TIDMHNL
RNS Number : 3190A
Hague and London Oil PLC
28 September 2015
28 September 2015
Hague and London Oil PLC
("Company", "HALO")
Unaudited Interim Results for the Half-Year ended 30 June
2015
Hague and London Oil PLC (AIM: HNL), the hydrocarbon exploration
company, is pleased to announce unaudited interim results for the
half-year ended 30 June 2015.
Highlights
Strategic
-- Integration and restructuring of the Company following
acquisition of HALO BV by Wessex Exploration PLC now completed.
-- Strategic focus shifted toward lower-risk opportunities in
Southeast Asia after integration of SC54A, Philippines within the
portfolio.
-- New Directors subsequently focused on cost-effectively scaling up the business.
-- HALO's efforts during 1H15 culminated in the Duyung
transaction, announced on 23 September 2015.
Operational
-- Technical and commercial evaluation of many opportunities;
terms agreed and documents finalised for proposed acquisition of
85% interest in, and operatorship of, the Duyung PSC containing the
Mako Gas Discovery.
-- Technical studies on-going with respect to SC54A in the
Philippines with minimal expenditure planned in 2016; no
commitments until 2018.
-- Awarded three new Blocks, offshore United Kingdom; 3D seismic
data merging, processing and interpretation was started and is near
completion.
-- Offshore activity and third party information in Northwest
Africa is being used to continue to evaluate HALO's SADR blocks;
continuation of these licenses into 2016 is probable.
-- French Guyana has seen little activity though drilling
success, and more activity in nearby basins may raise its profile
within the industry in 2016.
-- Options under consideration regarding Juan de Nova following
Global Petroleum's withdrawal from the application process; HALO
unlikely to pursue further.
Financial
-- Loss before taxation of GBP0.76 million (6 months ended 30 June 2014: loss GBP0.67 million).
-- Fully funded for existing commitments in 2015 with cash of
GBP0.95 million as at 30 June 2015.
Post-period and outlook
-- First strategic transaction post-Wessex deal with the
acquisition of 85% in Duyung PSC in Indonesia, combined with the
15% interest in SC54A in Philippines, creating core Southeast Asia
portfolio.
-- Efforts have shifted toward lower-risk opportunities with existing discoveries such as SC54A (Tindalo/Yakal discoveries) and Duyung (Mako discovery).
-- Near-term focus is on completion of the Duyung transaction
and development of the natural gas appraisal programme for
2016.
-- Screening of other, complementary, opportunities with focus
on value-accretive projects with synergies within core
portfolio.
-- Considering opportunities to rationalise portfolio, where
possible, and focus on core elements of the HALO assets.
-- Long-term incentive and retention scheme adopted by Remuneration Committee.
Andrew Cochran, Chairman and Interim CEO, commented:
"The first six months following the integration of HALO were an
extremely busy period for us. We have identified, analysed and
progressed on selective basis a wide number of acquisition
opportunities to capitalise on the challenging market environment.
Discipline has been at the core of our efforts and consequentl,y we
believe, we have now executed on the best opportunity in the
current environment. As a result, HALO has announced the expansion
of the Southeast Asia shallow-water appraisal portfolio with the
inclusion of an 85% interest in the Duyung PSC, offshore Indonesia.
We believe that such a lower-risk, lower-cost approach in
energy-hungry economies is the correct path to value creation today
within this challenging market situation."
For further information please contact:
+44 20 7520
Hague and London Oil PLC 9268
Andrew Cochran, Chairman
and Interim CEO
Natalia Erikssen, IR/PR enquiries
Stifel Nicolaus Europe Limited +44 20 7710
(NOMAD & Broker) 7600
Michael Shaw / Ashton Clanfield
Chairman's review
During the first half of the year we focused on the prompt
implementation of the revised strategy. The market environment
became increasingly challenging; however, we worked hard to
capitalise on the opportunities this presented at the same time as
keeping a tight rein on costs. This is a genuinely privileged
position, enabled by our disciplined management team, and we are
determined to grow the business on the virtually commitment-free
platform of the current portfolio.
The integration of HALO BV and Wessex Exploration is now
complete, with headquarters permanently relocated to The Hague,
with lower operating costs and access to a wide pool of industry
experts and advisers. The Company has been able to reduce its
already low overheads for 2015 by 10% during the course of the
year.
It is our belief that a market downturn is the right time to
grow the business within a carefully measured approach. Whilst
opportunities are abundant, it is important to stay focused and
remain disciplined regarding cost and quality. To date, we have
screened a dozen potential asset and corporate acquisition
opportunities, but fewer than half of them progressed to the stage
of commercial negotiations. This list was reduced further on the
basis of our dynamic appraisal of risk versus value balance, and so
metrics have changed during the course of the year. Additionally,
the strategic focus has also been altered to place more emphasis on
opportunities with less exposure to oil price and within a smaller
geographic circle.
Duyung is an excellent example of the results of this dynamic
process. The Company believes it has identified a lower-cost,
lower-risk opportunity for natural gas appraisal within the
previously suggested core area of energy-hungry Southeast Asia
created through the combination of Wessex and HALO in late 2014 and
the inclusion of the Philippines' discoveries.
The primary challenges ahead will be delivering on a successful
operations plan for Duyung in 2016 while HALO transitions to become
a fully-fledged operator in Southeast Asia, whilst maintaining the
same cost discipline followed to date. The Company believes that
through the acquisition of Duyung more, value-accretive,
opportunities will become available to HALO in the coming year.
Financial review
In the period under review, the loss before taxation was GBP0.76
million (6 months ended 30 June 2014: loss GBP0.67 million) and
loss per share stood at 3.15p (6 months ended 30 June 2014: loss
3.68p). Administration costs were GBP762,256 (6 months ended 30
June 2014: GBP934,337).
As at 30 June 2015, the Company had a cash balance of GBP0.95
million (31 December 2014: GBP1.80 million).
Shareholder funds as at 30 June 2015 stood at GBP1.79 million
(31 December 2014: GBP2.53 million).
Project Review
Indonesia
On 23 September 2015 HALO announced that it has entered into a
conditional agreement to acquire a material interest in the Duyung
Production Sharing Contract (PSC).
Situated in the major oil and gas producing and exporting Natuna
Sea basin, Duyung covers an area of 1,673km(2) in water depths
ranging from 60 metres to 100 metres. HALO believes that the PSC
has significant shallow gas potential with multiple stacked
reservoirs, as has been demonstrated in the Mako Discovery.
According to an independent report by Panterra Geoconsultants B.V.
dated 24 April 2015, Gas Initially in Place is estimated to be up
to 902Bcf (150 mmboe); recovery factors for such gas accumulations
may be in the range of 21-52% based on example fields
elsewhere.
The Mako Discovery, which is currently undeveloped, is covered
by legacy high-resolution 2D seismic plus log data from three
previous wells and covers an area of 430 km(2) . The Mako-1
exploration well was drilled in March 1999 by LASMO and targeted
large-scale channel seismic facies which were interpreted as
incised valley fill. The well encountered 23 feet of net gas filled
sand at the top of the seismic anomaly followed by 60 feet of
mudstone above a further 12 feet of net water-wet sand at the base
of the channel feature. Wireline logs confirmed gas-down-to and
water-up-to values consistent with the pre-drill gas water contact
modelling of 1,420-1,450 feet. HALO believes that the existing data
is sufficient to enable it to identify the location of the
potential appraisal well, Mako South-1X, to be drilled in 2016, the
aim of which is to improve reservoir understanding and, more
importantly, reservoir performance on a drill stem test in order to
establish other properties, particularly permeability, saturation
and ultimate recovery.
The PSC benefits from favourable economic terms, including full
cost recovery, and is expected to be viable at current commodity
prices. As Contractor, HALO would receive 71.4% of profit gas and
net a ca. 40% "take" post-tax. The Mako Discovery is also
commercially attractive due to the extensive nearby infrastructure,
including the West Natuna Transport System which delivers gas to
local Indonesian markets, as well as neighbouring Singapore,
through the gas export pipeline. Recent gas sales in Indonesia have
been in excess of US$6/mmbtu; the onshore Aceh Block A gas
development has recently contracted for the sale of gas at
US$9.45/mmbtu (at the Belawan pipeline tie-in point).
Philippines
The Company (through its wholly owned subsidiary HALO BV) holds
a 15% interest in Service Contract SC54A in the NW Palawan Basin,
offshore Philippines. A change in partners was announced in June
2015 following the disposal by Kairiki to IMC Oil and Gas
Investments Ltd of its entire 30.1% interest in SC54A. Other
partners remained unchanged with Bangchak (operator, 42.4%) and TG
World (BV) Corp. (12.5%).
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Following the extension obtained by the operator, the partners
have until August 2017 to evaluate the results of the discoveries
made and decide whether or not to commit to the drilling of a
single well in 2018. At present, HALO is evaluating the data
in-house in order to propose a work programme to the partners for
the coming year. However, given the outlook for oil price it is
unlikely that a development would be proposed or sanctioned. The
likely committed budget for 2016 would be minimal and require
little investment by HALO. The block remains prospective and
commerciality of existing discoveries could arise in the next two
years with a material deflation of costs and only a relatively
minor increase in oil price.
United Kingdom
HALO, as Licence Administrator (i.e. Operator) of Promote Blocks
98/7b, 98/8a and 98/12 (northern part), holds a 35% interest
through its wholly owned subsidiary Wessex Hydrocarbons Limited.
Its partner, NWE Mirrabooka (UK) Pty. Ltd (a wholly owned
subsidiary of ASX-listed Norwest Energy NL) has a 65% interest.
In May 2015, the UK Department of Energy and Climate Change
executed the formal documentation related to Licence P2265 over
blocks 98/7b, 98/8a and 98/12 (northern part), following the
provisional award. This allows HALO and NWE to explore the licence
for an initial period of two years commencing December 2014.
These Blocks are on trend with the giant Wytch Farm field and
Beacon discovery in the adjacent block to the west, in a parallel
fault block down-dip of these fields. The blocks are almost
entirely covered by 3D seismic data already but the existing data
under previous processing technology is not sufficient to de-risk
this at present. This data has been reprocessed to assess trap
integrity and decide on the best plan forward. The interpretation
of the re-processed seismic data is likely to be completed in
3Q15.
Western Sahara (Saharawi Arab Democratic Republic, "SADR")
Maghreb Exploration Limited (a wholly owned subsidiary of HALO)
and Comet Petroleum (SADR) Limited (a wholly-owned subsidiary of
Tower Resources plc) each hold a 50% interest in three licence
blocks under Assurance Agreements in the SADR - Bojador, Guelta and
Imlili.
The Assurance Agreements are valid for periods of up to ten
years and confer the right to convert to Production Sharing
Agreements upon the meeting of certain external conditions,
including the recognition of SADR sovereignty and formulation of
comprehensive tax laws. Agreement was reached with the SADR
authorities in October 2014 to renew the Imlili block for a period
of three years. As the Bojador and Guelta blocks are also due to
expire in October 2016, the Company approached the authorities with
a proposal to align the end dates of all three Assurance Agreements
to a uniform date in December 2020.
We continue to be encouraged by the results of third party
drilling activity in Northwest Africa, which confirmed the presence
of the elements of a working petroleum system within the tertiary
deltaic sediments. Whilst no commercial discovery was announced,
the presence of gas and condensate in these clastic reservoirs over
a sizeable interval is promising for the potential of hydrocarbons
in the area with respect to reservoir and a thermally mature source
rock. Other than annual licence fees for the Permits, HALO plans
only a care and maintenance budget for the coming year requiring
very little capital expenditure.
Juan de Nova
The current Juan de Nova Permit expired on 30 December 2013 and
was suspended since then awaiting determination by the French
Authorities of the renewal application. In July 2015, Global
Petroleum, which was leading the application process, announced its
withdrawal from the application process due to the lack of
progress.
HALO has the right to apply to take legal title to a 50%
non-operated working interest, in the event that a renewal is
successful. The Company is now reviewing its rights and options
regarding the situation in Juan de Nova as it considers the factors
that resulted in the lack of progress in the application process.
However, in the current climate and in response to the pace of the
renewal process it is likely that HALO will cease to pursue the
Juan de Nova permit and re-allocate capital to other core aspects
of the portfolio.
French Guyana
The Company holds a 44.11% interest in Northpet Investments
Limited ("Northpet"), giving it a 1.103% beneficial interest in the
Guyane Maritime Permit. The remaining interest in Northpet is owned
by Northern Petroleum plc. Northpet holds a 2.5% interest in this
Permit in partnership with Shell (operator, 45%), Tullow (27.5%)
and Total (25%).
The Company placed French Guyana under strategic review and has
fully impaired the asset value at the end of 2014. Management is
currently evaluating its options and in the meantime the asset
continues to be viewed as non-core with respect to the new
strategic direction of the business.
However, recent activity in neighbouring countries and nearby
basins has potentially raised the profile of French Guyana within
the industry. This is now being factored into the strategic review.
Regardless, the ongoing and upcoming net commitments for HALO are a
very minimal cost only.
Change of Accounting Reference Date
As announced on 30 March 2015, the Company changed its
Accounting Reference Date from 30 June to 31 December to align its
financial calendar with the sector. As a result, the Company has
issued two consecutive interim reports (6 months to 31 December
2014 and 6 months to 30 June 2015). Full audited results for the
18-month period ending 31 December 2015 will be published on or
before 31 March 2016.
Andrew Cochran
Chairman and Interim Chief Executive
Hague and London Oil PLC
Independent Review Report
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly report for the six
months ended 30 June 2015 which comprises a Condensed Consolidated
Income Statement, A Condensed Consolidated Balance Sheet, a
Condensed Consolidated Cash Flow Statement and related notes.
We have read the other information contained in the half-yearly
report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the AIM Rule 18. Our review has been undertaken so
that we might state to the Company those matters we are required to
state to it in this report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company for our review work, for this
report or for the conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the half-yearly report in accordance with AIM Rule
18.
As disclosed in note 1 the annual financial statements of the
group are prepared in accordance with IFRS as adopted by the
European Union. It is the responsibility of the directors to ensure
that the condensed set of financial statements included in this
half-yearly report have been prepared on a basis consistent with
that which will be adopted in the Group's annual financial
statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly report
based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly we do not express an audit
opinion.
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 report for the six months ended 30 June 2015 is
not prepared, in all material respects, in accordance with the
requirements of the AIM rules.
Nexia Smith & Williamson Audit Limited
Portwall Place
Portwall Lane
Bristol
BS1 6NA
Date: 28 September 2015
Unaudited Condensed Consolidated Income Statement
for the six months ended 30 June 2015
Notes Six months Six months Year
ended 30 ended ended
June 30 30
2015 June June
2014 2014
GBP GBP GBP
Continuing operations:
Revenue - - -
Administrative expenses (762,256) (934,337) (1,856,244)
----------- ----------- ------------
Operating loss (762,256) (934,337) (1,856,244)
Finance income 972 2,171 6,314
Share of gains/(losses) of joint
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ventures - 265,813 (5,023,059)
----------- ----------- ------------
Loss before taxation (761,284) (666,353) (6,872,989)
Taxation 3 - - -
----------- ----------- ------------
Loss and total comprehensive expense
for the financial period (761,284) (666,353) (6,872,989)
----------- ----------- ------------
Attributable to:
Equity shareholders of the Company (761,284) (666,353) (6,872,989)
----------- ----------- ------------
Basic and diluted loss per share
(pence) 2 (3.15) (3.68) (37.95)
Unaudited Condensed Consolidated Balance Sheet
as at 30 June 2015
Notes 30 31 30
June December June
2015 2014 2014
Restated
GBP GBP GBP
Assets
Non-current assets
Intangibles 1,148,292 1,126,805 -
Property, plant and
equipment 19,614 18,577 -
Investments in joint
ventures - - 3,467,422
------------- ------------- ----------------
1,167,906 1,145,382 3,467,422
------------- ------------- ----------------
Current assets
Trade and other receivables 88,668 45,047 47,318
Cash and cash equivalents 951,533 1,798,286 1,905,416
------------- ------------- ----------------
1,040,201 1,843,333 1,952,734
------------- ------------- ----------------
Total assets 2,208,107 2,988,715 5,420,156
============= ============= ================
Equity and liabilities
Capital and reserves
attributable to the
Company's equity shareholders:
Share capital 965,343 965,343 724,343
Share premium account 17,860,522 17,860,522 16,800,122
Share-based payment
reserve 1,159,784 1,130,983 1,078,182
Foreign exchange reserve (3,935) 1,546 -
Retained earnings (18,186,938) (17,425,654) (13,265,432)
------------- ------------- ------------------
Total equity 1,794,776 2,532,740 5,337,215
Liabilities
Trade and other payables 258,513 286,084 82,941
Deferred consideration 154,818 169,891 -
------------- ------------- ------------------
413,331 455,975 82,941
Total equity and liabilities 2,208,107 2,988,715 5,420,156
============= ============= ==================
Unaudited Condensed Consolidated Cash Flow Statement
for the six months ended 30 June 2015
Notes Six months Six months Year
ended ended ended
30 30 30
June June June
2015 2014 2014
GBP GBP GBP
Cash outflow from
operating activities (833,024) (462,561) (858,599)
Cash flow from investing
activities:
Purchase of intangible
assets (15,740) - (26,409)
Purchase of property,
plant and equipment (2,861) - -
Investments in joint
ventures - (81,345) (1,498,907)
Recoveries from joint
venture partners - 89,495 -
Interest received 972 2,171 6,314
----------- --------------- ----------------------------
Net cash (used in)/generated
from investing activities (17,629) 10,321 (1,519,002)
Cash flow from financing
activities:
Net cash from acquisition
of subsidiary - - -
----------- --------------- ----------------------------
Net cash generated
from financing activities - - -
Net decrease in cash
and cash equivalents (850,653) (452,240) (2,377,601)
Impact of foreign
exchange on cash
balances 3,900 (38,492) (159,241)
Cash and cash equivalents
at beginning of period 1,798,286 2,396,148 4,442,258
Cash and cash equivalents
at end of period 951,533 1,905,416 1,905,416
=========== =============== ============================
Notes to the Unaudited Financial Information for the six months
ended 30 June 2015
1 Accounting Policies
Basis of preparation
These condensed Half Yearly financial statements are for the
six-month period ended 30 June 2015.
The financial information for the six months ended 30 June 2015
and 30 June 2014 is unaudited.
The interim financial information in this report has been
prepared on the basis of the accounting policies set out in the
audited financial statements for the year ended 30 June 2014 which
complied with International Financial Reporting Standards as
adopted for use in the European Union ("IFRS").
IFRS is subject to amendment and interpretation by the
International Accounting Standards Board ("IASB") and the IFRS
Interpretations Committee and there is an ongoing process of review
and endorsement by the European Commission.
The financial information has been prepared on the basis of IFRS
that the Directors expect to be applicable for the period ended 31
December 2015.
Financial information contained in this document does not
comprise the Group's statutory financial statements as defined in
section 434 of the Companies Act 2006.
The statutory financial statements for the year ended 30 June
2014 have been delivered to the Registrar of Companies. The
auditors reported on these financial statements: their report was
unqualified, did not contain a statement under section 498(2) or
498(3) of the Companies Act 2006, and did not include references to
any matters to which the auditor drew attention by way of
emphasis.
2 Loss per Share Attributable to the Equity Shareholders of the Company
Basic loss per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
The calculation of diluted earnings per share assumes conversion
of all potentially dilutive ordinary shares, all of which arise
from share options. A calculation is done to determine the number
of shares that could have been acquired at fair value, based upon
the monetary value of the subscription rights attached to
outstanding share options. Share options are anti-dilutive and are
therefore not included below.
Basic loss per share
Six months Six months
ended ended Year ended
30 June 30 June 30 June
2015 2014 2014
pence pence pence
Loss per share from
continuing operation (3.15) (3.68) (37.95)
The earnings and weighted average number of ordinary
shares used in the calculation of basic and diluted
earnings per share are as follows:
Earnings used in the
calculation of total
basic and diluted earnings
per share (761,284) (666,353) (6,872,989)
Number of shares Six months Six months
ended ended Year ended
30 June 30 June 30 June
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