TIDMVLU
RNS Number : 7014K
Valeura Energy Inc.
09 May 2022
FIRST QUARTER 2022 RESULTS
Calgary, May 9, 2022: Valeura Energy Inc. (TSX:VLE, LSE:VLU)
("Valeura" or the "Company"), an upstream oil and gas company with
assets in the Thrace Basin of Turkey and an announced acquisition
in the offshore Gulf of Thailand, reports its unaudited financial
and operating results for the three month period ended March 31,
2022.
Highlights
-- Strong financial position, including cash of US$39.8 million at March 31, 2022;
-- Royalty payments of US$2.1 million collected in Q1 2022, with
a further US$0.4 million due and invoiced;
-- Acquisition announced subsequent to end of the quarter to
acquire certain Gulf of Thailand assets with a focus on near-term
production and cash flow and further growth in 2023; and
-- Continuing strategic focus on inorganic growth in Southeast
Asia in addition to seeking a suitable partner to farm in to the
Company's Turkish 20 Tcfe unrisked mean prospective resource tight
gas appraisal play.
Sean Guest, President and CEO of Valeura commented:
"We have carefully preserved our strong financial position,
resulting in nearly $40 million in cash resources at the end of Q1
2022, which was bolstered by incoming royalty payments. This has
facilitated our announced Gulf of Thailand acquisition without any
share dilution to our shareholders.
We expect to close the deal in Q2 2022 and our management and
our new team in Thailand are looking forward to returning to active
operations. We are already progressing the key commercial
arrangements and procurement work streams required to bring the
Wassana oil field back to production later this year, at an
expected rate of 3,300 bbls/d gross.
This acquisition is bringing balance into our portfolio by
providing strong near-term cash flow and further organic growth
opportunities for 2023. At the same time our strategy remains
unchanged and we are evaluating further M&A opportunities while
continuing to seek out a suitable partner for our deep gas play in
Turkey which provides very significant upside potential."
Financial Position
As of the end of Q1 2022, Valeura had cash and cash equivalent
resources totaling US$39.8 million, and no debt. The cash position
reflects having spent approximately US$1 million of initial cash
consideration paid for the Acquisition (defined below), and US$1.2
million incurred in transaction costs during Q1 2022.
Associated with the sale of its conventional gas producing
business in 2021, Valeura is due a royalty of up to $2.5 million.
Given the recent high price of gas in Turkey, the Company received
US$2.1 million in royalty payments by end Q1 2022, and has invoiced
the remaining US$0.4 million, which is now due and expected to be
collected in Q2 2022.
Acquisition and near-term priority
Subsequent to the end of Q1 2022, on April 28, 2022, Valeura
announced that it had entered into an agreement to acquire all of
the shares of KrisEnergy International (Thailand) Holdings Ltd.
(the "SPA") which holds an interest in two operated licences
offshore Thailand - licence G10/48 (89% working interest) and
licence G6/48 (43% working interest) in the Rossukon oil field -
for total initial cash consideration of US$3.1 million, plus
contingent payments of up to a further US$7.0 million relating to
future development milestones. Separately, Valeura agreed to
purchase the mobile offshore production unit located on the Wassana
oil field in the G10/48 licence for consideration of US$9.2 million
(the "MOPU Purchase") which will be phased over approximately 14
months. Valeura expects to fund both the SPA and the MOPU Purchase
(together the "Acquisition") from cash on hand and from initial
cash flows generated by the assets. The Acquisition is expected to
close in Q2 2022.
Based on the Company's internal assessment (non-independent)
effective December 31, 2021, the Acquisition includes total proved
and probable (2P) reserves of 4.0 mmbbls of oil and an aggregate
13.3 mmboe of 2C contingent unrisked resources, net to the working
interests being acquired.
In parallel with preparations to close the Acquisition, Valeura
is already working with the local operating team in Thailand to
prepare for the restart of production operations from the Wassana
field in the G10/48 licence. The Company is currently pursuing all
key commercial arrangements and procurement work streams required
for production operations to resume as soon as practicable after
the Acquisition closes. Oil production is expected in Q4 2022 and
the Company anticipates initial production rates of approximately
3,300 bbls/d gross.
Valeura anticipates making additional announcements during Q2
2022 on closing the Acquisition and thereafter on the award of
contracts for the restart of production operations at Wassana.
Ongoing Strategy
With the Company's continued strong financial position, even
considering the funds required for the Acquisition, Valeura has
created a foundation in the Southeast Asia region and is well
positioned to grow further by way of mergers and acquisitions. This
capability is further bolstered by the addition of an experienced
operating team in Thailand and a leadership team experienced across
the Southeast Asia region. As such, the Company is continuing to
evaluate additional targets that will further bolster near-term
cashflow while providing opportunities for additional medium-term
re-investment to generate value through further growth.
Valeura's 20 Tcfe prospective resources tight gas appraisal play
in Turkey represents a significant source of potential long-term
value. Valeura is continuing its search for a suitable farm-in
partner for the tight gas appraisal play. The Company believes
securing a partner is the most prudent first step before committing
significant capital to the next phase of the appraisal drilling.
Valeura is poised to resume deep drilling operations rapidly upon
securing a partner, with several locations already in the advanced
permitting stage.
Annual Meeting
Valeura has scheduled its annual meeting of shareholders for
June 23, 2022. Meeting materials will be mailed in the middle of
May.
About the Company
Valeura Energy Inc. is a Canada-based public company currently
engaged in the exploration, development and production of petroleum
and natural gas in Turkey, and is pursuing inorganic growth in
Southeast Asia.
Oil and Gas Advisories
Reserves and contingent resources disclosed in this announcement
in respect of the Acquisition are based on an internal evaluation
(non-independent) conducted by Valeura with an effective date of
December 31, 2021. Reserves and resources are in the process of
being updated by the incumbent independent petroleum engineering
firm, Netherland Sewell & Associates (" NSAI "), and will be
published by the Company in due course. The reserves and contingent
resources estimates disclosed in this announcement in respect of
the Acquisition are estimates only and there is no guarantee that
the estimated reserves and contingent resources will be
recovered.
Prospective resource disclosure in this announcement in respect
of the Company's tight gas appraisal play in Turkey is based on an
independent resources evaluation as at December 31, 2018 conducted
by DeGolyer and MacNaughton in its report dated March 13, 2019,
which was prepared using guidelines outlined in the Canadian Oil
and Gas Evaluation Handbook and in accordance with National
Instrument 51-101 - Standards of Disclosure for Oil and Gas
Activities, as adjusted to reflect Equinor's withdrawal from the
tight gas appraisal play in Q1 2020.
Contingent Resources
Contingent resources are those quantities of petroleum
estimated, as of a given date, to be potentially recoverable from
known accumulations using established technology or technology
under development, but which are not currently considered to be
commercially recoverable due to one or more contingencies.
Contingencies are conditions that must be satisfied for a portion
of contingent resources to be classified as reserves that are: (a)
specific to the project being evaluated; and (b) expected to be
resolved within a reasonable timeframe. Specific contingencies
which prevent the classification of the contingent resources
associated with the Acquisition disclosed in this announcement as
reserves are: the uncertainty in performance of additional future
G10/48 Wassana infill drilling locations; the current
non-commercial nature of the two G10/48 undeveloped discoveries;
the uncertainty of the G6/48 Rossukon final development scope and
timing; and the pending G6/48 Rossukon development partner and
government approvals.
Contingent resources are further classified in accordance with
the level of certainty associated with the estimates and may be
sub--classified based on a project maturity and/or characterised by
their economic status. There are three classifications of
contingent resources: low estimate, best estimate and high
estimate. Best estimate is a classification of estimated resources
described in the Canadian Oil and Gas Evaluation Handbook as the
best estimate of the quantity that will be actually recovered; it
is equally likely that the actual remaining quantities recovered
will be greater or less than the best estimate. If probabilistic
methods are used, there should be at least a 50 percent probability
that the quantities actually recovered will equal or exceed the
best estimate. All of the Company's contingent resources disclosed
in this announcement are best-case estimates.
The project maturity subclasses include development pending,
development on hold, development unclarified and development not
viable. All of the Company's contingent resources disclosed in this
announcement are classified as either development on hold or
development unclarified. Development on hold is defined as a
contingent resource where there is a reasonable chance of
development, but there are major non--technical contingencies to be
resolved that are usually beyond the control of the operator.
Development unclarified is defined as a contingent resource that
requires further appraisal to clarify the potential for development
and has been assigned a lower chance of development until
commercial considerations can be clearly defined.
Chance of development is the probability of a project being
commercially viable. The estimates of contingent resources referred
to in this announcement are unrisked and therefore have not been
risked for the chance of development.
The development of the contingent resources referred to in this
announcement is dependent upon the following factors: the
performance of the initial G10/48 Wassana infill drilling campaign;
further appraisal of the two G10/48 undeveloped discoveries and
their cost of development; the G6/48 Rossukon final development
scope, cost and timing; and the pending G6/48 Rossukon development
partner and government approvals.
There is uncertainty that it will be commercially viable to
produce any portion of the contingent resources disclosed in this
announcement.
Prospective Resources
Prospective resources are those quantities of petroleum
estimated, as of a given date, to be potentially recoverable from
undiscovered accumulations by application of future development
projects. Prospective resources have both an associated chance of
discovery and a chance of development. The unrisked estimates of
prospective resources referred to in this announcement have not
been risked for either the chance of discovery or the chance of
development. There is no certainty that any portion of the
prospective resources disclosed in this announcement will be
discovered. If a discovery is made, there is no certainty that it
will be developed or, if it is developed, there is no certainty as
to the timing of such development or that it will be commercially
viable to produce any portion of the prospective resources
disclosed in this announcement. Additional resources information is
included in the Company's annual information form for the year
ended December 31, 2018.
Barrels of Oil Equivalent
A boe is determined by converting a volume of natural gas to
barrels using the ratio of 6 Mcf to one barrel. Boes may be
misleading, particularly if used in isolation. A boe conversion
ratio of 6 Mcf:1 boe is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead. Further, a
conversion ratio of 6 Mcf:1 boe assumes that the gas is very dry
without significant natural gas liquids. Given that the value ratio
based on the current price of oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilising a conversion on a 6:1 basis may be misleading as an
indication of value.
Advisory and Caution Regarding Forward-Looking Information
Certain information included in this new release constitutes
forward-looking information under applicable securities
legislation. Such forward-looking information is for the purpose of
explaining management's current expectations and plans relating to
the future. Readers are cautioned that reliance on such information
may not be appropriate for other purposes, such as making
investment decisions. Forward-looking information typically
contains statements with words such as "anticipate", "believe",
"expect", "plan", "intend", "estimate", "propose", "project",
"target" or similar words suggesting future outcomes or statements
regarding an outlook. Forward-looking information in this new
release includes, but is not limited to: the anticipated benefits
of the Acquisition and associated benefits to Valeura's
stakeholders; the completion of the Acquisition and the timing
thereof; the total cash consideration for the Acquisition,
including contingent payments and the timing thereof; the Company's
ability to fund the Acquisition from cash on hand and future cash
flows ; statements with respect to the net working interest
reserves and resources in the acquired assets; statements with
respect to NSAI updating the reserves and resources associated with
respect to the Acquisition and the Company publishing such updates;
development plans and production start-up timelines in the Wassana
field; the Company's ability to secure all required key commercial
agreements and procurement work streams to resume production
operations following the Acquisition; expected production from the
Wassana field; successful integration of the operating and
leadership team in Thailand by Valeura following the Acquisition;
statements with respect to regulatory and partner approvals for a
development plan for the Rossukon field being pending; statements
with respect to the Company's continued inorganic growth strategy,
and evaluation of further opportunities to expand in Thailand to
achieve synergies; the Company's ability to collect the outstanding
$0.4 million in royalties the Company has invoiced; statements with
respect to the tight gas appraisal play in Turkey remaining as a
core part of Valeura's portfolio; the Company's ability to find
another partner for the tight gas appraisal play and the Company's
ability to resume deep drilling operations upon finding another
partner for the tight gas appraisal play. In addition, statements
related to "reserves" and "resources" are deemed to be
forward-looking information as they involve the implied assessment,
based on certain estimates and assumptions, that the resources can
be discovered and profitably produced in the future.
Forward-looking information is based on management's current
expectations and assumptions regarding, among other things: the
ability to close the Acquisition and to fund it from cash on hand
and future cash flow; the ability to successfully re-start
production from the Wassana field in Q4 2022; the ability to
successfully pursue further opportunities in Thailand; political
stability of the areas in which the Company is operating and
completing transactions; continued safety of operations and ability
to proceed in a timely manner; the ability to identify attractive
merger and acquisition opportunities to support growth; the timing
of royalty payments; the prospectivity of the tight gas appraisal
play; future sources of funding; future economic conditions; future
currency exchange rates; the ability to meet drilling deadlines and
fulfil commitments under licences and leases and the Company's
continued ability to obtain and retain qualified staff and
equipment in a timely and cost efficient manner. In addition, the
Company's work programmes and budgets are in part based upon
expected agreement among joint venture partners and associated
exploration, development and marketing plans and anticipated costs
and sales prices, which are subject to change based on, among other
things, the actual results of drilling and related activity,
availability of drilling, high-pressure stimulation and other
specialised oilfield equipment and service providers for onshore
and offshore operations, changes in partners' plans and unexpected
delays and changes in market conditions. Although the Company
believes the expectations and assumptions reflected in such
forward-looking information are reasonable, they may prove to be
incorrect.
Forward-looking information involves significant known and
unknown risks and uncertainties. Exploration, appraisal, and
development of oil and natural gas reserves and resources are
speculative activities and involve a degree of risk. A number of
factors could cause actual results to differ materially from those
anticipated by the Company including, but not limited to: inability
to close the Acquisition in Q2 2022; the ability of management to
execute its business plan or realise anticipated benefits from the
Acquisition; inability to integrate the Acquisition if it closes;
inability to secure a new partner for the tight gas appraisal play
and execute potential mergers and acquisitions; evolving impacts of
the COVID-19 pandemic including disruptions in global supply
chains; the Company's ability to manage growth; the Company's
ability to manage the costs related to inflation; uncertainty in
capital markets and ability to raise debt and equity, as required,
particularly for companies with a small market capitalisation; the
ability to finance future development and/or inorganic growth; the
risks of currency fluctuations; changes in oil and gas prices and
netbacks in Thailand and Turkey; potential changes in joint venture
partner strategies and participation in work programmes; potential
assertions of pre-emptive rights by a partner or potential disputes
with a partner in connection with the Acquisition; uncertainty
regarding the contemplated timelines and costs for offshore
development plans in Thailand and the tight gas appraisal play
evaluation in Turkey; the risks of disruption to operations and
access to worksites (including the impact of the COVID-19
pandemic); the ability of the Company to maintain its directors,
senior management team and employees with relevant experience;
potential changes in laws and regulations, and the uncertainty
regarding government and other approvals; counterparty risk; the
ability of the Company to maintain effective ICFR; counterparty
risk; risks associated with weather delays and natural disasters;
and the risk associated with international activity. The
forward-looking information included in this new release is
expressly qualified in its entirety by this cautionary statement.
See the Company's annual information form for the year ended
December 31, 2021 for a detailed discussion of the risk
factors.
The forward-looking information contained in this new release is
made as of the date hereof and the Company undertakes no obligation
to update publicly or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
unless required by applicable securities laws. The forward-looking
information contained in this new release is expressly qualified by
this cautionary statement.
Additional information relating to Valeura is also available on
SEDAR at www.sedar.com .
This Announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 ("MAR") which
is part of UK law by virtue of the European Union (Withdrawal) Act
2018. Upon the publication of this Announcement, this inside
information is now considered to be in the public domain.
This announcement does not constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction,
including where such offer would be unlawful. This announcement is
not for distribution or release, directly or indirectly, in or into
the United States, Ireland, the Republic of South Africa or Japan
or any other jurisdiction in which its publication or distribution
would be unlawful.
Neither the Toronto Stock Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the Toronto
Stock Exchange) accepts responsibility for the adequacy or accuracy
of this news release.
For further information, please contact:
Valeura Energy Inc. (General Corporate Enquiries) +1 403 237
7102
Sean Guest, President and CEO
Heather Campbell, CFO
Contact@valeuraenergy.com
Valeura Energy Inc. (Capital Markets / Investor Enquiries) +1 403 975 6752
Robin James Martin, Investor Relations Manager +44 7392
940495
IR@valeuraenergy.com
Auctus Advisors LLP (Corporate Broker to Valeura) +44 (0) 7711
627 449
Jonathan Wright
Valeura@auctusadvisors.co.uk
CAMARCO (Public Relations, Media Adviser to Valeura) +44 (0) 20 3757 4980
Owen Roberts, Monique Perks, Hugo Liddy, Billy Clegg
Valeura@camarco.co.uk
Condensed Interim Consolidated Statements of Financial
Position
March 31, December 31,
(thousands of US Dollars, unaudited) 2022 2021
Assets
Current Assets
Cash and cash equivalents $ 39,775 $ 40,826
Restricted cash 16 16
Accounts receivable (note 9) 583 586
Royalty receivable (note 9) 407 2,315
Prepaid expenses and deposits 559 260
41,340 44,003
Non-Current Assets
Deposits (note 11) 966 -
Exploration and evaluation assets (note
3) 1,333 1,174
Property, plant and equipment (note 4) 46 46
$ 43,685 $ 45,223
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities
(note 10) $ 1,778 $ 341
1,778 341
Decommissioning obligations (note 5) 1,638 1,752
3,416 2,093
Shareholders' Equity
Share capital (note 6) 179,717 179,717
Contributed surplus 22,830 22,706
Accumulated other comprehensive gain (loss) 10,634 10,146
Deficit (172,912) (169,439)
40,269 43,130
$ 43,685 $ 45,223
Subsequent events (note 11)
See accompanying notes to the condensed interim consolidated
financial statements.
Condensed Interim Consolidated Statements of Loss and
Comprehensive Loss
For the three months ended March 31, 2022 and 2021
March 31, March 31,
(thousands of US Dollars, unaudited) 2022 2021
Revenue
Petroleum and natural gas sales $ - $ 2,086
Royalties - (279)
Other Income 25 129
25 1,936
Expenses and other items
Production 45 770
General and administrative 1,590 1,658
Severance - 146
Transaction costs 1,223 44
Accretion on decommissioning liabilities (notes
5) 79 277
Foreign exchange (gain) loss 445 744
Share-based compensation (note 6) 113 (76)
Change in estimate on decommissioning liabilities
(note 5) (5) (709)
Depletion and depreciation (notes 4) 8 7
3,498 2,861
Loss for the period before income taxes (3,473) (925)
Income taxes
Current tax expense - 22
Deferred tax expense (recovery) - 114
Net loss (3,473) (1,061)
Other comprehensive income (loss)
Currency translation adjustments 488 (727)
Comprehensive loss $ (2,985) $ (1,788)
Net loss per share (note 6)
Basic $ (0.04) $ (0.01)
Diluted $ (0.04) $ (0.01)
Weighted average number of shares outstanding
(thousands)
Basic 86,585 86,585
Diluted 86,585 86,585
See accompanying notes to the condensed interim consolidated
financial statements.
Condensed Interim Consolidated Statements of Cash Flows
For the three months ended March 31, 2022 and 2021
March 31, March 31,
(thousands of US Dollars, unaudited) 2022 2021
Cash was provided by (used in):
Operating activities:
Net income (loss) for the period $ (3,473) $ (1,061)
Depletion and depreciation (note 4) 8 7
Share-based compensation (note 6) 113 (76)
Accretion on decommissioning liabilities (note
5) 79 277
Change in estimate on decommissioning liabilities
(note 5) (5) (709)
Foreign exchange loss (gain) 380 755
Deferred tax expense (recovery) - 114
Change in restricted cash - (2)
Change in non-cash working capital (note 8) 1,155 247
Cash (used in) provided by operating activities (1,743) (448)
Financing activities:
Principal payments on lease liability - (28)
Cash used in financing activities - (28)
Investing activities:
Property and equipment expenditures (note 4) (3) -
Exploration and evaluation expenditures (note
3) (275) (68)
Assets held for sale expenditures - (72)
Royalty receivable (note 9) 1,908 -
Change in non-cash working capital (note 8) (968) (172)
Cash used in investing activities 662 (312)
Foreign exchange gain (loss) on cash held in
foreign currencies 30 29
Net change in cash and cash equivalents (1,051) (759)
Cash and cash equivalents, beginning of period 40,826 30,143
Cash and cash equivalents, end of period $ 39,775 $ 29,384
See accompanying notes to the condensed interim consolidated
financial statements.
Condensed Interim Consolidated Statements of Changes in
Shareholders' Equity
For the three months ended March 31, 2022 and 2021
(thousands of
US Dollars and Number
thousands of of Accumulated
shares, common Other Comp. Total Shareholders'
unaudited) shares Share Capital Contributed Surplus Deficit Income/(loss) Equity
Balance,
January
1, 2022 86,585 $ 179,717 $ 22,706 $(169,439) $ 10,146 $ 43,130
Net loss for
the
period - - - (3,473) - (3,473)
Currency
translation
adjustments - - - - 488 488
Share-based
Compensation - - 124 - - 124
March 31, 2022 86,585 $179,717 $ 22,830 $(172,912) $ 10,634 $ 40,269
(thousands of
US Dollars and
thousands of Accumulated Total
shares, Number of common Contributed Other Comp. Shareholders'
unaudited) shares Share Capital Surplus Deficit Loss Equity
Balance, January
1, 2021 86,585 $ 179,717 $ 22,410 $ (104,889) $ (55,288) $ 41,950
Net loss for the
period - - - (1,061) - (1,061)
Currency
translation
adjustments - - - - (727) (727)
Share-based
Compensation - - (59) - - (59)
March 31, 2021 86,585 $ 179,717 $ 22,351 $(105,950) $ (56,015) $ 40,103
See accompanying notes to the condensed interim consolidated
financial statements.
1. Reporting Entity
Valeura Energy Inc. ("Valeura" or the "Company") and its
subsidiaries (refer to note 2c) are currently engaged in the
exploration and development of petroleum and natural gas in Turkey.
Valeura is incorporated in Alberta, Canada and has subsidiaries in
the Netherlands and Turkey. Valeura's shares are traded on the
Toronto Stock Exchange ("TSX") under the trading symbol VLE and the
Main Market of the London Stock Exchange ("LSE"), under the trading
symbol "VLU". Valeura's head office address is 1200, 202 - 6 Avenue
SW, Calgary, AB, Canada.
2. Basis of Preparation
(a) Statement of compliance
These unaudited condensed interim consolidated financial
statements have been prepared in accordance with IAS 34 - Interim
Financial Reporting of the International Financial Reporting
Standards ("IFRS"). The attached unaudited condensed interim
consolidated financial statements should be read in conjunction
with Valeura's audited consolidated financial statements and
MD&A for the year ended December 31, 2021. The unaudited
condensed interim consolidated financial statements have been
prepared in accordance with IFRS accounting policies and methods of
computation as set forth in Valeura's audited consolidated
financial statements for the year ended December 31, 2021 with the
exception as noted below of certain disclosures that are normally
required to be included in annual consolidated financial statements
which have been condensed or omitted in the interim statements.
Operating, transportation and marketing expenses in profit or
loss are presented as a combination of function and nature in
conformity with industry practices. Depletion and depreciation and
finance expenses are presented in a separate line by their nature,
while net administrative expenses are presented on a functional
basis. The use of estimates and judgements is also consistent with
the December 31, 2021 financial statements.
The unaudited condensed interim consolidated financial
statements were authorised for issue by the Board of Directors on
May 6, 2022.
(b) Basis of measurement
These unaudited condensed interim consolidated financial
statements have been prepared on the historical cost basis except
for certain financial and non-financial assets and liabilities,
which have been measured at fair value. The methods used to measure
fair value are consistent with the Company's December 31, 2021
audited consolidated financial statements.
The COVID-19 pandemic is an evolving situation that may continue
to have widespread implications for the Company's business
environment, operations, and financial conditions. Management
cannot reasonably estimate the length or severity of this pandemic
and will continue to monitor the situation closely.
The Company's unaudited condensed interim consolidated financial
statements include the accounts of Valeura and its subsidiaries and
are expressed in thousands of US Dollars, unless otherwise
stated.
(c) Functional and presentation currency
The consolidated financial statements are presented in US
Dollars which is Valeura's reporting currency. Valeura and its
foreign subsidiaries transact in currencies other than the US
Dollar and have a functional currency of Turkish Lira and Canadian
dollars as follows:
Company Functional Currency
Valeura Energy Inc. Canadian Dollars
Northern Hunter Energy Inc. Canadian Dollars
Valeura Energy (Netherlands) Turkish Lira
BV
The functional currency of a subsidiary is the currency of the
primary economic environment in which the subsidiary operates.
Transactions denominated in a currency other than the functional
currency are translated at the prevailing rates on the date of the
transaction. Any monetary items held in a currency which is not the
functional currency of the subsidiary are translated to the
functional currency at the prevailing rate as at the date of the
statement of financial position. All exchange differences arising
as a result of the translation to the functional currency of the
subsidiary are recorded in earnings.
Translation of all assets and liabilities from the respective
functional currencies to the reporting currency are performed using
the rates prevailing at the statement of financial position date.
The differences arising upon translation from the functional
currency to the reporting currency are recorded as currency
translation adjustments in other comprehensive income or loss
("OCI") and are held within accumulated other comprehensive loss
until a disposal or partial disposal of a subsidiary. A disposal or
partial disposal will then give rise to a realised foreign exchange
gain or loss which is recorded in earnings.
(d) Use of estimates
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. The ability to
make reliable estimates is further influenced by political and
economic factors. Management has based its estimates with respect
to the Company's operations in Turkey based on information
available up to the date these condensed interim consolidated
financial statements were approved by the Board of Directors.
Significant changes could occur which could materially impact the
assumptions and estimates made in these consolidated financial
statements. Changes in assumptions are recognised in the financial
statements prospectively.
3. Exploration and Evaluation Assets
Cost Total
Balance, December 31, 2021 $ 1,174
Additions 275
Capitalised share-based compensation 10
Effects of movements in exchange rates (126)
Balance, March 31, 2022 $ 1,333
4. Property, Plant and Equipment
Cost Total
Balance, December 31, 2021 $ 8,824
Additions 3
Effects of movements in exchange
rates (910)
Balance, March 31, 2022 $ 7,917
Accumulated depletion and Total
depreciation
Balance, December 31, 2021 $ 8,778
Depreciation expense 8
Effects of movements in exchange
rates (915)
Balance, March 31, 2022 $ 7,871
Net book value Total
Balance, December 31, 2021 $ 46
Balance, March 31, 2022 $ 46
The depreciation expense recorded in 2022 relates to the
Company's corporate assets.
(a) Contingencies
Although the Company believes that it has title to its oil and
natural gas properties, it cannot control or completely protect
itself against the risk of title disputes or challenges.
The ultimate recovery of property, plant and equipment and
exploration and evaluation costs in Turkey is dependent upon the
Company obtaining government approvals, obtaining and maintaining
licences in good standing, the existence and commercial
exploitation of petroleum and natural gas reserves and undeveloped
lands, and other uncertainties.
5. Decommissioning Obligations
March 31, 2022
Decommissioning obligations, beginning of period $ 1,752
Change in estimates (5)
Accretion of decommissioning obligations 79
Effects of movements in exchange rates (188)
Balance, March 31, 2022 $ 1,638
The Company's decommissioning obligations result from its
ownership interest in oil and natural gas assets. The total
decommissioning obligation is estimated based on the Company's net
ownership interest in all wells, estimated costs to reclaim and
abandon these wells and facilities and the estimated timing of the
costs to be incurred in future years. The change in estimate is
mainly due to a change in the risk-free interest rate and inflation
in Turkey. The change in estimate has been recorded on the
statement of loss and comprehensive loss as the Company has no
asset related to the decommissioning liability.
6. Share Capital
(a) Issued
Common shares Number of Shares Amount
Balance, March 31, 2022 and December
31, 2021 86,584,989 $ 179,717
(b) Per share amounts
Per share amounts have been calculated using the weighted
average number of common shares outstanding. The weighted average
number of common shares outstanding for the three months ended
March 31, 2022 is 86,584,989 (March 31, 2021 and December 31, 2021
- 86,584,989). The weighted average number of common shares
outstanding was not increased for the three month period ended
March 31, 2022, and 2021, for outstanding stock options, as the
effect would be anti-dilutive.
(c) Stock options
Valeura has an option programme that entitles officers,
directors, employees and consultants to purchase shares in the
Company. Options are granted at the market price of the shares at
the date of grant, have a seven-year term and vest in thirds over
three years.
The number and weighted average exercise prices of share options
are as follows:
Weighted average
exercise price
Number of Options (CAD)
Balance outstanding, December 31, 2021 6,667,666 $ 0.48
Balance outstanding, March 31, 2022 6,667,666 0.48
Exercisable at March 31, 2022 4,289,345 $ 0.50
The following table summarises information about the stock
options outstanding at March 31, 2022:
Outstanding Weighted average Weighted average Weighted average exercise
Exercise at March remaining life exercise price Exercisable at March 31, price
prices (CAD) 31, 2022 (years) (CAD) 2022 (CAD)
$0.25 -
$0.51 2,310,000 5.0 $ 0.26 1,523,338 $ 0.25
$0.52 -
$0.53 2,262,500 6.0 0.52 754,174 0.52
$0.54 -
$0.74 1,141,833 1.6 0.62 1,058,500 0.62
$0.75 -
$0.80 953,333 1.9 0.76 953,333 0.76
6,667,666 4.3 $ 0.48 4,289,345 $ 0.50
No options were granted during Q1 2022. In 2021, the fair value,
at the grant date, of the stock options issued was estimated using
the Black-Scholes model with the following weighted average inputs
(weighted average fair value per option in CAD):
March 31, 2022 December 31,
Assumptions 2021
Risk free interest rate (%) - 0.8
Expected life (years) - 4.5
Expected volatility (%) - 99.0
Forfeiture rate (%) - 11.0
Weighted average fair value per
option - $ 0.37
7. Credit Facilities
The Company's APSG facility with Export Development Canada
("EDC") is effective from June 16, 2021 to May 31, 2022 with a
limit of $0.25 million and can be renewed on an annual basis. The
APSG facility, which was issued to NBC allows the Company to use
the facility as collateral for certain letters of credit issued by
NBC, with a limit of $0.25 million and can be renewed on an annual
basis. The Company has issued approximately $0.15 million in
letters of credit under the APSG facility at current exchange
rates.
8. Supplemental Cash Flow Information
Three months ended March 31, March 31, 2021
2022
Change in non-cash working capital:
Accounts receivable $ 3 $ 112
Prepaid expenses and deposits (1,265) (233)
Inventory - -
Accounts payable and accrued liabilities 1,437 439
Assets held for sale - 3,425
Liabilities directly associated with
the asset held for sale - (1,875)
Movements in exchange rates 12 (1,793)
$ 187 $ 75
The change in non-cash working capital has been allocated to the
following activities:
Operating 1,155 247
Investing (968) (172)
$ 187 $ 75
9. Financial Risk Management
The Company's activities expose it to a variety of financial
risks that arise as a result of its exploration, development,
production, and financing activities such as:
-- Credit risk
-- Market risk
-- Liquidity risk
This note presents information about the Company's exposure to
each of the above risks, the Company's objectives, policies and
processes for measuring and managing risk, and the Company's
management of capital.
The Board of Directors oversees managements' establishment and
execution of the Company's risk management framework. Management
has implemented and monitors compliance with risk management
policies. The Company's risk management policies are established to
identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls, and to monitor risks and
adherence to market conditions and the Company's activities.
(a) Credit risk
Credit risk is the risk of financial loss to the Company if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the
Company's receivables from joint venture partners and oil and
natural gas marketers. The maximum exposure to credit risk is as
follows:
March 31, 2022 December 31,
2021
Joint venture receivable from partners $ 29 $ 25
Retention receivable 310 310
Taxes receivable 227 205
Other 17 46
Accounts receivable $ 583 $ 586
Royalty receivable $ 407 $ 2,315
Trade and other receivables:
The Company's accounts receivables consist of a retention
receivable amount related to the 2021 Disposition which is a
portion of the purchase price held in escrow for one year and taxes
receivable from the Turkish Government (VAT receivable). The
royalty receivable relates to the 2021 Disposition. As at March 31,
2022, $2.1 million of the $2.5 million royalty receivable has been
collected.
Receivables from partners are related to the Company's remaining
licences in Turkey. Other receivables are related to an insurance
premium refund.
(b) Market risk
Market risk is the risk that changes in market conditions, such
as commodity prices, foreign exchange rates and interest rates will
affect the Company's income or the value of financial instruments.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while
maximising the Company's return.
Interest rate risk:
Interest rate risk i s the risk that future cash flows or
valuations of assets or liabilities will fluctuate as a result of
changes in market interest rates. The Company currently has limited
exposure to interest rate risk as it has no debt and interest rates
on cash balances are at historic lows. Market interest rates
currently affect the present value of the Company's decommissioning
liability.
Liquidity risk:
Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with the financial
liabilities. The Company's financial liabilities consist of
accounts payable. Accounts payable consists of invoices payable to
trade suppliers for office, field operating activities and capital
expenditures. The Company processes invoices within a normal
payment period. Accounts payable have contractual maturities of
less than one year. The Company maintains and monitors a certain
level of cash which is used to finance all operating and capital
expenditures.
Capital management:
The Company's capital structure includes working capital and
shareholders' equity. Currently, total capital resources available
are working capital and the Company has a significant cash and cash
equivalents balance of $39.8 million. The Company's objective when
managing capital is to maintain a flexible capital structure which
allows it to execute its growth strategy through expenditures on
exploration and development activities while maintaining a strong
financial position. The Company's capital structure includes
working capital and shareholders' equity. Currently, total capital
resources available include working capital and funds flow from
operations.
The Company's capital expenditures include expenditures in oil
and gas activities which may or may not be successful. The Company
makes adjustments to the capital structure in light of changes in
economic conditions and the risk characteristics of the underlying
petroleum and natural gas assets. In order to maintain or adjust
the capital structure, the Company may, from time to time, issue
shares, adjust its capital spending or issue debt instruments. The
Company is not currently subject to any externally imposed capital
requirements as it maintains operatorship over all of its lands in
the Thrace Basin.
The successful future operations of the Company are dependent on
the ability of the Company to secure sufficient funds through
operations, bank financing, equity offerings or other sources and
there are no assurances that such funding will be available when
needed. Failure to obtain such funding on a timely basis could
cause the Company to reduce capital spending and could lead to the
loss of exploration licences due to failure to meet drilling
deadlines. Valeura has not utilised bank loans or debt capital to
finance capital expenditures to date.
Fair value of financial assets and liabilities:
The Company's fair value measurements are classified as one of
the following levels of the fair value hierarchy:
Level 1 - inputs represent unadjusted quoted prices in active
markets for identical assets and liabilities. An active market is
characterized by a high volume of transactions that provides
pricing information on an ongoing basis.
Level 2 - inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly or
indirectly. These valuations are based on inputs that can be
observed or corroborated in the marketplace, such as market
interest rates or forecasted commodity prices.
Level 3 - inputs for the asset or liability are not based on
observable market data.
The Company aims to maximise the use of observable inputs when
preparing calculations of fair value. Classification of each
measurement into the fair value hierarchy is based on the lowest
level of input that is significant to the fair value
calculation.
The fair value of cash and cash equivalents, accounts
receivable, royalty receivable, and accounts payable and accrued
liabilities approximate their carrying amounts due to their short
terms to maturity.
10. Accounts payable and accrued liabilities
The majority of the accounts payable and accrued liabilities
balance is comprised of legal transactions costs related to the
share purchase agreement disclosed in note 11 and business
development costs.
11. Subsequent events
As announced on April 28, 2022, the Company entered into a Sale
and Purchase Agreement with KrisEnergy (Asia) Ltd (the "Seller") to
acquire all of the shares of KrisEnergy International (Thailand)
Holdings Ltd (the "SPA"), which holds an interest in two operated
licences in shallow water offshore Thailand for total initial cash
consideration of $3.1 million (refundable if certain conditions are
not met), plus certain contingent payments of up to a further
US$7.0 million relating to future development milestones and an
estimated $1.6 million for maintenance and administrative costs
between the signing of the SPA and the anticipated close. As at
March 31, 2022, $1.0 million of the cash consideration was paid and
recorded as a non-current deposit (refundable if certain conditions
are not met). Separately, Valeura has agreed to purchase an onsite
Mobile Offshore Production Unit (asset acquisition) from Nora
Limited, for cash consideration of $9.2 million (the "MOPU
Purchase"), which will be phased over approximately 14 months. The
SPA has an effective date of January 1, 2022 and Valeura
anticipates the deal closing within the first half of 2022.
To facilitate the SPA, Valeura, with an 85% interest, and
Panthera Resources PTY Ltd (a Singapore-based geo-technical
consulting firm, "Panthera"), with a 15% interest, have created a
Singapore-domiciled special purpose vehicle company ("SPV")
Panthera Resources Pte. Ltd, to serve as the buying entity under
the SPA. The relationship between Valeura and Panthera as
shareholders of the SPV is governed by a shareholder agreement
which includes, among other things, provisions for the funding of
the SPA purchase 100% by Valeura, and the ongoing engagement of
certain Panthera individuals as part of the Valeura management
team.
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END
QRFDVLFBLELZBBX
(END) Dow Jones Newswires
May 09, 2022 13:10 ET (17:10 GMT)
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