRS 12 and IAS 28 (amendments) Investment Entities; Applying the Consolidation Exception (effective for accounting periods beginning on or after 1 January 2016)

IAS 16 and IAS 38 (amendments) Clarification of Acceptable Methods of Depreciation and Amortisation (effective for accounting periods beginning on or after 1 January 2016)

IAS 16 and IAS 41 (amendments) Agriculture: Bearer Plants (effective for accounting periods beginning on or after 1 January 2016)

IAS 27 (amendments) Equity Method in Separate Financial Statements (effective for accounting periods beginning on or after 1 January 2016)

Annual Improvements to IFRSs: 2012-2014 Cycle (effective for accounting periods beginning on or after 1 January 2016)

 

2.   Basic and diluted earnings per share

 

Basic earnings per share and diluted earnings per share at the end of the period were as follows:

 

 

30 June

2016

 

30 June

2015

 

31 December

2015

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

Basic earnings per share

(26.47)c

 

0.49c

 

(21.26)c

 

 

 

 

 

 

Diluted earnings per share

(26.47)c

 

0.31c

 

(21.26)c

 

The calculation of basic earnings per share attributable to the ordinary equity holders is based on the following data:

 

30 June

2016

 

30 June

2015

 

31 December

2015

 

US$000

 

US$000

 

US$000

Profit/(loss) for period attributable to equity holders of the parent

 

(149,762)

 

 

2,786

 

 

(120,276)

 

 

 

 

 

 

 

                '000

 

                '000

 

                  '000

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

565,847

 

 

           565,847

 

 

              565,847

                                                                       

Diluted earnings per share is calculated using the weighted average number of ordinary shares assuming the conversion of its potential dilutive ordinary shares outstanding which relate to the convertible loan and employee share options. All of the Group's potential ordinary shares were anti-dilutive for the period ended 30 June 2016 which resulted in a decrease in loss per share. The Group had total potential ordinary shares outstanding of 143,876,346 at 30 June 2016 (2015: 147,608,751).

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

 

3.   Segmental reporting

                                                                             

Six months to 30 June 2016

     Africa

 

Middle-East

 

Corporate

 

Total

 

US$000

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

Revenue

14,129

 

-

 

-

 

14,129

 

 

 

 

 

 

 

 

Cost of sales

(2,400)

 

-

 

-

 

(2,400)

 

 

 

 

 

 

 

 

Depreciation

(8,866)

 

-

 

-

 

(8,866)

 

 

 

 

 

 

 

 

Gross profit

2,863

 

-

 

-

 

2,863

 

 

 

 

 

 

 

 

Administration expenses

(1,828)

 

(13)

 

(1,330)

 

(3,171)

 

 

 

 

 

 

 

 

 

     1,035

 

(13)

 

(1,330)

 

(308)

 

 

 

 

 

 

 

 

Share option expense

-

 

-

 

(578)

 

(578)

 

 

 

 

 

 

 

 

Exploration write-off

(63,879)

 

-

 

-

 

(63,879)

 

 

 

 

 

 

 

 

Impairment

(80,947)

 

-

 

-

 

(80,947)

 

 

 

 

 

 

 

 

Finance costs

(3,276)

 

-

 

(797)

 

(4,073)

 

 

 

 

 

 

 

 

Finance revenue

-

 

-

 

1

 

1

 

 

 

 

 

 

 

 

Foreign exchange gain/(loss)

47

 

-

 

(25)

 

22

 

 

 

 

 

 

 

 

Loss before taxation

(147,020)

 

(13)

 

(2,729)

 

(149,762)

 

 

 

 

 

 

 

 

Taxation

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

Loss for the period

(147,020)

 

(13)

 

(2,729)

 

(149,762)

 

 

 

 

 

 

 

 

Total assets

24,452

 

-

 

2,291

 

26,743

 

 

 

 

 

 

 

 

Total liabilities

(80,267)

 

(1,346)

 

(22,086)

 

(103,699)

 

 

 

 

 

 

 

 

Sales revenue in Africa of US$14.13 million (H1 2015: US$22.29 million) consists of US$6.63 million in oil sales and US$0.5 million in gas and associated liquid sales in Egypt together with US$7.0 million in gas sales in Morocco. Corporate comprises mainly of corporate expenses, cash and other assets and liabilities not directly attributable to an operating segment.

 

 

 

 

 

 

 

 

 

 

 

 

 

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

 

3.   Segmental reporting (continued)

 

 

 

 

 

 

 

 

Six months to 30 June 2015

     Africa

 

Middle-East

 

Corporate

 

Total

 

US$000

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

Revenue

22,290

 

-

 

-

 

22,290

 

 

 

 

 

 

 

 

Cost of sales

(5,172)

 

-

 

-

 

(5,172)

 

 

 

 

 

 

 

 

Depreciation

(7,436)

 

-

 

-

 

(7,436)

 

 

 

 

 

 

 

 

Gross profit

9,682

 

-

 

-

 

9,682

 

 

 

 

 

 

 

 

Administration expenses

(1,015)

 

(637)

 

(1,454)

 

(3,106)

 

 

 

 

 

 

 

 

 

       8,667

 

(637)

 

(1,454)

 

          6,576

 

 

 

 

 

 

 

 

Share option expense

-

 

-

 

(706)

 

(706)

 

 

 

 

 

 

 

 

Exploration write-off

-

 

(271)

 

-

 

(271)

 

 

 

 

 

 

 

 

Finance costs

(1,292)

 

(6)

 

(1,969)

 

(3,267)

 

 

 

 

 

 

 

 

Finance revenue

62

 

-

 

541

 

603

 

 

 

 

 

 

 

 

Foreign exchange (loss)/gain

(238)

 

-

 

89

 

(149)

 

 

 

 

 

 

 

 

Profit/(loss) before taxation

7,199

 

(914)

 

(3,499)

 

2,786

 

 

 

 

 

 

 

 

Taxation

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

Profit/(loss) for the period

7,199

 

(914)

 

(3,499)

 

2,786

 

 

 

 

 

 

 

 

Total assets

290,687

 

76

 

2,970

 

293,733

 

 

 

 

 

 

 

 

Total liabilities

70,517

 

1,412

 

25,549

 

97,478

 

 

 

 

 

 

 

 

 

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

 

3.   Segmental reporting (continued)

 

Twelve months to 31 December 2015

Africa

 

Middle-East

 

Corporate

 

Total

 

US$000

 

US$000

 

US$000

 

US$000

 

 

 

 

 

 

 

 

Revenue

38,945

 

-

 

-

 

38,945

 

 

 

 

 

 

 

 

Cost of sales excluding depreciation

(10,620)

 

-

 

-

 

(10,620)

 

 

 

 

 

 

 

 

Depreciation

(24,022)

 

-

 

-

 

(24,022)

 

 

 

 

 

 

 

 

Gross profit

4,303

 

-

 

-

 

4,303

 

 

 

 

 

 

 

 

Administrative expenses

(3,526)

 

(832)

 

(2,866)

 

(7,224)

 

 

 

 

 

 

 

 

 

777

 

(832)

 

(2,866)

 

(2,921)

 

 

 

 

 

 

 

 

Share option expense

-

 

-

 

(598)

 

(598)

 

 

 

 

 

 

 

 

Exploration write-off

(40,888)

 

(261)

 

-

 

(41,149)

 

 

 

 

 

 

 

 

Impairment

(67,667)

 

-

 

-

 

(67,667)

 

 

 

 

 

 

 

 

Finance costs

(5,702)

 

(6)

 

(2,640)

 

(8,348)

 

 

 

 

 

 

 

 

Finance revenue

794

 

-

 

11

 

805

 

 

 

 

 

 

 

 

Foreign exchange (loss)/gain

(443)

 

-

 

124

 

(319)

 

 

 

 

 

 

 

 

Loss before taxation

(113,129)

 

(1,099)

 

(5,969)

 

(120,197)

 

 

 

 

 

 

 

 

Taxation

(45)

 

-

 

(34)

 

(79)

 

 

 

 

 

 

 

 

Loss for the financial year

(113,174)

 

(1,099)

 

(6,003)

 

(120,276)

 

 

 

 

 

 

 

 

Total assets

176,059

 

-

 

3,232

 

179,291

 

 

 

 

 

 

 

 

Total liabilities

82,663

 

1,396

 

22,147

 

106,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

 

4. Exploration and evaluation assets

 

The movement on exploration and evaluation assets which relate to oil and gas interests during the period was:

 

Six months to 30 June 2016

 

Opening balance

US$000

 

 

 

Additions      US$000

 

 

Exploration write-off

US$000

 

 

Closing balance

US$000

 

 

 

 

 

 

 

 

Africa

63,552

 

327

 

(63,879)

 

-

Middle-East

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

30 June 2016

63,552

 

327

 

(63,879)

 

                  -

 

Six months to 30 June 2015

 

Opening balance

US$000

 

 

 

Additions      US$000

 

 

Exploration write-off

US$000

 

 

Closing balance

US$000

 

 

 

 

 

 

 

 

Africa

97,411

 

3,484

 

-

 

100,895

Middle-East

-

 

271

 

 (271)

 

-

 

 

 

 

 

 

 

 

30 June 2015

        97,411

 

            3,755

 

            (271)

 

       100,895

 

Twelve months to 31 December 2015

 

Opening balance

US$000

 

 

 

Additions      US$000

 

 

Exploration write-off

US$000

 

 

Closing balance

US$000

 

 

 

 

 

 

 

 

Africa

 97,411

 

7,029

 

(40,888)

 

63,552

Middle-East

-

 

261

 

(261)

 

-

 

 

 

 

 

 

 

 

31 December 2015

        97,411

 

            7,290

 

       (41,149)

 

        63,552

 

 

Oil and gas interests at 30 June 2016 represent exploration and related expenditure on the Group's licences & permits in the geographical areas noted above. The realisation of these intangible assets by the Group is dependent on the development of economic reserves and the ability of the Group to raise sufficient funds to develop these interests. Should the development of economic reserves prove unsuccessful, the carrying value in the statement of financial position will be written off.

 

As there is a material uncertainty as to the outcome of certain discussions regarding the RBL and any additional funding from IFC the Directors do not consider the going concern basis of accounting to be appropriate in preparing the interim accounts. As a consequence, the decision has been taken to write down in full the carrying values of exploration and evaluation assets to a Nil value at 30 June 2016.

 

 

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                         FOR THE SIX MONTHS ENDED 30 JUNE 2016

 

5. Production and development assets

 

The movement on production and development assets which relate to oil and gas interests during the period was:

 

Cost

 

       Africa

US$000

 

Total

US$000

At 1 January 2015

 

227,345

 

227,345

Additions

 

8,637

 

8,637

At 30 June 2015

 

235,982

 

235,982

 

 

 

 

 

Additions

 

12,735

 

12,735

At 31 December 2015

 

248,717

 

248,717

 

 

 

 

 

Additions

 

1,715

 

1,715

At 30 June 2016

 

250,432

 

             250,432

 

Accumulated depreciation

 

Africa

US$000

 

Total

US$000

At 1 January 2015

 

64,762

 

64,762

Charge for financial period

 

7,169

 

7,169

At 30 June 2015

 

71,931

 

71,931

 

 

 

 

 

Charge for financial period

 

17,120

 

17,120

At 31 December 2015

 

89,051

 

89,051

 

 

 

 

 

Charge for financial period

 

8,636

 

8,636

At 30 June 2016

 

97,687

 

97,687

 

 

 

 

 

Impairment

 

Africa

US$000

 

Total

US$000

At 1 January 2015

 

13,936

 

13,936

Charge for financial period

 

-

 

-

At 30 June 2015

 

13,936

 

13,936

 

 

 

 

 

Charge for financial period

 

67,667

 

67,667

At 31 December 2015

 

81,603

 

81,603

 

 

 

 

 

Charge for financial period

 

64,238

 

64,238

At 30 June 2016

 

145,841

 

145,841

 

Net book value

 

 

Africa

US$000

 

Total

US$000

At 30 June 2015

 

150,115

 

150,115

 

 

 

 

 

At 31 December 2015

 

78,063

 

78,063

 

 

 

 

 

At 30 June 2016

 

6,904

 

6,904

 

 

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

 

The realisation of production and development assets by the Group is dependent on the successful operation of the Group's oil and gas interests in Africa and the continuing availability of adequate funding for these interests.

The Directors have considered whether facts or circumstances exist that indicate that production and development assets are impaired. Production and development assets have been assessed for impairment having regard to the likelihood of further development expenditures and ongoing production for each geographical area under the rules of IAS 36 'Impairment of Assets'. The Directors performed the assessment as at 30 June 2016, as required by IAS 36, being the reporting date.

 

As there is a material uncertainty as to the outcome of certain discussions regarding the RBL and any additional funding from IFC the Directors do not consider the going concern basis of accounting to be appropriate in preparing the interim accounts. As a consequence, the Directors have decided to write-down the value of the production and development assets to a net realisable value of US$6.9 million which the Directors believe fairly reflects the sales value of these assets in a case of liquidation. These assets have been re-classified as current assets in the Statement of Financial Position.

 

These estimated recoverable values are substantially below the range of values recently evidenced in the Strategic Review process, but are a direct consequence of the Company being required to prepare the accounts on a basis other than going concern.

6.  Finance revenue

 

 

6 months to

30 June

2016

 

6 months to

30 June

2015

 

Year ended

31 December 2015

 

 

US$000

 

US$000

 

US$000

Interest receivable

 

1

 

2

 

1

Gain on fair value of conversion of option

 

-

 

399

 

10

Gain on fair value of term extension option

 

-

 

140

 

-

Finance income - deferred revenue interest

 

-

 

62

 

153

Revisions to discount on decommissioning provision

 

-

 

-

 

641

 

 

 

 

 

 

 

 

 

1

 

         603

 

805

 

7.  Finance costs

 

 

6 months to

30 June

2016

 

6 months to

30 June

2015

 

Year ended

31 December 2015

 

 

 

US$000

 

US$000

 

        US$000

Interest payable:

 

 

 

 

 

 

 

Convertible loan

 

798

 

927

 

2,744

 

Reserve based lending facility interest

 

1,805

 

1,346

 

5,361

 

Interest expense non-cash

 

-

 

503

 

-

 

Loss on fair value of additional options

 

-

 

606

 

-

 

Convertible loan transaction costs

 

-

 

-

 

48

 

RBL facility transaction costs

 

1,356

 

-

 

594

 

Interest payable to suppliers

 

-

 

24

 

24

 

Unwinding of discount on decommissioning provision

 

115

 

18

 

-

 

Capitalised to exploration and evaluation assets

 

-

 

    (157)

 

(423)

 

 

 

 

 

 

 

 

 

 

 

 4,073

 

3,267

 

   8,348

 

 

8.  Cash and cash equivalents

 

Cash balances at 30 June 2016 of US$7.3 million (H1 2015: US$17.1 million) include restricted cash amounts of US$1.3 million (H1 2015: US$1.8 million).

                                                                       

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

 

9.  Loans and borrowings

 

At 30 June 2016 the amount outstanding on loans was as follows:

 

Current liabilities

 

30 June

2016

 

      30 June

2015

 

31 December 2015

 

 

US$000

 

US$000

 

       US$000

Reserve based lending facility

 

57,500

 

-

 

          57,500

Convertible loan

 

20,000

 

4,000

 

          20,000

 

 

 

 

 

 

 

 

 

77,500

 

4,000

 

77,500

 

 

 

 

 

 

 

 

                       

 

Non-current liabilities

 

30 June

2016

 

      30 June

2015

 

31 December 2015

 

 

 

US$000

 

US$000

 

     US$000

Reserve based lending facility

 

-

 

55,251

 

-

 

Convertible loan

 

-

 

19,556

 

-

 

 

 

 

 

 

 

 

 

 

 

-

 

74,807

 

-

 

                   

 

10.  Reconciliation to net cash generated from operations

 

 

6 months to

30 June

2016

 

6 months to

30 June

2015

 

Year ended

31 December 2015

 

 

US$000

 

US$000 

 

 

US$000

(Loss)/profit before taxation

 

(149,762)

 

2,786

 

(120,197)

Finance revenue

 

(1)

 

 (603)

 

(805)

Finance costs

 

4,073

 

3,267

 

8,348

Exploration write-off

 

63,879

 

271

 

41,149

Impairment of production and development assets

 

80,947

 

-

 

67,667

(Decrease)/increase in trade and other payables

 

(883)

 

     (2,639)

 

193

(Increase)/decrease in trade and other receivables

 

(1,835)

 

   6,381

 

5,012

Decrease in inventory

 

-

 

378

 

385

Share option expense

 

578

 

706

 

598

Foreign exchange (gain)/loss

 

(62)

 

5

 

304

Depreciation

 

8,924

 

7,237

 

24,154

 

 

 

 

 

 

 

Net cash generated from operations

 

5,858

 

        17,789

 

26,808

 

   11.  Contingent liabilities

 

In Morocco, a small number of legal claims against Circle Oil Morocco remain outstanding.  Where Circle Oil Morocco believes it may be required to, or it may be commercially appropriate to settle, a provision has been made.  As at 30 June 2016, this provision is US$0.27 million.

 

The Group has not recognised all liabilities associated with the implementation of a liquidation or similar process nor has it made any provision for such costs in the financial statements at 30 June 2016.

 

   12.  Interim Report

         

          Copies of the Interim Report are available by download from the Group's web-site at www.circleoil.net

 

 

 

 

Glossary

 

bbls

Barrels

bo

Barrels of oil

bopd

Barrels of oil per day

boepd

Barrels of oil equivalent per day

Bcf

Billions of cubic feet of gas

E&P

Exploration & production

EBITDA

Earnings before interest, tax, depreciation and amortisation

EGPC

Egyptian General Petroleum Company

GANOPE

Ganoub El-Wadi Petroleum Holding Company

IFC

International Finance Corporation

LPG

Liquified Petroleum Gas

MD

Measured depth

Mcf

Thousands of cubic feet

MMcf

Millions of cubic feet

MMbo

Millions of barrels of oil

Mboe

Millions of barrels of oil equivalent

MMbw

Millions of barrels of water

MMcf/d

Millions of cubic feet of gas per day

ONHYM

Office National des Hydrocarbures et des Mines

RBL

Reserve based lending

sq km

Square kilometres

TD

Total depth

3D

Three dimensional

 

 

 

For further information contact:

Circle Oil Plc (+44 20 7182 4913)

Mitch Flegg, CEO

 

Investec (+44 20 7597 5970)
Chris Sim
George Price

James Rudd

Jonathan Wynn

 

Murray Consultants (+353 1 498 0300)
Joe Heron

Pat Walsh

In accordance with the guidelines of the AIM Market of the London Stock Exchange the technical information contained in the announcement has been reviewed and approved by Mitch Flegg, Chief Executive Officer of Circle Oil Plc. Mitch Flegg, who has over 35 years of experience, is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies,

Mitch Flegg holds a BSc in Physics from Birmingham University and is a member of the Society of Petroleum Engineers (SPE) and the Petroleum Exploration Society of Great Britain (PESGB).

 

 

Notes to Editors

Circle Oil plc (AIM: COP) is an international oil & gas exploration, development and production company holding a portfolio of assets in Morocco, Tunisia, and Egypt with a combination of low-risk, near-term production, and significant upside exploration potential. The Company listed on AIM in October 2004.

Internationally, the Company has assets in the Rharb Basin, Morocco; the Ras Marmour Permit in southern Tunisia; the Beni Khalled permit in northern Tunisia, the Mahdia Permit offshore Tunisia and the NW Gemsa permit in Zeit Bay area of Egypt.

Further information on Circle Oil is available on its website at www.circleoil.net.

 


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