02:00 Wed 30 Sep 2020
Block Energy PLC - Interim Results for Six Months Ended 30 June 2020
Block Energy Plc
("Block" or the "Company")
Interim Results for the Six Months Ended
Block Energy Plc, the exploration and production company focused on
Highlights
· Entered into a conditional sale and purchase agreement to acquire Schlumberger Rustaveli Company Limited ("SRCL") including Georgian onshore licence blocks IX and XIB
· Implementation of prudent cost-cutting and cash conservation measures in response to COVID-19
· The Group held cash at
· Proceeds from sales of crude oil from its West Rustavi, Norio and Satskhenisi licences were
· Early production facility ("EPF"), including a gas processing unit procured during the period and commissioned in
· Commencement of construction of the gathering line between the EPF and WR-38Z during
· Shut-in of the West Rustavi field's production at wells WR-16aZ and WR-38Z to conserve valuable gas resources until the gas sales pipeline is complete later this year
· Early results from fully migrated 3D seismic processing are providing insight into the full potential of the West Rustavi XIF licence area
· Engaged EPI Limited ("EPI"), a leading independent geoscience and geophysical consultancy
"Firstly, I am very proud of how everyone at Block has helped navigate the challenges of the pandemic. Undoubtedly, this has been a very tough six months for the sector, but I am pleased this hasn't stopped Block from still achieving its goals for the period. With the EPF in place and connected to the first of two West Rustavi wells, we expect gas sales to commence in Q4. The acquisition of SRCL has been slightly delayed due to COVID-19 restrictions, but both parties remain committed to its completion. We have been progressing an extensive sub-surface technical study, which is revealing some exciting short and medium-term opportunities that will be presented to the market on completion of the acquisition.
Block Energy remains strong and agile, with cash on the balance sheet and near-term realisation of its gas reserves. Through these gas sales, we will generate more cash from our production base. We look forward to the remaining months of 2020, to continue our mission of value creation for our shareholders, through growing the business and unlocking
Chief Executive Officer's Business Review
Introduction
COVID-19 has affected the whole sector. During the period, the Company's activities were disrupted by lockdowns in the
Reactive measures
In early
Work during 2020
While navigating the challenges encountered in 2020, Block continued to press ahead with its planned work programme.
Block continued with the processing and interpretation of the 3D seismic data. Results show good sub-surface imaging of the main producing and prospective formations in the permit.
The Company achieved the procurement of its EPF from
Construction of the gathering line between the EPF and WR-38Z commenced on
Unfortunately, the Company had to abort drilling operations at the WR-51Z site owing to the discovery of poor conditions in the existing well. Legacy wellbore integrity issues are an inherent risk with re-entry operations and the occasional abandonment is to be expected.
Crude oil production and sales
During the period, the Company continued to produce and sell oil from its Norio and Satskhenisi licences. Revenue from oil sales during the period was
Acquisition of SRCL
Block continues to work with Schlumberger on completion of the acquisition of SRCL, which was announced on
Engagement of EPI
In
EPI has been defining new development well activity in West Rustavi, and in the soon-to-be-acquired assets within the Block XIB area. In particular, Block sees significant potential for the horizontal side-tracking of new and existing wells, including deeper targets in the Patardzeuli field. EPI has brought their expertise to the analysis of the geological aspects of horizontal well design and the selection and ranking opportunities in Block XIB, where over 180 MMbbls of oil have been produced, with a peak production rate of 67,000 barrels of oil equivalent per day.
Directorate Change
Following the successful commissioning of the EPF, Mr
Block continues to give significant focus to its internal corporate governance standards and has initiated a search through a leading energy executive search firm for a senior independent director and an independent non-executive director. We will update the market further when it has appointed suitable candidates for these roles.
Outlook
Though COVID-19 is proving very hard to predict, Block still expects gas sales to commence in Q4 2020 from West Rustavi, as the gas purchaser, Bago, is completing the final stages of the permitting process to enable it to construct its gas sales pipeline, which they expect to have completed later this year.
This first half of the year has proven how dedicated everyone at Block is to its success and survival. As CEO, I am greatly impressed by and appreciative of how our staff have navigated these challenges and will continue to do so as the year progresses.
Financial Review
For the six months ended
During the six months ended
Subsequent to the period end, Block received
Chief Executive Officer
This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation which came into effect on
The directors of the Company accept responsibility for this announcement.
For further information please visit http://www.blockenergy.co.uk/ or contact:
(Chief Executive Officer) |
Block Energy Plc |
Tel: +44 (0)20 3980 6250 |
(Nominated Adviser) |
Spark Advisory Partners Limited |
Tel: +44 (0)20 3368 3554 |
(Corporate Broker) |
Mirabaud Securities Limited |
Tel: +44 (0)20 3167 7221 |
(Financial PR) |
Camarco |
Tel: +44 (0)20 3757 4980 |
Notes to Editors
Block Energy is an AIM-listed independent oil and gas company focused on production and development in
The Company has a 100% working interest in the highly prospective West Rustavi onshore oil and gas field with multiple wells that have tested oil and gas from a range of geological horizons. The field has so far produced 50 Mbbls of light sweet crude and has 0.9 MMbbls of gross 2P oil reserves in the Middle Eocene. It also has 38 MMbbls of gross unrisked 2C contingent oil resources and 608 BCF of gross unrisked 2C contingent gas resources in the Middle, Upper and Lower Eocene formations (Source: CPR by Gustavson Associates:
Block also holds 100% and 90% working interests in the onshore oil producing Norio and Satskhenisi fields. In
The Company offers a clear entry point for investors to gain exposure to
Glossary
1. bbls: barrels. A barrel is 35 imperial gallons.
2. Mbbls: thousand barrels.
3. MMbbls: million barrels.
4. MMCF/d: million cubic feet per day.
5. BCF: billion cubic feet.
INDEPENDENT REVIEW REPORT TO BLOCK ENERGY PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended
Material uncertainty related to going concern
We draw attention to note 2 to the Condensed Consolidated Interim Financial Statements which highlights the further economic and commercial challenges which the Group faces as a result of the global uncertainty surrounding the COVID-19 pandemic, and notes that as a result the Group may need to raise additional funding to enable it to continue as a going concern. As stated in note 2, these conditions, along with the other matters referred to in note 2, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our conclusion is not modified in respect of this matter.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
BDO LLP is a limited liability partnership registered in
Condensed Consolidated Interim Statement of Comprehensive Income
For the period ended
|
|
6 months ended |
6 months ended |
|
|
30 June 2020 |
30 June 2019 |
|
|
Unaudited |
Unaudited
|
|
|
US$'000 |
US$'000 |
Continuing operations |
|
|
|
|
|
|
|
Revenue |
|
313 |
- |
|
|
|
|
Cost of sales |
|
(1,141) |
(478) |
Gross loss |
|
(828) |
(478) |
|
|
|
|
Impairment losses |
|
(208) |
- |
Administrative expenses |
|
(1,646) |
(2,243) |
|
|
|
|
Results from operating activities |
|
(2,682) |
(2,721) |
|
|
|
|
Finance income |
|
14 |
- |
Finance expense |
|
- |
(4) |
|
|
|
|
Loss for the year before taxation |
|
(2,668) |
(2,725) |
|
|
|
|
Taxation |
|
- |
- |
|
|
|
|
Loss for the period from continuing operations (attributable to the equity holders of the parent) |
|
(2,668) |
(2,725) |
Loss for the year |
|
(2,668) |
(2,725) |
|
|
|
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
Exchange differences on translation of foreign operations |
|
(223) |
638 |
|
|
|
|
Total comprehensive loss for the period attributable to the equity holders of the parent |
|
(2,891) |
(2,087) |
|
|
|
|
Loss per share (basic and diluted) |
4 |
(0.61)c |
(0.70)c |
Condensed Consolidated Statement of Financial Position
As at
|
|
|
|
|
|
|
Unaudited |
Audited |
|
|
|
US$'000 |
US$'000 |
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
5 |
13,607 |
12,713 |
|
|
|
13,607 |
12,713 |
|
Current assets |
|
|
|
|
Inventory |
|
2,979 |
2,519 |
|
Trade and other receivables |
|
352 |
303 |
|
Cash and cash equivalents |
|
2,258 |
6,494 |
|
Total current assets |
|
5,589 |
9,316 |
|
Total assets |
|
19,196 |
22,029 |
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
Capital and reserves attributable to equity holders of the Company: |
|
|
|
|
Share capital |
6 |
2,754 |
2,623 |
|
Share premium |
|
28,073 |
27,985 |
|
Other reserves |
|
1,432 |
1,114 |
|
Foreign exchange reserve |
|
210 |
433 |
|
Accumulated deficit |
|
(14,213) |
(11,545) |
|
Total Equity |
|
18,256 |
20,610 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Trade and other payables |
|
650 |
1,143 |
|
Provisions |
|
290 |
276 |
|
Total current liabilities |
|
940 |
1,419 |
|
Total equity and liabilities |
|
19,196 |
22,029 |
|
Consolidated Statement of Changes in Equity
As at
|
Share |
Share premium |
Accumulated deficit |
Other reserve |
Foreign exchange reserve |
Total equity |
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
Balance at |
2,192 |
12,221 |
(5,623) |
460 |
(50) |
9,200 |
Loss for the year |
- |
- |
(6,130) |
- |
- |
(6,130) |
Exchange differences on translation of operations in foreign currency |
- |
- |
- |
- |
483 |
483 |
Total comprehensive loss for the year |
- |
- |
(6,130) |
- |
483 |
(5,647) |
Shares issued |
431 |
16,655 |
- |
- |
- |
17,086 |
Cost of issue |
- |
(891) |
- |
- |
- |
(891) |
Share based payments |
- |
- |
208 |
654 |
- |
862 |
Total transactions with owners |
431 |
15,764 |
208 |
654 |
- |
17,057 |
Balance at |
2,623 |
27,985 |
(11,545) |
1,114 |
433 |
20,610 |
Loss for the year |
- |
- |
(2,668) |
- |
- |
(2,668) |
Exchange differences on translation of operations in foreign currency |
- |
- |
- |
- |
(223) |
(223) |
Total comprehensive loss for the year |
- |
- |
(2,668) |
- |
(223) |
(2,891) |
Shares issued |
131 |
88 |
- |
- |
- |
219 |
Share based payments |
- |
- |
- |
318 |
- |
318 |
Total transactions with owners |
131 |
88 |
- |
318 |
- |
537 |
Balance at |
2,754 |
28,073 |
(14,213) |
1,432 |
210 |
18,256 |
Condensed Consolidated Interim Statement of Cash Flows
For the 6 months ended
|
|
6 months ended |
6 month ended |
|
|
30 June 2020 |
30 June 2019 |
|
|
Unaudited |
Unaudited
|
|
|
US$'000 |
US$'000 |
|
|
|
|
Operating activities |
|
|
|
Loss for the period before income tax |
|
(2,668) |
(2,725) |
Adjustments for: |
|
|
|
Finance income |
|
(14) |
- |
Depreciation and depletion |
5 |
456 |
84 |
Impairment losses |
|
208 |
- |
Share based payments expense |
|
318 |
262 |
Foreign exchange movement |
|
69 |
293 |
Net cash flows used in operating activities before changes in working capital |
|
(1,631) |
(2,086) |
Increase in trade and other receivables |
|
(49) |
(573) |
(Decrease) / increase in trade and other payables |
|
(274) |
1,033 |
Decrease in inventory |
|
(544) |
(106) |
Net cashflows used in operating activities |
|
(2,498) |
(1,732) |
Investing activities |
|
|
|
Expenditure in respect of PP&E |
|
(1,679) |
(1,352) |
Cash used in investing activities |
|
(1,679) |
(1,352) |
Financing activities |
|
|
|
Issue of ordinary share capital |
|
- |
14,574 |
Costs of issue of ordinary share capital |
|
- |
(891) |
Net cash flows from financing activities |
|
- |
13,683 |
|
|
|
|
Net (decrease) / increase in cash and cash equivalents |
|
(4,177) |
10,599 |
Cash and cash equivalents at the beginning of period |
|
6,494 |
2,518 |
Effects of foreign exchange rate changes on cash and cash equivalents |
|
(59) |
75 |
Cash and cash equivalents at end of period |
|
2,258 |
13,192 |
Notes to the Condensed Consolidated Interim Financial Statements
For the 6 months ended
1. Interim Financial Statements
The Condensed Consolidated Interim Financial Statements of the Group, which comprises Block Energy plc and its subsidiaries for the six-month period from
The Condensed Consolidated Interim Financial Statements have been reviewed by the Group's auditors.
The Company's shares are traded on AIM and the trading symbol is BLOE.
2. Summary of significant accounting policies
Management have prepared these interim accounts in accordance with the IFRS accounting policies as applied at
During the prior period, the Group changed its accounting reference date from 30 June to 31 December and consequently reported on the 18-month period ended
The condensed set of financial statements included in this half-yearly financial report have been prepared on a going concern basis as the directors consider that the Group has adequate resources to continue operating for the foreseeable future.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chief Executive Officer's Business Review. The financial position of the Group at the period end and its cash flows and liquidity position are included in the Financial Review.
The Group continues to closely monitor and manage its cash. Cash forecasts are regularly produced, and sensitivities run for different scenarios including, but not limited to, commodity prices, the date for recommencement of oil and gas production from West Rustavi, operating expenditure, capital expenditure and the USD/GBP foreign exchange rate. To preserve cash in response to COVID-19 and as a result of the low oil price, the Group reduced its capital and operating expenditure, reduced its workforce, paid salaries of remaining employees and fees of directors of its parent company in nil-cost options instead of cash, deferred salaries of its remaining employees in
The directors note that COVID-19 has had a significant negative impact on the global economy and oil prices have fallen significantly, which may mean it is harder to secure additional funding than it has historically been. The global pandemic may also bring practical challenges to the timetables for the construction of the gas pipeline and the consequent sale of oil and gas from its West Rustavi licence. The directors are confident that current capital projects are funded based on current timelines and have a reasonable expectation that they could secure additional funding, if needed, to fund additional capital projects. However, these conditions are necessarily considered to represent a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern. Whilst acknowledging this material uncertainty, the directors remain confident of making further cost savings when required and therefore the directors consider it appropriate to prepare the financial statements on a going concern basis. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.
The accounting policies adopted in this half-yearly financial report are the same as those adopted in the 2019 Annual Report and Financial Statements, other than the implementation of new IFRS reporting standards as set out below.
Adoption of new and revised accounting standards
As of
IFRS 16 Leases
IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. IFRS 16 supersedes IAS 17 Leases. The date for the initial application of IFRS 16 for the Group is
The most significant lease the group has is in relation to a drilling rig. Management has considered the terms of this lease and notes that the lease term is for 12 months to
Other leases for which the group is lessee are not material and have not been recognised on this basis.
3. Operating segments
The Group is engaged in the exploration for, and development of oil and gas resources in
4. Loss per share
The calculation of loss per share for the six months ended
In the opinion of the directors, all the outstanding share options and warrants are anti-dilutive and hence, basic and fully diluted loss per share are the same.
5. Property, plant and equipment
Unaudited |
Licence area |
Development/ Production equipment |
Computer/ Office equipment/ Vehicles |
Total |
|
Cost |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
At |
4,985 |
8,219 |
129 |
13,333 |
|
Additions |
- |
1,434 |
124 |
1,558 |
|
At |
4,985 |
9,653 |
253 |
14,891 |
|
|
|
|
|
|
|
Accumulated depreciation and impairment |
|
|
|
|
|
At |
18 |
595 |
7 |
620 |
|
Charge |
- |
454 |
2 |
456 |
|
Impairment |
- |
208 |
- |
208 |
|
At |
18 |
1,257 |
9 |
1,284 |
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
At |
4,967 |
8,396 |
244 |
13,607 |
|
|
|
|
|
|
|
|
Licence area |
Development/ Production equipment |
Computer/ Office equipment/ Vehicles |
Total |
|
Cost |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
At |
1,641 |
208 |
- |
1,849 |
|
Transfer from intangibles |
2,158 |
- |
- |
2,158 |
|
Additions |
1,186 |
8,011 |
129 |
9,326 |
|
At |
4,985 |
8,219 |
129 |
13,333 |
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
|
|
|
At |
18 |
28 |
- |
46 |
|
Charge |
- |
567 |
7 |
574 |
|
At |
18 |
595 |
7 |
620 |
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
At |
4,967 |
7,624 |
122 |
12,713 |
|
During the six months ended
6. Share capital
The Ordinary Shares consist of full voting, dividend and capital distribution rights and they do not confer any rights for redemption. The Deferred Shares have no entitlement to receive dividends or to participate in any way in the income or profits of the Company, nor is there entitlement to receive notice of, speak at, or vote at any general meeting or annual general meeting.
On
7. Other matters
A copy of this report is available from the Group's website, www.blockenergy.co.uk
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