Source - LSE Regulatory
RNS Number : 6179L
Phoenix Global Resources PLC
14 September 2021
 

 

14 September 2021

Phoenix Global Resources plc

('Phoenix' or 'the Company')

 

UNAUDITED INTERIM RESULTS FOR THE SIX-MONTH PERIOD TO 30 JUNE 2021

 

Phoenix Global Resources (AIM: PGR; BCBA: PGR) announces its unaudited interim results for the six-month period ended 30 June 2021.

 

Operational highlights

·    35 year unconventional exploitation concession over 43,372 acres in Mata Mora granted

·    Exploration rights over 11,918 acres in Mata Mora extended for 5 years

·    Average daily production of 4,863 boepd (H1 2020: 4,369 boepd)

·    Site preparation for the two horizontal wells in Corralera completed

·    Drilling rig for first Corralera horizontal well mobilised

·    Successful pulling interventions at Tupungato and Atamisqui

 

2021 interim results summary

·    Revenues of US$36.1 million (H1 2020: US$24.9 million)

·    Realised oil price of US$ 47.03/bbl (H1 2020: US$39.19/bbl)

·    Operating loss of US$ 16.04 million (H1 2020: loss of US$ 50.8 million)

·    EBITDA gain of US$ 7.23 million (H1 2020: US$34.5 million loss)

·    Adjusted EBITDA gain of US$ 7.06 million (H1 2020: US$11.6 million loss)

 

Overview and outlook

 

Whilst Covid-19 continues to make the environment extremely challenging, the benefits of the impact of the cost reductions and corporate restructure that we implemented last year are reflected in the results for the six-month period to 30 June 2021.

 

The Company's major shareholder, Mercuria, continues to be supportive and the Board believes the Company is now on a sounder financial footing to enable it to focus on the development of its unconventional assets.

 

During the period the Neuquen Province issued a Decree granting the Company a 35-year unconventional exploitation concession over approximately 43,372 acres in the northern part of Mata Mora and extending for 5 years to April 2026 the exploration rights over approximately 11,918 acres in the southern part of Mata Mora. Furthermore, the Province has issued a Decree approving a one-year extension of the Company's exploration rights for the Corralera Noreste and Corralera Sur blocks to April 2022.

 

The Mata Mora concession involves a pilot phase with certain works to be completed by March 2026, which includes a capex commitment of US$110 million, consisting of four pads of three horizontal wells each, with an average lateral length of 2,150 metres. The Corralera exploration commitment includes obligations to execute two horizontal wells by April 2022.

 

The work programs for 2021 and 2022 include the drilling and completion of the two horizontal wells in Corralera and the drilling and completion of two pads each of three wells in Mata Mora. We have completed the site preparation at both locations in Corralera and the drilling rig for the drilling of the first well has been mobilised.

 

The Board will continue to provide updates on these drilling programs as they progress and hopes this will provide a platform for the further development of these assets, whilst recognising that significant investment will be required to fully exploit these assets and acknowledges that funding from third parties, other than Mercuria, may be required to achieve this.  

 

Phoenix Global Resources plc

Nigel Duxbury

 

T: +44 20 3912 2800

 

 

Shore Capital

Joint broker and nominated adviser

 

Toby Gibbs

David Coaten

T: +44 20 7408 4090

 

Panmure Gordon

Joint broker

 

John Prior

Atholl Tweedie

 

T: +44 20 7886 2500

 

About Phoenix

Phoenix Global Resources is an independent oil and gas exploration and production company focused on Argentina and listed on both the London Stock Exchange (AIM: PGR) and the Buenos Aires Stock Exchange (BCBA: PGR) and offers its investors an opportunity to invest directly into Argentina's Vaca Muerta shale formation and other unconventional resources. The Company has over 0.9 million licenced working interest acres in Argentina (of which approximately 0.7 million are operated), 18.8 million boe of working interest 2P reserves and average working interest production of 4,549 boepd in 2020. Phoenix has significant exposure to the unconventional opportunity in Argentina through its approximately 0.6 million working interest acres with Vaca Muerta and other unconventional potential.

 

The Company's website is www.phoenixglobalresources.com

 

Operations Review

 

OPERATED AREAS

Mata Mora

Our two Mata Mora wells, MMox-1001 and MMox-1002, continue to produce at our predicted post 2020 shut-in type curve rates. If needed, interventions are planned for Q4 to run velocity strings and given normal expected reservoir pressure decline, we are anticipating installing artificial lift on the wells sometime later this year.

 

Field development plans are also continuing and site preparation for pads 2 and 3 began in Q3. After completing drilling activity at Corralera, the drilling rig will be moved to Mata Mora where we plan to drill a total of 6 wells (3 wells per pad) with an average lateral lengths of 2,150 metres and between 29 and 33 frac stages. A vertical well is also planned to obtain geological data. We expect to complete the first pad by May 2022 and the second pad by July 2022.

 

Plans for the building of facilities are being developed to avoid gas flaring and avoid the delivery of production by truck through the use of midstream facilities.

 

Corralera

The Company has progressed its plans to drill two wells in the Corralera area and site preparation at both locations (Corralera North East ("CONE") and Corralera South ("COSU")) has been completed. Conductor wells have been drilled and a H&P-230 drilling rig has been moved to the CONE site location and drilling operations on well CoNe.x-1 have started with the drilling of the vertical well to a target depth of 2,960 metres. After the collection and logging of geological information, the vertical well will be abandoned and a sidetrack will be performed to drill a 2,000 metre lateral length horizontal well, with 29 frac stages. We expect the initial results from this well to be available by the end of November. After CONE we plan to drill the well in COSU and expect to start drilling activities at COSU in mid-October and again plan to drill a horizontal section with 29 frac stages. We expect initial production results to be available by late January 2022. The geological information from the vertical wells will enable us to define the petrophysical parameters of the rock to enable us to determine the best navigation horizons for the lateral sections. We plan to rent facilities to optimise the deployment of allocated capital expenditure and the technical team is working on plans to reduce the flaring and the venting of natural gas in line with the Company's zero flaring targets.

 

Tupungato-Refugio and Atamisqui

In the first half of the year 13 pulling interventions were completed with outstanding results. The production during Q1 was below budget but since April oil production has been above budget. General maintenance work and some minor jobs were also carried out at the Tupungato water injection plant.

 

A well risk analysis was performed on well T-48 and the conclusion reached that the well should be  abandoned. Due to the condition of the wellhead a specialised team was hired to perform remediation jobs. The well is now in a secure condition and the abandonment is planned for Q1 2022. A critical tanks inspection and reparation campaign was started in May and a well swabbing campaign is planned to start in September. Subsurface modelling was started in June 2021, as no comprehensive modelling has been carried out for over 40 years. A static model has been completed and some opportunities for implementing secondary recovery have been identified and the possibility of tertiary recovery is under analysis. A dynamic model is now being developed with the support of an external consultant.

 

Puesto Rojas

The drop in production primarily relates to a higher rate of decline from the wells producing from the Agrio and Vaca Muerta, with only 5 wells currently producing from the 12 wells drilled in the last campaign. Based on the variable results from these Agrio and Vaca Muerta vertical wells, management continues to evaluate unconventional prospectivity in this area, which it expects to complete by the end of the year.

 

A five well pulling campaign was conducted during the first half of 2021. Three wells produced very good results but the other two wells require jobs that were not originally planned and for this reason further work on these wells has been postponed. Some issues relating to fluids compatibility were detected in wells producing from the Vaca Muerta formation and an analysis of this situation is being carried out. A comprehensive review of over 100 shut-in wells is being carried out and to date, two wells have been put back into production.

 

Rio Atuel

In November 2021, we expect to drill an exploratory well, Picunches.x-1, in the Rio Atuel licence in the Mendoza Province, which we expect to complete by the end of the year. Pampa Energia has a minority non-operating interest of 33% in this licence. The main target is the Huitrin formation, but the Agrio and Vaca morta formations will also be analysed. This well will fulfill our commitments under the licence with the Mendoza Province. Five further possible targets have also been identified.

 

La Paloma

In 2019, two wells, LP-9 and LP-7, were drilled in the La Paloma/Cerro Alquitran area targeting the Grupo Neuquén formation. After analyzing the reservoir conditions, the Company has decided not to complete these wells due to lack of petrophysical conditions and current local regulatory restraints, which prohibit fracking in the area.

 

NON-OPERATED AREAS

 

Chachahuen

In the Chachahuen Sur area, the focus in 2021 has been to improve the water flooding projects and start a polymer pilot project. A plan to reduce production losses has also been prepared, which will require the building of a gas and oil pipeline from Chachahuen to the Puesto Hernandez field. Injection water quality issues have been identified and the operator is currently preparing a plan that will be implemented before the tertiary recovery pilot project begins.

 

At Cerro Morado Este, we have focused on the reduction of production losses. This will require an alternative route for fluid evacuation due to flooding of current routes when it rains. A remediation of "Bateria 1" at the Chachahuen field is also being carried out and a tertiary recovery pilot project is planned for 2022.

 

The Chachahuen licence is operated by YPF.

 

Tierra del Fuego

The San Martin wells continue to produce with the water cut rate in line with expectations. The operator has proposed the drilling of an extra well in an independent reservoir compartment. Alternatives for production evacuation are also being analysed in the event delivery through the YPF buoy is disrupted and Total's facilities have been identified as a possible option.

 

H1 2021 production

Total production (net WI)

Average total daily working interest production volumes in H1, Q1 and Q2 2021 compared to full year 2020 and Q4 2020:

 

 

 

 

WI

%

H1 2021 Boe/d

Q2 2021

Boe/d

Q1 2021

Boe/d

Q4 2020

Boe/d

FY 2020

Boe/d

OPERATED

 

 

 

 

 

 

Puesto Rojas Area

 100%

563

535

591

805

765

Atamisqui

100%

239

254

223

258

203

Tupungato

100%

838

887

788

894

644

Mata Mora

90%

484

423

546

317

253

TOTAL OPERATED

 

2,124

2,099

2,148

2,274

1,865

NON-OPERATED

 

 

 

 

 

 

Chachahuen Area

20%

1,806

1,747

1,865

1,898

1,717

Rio Cullen

17%

811

795

826

895

739

Cajon de los Caballos

38%

97

93

101

115

72

Other

40%/78%

25

23

28

36

156

TOTAL NON-OPERATED

 

2,739

2,658

2,820

2,944

2,684

 

 

 

 

 

 

 

GRAND TOTAL

 

4,863

4,757

4,968

5,218

4,549

 

Financial review

 

H1 2021

H1 2020

FY 2020

 

US$MM

US$MM

US$MM

Revenue

36.14

24.90

54.00

Gross loss

(5.63)

(13.60)

(27.40)

Operating loss

(16.04)

(50.75)

(219.66)

Adjusted EBITDA (gain/(loss))

7.06

(11.56)

(7.18)

Loss for the period

(13.68)

(55.42)

(197.02)

Net assets

12.50

167.60

26.09

Net cash inflow/(outflow) from operating activities

28.66

(10.48)

(6.39)

Capital expenditures

9.71

3.34

8.15

 

Income Statement

 

Revenue and gross loss

Revenue for the period was US$36.14 million (H1 2020: US$24.9 million), comprising revenue from oil sales of US$35.1 million (H1 2020: US$23.9 million) and revenue from gas sales of US$1.1 million (H1 2020: US$1.0 million).

 

The increase in oil revenue between periods resulted primarily from the shut-in of production due to Covid-19 in H1 2020 and an increase in the realised price per barrel in the period.

 

The average realised oil sales price in H1 2021 was US$47.03/bbl, a 20% increase on the average price of US$39.19/bbl in H1 2020. Realised prices achieved by the Company are indirectly linked to Brent.

 

The emergence of Covid-19 as a global pandemic and the resulting fall in the demand for oil had a significant impact on the operations of the Company during H1 2020. The over-supply of crude in the market resulted in YPF, the state-controlled Argentine energy company, giving notice to its customers of the suspension of the purchase of oil until further notice. This resulted in refineries stopping the acceptance of deliveries, leaving the Company with no option but to shut-down production in April 2020.

 

The increase in average daily oil production in H1 2021 to 4,258 bopd from 3,546 bopd in H1 2020 reflects the impact of pulling and other activities and also the impact of the 2020 shut-down.

 

Gas revenue in the period was US$1.1 million compared to US$1.0 million in the comparative period last year. Realised gas prices increased from an average of US$2.13/MMcf in H1 2020 to an average of US$2.99 /MMcf in H1 2021 due to under supply in the gas market.

 

Operating costs in H1 2021 decreased to US$15.01/boe compared to US$26.3/boe in H1 2020, primarily due to increased production levels resulting in the fixed element of production costs being allocated over larger volumes.

 

Depreciation increased US$7.1 million in the period from US$16.2 million in H1 2020 to US$23.3 million in H1 2021. This increase is due, primarily to larger production volumes.

 

Other operating costs

No significant exploration expense was recognised in the period. An exploration expense of US$2.7 million was recognised in H1 2020, which related primarily to the write-off of the US$2.5 million cost of the Rio Atuel exploratory well.

 

Finance income and costs

Net finance income in H1 2021 was US$12.2 million compared to net finance costs of US$11.3 million in H1 2020. This gain was driven by the benefit on transfers of US$ into Argentina under the 'contado con liquidacion' mechanism, a reduction in the foreign exchange losses on Peso denominated balances held by the Company and a reduction in other finance costs.

 

Taxation

A US$9.8 million tax expense was recognised in H1 2021, compared to a US$6.7 million tax benefit in H1 2020. This resulted from an increase in the deferred tax liability in the period primarily arising from a reduction in the book values of fixed assets when compared to the tax-deductible values and an increase in the tax rates to 35% (2020: 25%).

 

Balance Sheet

At 30 June 2021 the Group had net assets of US$ 12.5 million, a decrease of US$13.6 million compared to 31 December 2020. During the period, intangible assets and property, plant and equipment decreased by US$13.6 million primarily due to DD&A of US$23.3 million, offset by US$9.7 million of additions.

 

Variances were also observed in the working capital balances when compared to 31 December 2020. Trade and other receivables decreased by US$0.9 million to US$24.5 million at 30 June 2021. Inventories increased by US$0.9 million to US$19.2 million at 30 June 2021. Deferred tax assets increased by US$ 7.3 million to US$27.4 million at 30 June 2021 primarily due to an increase in tax rates from 25% to 35%. Trade and other payables declined by US$4.1 million to US$22.1 million at 30 June 2021 due to a reduction in costs.

 

Funding status and going concern

At 30 June 2021 the Group had cash on hand of US$50.0 million (31 December 2020: US$5.4 million). Total borrowings in the period increased by US$36.4 million from US$332.2 million at 31 December 2020 to US$368.6 million at 30 June 2021. The increase resulted primarily from the drawdown of an additional US$29.6 million of funds from the bridging facility in place with Mercuria and the capitalisation of US$7.1 million of accrued interest. Funds advanced under the credit facilities have been used to satisfy working capital needs and work programs.

 

The Group principally generates cash from its existing conventional oil and gas production operations. Nevertheless, it was formed with the stated intention of undertaking a significant exploration, evaluation and development programme focused on the Group's unconventional oil and gas assets in Argentina, including the Vaca Muerta formation.

 

Our major shareholder, Mercuria, continues to be supportive and has provided the Company with a letter stating its intention to continue providing financial support to the Company in order that it may continue to operate and service its liabilities as they fall due in the next 12 months and fund the planned work programs. Mercuria has also specifically agreed to not demand repayment of the existing loans (principal and interest) within the next 12 months whilst discussions with the Company to restructure these loan agreements continue.

 

The directors believe they will be able to agree the restructure of the existing debt with Mercuria and formalise an agreement for new funding and that the Group and Company can continue as a going concern for the foreseeable future. The application of the going concern basis of preparation of this interim condensed consolidated financial information is based on the letter that has been received from Mercuria and the ongoing discussions with the Mercuria principals. Accordingly, the directors continue to adopt the going concern basis for accounting in preparing these financial statements. However, the directors recognise that if financial support over the next 12 months from Mercuria were not to be available and the Company is unable to restructure the existing loan agreements with Mercuria or obtain funding from alternative sources, this gives rise to a material uncertainty that may cast significant doubt on the Group's and Company's ability to continue as a going concern.

 

The condensed consolidated financial information contained in this interim report does not include any adjustments that would be required if the Group and Company were unable to continue as a going concern.

 

At 30 June 2021 the Group had cash and cash equivalents of US$50.0 million (2020: US$5.4 million).

 

 

On behalf of the Board

Sir Michael Rake

Chairman

14 September 2021 
 

Unaudited consolidated income statement

For the period ended

 

 

Six months to 30 June 2021

Year to

 31 December 2020

 

Note

   US$'000

   US$'000

  US$'000

Revenue

2,3

      36,139

     24,896

         54,001

Cost of sales

4

    (41,769)

  (38,498)

       (81,401)

Gross loss

 

     (5,630)

  (13,602)

       (27,400)

 

 

 

 

 

Selling and distribution expenses

 

      (1,499)

       (934)

         (1,958)

Exploration expenses

 

           (70)

    (2,689)

        (2,746)

Gain/(loss) on termination of licences and other impairment charges and recoverables 

5,6

             40 

  (22,980)

     (171,129)

Gain/(loss) on sale of non-current assets

 

           138 

              -  

                (6)

Administrative expenses

 

      (6,986)

    (9,096)

       (14,892)

Other operating expenses

 

         (2,037)

    (1,450)

         (1,527)

Operating loss

 

    (16,044)

  (50,751)

     (219,658)

 

 

 

 

 

Finance income

 

       22,659 

       1,333 

           6,905 

Finance costs

 

    (10,476)

   (12,667)

       (22,276)

Loss before taxation

 

      (3,861)

  (62,085)

     (235,029)

 

 

 

 

 

Taxation

      (9,817)

      6,665 

        38,005 

Loss for the period

 

   (13,678)

  (55,420)

    (197,024)

 

 

 

 

 

Loss per ordinary share

 

 

 

 

Basic and diluted loss per share

 

        (0.00)

      (0.20)

           (0.07)

 

The above unaudited consolidated income statement should be read in conjunction with the accompanying notes.
 

Unaudited consolidated statement of comprehensive income

For the period ended

 

 

Six months

to 30 June

 2021

Six months

to 30 June

 2020

Year

to 31 December 2020

 

US$'000

US$'000

US$'000

Loss for the period

(13,678)

  (55,420)

   (197,024)

Translation differences

-  

-  

                     -  

Total comprehensive loss for the period

 (13,678)

  (55,420)

  (197,024)

 

The above items will not be subsequently reclassified to profit and loss. There are no impairment losses on revalued assets recognised directly in equity.

The above unaudited consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

 

 

Unaudited consolidated statement of financial position

At

 

Note

30 June

2021

30 June

2020

31 December 2020

 

 

US$'000

US$'000

US$'000

Non-current assets

 

 

 

 

Property, plant and equipment

5

 145,369

 303,125

158,357

Intangible assets and goodwill

6

  211,316

  229,161

211,974

Other receivables

 

                     2,780

                     1,726

                       4,124

Deferred tax assets

9

                  27,395

                 22,759

                   20,116

Total non-current assets

 

               386,860

               556,771

                  394,571

 

 

 

 

 

Current assets

 

 

 

 

Assets held for sale

 

                   12,361

                18,400

                  11,965

Inventories

 

                 19,244

                 20,229

                   18,349

Trade and other receivables

 

                  24,459

                  23,628

                    25,399

Cash and cash equivalents

 

                  49,991

                     1,439

                       5,386

Total current assets

 

                106,055

                  63,696

                    61,099

Total assets

 

               492,915

               620,467

                  455,670

 

 

 

 

 

Non-current liabilities

 

 

 

 

Trade and other payables

 

                       290

                     4,372

                          299

Borrowings

7

                     3,294

               154,122

                       6,641

Deferred tax liabilities

9

                   70,608

                  85,307

                   53,682

Provisions

 

                   17,640

                 16,081

                   15,965

Total non-current liabilities

 

                   91,832

                259,882

                   76,587

 

 

 

 

 

Current liabilities

 

 

 

 

Liabilities held for sale

 

                        447

                        447

                          447

Trade and other payables

 

                   21,858

                 28,313

                    25,909

Income tax liability

 

                       959

                       649

                          920

Borrowings

7

                365,261

               163,577

                  325,592

Provisions

 

                          56

                            -  

                          121

Total current liabilities

 

                388,581

               192,986

                  352,989

Total liabilities

 

               480,413

               452,868

                  429,576

Net assets

 

                   12,502

               167,599

                   26,094

 

 

 

 

 

Equity

 

 

 

 

Share capital and share premium

 

                457,183

                456,734

                  457,183

Other reserves

 

              (112,150)

              (112,150)

                (112,150)

Retained deficit

 

              (332,531)

              (176,985)

                (318,939)

Total equity

 

                   12,502

               167,599

                   26,094

 

The above unaudited consolidated statement of financial position should be read in conjunction with the accompanying notes.
 

Unaudited consolidated statement of changes in equity

For the period ended

 

 

 

Capital and reserves

 

Called up share capital

Share premium

Treasury shares

Retained

(deficit)

/earnings

Other reserves

Total equity

 

 

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

At 1 January 2020

 

  364,175 

    93,023 

      (464)

 (121,867)

(112,150)

  222,717 

Loss for the period

 

                 -  

                 -  

                   -  

       (55,420)

                 -  

   (55,420)

Total comprehensive loss for the period

 

                 -  

                 -  

                   -  

       (55,420)

                 -  

   (55,420)

Fair value of share based payments

 

            -  

              -  

            -  

         302 

                -  

    302 

At 30 June 2020

 

364,175 

   93,023 

      (464)

(176,985)

(112,150)

167,599 

 

 

 

 

 

 

 

 

At 1 January 2021

 

364,175 

   93,023 

        (15)

(318,939)

(112,150)

    26,094 

Loss for the period

 

             -  

             -  

             -  

  (13,678)

                -  

 (13,678)

Total comprehensive loss for the period

 

              -  

             -  

              -  

  (13,678)

               -  

 (13,678)

Fair value of share based payments

 

             -  

              -  

       -  

          86 

                -  

      86 

At 30 June 2021

 

364,175 

   93,023 

        (15)

(332,531)

(112,150)

   12,502 

 

Other reserves

Merger
reserve

Warrant
reserve

Translation
 reserve

Total other
reserves

US$'000

US$'000

US$'000

US$'000

At 1 January 2020

 (112,000)

          2,105 

     (2,255)

   (112,150)

At 30 June 2020

        (112,000)

          2,105 

     (2,255)

   (112,150)

 

 

 

 

 

At 1 January 2021

         (112,000)

          2,105 

     (2,255)

    (112,150)

At 30 June 2021

         (112,000)

          2,105 

      (2,255)

    (112,150)

 

The above statement of consolidated changes in equity should be read in conjunction with the accompanying notes.

 

 

Unaudited consolidated statement of cash flows

For the period ended

 

 

Note

Six months

to 30 June

2021

Six months

to 30 June

2020

Year

to 31 December 2020

 

 

US$'000

US$'000

US$'000

Cash flows from operating activities

 

 

 

 

Cash generated from/(used in) operations

10

          28,697 

        (10,475)

     (6,318)

Income taxes paid

 

                (40)

                   (1)

           (73)

Net cash inflow/(outflow) from operating activities

 

           28,657 

         (10,476)

     (6,391)

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Payments for property, plant and equipment

 

           (2,735)

           (1,985)

     (4,099)

Payments for intangibles

 

           (7,023)

              (914)

         (998)

Payments for held for sale assets

 

             (396)

             (192)

        (371)

Net cash outflow from investing activities

 

        (10,154)

           (3,091)

     (5,468)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Proceeds from borrowings

 

29,590

              6,280 

     14,260 

Repayment of borrowings

 

          -  

             (800)

        (801)

Interest paid

 

              (871)

              (427)

         (709)

Principal lease payments

 

                (62)

             (216)

     (5,327)

Net cash inflow from financing activities

 

  28,657 

     4,837 

7,423 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

          47,160 

           (8,730)

      (4,436)

Cash and cash equivalents at the beginning of the period

 

             5,386 

          11,002 

11,002

Effects of exchange rates on cash and cash equivalents

 

          (2,555)

              (833)

      (1,180)

Cash and cash equivalents at end of the period

 

           49,991 

              1,439 

       5,386 

 

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

 

Unaudited notes to the unaudited consolidated financial information

 

1. Basis of preparation

 

General information

The Company is a Public Limited Company incorporated in England and Wales and is domiciled in the United Kingdom. The Registered Office address is 1st Floor, 62 Buckingham Gate, London SW1E 6AJ. The Company is quoted on the AIM market of the London Stock Exchange and maintains a secondary listing on the Buenos Aires Stock Exchange.

 

The principal activities of the Company and its subsidiaries (together the "Group") are the exploration for and the development and production of oil and gas in Argentina.

 

Basis of preparation

The unaudited condensed consolidated interim financial information for the six-months ended 30 June 2021 contained in this interim report has been prepared in accordance with UK-adopted International Accounting Standard 34 'Interim Financial Reporting' and the AIM Rules for Companies. This unaudited condensed consolidated financial information should be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2020, which were prepared in accordance with international financial reporting standards in conformity with the requirements of the Companies Act 2006. In preparing those annual consolidated financial statements, the directors also elected to comply with international financial reporting standards issued by the International Accounting Standards Board (IFRSs as issued by the IASB).

 

In the year to 31 December 2021 the annual financial statements will be prepared in accordance with IFRS as adopted by the UK Endorsement Board and that this change in basis of preparation is required by UK company law for the purposes of financial reporting as a result of the UK's exit from the EU on 31 January 2020 and the cessation of the transition period on 31 December 2020.

 

This change does not constitute a change in accounting policy but rather a change in framework which is required to ground the use of IFRS in company law. There is no impact on recognition, measurement or disclosure between the two frameworks in the period reported.

 

The financial information for the period ended 30 June 2021 contained within this unaudited condensed consolidated financial interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The information for 2020 within was derived from the statutory accounts for the year ended 31 December 2020, a copy of which has been delivered to the Registrar of Companies. The auditors' report on these accounts was unqualified but did include a reference to the adequacy of the disclosures made concerning the Group's and Company's ability to continue as a going concern.  The Group had not completed the renegotiation of its current debt repayments to Mercuria, who is a majority shareholder of the Group, and the funding plans for FY2021 and FY2022 had not yet been agreed. The ultimate form of the funding could be significantly different to what is currently being discussed with Mercuria. This situation could lead to a lack of future funding for capital and operating expenditures. The auditors' report did not contain a statement under sections 498 (2) or (3) of the Companies Act 2006.The annual financial statements for the year ended 31 December 2020 are available on the Company's website at www.phoenixglobalresources.com.

 

The Group's business activities, together with factors likely to affect its future development, performance and position are set out in the operations and financial review sections of this report.

 

The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial review section.

 

Going concern

The Group generates cash from its existing conventional oil and gas production operations. However, it was formed with the stated intention of undertaking a significant exploration, evaluation and development programme focused on the Group´s unconventional oil and gas assets in Argentina, including the Vaca Muerta formation, which requires significant investments. To date, the funding required to support the activities of the Group has been provided by Mercuria Energy Group.

 

Our major shareholder, Mercuria continues to be supportive and has provided the Company with a letter stating its intention to continue to provide financial support to the Company in order that it may continue to operate and service its liabilities as they fall due in the next 12 months and fund the planned work programs. Mercuria has also specifically agreed to not demand repayment of the existing loans (principal and interest) within the next 12 months whilst discussions with the Company to restructure these loan agreements continue.

 

The directors believe they will be able to agree the restructure of the existing debt with Mercuria and formalise an agreement for new funding and that the Group and Company can continue as a going concern for the foreseeable future. The application of the going concern basis of preparation of this interim condensed consolidated financial information is based on the letter that has been received from Mercuria and the ongoing discussions with the Mercuria principals. Accordingly, the directors continue to adopt the going concern basis for accounting in preparing these financial statements. However, the directors recognise that if financial support over the next 12 months from Mercuria were not to be available and the Company is unable to restructure the existing loan agreements with Mercuria or obtain funding from alternative sources, this gives rise to a material uncertainty that may cast significant doubt on the Group´s and Company´s ability to continue as a going concern.

 

The condensed consolidated financial information contained in this interim report does not include any adjustments that would be required if the Group and Company were unable to continue as a going concern.

 

Estimates and judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

 

In preparing the condensed consolidated financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2020.

 

Principal risks and uncertainties

In preparing the condensed consolidated financial information management is required to consider the principal risks and uncertainties facing the Group. In management's opinion the principal risks and uncertainties facing the Group are unchanged since the preparation of the consolidated financial statements for the year ended 31 December 2020. Those risks and uncertainties, together with management's response to them are described in the Risk Review section of the Annual Report and Accounts 2020.

 

Accounting policies

The accounting policies applied in this condensed consolidated financial interim report are consistent with those applied in preparing the financial statements for the year ended 31 December 2020.

 

2. Segment information

The information reported to the Group's executive management team for the purposes of resource allocation and assessment of segment performance is split between those assets which are operated by the Group and those which are not. The strategy of the Group is focused on the development of its unconventional operated assets in the Vaca Muerta and other unconventional opportunities in Argentina, while optimising its operated conventional production assets. The Group also participates in joint arrangements as a non-operated partner. Operated and non-operated assets of the Group have therefore been determined to represent the reportable segments of the business. The third segment, "Corporate", primarily relates to administrative costs, financing costs and taxation incurred in running the business which are not directly attributable to one of the identified segments.

 

The Group's executive management primarily uses a measure of earnings before interest, tax, depreciation, loss on termination of licences and other impairment charge and loss on sale of non-current assets ('Adjusted EBITDA') to assess the performance of the operating segments. However, the executive management team also receives information about segment revenue and capital expenditure on a monthly basis.

 

First half 2021

 Operated

 Non-operated

Corporate

 Total

 

 US$'000

 US$'000

  US$'000

US$'000

Revenue

         16,941

      19,198

                 -  

     36,139 

Loss for the period

      (12,571)

        4,481 

       (5,588)

 (13,678)

Add: Depreciation, depletion and amortisation

         16,567

         6,099

             612

     23,278 

Less: Finance income

                   -  

                 -  

     (22,659)

  (22,659)

Add: Finance costs

              235

         (163)

        10,404 

    10,476 

Add: Taxation

                    -  

                  -  

          9,817 

       9,817 

EBITDA

          4,231 

      10,417 

      (7,414)

       7,234 

Non-recurring expenses

 

 

 

 

Less: (Gain)/loss on termination of licences and other impairment charge

                         11

                        (51)

                     -  

                 (40)

Less: Gain on sale of non-current assets

                   -  

                 -  

          (138)

        (138)

Adjusted EBITDA

           4,242 

       10,366 

       (7,552)

       7,056 

 

 

 

 

 

Oil revenues

         16,941

      18,139

                   -  

     35,080 

bbls sold

       356,627

     389,345

                 -  

  745,972

Realised price (US$/bbl)

          47.50

         46.59

                  -  

      47.03 

 

 

 

 

 

Gas revenues

                   -  

        1,059

                  -  

      1,059 

MMcf Sold

                   -  

      353.63

                 -  

     353.63 

Realised price (US$/MMcf)

                   -  

           2.99

                 -  

        2.99 

 

 

 

 

 

Capital expenditure

 

 

 

 

Property, plant and equipment

              827

         1,553

             310

      2,690 

Intangible exploration and evaluation assets

6,983

40

                  -  

      7,023 

Total capital expenditure

          7,810

        1,593

            310

      9,713 

Total assets

      312,764

      52,348

127,803

  492,915 

Total liabilities

       (7,239)

   (12,349)

 (460,825)

(480,413)

First half 2020

 Operated

 Non-operated

  Corporate

 Total

 

 US$'000

 US$'000

  US$'000

US$'000

Revenue

        11,242

      13,654

   24,896 

Loss for the period

      (35,550)

      (4,678)

   (15,192)

 (55,420)

Add: Depreciation, depletion and amortisation

           8,116

         7,214

           884

  16,214 

Less: Finance income

                    -  

                -  

     (1,333)

  (1,333)

Add: Finance costs

               227

            158

      12,282 

   12,667 

Less: Taxation

                   -  

                -  

    (6,665)

  (6,665)

EBITDA

      (27,207)

        2,694 

   (10,024)

(34,537)

Non-recurring expenses

 

 

 

 

Add: Loss on termination of licences and other impairment charge

        22,980

                 -  

                -  

  22,980 

Add: Loss on sale of non-current assets

                   -  

-

-

             -  

Adjusted EBITDA

        (4,227)

        2,694 

   (10,024)

(11,557)

 

 

 

 

 

Oil revenues

        11,240

      12,634

                 -  

  23,874 

bbls sold

      270,519

    338,651

                -  

 609,170

Realised price (US$/bbl)

          41.55

        37.31

                -  

     39.19 

 

 

 

 

 

Gas revenues

                  2

        1,020

                -  

     1,022 

MMcf Sold

             0.90

      479.06

                -  

   479.96

Realised price (US$/MMcf)

             2.22

          2.13

                -  

       2.13 

 

 

 

 

 

Capital expenditure

 

 

 

 

Property, plant and equipment

          1,409

            561

             88

     2,058 

Intangible exploration and evaluation assets

          1,282

                -  

    1,282 

Total capital expenditure

          2,691

           561

            88

     3,340 

Total assets

      456,119

     99,518

     64,830

620,467 

Total liabilities

        (6,917)

      (5,622)

(440,329)

(452,868)

               

 

There are no intersegment revenues in either period presented. The majority of oil and gas sales are made to the Argentina state-owned oil company, YPF.

 

3. Total revenue

 

Six months to 30 June 2021

US$'000

Six months to 30 June 2020

US$'000

Year to 31 December 2020
US$'000

Crude oil revenue

         35,080

            23,874

         52,159

Gas revenue

           1,059

              1,022

           1,842

Total revenue

         36,139

            24,896

         54,001

 

 

4. Cost of sales

 

Six months to 30 June 2021

US$'000

Six months to 30 June 2020

US$'000

Year to 31 December 2020
US$'000

Production costs

19,037

22,981

39,404

Depreciation of oil and gas assets

23,278

16,214

41,346

Movements in crude inventory

(546)

(697)

651

Total cost of sales

41,769

38,498

81,401

 

5. Property, plant and equipment

 

 

Other fixed assets

Development and production assets

Assets under construction

Total

Non-current assets

US$'000

US$'000

US$'000

US$'000

At 1 January 2021

 

 

 

 

Cost

      13,091 

         541,489 

             8,966 

   563,546 

Accumulated depreciation and impairment

    (8,796)

      (396,393)

                    -  

  (405,189)

Net book amount

        4,295 

         145,096 

             8,966 

   158,357 

 

 

 

 

 

Six months to 30 June 2021

 

 

 

 

Opening net book amount

        4,295 

         145,096 

             8,966 

   158,357 

Additions

           277 

             1,129 

             1,284 

         2,690 

Disposal of assets

-

                 (51)

-

           (51)

Impairment charge and recoverables

-

                  40 

-

              40 

Transfers

               -  

             8,717 

          (1,076)

         7,641 

Exploration costs written off

               -  

                 (30)

                    -  

            (30)

Depreciation charge

        (610)

        (22,668)

                    -  

    (23,278)

Closing net book amount

        3,962 

         132,233 

             9,174 

   145,369 

 

 

 

 

 

At 30 June 2021

 

 

 

 

Cost

      13,368 

         551,305 

             9,174 

   573,847 

Accumulated depreciation and impairment

     (9,406)

      (419,072)

                    -  

  (428,478)

Net book amount

        3,962 

         132,233 

             9,174 

   145,369 

 

Additions to property, plant and equipment in the period ended 30 June 2021 include US$ nil of interest capitalised in respect of qualifying assets (H1 2020: US$nil). The total amount of interest capitalised within property, plant and equipment at 30 June 2021 is US$3.1 million (2020: US$3.1 million).

 

 

 

Other fixed assets

Development and production assets

Assets under construction

Total

Non-current assets 

US$'000

US$'000

US$'000

US$'000

At 1 January 2020

 

 

 

 

Cost

    13,072

          539,100

             7,290

     559,462

Accumulated depreciation and impairment

    (7,159)

       (228,054)

                     -  

  (235,213)

Net book amount

       5,913 

         311,046 

             7,290 

    324,249 

 

 

 

 

 

Six months to 30 June 2020

 

 

 

 

Opening net book amount

       5,913 

         311,046 

             7,290 

     324,249 

Additions

             56 

                 481 

             1,521 

         2,058 

Transfers

               -  

                 355 

             (355)

                 -  

Exploration costs written off

               -  

              (116)

                     -  

         (116)

Depreciation charge

       (895)

        (15,319)

                     -  

    (16,214)

Impairment charge

               -  

           (6,852)

                     -  

      (6,852)

Closing net book amount

       5,074 

         289,595 

            8,456

    303,125

 

 

 

 

 

At 30 June 2020

 

 

 

 

Cost

     13,128 

         539,820 

             8,456 

    561,404 

Accumulated depreciation and impairment

    (8,054)

      (250,225)

                      -  

 (258,279)

Net book amount

       5,074 

         289,595 

             8,456 

    303,125 

 

The company defines the key indicators of impairment in relation to its oil and gas assets within its accounting policies. When a specific impairment trigger is identified during a period, the company will complete an impairment review of the associated CGU. Since the review carried out at the end of 2020, no further specific impairment triggers have been identified.

 

At the end of H1 2020 our assessment review identified an impairment trigger and indicated that our Chachahuen interest was potentially impaired, as a result primarily of the lower oil price environment and a provision for impairment of US$6.9 million was recognised in H1 2020.

 

6. Intangible assets

Exploration and evaluation assets are primarily the Group's licence interests in exploration and evaluation assets located in Argentina. The exploration and evaluation assets consist of both conventional and unconventional oil and gas properties.

 

Goodwill

Exploration and evaluation assets

Total

Non-current assets

US$'000

US$'000

US$'000

At 1 January 2021

 

 

 

Cost

   260,007 

   217,078 

   477,085 

Accumulated amortisation and impairment

 (239,392)

    (25,719)

(265,111)

Net book amount

     20,615 

   191,359 

   211,974 

 

 

 

Six months to 30 June 2021

 

 

 

Opening net book amount

     20,615 

   191,359 

   211,974 

Additions

              -  

       7,023 

       7,023 

Transfer from property, plant and equipment

 

      (7,641)

      (7,641)

Exploration cost written off

              -  

           (40)

           (40)

Closing net book amount

     20,615 

   190,701 

   211,316 

 

 

 

At 30 June 2021

 

 

 

Cost

   260,007 

   216,420 

   476,427 

Accumulated amortisation and impairment charges

(239,392)

(25,719)

(265,111)

Net book amount

     20,615 

   190,701 

   211,316 

 

Additions to intangible assets during the period relate primarily to the Mata Mora licence.

 

 

Goodwill

Exploration and evaluation assets

 Total

Non-current assets

US$'000

US$'000

US$'000

At 1 January 2020

 

 

 

Cost

       260,007 

       215,759 

       475,766 

Accumulated amortization and impairment charges

(224,169)

         (5,057)

   (229,226)

Net book amount

         35,838 

       210,702 

       246,540 

 

 

 

 

Six months to 30 June 2020

 

 

 

Opening net book amount

         35,838 

       210,702 

       246,540 

Additions

                    -  

           1,282

          1,282 

Exploration cost written off

                    -  

         (2,533)

         (2,533)

Impairment charge

       (15,223)

           (905)

       (16,128)

Closing net book amount

         20,615 

       208,546 

       229,161 

 

 

 

 

At 30 June 2020

 

 

 

Cost

       260,007 

       217,041 

       477,048 

Accumulated amortisation and impairment charges

    (239,392)

         (8,495)

   (247,887)

Net book amount

         20,615 

       208,546 

       229,161 

 

Additions to intangible assets during the period relate primarily to Corralera.

               

Impairment tests for exploration and evaluation assets

Exploration and evaluation assets are subject to impairment testing prior to reclassification as tangible fixed assets where commercially viable reserves are confirmed. Where commercially viable reserves are not encountered at the end of the exploration phase for an area the accumulated exploration costs are written off in the income statement. No significant exploration expense was recognised in the period. Exploration costs written off in H1 2020 include US$2.5 million, which related primarily to the write-off of an unsuccessful exploration well at Rio Atuel.

 

Impairment tests for goodwill

Goodwill is monitored by management at the level of the operating segments identified in note 2. At the end of H1 2020, our impairment assessment review resulted in an impairment charge of US$15.2 million.  Since this review and the review carried out at the end of 2020, no further specific impairment triggers have been identified.

 

A segment level summary of the goodwill allocation is presented below.

At acquisition

Operated
US$'000

Non-operated
US$'000

Corporate
US$'000

Total
US$'000

Corralera

16,780

-

-

16,780

Mata Mora

3,835

-

-

3,835

Total

20,615

-

-

20,615

 

No goodwill was recognised prior to 2017. All goodwill presented relates to the allocation of technical goodwill arising as a result of accounting for deferred tax on the business combination that completed on 10 August 2017.

 

7. Borrowings

 

30 June 2021

31 December 2020

 

Current
US$'000

Non-current US$'000

Total
US$'000

Current
US$'000

Non-current US$'000

Total
US$'000

Secured

 

 

 

 

 

 

Bank loans

        5,587

         3,294

        8,881 

        2,598 

        6,641 

        9,239 

Total secured borrowings

        5,587

        3,294

      8,881 

        2,598 

        6,641 

         9,239 

 

 

 

 

 

 

 

Unsecured

 

 

 

 

 

 

Loans from related parties

    359,655

                  -  

    359,655 

   322,973 

-

    322,973 

Other loans

               19

                  -  

             19 

              21 

                 -  

           21 

Total unsecured borrowings

    359,674

-

   359,674 

    322,994 

                 -  

    322,994 

Total borrowings

    365,261

         3,294

    368,555 

    325,592 

        6,641 

    332,233 

 

Secured liabilities and assets pledged as security

Secured liabilities relate to US Dollar and Peso denominated loans at an interest rate of Libor + 700 points for Dollar loans and Badlar + 700 points for Peso loans. At 30 June 2021 the Group held US$ 2.4 million loans in Argentine Peso (2020: US$2.7 million).

 

Loans from related parties

The related party loan at 30 June 2021 relates to a convertible rolling credit facility ('RCF') and non-convertible bridging facility ('BF') provided to the Group by Mercuria Energy Netherlands B.V., a subsidiary of the Mercuria Energy Group Limited ('Mercuria').

 

As part of the business combination in 2017, Mercuria advanced a bridging and working capital facility to the Group for the amount of US$160.0 million. In February 2018, US$100.0 million of the original Mercuria facility was converted to equity of the Company at a price of £0.37 per share. At the same time the facility was restructured as a new convertible RCF in the amount of US$160.0 million with an additional US$100.0 million of new funds made available to the Company.

 

In December 2018, Mercuria advanced an additional US$25.0 million as a Facility B element to the RCF. In February 2019, a further US$50.0 million was made available under this Facility B element of the RCF. The original loan of US$160.0 million became Facility A.

 

In May 2019, the amended convertible RCF was further extended to add a Facility C commitment of US$40 million. Facility C was extended in November 2019 by an additional US$10.0 million and in March 2020 by an additional US$6.0.

 

At 30 June 2021, US$281.0 million was drawn down under the RCF with the undrawn balance of US$10 million made available through the BF, which was subsequently increased to US$42.5 million, of which US$40.8 million was drawn down at the period end.

 

All funds drawn down under the RCF and BF bear interest at US$ LIBOR+4%. The RCF provides for a grace period for repayments (interest and principal) from 1 January 2019 to 30 September 2021 with a maturity date of 31 December 2021 amortised in equal quarterly repayment instalments from and including 30 September 2021 until maturity. The BF, principal and interest, is repayable by 30 September 2021. At the period-end US$37.8 million of interest had been capitalised under the RCF and BF loans.

 

Under the RCF, Mercuria has the right to convert all or part of the outstanding principal of Facility A into additional new ordinary shares of the Company at a price of £0.45 per share. This conversion right can be exercised at any time from 30 June 2018 until 10 business days prior to the maturity of Facility A. A similar conversion feature exists in relation to Facility B at a price of £0.28 per share exercisable from 30 June 2019 until 10 business days prior to the maturity date and in relation to Facility C at a price of £0.23 per share exercisable from 30 June 2020 until 10 business days prior to the maturity date.

 

8. Income tax expense

Income tax expense

Six months to 30 June 2021

 US$'000

Six months to 30 June 2020
 US$'000

Year to 31 December 2020
US$'000

Current tax

 

 

 

Current tax credit/(expense) on profits for the period

          (170)

            111 

         2,469 

Total current tax expense

              (170)

                111 

             2,469 

 

 

 

 

Deferred income tax

 

 

 

(Decrease)/increase in deferred tax

     (9,647)

             6,554 

          35,536 

Total deferred tax (expense)/credit

          (9,647)

             6,554 

           35,536 

Income tax (expense)/credit

                 (9,817)

             6,665 

          38,005 

 

Reconciliation of income tax expense to notional tax charge calculated using corporate tax rate:

 

 

Six months to 30 June 2021

 US$'000

Six months to 30 June 2020
 US$'000

Year to 31 December 2020

US$'000

Loss from continuing operations before income tax expense

          (3,861)

        (62,085)

      (235,029)

Tax at the Argentina tax rate of 30% (2020: 30%)

                1,158 

           18,626 

           70,509 

Tax effect of amounts which are not deductible (taxable) in calculating taxable income:

 

 

 

 

 

 

 

Effect of currency translation on tax values

             1,228

          (3,615)

           (6,071)

Effect of change in tax rate

         (12,533)

          (1,943)

        (10,649)

Disposals of assets

-

                     -  

          (1,315)

Expenses not deductible for taxation

             5,680

              1,159

          (1,960)

Deferred tax assets not recognised

           (1,383)

           (6,972)

           (6,784)

Inflation adjustment

          (7,373)

              (825)

          (4,883)

Other

             3,406

                235 

              (842)

Total income tax (expense)/credit

          (9,817)

             6,665 

           38,005 

 

The corporate income tax rate in Argentina in 2021 is 30% (2020: 30%) and applies to profits earned and losses suffered in the period to 30 June 2021.

 

Under the December 2017 tax reform plan implemented by the Argentina tax authorities, (the Administration Federal de Ingresos Publicos or "AFIP"), the corporate income tax rate was to be further reduced to 25% for years ending 31 December 2020 and forward. In December 2019 however, new tax reforms were implemented by the incoming government under Law 27,541. Under the new legislation, it was established that the reduced corporate rate of 25% would not be applicable until the year ending 31 December 2021 and forward.

 

An additional tax rate of 7% is applied to dividends when the corporate income tax rate is 30%. This additional dividend tax will be increased to 13% when the corporate tax rate is reduced to 25% in 2021.

 

On June 16, 2021, the Law 27,630 makes some amendments of the income tax rates applicable as from fiscal year 2021. The main relevant change is the introduction of progressive tax rates based on the accumulated net profit, according the following: i) on accumulated net profits up to AR$5 million, a rate of 25%; (ii) for accumulated net profits between AR$5 million and AR$50 million, a fixed amount of AR$1.2 million plus a rate 30% on the excess over AR$5 million; (iii) on net profits in excess of AR$50 million, a fixed amount of AR$14 million plus a rate of 35% the excess over AR$ 50 million. The amounts set forth above will be adjusted annually, with effect from 1 January 2022, by reference to the annual movement in the Consumer Price Index. Dividends will be taxed in all cases at 7%.

 

Deferred tax balance estimations have been calculated based on these amended tax rates.

 

9. Deferred tax balances

Argentina tax law does not contain the concept of tax groups and therefore deferred tax assets and liabilities cannot be offset between and among companies registered in Argentina and falling under the control of the same shareholder. Outside of Argentina, the Group does not have sufficient concentration of subsidiaries in a single tax jurisdiction to warrant seeking tax group status to allow the offset of assets and liabilities.

 

Deferred tax assets and liabilities are calculated at the rate of 35% (2020: 25% or 30%) taking into consideration the expected time of recovery and net tax profits.

 

Deferred tax assets

 

30 June

2021
 US$'000

30 June

 2020 US$'000

31 December 2020
US$'000

Tax losses

         27,005

          18,837

           19,757

Provisions

            2,148

            1,607

             1,898

Other

             7,734

            7,995

             3,900

Total deferred tax assets

           36,887

          28,439

           25,555

 

Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

 

The Company did not recognise deferred income tax assets of US$1,3 million (2020: US$6.8 million) in respect of tax losses amounting to US$4.6 million (2020: US$22.6 million) as there is insufficient evidence that the potential assets will be recovered.

 

Assessed tax losses amounting to US$27.0 million (2020: US$19.8 million) will expire between 2023 to 2026 (2020: 2023 to 2025).

Movements

Tax losses
US$'000

Provisions
US$'000

Other
US$'000

Total
US$'000

At 1 January 2020

          14,468

            1,723

              7,063

           23,254

Credited/(charged) to profit and loss

              4,369 

             (116)

                932 

            5,185 

At 30 June 2020

           18,837

             1,607

              7,995

           28,439

 

 

Movements

Tax losses
US$'000

Provisions
US$'000

Other
US$'000

Total
US$'000

At 1 January 2021

          19,757

             1,898

              3,900

           25,555

Credited to profit and loss

             7,248

                 250

             3,834

           11,332

At 30 June 2021

           27,005

             2,148

              7,734

           36,887

 

The timeframe for expected recovery or settlement of deferred tax assets is as follows:

 

 

30 June

2021
US$'000

30 June

2020

US$'000

31 December 2020
 US$'000

No more than 12 months after the reporting period

             9,882

             9,602

             5,798

More than 12 months after the reporting period

           27,005

           18,837

           19,757

 

        36,887

          28,439

           25,555

 

Deferred tax liabilities

The balance comprises temporary differences attributable to:

 

30 June

2021
US$'000

30 June

 2020

US$'000

31 December 2020

US$'000

 

Property, plant and equipment and intangible assets

        (62,313)

        (83,201)

         (48,401)

 

Inventories

           (2,108)

           (1,551)

           (1,322)

 

Inflation adjustments

        (15,679)

           (6,235)

           (9,398)

 

Total deferred tax liabilities

        (80,100)

        (90,987)

        (59,121)

 

 

 

 

 

 

Movements

Property,
plant and
equipment
and intangible
assets
US$'000

Inventories
US$'000

Inflation adjustments
US$'000

Other
US$'000

Total
US$'000

At 1 January 2020

   (84,462)

       (1,861)

        (6,033)

                 -  

     (92,356)

(Charged)/ credited to profit and loss

         1,261 

             310 

           (202)

 

          1,369 

At 30 June 2020

    (83,201)

      (1,551)

        (6,235)

                 -  

     (90,987)

                   

 

Movements

Property,
plant and
equipment
and intangible
assets
US$'000

Inventories
US$'000

Inflation adjustments
US$'000

Other
US$'000

Total
US$'000

At 1 January 2021

    (48,401)

     (1,322)

        (9,398)

                  -  

   (59,121)

Charged to profit and loss

    (13,912)

          (786)

       (6,281)

                  -  

   (20,979)

At 30 June 2021

    (62,313)

       (2,108)

   (15,679)

                 -  

    (80,100)

 

Argentine tax law has introduced provisions for inflationary adjustments to be made for tax purposes in the event that the increases in the 36-month cumulative CPI index for the preceding closing year exceed 100%, considering for the first three periods assessed a increase in excess of 55% in 2018, 30% in 2019 or 15% in 2020. Where an inflationary adjustment for tax is triggered, the law requires an adjustment to taxes in the period with one sixth of the calculated value booked to current income taxes in the period and the remaining five sixths included within deferred tax and recognised through current tax in equal parts in the following five years.

 

During the period an amount of US$1.1 million (FY20: US$ 1.5 million) has been included in current taxes, with an additional US$6.3 million (FY20: US$ 9.4 million) included within other deferred tax assets in relation to this adjustment.

 

The above presentation of deferred tax assets and liabilities is prepared showing the aggregate of the gross asset and liability position on a company-by-company basis.

 

 

30 June

2021
US$'000

30 June

2020

US$'000

31 December 2020

US$'000

Deferred income tax assets

         36,887 

          28,439 

          25,555 

Deferred tax liabilities

       (80,100)

       (90,987)

        (59,121)

Net deferred income tax liability

       (43,213)

       (62,548)

        (33,566)

 

 

Deferred tax assets and liabilities presented in the balance sheet reflect the offset of deferred tax assets and liabilities where permissible. The deferred tax assets and liabilities, after legal offset, are shown in the table below.

 

30 June

2021
US$'000

30 June

2020

US$'000

31 December 2020

US$'000

Deferred income tax assets

         27,395 

          22,759 

          20,116 

Deferred tax liabilities

       (70,608)

       (85,307)

        (53,682)

Net deferred income tax liability

       (43,213)

       (62,548)

        (33,566)

 

10. Cash generated from/(used in) operations

 

Six months to 30 June 2021

 US$'000

Six months to 30 June 2020
 US$'000

Year to 31 December 2020
US$'000

Loss for the period before taxation

        (3,861)

       (62,085)

     (235,029)

 

 

 

 

Adjusted for:

 

 

 

Finance costs

            8,127 

            9,885

          16,916

Finance income

       (16,030)

             (861)

         (5,796)

Accretion of discount on asset retirement obligation

                 72 

               385 

               764 

Accretion of discount on lease obligation

                 14 

                 14 

               152 

Net unrealised exchange gains

            2,161 

            (114)

           1,386 

Interest received on short term investments

         (3,281)

            (236)

            (462)

Exploration cost written-off

                 70 

             2,649 

           2,746 

Impairment charge

               (40)

           22,980

        171,129

Increase in provisions

             1,710 

-

                     -  

Loss of disposal of non-current assets

-

               284 

                    -  

Share based payments

                  86 

-

               401 

Depreciation and amortisation

         23,278 

          16,214 

          41,346 

 

 

 

 

Change in operating assets and liabilities:

 

 

 

Increase in inventories

            (895)

         (2,027)

            (147)

Decrease in trade and other receivables

         20,586 

          10,939 

          12,341 

(Decrease) in trade and other payables

         (3,248)

         (8,569)

       (12,120)

(Decrease) / increase in provisions

               (52)

                 67 

                 55 

Cash generated from/(used in) operations

         28,697 

       (10,475)

         (6,318)

 

11. Adjusted EBITDA

The adjusted EBITDA is calculated as follows:

 

Six months

to 30 June

2021

Six months

to 30 June

2020

Year to 31 December 2020

US$'000

US$'000

US$'000

Loss for the period from continuing operations

 (13,678)

 (55,420)

  (197,024)

Add: Depreciation, depletion and amortization

   23,278 

 16,214 

  41,346 

Less: Finance Income

   (22,659)

 (1,333)

  (6,905)

Add: Finance cost

   10,476 

 12,667 

  22,276 

Add/(less): Taxation

  9,817 

 (6,665)

  (38,005)

EBITDA

  7,234 

          (34,537)

 (178,312)

Non-recurring expenses:

 

 

 

Add: (Gain)/loss on termination of licences and other impairment charge

  (40)

 22,980 

 171,129 

Add: (Gain)/loss on sale of non-current assets

  (138)

 -  

 6 

Adjusted EBITDA

   7,056 

 (11,557)

 (7,177)

 

12. Events occurring after the reporting period

No events occurred after the reporting period requiring disclosure.

 

Translation

This document is the English original in the event of any discrepancy between the original English document and the Spanish translation, the English original shall prevail.

 

- ENDS -

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