Earnings Release • Aug 24, 2016
Earnings Release
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August 23, 2016
| Contents2 | |
|---|---|
| Highlights and events3 | |
| Operational update4 | |
| Financial information6 | |
| Risks and uncertainties10 | |
| Outlook11 | |
| Condensed consolidated financial statements12 | |
| Notes to the condensed consolidated financial statements16 | |
| Responsibility statement 21 | |
| Other information22 |
The first introduction of hydrocarbons, light oil of approximately 42 degree API, from the Aje field to the Front Puffin FPSO was achieved on May 3, 2016. A period of commissioning followed, and the 72 hour production test was completed with the FPSO placed on hire in mid-July, 2016. As previously reported, production is being temporarily constrained; this is due to mechanical issues with the Aje 5 well and the FPSO compressor systems.
In order to resolve the FPSO compressor issue, the system has been under maintenance since early August, and should be fully repaired and working within the next four weeks. The use of the compressor is a key variable in well production. Based on recent performance, with the resumed full use of the compression system, the forward looking production guidance range is anticipated to be 7,000-9,000 bopd prior to remediation work with Aje-5.
Aje 5 requires subsurface intervention to solve a mechanical issue, and is currently materially restricted in its productivity. The Aje Joint Venture is working to implement the most cost effective intervention solution in order to resolve this issue in the shortest possible time period. Average gross daily production at Aje calculated from first oil in May until mid-August has been 5,500 bopd, which includes the entire testing, commissioning, and approval period which completed in mid-July.
Nigerian regulators have recently officially approved production and the export sale from Aje. The first cargo of Aje crude should be lifted during September and Glencore Energy UK Limited has been selected for its offtake.
The initial production data from the 2 existing wells are being used to update our subsurface geological models which were constructed using the recently acquired 3D seismic data. These models are being used to determine the optimum locations for the Aje-6 and Aje-7 wells which will form phase 2 of the Cenomanian oil field development. It is expected that a decision regarding the phase 2 drilling programme will be made towards the end of 2016.
The Aje gas development project based around the commercialisation of the 2C Turonian contingent resources of 163 mmboe (gross) was progressed in the quarter. The development concept involves production of the Turonian hydrocarbons through two or more additional wells, processing and export of gas via pipeline for sale to buyers in the region. Liquid hydrocarbons produced from the Turonian would be stored aboard the FPSO for sale.
AGR TRACS have been commissioned to do a prospective resource review of the exploration potential on OML 113, and the summary of this report should be available later this year.
In Gabon, we continue to have ongoing discussions with potential farm-in partners and to examine other initiatives such as refined development plans with our partners Harvest Natural Resources. We are actively working on a forward plan for the license where, alongside the already discovered contingent resources in the Ruche, Tortue, Moubenga and Walt Whitman fields, we see world-class exploration potential. Within the EEA area prospects A and B have combined P50 of 482 million barrels of gross un-risked prospective resources. The third exploration phase of the Dussafu PSC expired on May 27, 2016. The expiration of the exploration phase has no effect on the discovered fields under the Exclusive Exploitation Authorization (EEA). All expenditure commitments on this exploration phase have been completed.
Following the Equity Private Placement in the first quarter, the Company issued NOK 10 million (approximately USD 1.2 million) in gross proceeds through the subscription and allocation of 23,809,500 new shares in a Subsequent Offering to the shareholders that did not participate in the Equity Private Placement. The new shares were issued at a subscription price of NOK 0.42 per share.
At the end of May 2016, the Company completed a reverse split of the Company's shares at a ratio of 10:1 resulting in an increase in the share capital of NOK 0.04. Following the registration of the reverse split and capital increase and as at June 30, 2016, the Company had a registered share capital of NOK 2,125,109.80 divided into 42,502,196 shares, each with a nominal value of NOK 0.05.
The Company's General and Administration (G&A) costs reduced by approximately 24% year-on-year, whereas the quarter-onquarter G&A rose marginally as a result of timings and quarterly variations. The Company will continue to seek further cost reductions and to maintain strong financial discipline, although some further quarterly variations may still occur. In addition to the internal G&A, the asset related expensed overheads have also been reduced in the current quarter.
The Company's formal exit from its historical Brazilian business is still ongoing with slow progress towards completion of license relinquishment by the Brazilian regulators. Management is working actively with the Operator Petrobras to bring matters to a close by the end of the current financial year. However, the timing of such conclusion will subject to necessary approvals by the Brazilian Regulator ANP.
During the second quarter, the Company started first oil production from its Aje field, offshore Nigeria. Between first oil in May 2016 and the commissioning of commercial production (post-period end), the field's test production has been stored to be sold at a later date. All pre-commissioning costs in the test production period are deemed integral to the development of the field and have be recognised in the balance sheet of the end of the second quarter 2016. These costs will be expensed in the income statement to align with the revenue from the sale of oil, which is expected in September 2016.
Panoro Energy reported a net loss of USD 1.3 million from continuing operations for the second quarter 2016, a decrease of USD 16.9 million, compared to a loss of USD 18.2 million in the first quarter 2016. The reduction in loss was a result of the noncash impairment of the Dussafu licence by USD 17.1 million during the first quarter.
Exploration related costs and operator G&A was USD 0.2 million for both reported quarters in 2016 and is a result of re-phasing of work programmes on the licences.
General and Administration costs from continuing activities increased from USD 0.9 million in Q1 2016 to USD 1.0 million in Q2 2016. This is driven by quarterly variations as highlighted in the first quarter; however the overall downward trend brought about by the cost reduction initiatives is expected to continue.
Depreciation for the current quarter was USD 26 thousand decreasing from USD 31 thousand in Q1 2016.
There was no impairment charge in the second quarter 2016 in comparison to the non-cash provision for impairment of USD 17.1 million to its investment in the Dussafu asset in Gabon in the first quarter 2016.
EBIT from continuing operations was thus a negative USD 1.3 million in the second quarter 2016, compared to a negative USD 18.2 million in the first quarter 2016.
Net financial items amounted to a net expense of USD 22 thousand in the second quarter 2016 compared to an income of USD 18 thousand in the first quarter.
Loss before tax from continuing activities was USD 1.3 million in the second quarter 2016 which was lower by USD 16.9 million compared to previous quarter loss of USD 18.2 million.
Net loss for the period from discontinued operations was USD 20 thousand for the current quarter, an increase in loss of USD 14 thousand from the first quarter.
The total net loss was USD 1.3 million, compared to a net loss of USD 18.2 million in the first quarter.
Minor movement in other comprehensive income was a result of currency translation adjustments for reporting purposes in both quarters.
Panoro Energy reported a net loss of USD 19.4 million from continuing operations for the first half 2016, compared to a loss of USD 36 million in the same period in 2015.
Exploration related costs and operator G&A decreased to USD 0.4 million in 1H 2016, down from USD 1 million in same period in 2015. This is consistent with the operator general and administrative costs on the JVs and in line with the budgeted expenditure in the respective periods.
General and Administration costs from continuing operations decreased to just under USD 2 million in the first half of 2016 compared to USD 2.6 million in the comparative period in 2015 culminating in a year-on-year decrease of 24.2%. The reduction is a result of continued cost saving efforts.
Depreciation increased from USD 28 thousand in the first half of 2014 to USD 57 thousand for the six months to June 2016.
During the first half of 2016, the Company recorded a non-cash provision for impairment of USD 17.1 million to its investment in the Dussafu asset in Gabon. The impairment is the result of the effect of lower oil prices and is considered to be a fair and current reflection on the Company's valuation of the carrying value of the asset. The recognition of such provision is prudent and conservative treatment without an underlying change in technical view of the asset and follows the initial impairment to Dussafu of USD 32.4 million during the first half of 2015.
EBIT from continuing operations was thus a negative USD 19.4 million for the first half 2016, compared to a negative USD 36.1 million in the same period of 2015.
Net financial items amounted to an expense of USD 4 thousand in the current period compared to an income of USD 32 thousand in the same period in 2015.
Loss before tax from continuing activities was USD 19.4 million for the first half 2016 compared to the loss of USD 36 million for the same period in 2015. The decrease in loss in 2016 is predominantly due to the respective Dussafu impairment charges.
Net loss for the period from discontinued operations was USD 26 thousand for the first half 2016 compared to net loss of USD 0.3 million for the same period in 2015.
The total net loss for the first half 2016 was USD 19.5 million, compared to a net loss of USD 36.4 million for 2015.
Minor movement in respective quarters to other comprehensive income was a result of currency translation adjustments for reporting purposes in both quarters.
Movements in the Group statement of financial position during the second quarter of 2016 were a combination of the following:
Non-current assets amounted to USD 96.1 million at June 30, 2016, an increase of USD 1.8 million from March 31, 2015.
Licences and exploration assets amounted to USD 14.6 million, effectively unchanged from USD 14.5 million as at March 31, 2016. The development assets balance amounted to USD 81.2 million as of June 30, 2016 from USD 78.6 million as March 31, 2016 with investments of USD 1.8 million in the current quarter and USD 0.8 million from the capitalisation of the Rubicon FPSO guarantee deposit, previously held in other non-current assets.
Property, furniture, fixtures and equipment was USD 209 thousand decreasing from USD 235 thousand at March 31, 2016.
Other non-current assets decreased to USD 0.2 million as at June 30, 2016 as a result of the capitalisation of the Rubicon FPSO guarantee deposit of USD 0.8 million. The remaining USD 0.2 million relates to the tenancy deposit for office premises.
Current assets amounted to USD 8.3 million per June 30, 2016, compared to USD 10.5 million per March 31, 2016.
Trade and other receivables stood at USD 1.7 million, a decrease from USD 2.9 million at the end of March 2016. The main factor is the decrease in the receivable balance of prepaid Aje cash calls during the period.
Cash and bank balances stood at USD 6.6 million per June 30, 2016, a decrease from USD 7.6 million per March 31, 2016. The decrease is mainly attributed to Aje and Dussafu capital and operating cost cash calls paid during the quarter which amounted to USD 0.6 million and USD 0.2 million, respectively. However the effect of these cash calls was effectively offset by the injection of net proceeds from the Subsequent Offering during the quarter of approx. USD 1.1 million.
Equity amounted to USD 97.5 million per June 30, 2016, compared to USD 97.6 million at the end of March 2016. The change reflects increased equity, offset by costs of the Subsequent Offering and by the loss for the period.
Total non-current liabilities of USD 6.2 million remain unchanged for both periods, representing the inclusion of the Aje Field decommissioning provision of USD 1.8 million and a deferred tax liability of USD 4.4 million arising on a business combination in 2010. The deferred tax liability is expected to unwind proportionally following commencement of oil production from the Aje field.
Current liabilities amounted to USD 0.8 million at June 30, 2016, compared to USD 1 million at the end of March 2016.
Accounts payable, accruals and other liabilities amounted to USD 0.8 million, a decrease from USD 1 million at the end of March 2016. The decrease represents lower corporate trade payables and operational accruals as at June 30, 2016.
Movements in the Group statement of financial position during the first half of 2016 were a combination of the following:
Non-current assets amounted to USD 96.1 million at June 30, 2016, a decrease of USD 6.3 million from December 31, 2015.
Licences and exploration assets amounted to USD 14.6 million, a decrease of USD 16.4 million since December 2015. The effect of the Dussafu impairment charge in the period of USD 17.1 million has been marginally offset by capital additions on Dussafu permit progressing 2016 work programme with expenditure covering FEED, G&G and Engineering Management and the annual Surface Rental for the EEA area. The development assets balance amounted to USD 81.2 million as of June 30, 2016 with investments of USD 10.2 million in the first half of 2016 and USD 0.8 million from the capitalisation of the Rubicon FPSO guarantee deposit, previously held in other non-current assets.
Property, furniture, fixtures and equipment was USD 209 thousand decreasing from USD 266 thousand at December 31, 2015. The decrease represents the depreciation of office premises and information technology upgrades carried out in 2015.
Other non-current assets decreased to USD 0.2 million as at June 30, 2016 as a result of the capitalisation of the Rubicon FPSO guarantee deposit of USD 0.8 million. The remaining USD 0.2 million relates to the tenancy deposit for office premises.
Current assets amounted to USD 8.3 million per June 30, 2016, compared to USD 12.6 million per December 31, 2015.
Trade and other receivables stood at USD 1.7 million at the end of both periods. Cash and bank balances stood at USD 6.6
million per June 30, 2016, a decrease from USD 10.9 million per December 31, 2015.
Equity amounted to USD 97.5 million per June 30, 2016, compared to USD 108.2 million at the end of December 2015. The change reflects increased equity, offset by costs of the Private Placement and Subsequent Offering and by the loss for the period.
Total non-current liabilities of USD 6.2 million remain unchanged for both periods, representing the inclusion of the Aje Field decommissioning provision of USD 1.8 million and a deferred tax liability of USD 4.4 million arising on a business combination in 2010. The deferred tax liability is expected to unwind proportionally following commencement of oil production from the Aje field.
Current liabilities amounted to USD 0.8 million at June 30, 2016, effectively unchanged from USD 0.7 million at the end of December 2015.
Accounts payable, accruals and other liabilities amounted to USD 0.8 million at June 30, 2016 with only a marginal increase from USD 0.7 million at the end of December 2015.
As of June 30, 2016, the Company had USD 6.6 million in cash and bank balances and no debt. There is also unspent net cash in JV accounts of USD 1.6 million which is allocated to remaining capital and operating costs. As the Company has now reached the milestone of first oil production on the Aje field, offshore Nigeria, positive cash flow is expected in future quarters.
Investment in Panoro Energy involves risks and uncertainties as described in Company's Annual Report for 2015.
As an oil and gas company operating in multiple jurisdictions in West Africa, exploration results, reserve and resource estimates and estimates for capital and operating expenditures are associated with uncertainty. The field's production performance may be uncertain over time.
The company is exposed to various forms of financial risks, including, but not limited to, fluctuation in oil prices, exchange rates, interest rates and capital requirements; these are described in the company's 2015 annual report and accounts, and in note 2.1 to the half year financial statements. The company is also exposed to uncertainties relating to the international capital markets and access to capital and this may influence the speed with which development projects can be accomplished.
The development of oil and gas fields in which the Company is involved is associated with technical risk, reservoir performance, alignment in the consortiums with regards to development plans and on obtaining the necessary licenses and approvals from the authorities. Such operations might occasionally lead to cost overruns and production disruptions, as well as delays compared to the plans laid out by the operator of these fields. Furthermore, the Company has limited influence on operational risk related to exploration success and development of industry cost.
The Board of Directors Panoro Energy ASA August 23, 2016
Julien Balkany Hilde Ådland Alexandra Herger Chairman of the Board Non-Executive Director Non-Executive Director
Torstein Sanness Garrett Soden
Non-Executive Director Non-Executive Director
| Q1 | Q2 | YTD | YTD | |||
|---|---|---|---|---|---|---|
| 2015 | 2016 | 2016 | Amounts in USD 000 | Note | 2016 | 2015 |
| (Unaudited) | (Unaudited) | |||||
| Continuing Operations | ||||||
| - | - | - | Revenues | - | - | |
| - | - | - | Total revenues | - | - | |
| (342) | (235) | (204) | Exploration related costs and Operator G&A | (439) | (961) | |
| (38) | - | - | Severance and restructuring costs | - | (38) | |
| (1,297) | (944) | (1,028) | General and administrative costs | (1,972) | (2,603) | |
| (14) | (31) | (26) | Depreciation | (57) | (28) | |
| (32,445) | (16,960) | - | Impairment of Assets | 6.2 | (16,960) | (32,445) |
| - | - | (6) | Share based payments | 5 | (6) | - |
| (34,136) | (18,170) | (1,264) | EBIT - Operating income/(loss) | (19,434) | (36,075) | |
| 6 | 3 | 11 | Interest costs net of income | 14 | 62 | |
| (3) | (5) | (3) | Other financial costs net of income | (8) | (6) | |
| (15) | 20 | (30) | Net foreign exchange gain/(loss) | (10) | (24) | |
| (34,148) | (18,152) | (1,286) | Income/(loss) before tax | (19,438) | (36,043) | |
| - | - | - | Income tax benefit/(expense) | - | - | |
| (34,148) | (18,152) | (1,286) | Net income/(loss) for the period from continuing operations |
(19,438) | (36,043) | |
| Discontinued operations | ||||||
| (88) | (6) | (20) | Net income / (loss) for the period from discontinued operations |
4 | (26) | (346) |
| (34,236) | (18,158) | (1,306) | Net income / (loss) for the period | (19,464) | (36,389) | |
| 19 | 2 | (9) | Exchange differences arising from translation of foreign operations |
(7) | 48 | |
| 19 | 2 | (9) | Other comprehensive income/(loss) for the period (net of tax) |
(7) | 48 | |
| (34,217) | (18,156) | (1,315) | Total comprehensive income/(loss) for the period (net of tax) |
(19,471) | (36,341) | |
| Net income /(loss) for the period attributable to: | ||||||
| (34,236) | (18,158) | (1,306) | Equity holders of the parent | (19,464) | (36,389) | |
| Total comprehensive income / (loss) for the period | ||||||
| attributable to: | ||||||
| (34,217) | (18,156) | (1,315) | Equity holders of the parent | (19,471) | (36,341) | |
| Earnings per share | 5 | |||||
| (USD) – Basic and diluted for income/(loss) for the period | ||||||
| (0.15) | (0.07) | (0.03) | attributable to equity holders of the parent - Total | (0.55) | (0.16) | |
| (0.15) | (0.07) | (0.03) | (USD) – Basic and diluted for income/(loss) for the period attributable to equity holders of the parent - Continuing operations |
(0.55) | (0.15) |
| June 30, | March 31, | December 31, | ||
|---|---|---|---|---|
| Amounts in USD 000 | 2016 | 2016 | 2015 | |
| (Unaudited) | (Unaudited) | (Audited) | ||
| Non-current assets | ||||
| Licenses and exploration assets | 6/6.2 | 14,610 | 14,546 | 31,033 |
| Development assets | 6/6.1 | 81,174 | 78,574 | 70,195 |
| Property, furniture, fixtures and office equipment | 209 | 235 | 266 | |
| Other non-current assets | 149 | 962 | 962 | |
| Total Non-current assets | 96,142 | 94,317 | 102,455 | |
| Current assets | ||||
| Trade and other receivables | 1,703 | 2,853 | 1,693 | |
| Cash and cash equivalents | 6,640 | 7,639 | 10,948 | |
| Total current assets | 8,343 | 10,492 | 12,641 | |
| Total Assets | 104,485 | 104,809 | 115,096 | |
| Equity | ||||
| Share capital | 7 | 305 | 290 | 193 |
| Other equity | 97,173 | 97,280 | 107,978 | |
| Total Equity attributable to equity holders of the parent | 97,478 | 97,570 | 108,171 | |
| Non-current liabilities | ||||
| Decommissioning liability | 1,856 | 1,856 | 1,856 | |
| Deferred tax liabilities | 4,376 | 4,376 | 4,376 | |
| Total Non-current liabilities | 6,232 | 6,232 | 6,232 | |
| Current liabilities | ||||
| Accounts payable, accruals and other liabilities | 775 | 1,007 | 693 | |
| Total current liabilities | 775 | 1,007 | 693 | |
| Total Liabilities | 7,007 | 7,239 | 6,925 | |
| Total Equity and Liabilities | 104,485 | 104,809 | 115,096 |
| Q2 | Q1 | Q2 | YTD | YTD | |
|---|---|---|---|---|---|
| 2015 | 2016 | 2016 | Amounts in USD 000 - (Unaudited) | 2016 | 2015 |
| Cash flows from operating activities | |||||
| (34,148) | (18,152) | (1,286) Net (loss)/ income from continuing operations | (19,438) | (36,043) | |
| (88) | (6) | (20) Net (loss)/ income from discontinued operations | (26) | (346) | |
| (34,236) | (18,158) | (1,306) Net (loss)/ income for the period before tax | (19,464) | (36,389) | |
| Adjusted for: | |||||
| 14 | 31 | 26 | Depreciation | 57 | 28 |
| 32,509 | 16,969 | - | Impairment and asset write-off | 16,969 | 32,599 |
| 342 | 59 | 380 | Exploration related costs and operator G&A | 439 | 961 |
| (12) | 2 | (8) | Net finance costs | (6) | (81) |
| - | - | 6 | Share-based payments | 6 | - |
| 18 | (20) | 30 | Foreign exchange gains/losses | 10 | 21 |
| 145 | 276 | (420) | Increase/(decrease) in trade and other payables | (144) | (565) |
| (172) | (227) | 263 | (Increase)/decrease in trade and other receivables | 36 | (100) |
| - | - | - | Taxes paid | - | - |
| (1,392) | (1,068) | (1,029) Net cash flows from operating activities | (2,097) | (3,526) | |
| Cash flows from investing activities | |||||
| (1,241) | (9,787) | (2,005) Investment in exploration, production and other assets | (11,792) | (3,188) | |
| (149) | - | 813 | Movement in related non-current assets | 813 | (962) |
| (1,390) | (9,787) | (1,192) Net cash flows from investing activities | (10,979) | (4,150) | |
| Cash flows from financing activities | |||||
| - | 7,555 | 1,219 | Net proceeds from Equity Private Placement | 8,774 | - |
| 12 | (2) | 8 | Net financial charges paid | 6 | 81 |
| 12 | 7,553 | 1,227 | Net cash flows from financing activities | 8,780 | 81 |
| 3 | (7) | (5) Effect of foreign currency translation adjustment on cash balances | (12) | (21) | |
| (2,767) | (3,309) | (999) Change in cash and cash equivalents during the period | (4,308) | (7,616) | |
| 36,092 | 10,948 | 7,639 | Cash and cash equivalents at the beginning of the period | 10,948 | 40,941 |
| 33,325 | 7,639 | 6,640 | Cash and cash equivalents at the end of the period | 6,640 | 33,325 |
| Attributable to equity holders of the parent | |||||||
|---|---|---|---|---|---|---|---|
| For the six months ended June 30, 2016 Amounts in USD 000 |
Issued capital |
Share premium |
Additional paid-in capital |
Retained earnings |
Other reserves |
Currency translation reserve |
Total |
| At January 1, 2016 - (Audited) Net income/(loss) for the period - Continuing |
193 | 288,858 | 122,054 | (259,539) | (37,647) | (5,747) | 108,171 |
| Operations | - | - | - | (18,152) | - | - | (18,152) |
| Net income/(loss) for the period - Discontinued Operations |
- | - | - | (6) | - | - | (6) |
| Other comprehensive income/(loss) | - | - | - | - | - | 2 | 2 |
| Total comprehensive income/(loss) | - | - | - | (18,158) | - | 2 | (18,156) |
| Share Issue for cash | 97 | 8,090 | - | - | - | - | 8,187 |
| Transaction costs on Share Issue | - | (632) | - | - | - | - | (632) |
| At March 31, 2016 - (Unaudited) | 290 | 296,316 | 122,054 | (277,697) | (37,647) | (5,745) | 97,570 |
| Net income/(loss) for the period - Continuing Operations Net income/(loss) for the period - Discontinued |
- | - | - | (1,286) | - | - | (1,286) |
| Operations | - | - | - | (20) | - | - | (20) |
| Other comprehensive income/(loss) | - | - | - | - | - | (9) | (9) |
| Total comprehensive income/(loss) | - | - | - | (1,306) | - | (9) | (1,315) |
| Share Issue for cash | 15 | 1,288 | - | - | - | - | 1,303 |
| Transaction costs on Share Issue | - | (84) | - | - | - | - | (84) |
| Employee share options charge/(benefit) | - | - | 6 | - | - | - | 6 |
| At June 30, 2016 - (Unaudited) | 305 | 297,520 | 122,059 | (279,005) | (37,647) | (5,754) | 97,478 |
| Attributable to equity holders of the parent | |||||||
|---|---|---|---|---|---|---|---|
| For the six months ended June 30, 2015 Amounts in USD 000 |
Issued capital |
Share premium |
Additional paid-in capital |
Retained earnings |
Other reserves |
Currency translation reserve |
Total |
| At January 1, 2015 - (Audited) Net income/(loss) for the period - Continuing |
56,333 | 288,858 | 65,914 | (219,672) | (37,647) | (5,729) | 148,057 |
| Operations | - | - | - | (1,895) | - | - | (1,895) |
| Net income/(loss) for the period - Discontinued Operations |
- | - | - | (258) | - | - | (258) |
| Other comprehensive income/(loss) | - | - | - | - | - | 30 | 30 |
| Total comprehensive income/(loss) | - | - | - | (2,153) | - | 30 | (2,123) |
| At March 31, 2015 - (Unaudited) Net income/(loss) for the period - Continuing |
56,333 | 288,858 | 65,914 | (221,825) | (37,647) | (5,699) | 145,933 |
| Operations | - | - | - | (34,148) | - | - | (34,148) |
| Net income/(loss) for the period - Discontinued Operations |
- | - | - | (88) | - | - | (88) |
| Other comprehensive income/(loss) | - | - | - | - | - | 19 | 19 |
| Total comprehensive income/(loss) | - | - | - | (34,236) | - | 19 | (34,217) |
| At June 30, 2015 - (Unaudited) | 56,333 | 288,858 | 65,914 | (256,061) | (37,647) | (5,680) | 111,716 |
The holding Company, Panoro Energy ASA, was incorporated on April 28, 2009 as a public limited company under the Norwegian Public Limited Companies Act of June 19, 1997 No. 45. The registered organisation number of the Company is 994 051 067 and its registered address is c/o Michelet & Co Advokatfirma AS, Grundingen 3, 0250 Oslo, Norway.
The Company and its subsidiaries are engaged in exploration and production of oil and gas resources in West Africa. The condensed consolidated financial statements of the Group for the period ended June 30, 2016 were authorised for issue by the Board of Directors on August 23, 2016.
The Company's shares are traded on the Oslo Stock Exchange under the ticker symbol PEN.
The unaudited condensed consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting", as adopted by the EU. The condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the financial information and the risk factors contained in the Company's 2015 Annual Report and the Company's recently published Prospectus. A copy of the 2015 Annual Report and the recently published Prospectus are available on the Company's website at http://www.panoroenergy.com.
The condensed consolidated financial statements are presented in US Dollars and all values are rounded to the nearest thousand dollars (USD 000), except when otherwise stated.
The accounting policies adopted in preparation of these condensed consolidated financial statements are consistent with those followed in the preparation of the Group's 2015 Annual Report.
During the second quarter, the Company started first oil production from its Aje field, offshore Nigeria. Between first oil in May 2016 and the commissioning of commercial production (post-period end), the field's test production has been stored to be sold at a later date. As a consequence of the timing of the test production, the company has adopted the policy that all precommissioning operating costs are deemed integral to the development of the field and will be capitalised to the cost of the asset in this pre-commissioning period. As a result on from this, these costs will be recognised in the income statement to align with the revenue from the sale of oil, which is expected in September 2016.
As of June 30, 2016, the Company had USD 6.6 million in cash and bank balance including NOK 10 million (USD 1.2 million) in gross proceeds raised through the Subsequent Offering. As a result and including anticipated cash flow from operations, the Group's liquidity situation has improved. The interim financial statements have been prepared under the assumption of going concern.
The Group operated predominantly in one business segment being the exploration and production of oil and gas in West Africa. However, for the purpose of comparative information, the Brazilian segment has been included.
The Group's reportable segments, for both management and financial reporting purposes, are as follows:
Management monitors the operating results of business segments separately for the purpose of making decisions about resources to be allocated and of assessing performance. Segment performance is evaluated based on capital and general expenditure. Details of group segments are reported below.
| Q2 | Q1 | Q2 | YTD | YTD | |
|---|---|---|---|---|---|
| 2015 | 2016 | 2016 | 2016 | 2015 | |
| (Unaudited) | OPERATING SEGMENT - WEST AFRICA | (Unaudited) | |||
| in USD 000 | |||||
| (32,754) | (17,954) | (1,074) Income / (Loss) for the period from continuing operations | (19,028) | (33,397) | |
| 32,445 | 17,147 | - | Impairment of E&E Assets | 17,147 | 32,445 |
| - | 96,480 | - | Segment assets | 97,183 | 84,549 |
| CORPORATE | |||||
| in USD 000 | |||||
| (1,394) | (198) | (213) Income / (Loss) for the period from continuing operations | (411) | (2,300) | |
| 14 | 31 | 26 Depreciation and amortisation | 57 | 28 | |
| - | 8,262 | - | Segment assets | 7,242 | 33,362 |
| DISCONTINUED OPERATIONS | |||||
| in USD 000 | |||||
| (88) | (6) | (20) Income / (Loss) for the period from discontinued operations | (26) | (346) | |
| - | 67 | - | Segment assets | 60 | 771 |
| CONSOLIDATED | |||||
| in USD 000 | |||||
| (34,148) | (18,152) | (1,287) Income / (Loss) for the period from continuing operations | (19,439) | (35,697) | |
| (88) | (6) | (20) Income / (loss) for the period from discontinued operations | (26) | (346) | |
| 14 | 31 | 26 Depreciation and amortisation | 57 | 28 | |
| 32,445 | 17,147 | - | Impairment of E&E Assets | 17,147 | 32,445 |
| - | 104,809 | - | Segment assets | 104,485 | 118,682 |
The segment assets represent position as of quarter ends and the statement of comprehensive income items represent results for the respective quarters presented. There are no differences in the nature of measurement methods used on segment level compared with the interim condensed consolidated financial statements. There are no inter-segment adjustments and eliminations for the periods presented.
The Company's subsidiaries in Brazil have been classified as discontinued operations under IFRS 5. The results of Brazilian segment for the comparative quarters have therefore been carved out of the operating results and presented below as discontinued operations:
| Q2 | Q1 | Q2 | YTD | YTD |
|---|---|---|---|---|
| 2015 | 2016 | 2016 | 2016 | 2015 |
| USD 000 - (Unaudited) | USD 000 - (Unaudited) |
| - | - | - Oil and gas revenue |
- | - |
|---|---|---|---|---|
| - | - | - Total revenues and other income |
- | - |
| - | - | - Production costs |
- | - |
| - | - | - Redundancies and restructuring costs |
- | - |
| (11) | (11) | (20) General and administration costs | (31) | (11) |
| (11) | (11) | (20) EBITDA | (31) | (11) |
| - | - | - Depreciation |
- | - |
| - | - | - Impairment |
- | - |
| - | - | - Share based payments |
- | - |
| - | - | - Gain/(loss) on sale of subsidiary |
- | - |
| (11) | (11) | (20) EBIT - Operating income / (loss) | (31) | (11) |
| 6 | 6 | 1 Interest costs net of income |
7 | 6 |
| - | - | Other financial costs net of income | - | - |
| (1) | (1) | (1) Net foreign exchange gain / (loss) | (2) | (1) |
| (6) | (6) | (20) Income / (loss) before tax | (26) | (6) |
| - | - | - Income tax benefit / (expense) |
- | - |
| (6) | (6) | (20) Net income/(loss) for the period from discontinued | (26) | (6) |
| (0.00) | (0.00) | (0.00) discontinued operations |
(0.00) | (0.00) |
|---|---|---|---|---|
| Q2 | Q1 | Q2 | YTD | YTD | |
|---|---|---|---|---|---|
| 2015 | 2016 | 2016 | 2016 | 2015 | |
| (Unaudited) | Amounts in USD 000, unless otherwise stated | (Unaudited) | |||
| (34,236) | (18,158) | (1,306) Net profit / (loss) attributable to equity holders of the parent - Total | (19,464) | (36,389) | |
| (34,148) | (18,152) | (1,286) Net profit / (loss) attributable to equity holders of the parent - Continuing operations | (19,438) | (36,043) | |
| 234,546 | 278,502 | 42,319 Weighted average number of shares outstanding - in thousands | 35,085 | 234,546 | |
| (0.15) | (0.07) | (0.03) Basic and diluted earnings per share (USD) - Total | (0.55) | (0.16) | |
| (0.15) | (0.07) | (0.03) Basic and diluted earnings per share (USD) - Continuing operations | (0.55) | (0.15) |
The weighted average number of shares and the EPS workings for Q2 2016 and YTD 2016 are calculated including the effect of the reverse share split that occurred during the quarter.
In June 2016, the Company announced that for the year 2015, the Board of Directors granted 200,000 Restricted Share Units ("RSUs") to the key employees of the Company under the long term incentive compensation plan approved by the shareholders. One Restricted Share Unit ("RSU") entitles the holder to receive one share of capital stock of the Company against payment in cash of the par value for the share. The par value is currently NOK 0.05 per share. Vesting of the RSUs is time based. The standard vesting period is 3 years, where 1/3 of the RSUs vest after one year, 1/3 vest after 2 years, and the final 1/3 vest after 3 years from grant. RSUs vest automatically at the respective vesting dates and the holder will be issued the applicable number of shares as soon as possible thereafter.
| Licence Interest, Exploration and Development Evaluation Assets |
||
|---|---|---|
| USD 000 | USD 000 | |
| Net book value | ||
| At January 1, 2016 (Audited) | 31,033 | 70,195 |
| Additions | 724 | 10,979 |
| Impairment of E&E Assets | (17,147) | - |
| At June 30, 2016 (Unaudited) | 14,610 | 81,174 |
License interest, exploration and evaluation assets of USD 14.6 million relate to Dussafu asset.
| USD 000 | |
|---|---|
| Net book value | |
| Development Costs - Facilities and Production Assets | 43,229 |
| Pre-Commissioning Operating Costs | 1,011 |
| Licence and Exploration Costs | 35,078 |
| Asset Retirement Obligation | 1,856 |
| At June 30, 2016 (Unaudited) | 81,174 |
The costs in relation to OML 113 that are currently part of the development costs will be transferred to the respective categories in 3Q 2016 at the commissioning of the Aje field.
There was no addition to the 2016 Dussafu impairment provision of USD 17.1 million during the second quarter. This first quarter charge to the income statement was the result of the effect of low oil prices and was considered to be a fair and current reflection on the Company's valuation of the carrying value of the asset. The recognition of such provision is prudent and conservative treatment without an underlying change in technical view of the asset and the associated volumes. There was an offset of USD 187 thousand through a return of capital, received from the Company's fully impaired investment in its subsidiary, Panoro Energy do Brasil Ltda.
Following the Equity Private Placement in the first quarter, the Company issued NOK 10 million (approximately USD 1.2 million) in gross proceeds through the subscription and allocation of 23,809,500 new shares in a Subsequent Offering to the shareholders that did not participate in the Equity Private Placement. The new shares were issued at a subscription price of NOK 0.42 per share. Following registration of the new shares issued in the Subsequent Offering, the total number of issued shares in the Company are 425,021,952 each having a par value of NOK 0.005.
At the end of May 2016, the Company completed a reverse split of the Company's shares at a ratio of 10:1 resulting in an increase in the share capital of NOK 0.04. Following the registration of the reverse split and capital increase and as at June 30, 2016, the Company had a registered share capital of NOK 2,125,109.80 divided into 42,502,196 shares with a nominal value of NOK 0.05.
In July, 2016, the Company announced that the commissioning of the Front Puffin FPSO was completed, and the Front Puffin FPSO was on hire following the 72 hour test. Targeted stabilised production rates have not yet been achieved, due to mechanical issues and Nigerian regulatory approvals. Until the outstanding issues are resolved, which could take until the end of Q4 2016, production will be maintained at a restricted daily rate of approximately 7,000-8,000 barrels of oil. It is expected that the first crude oil lifting from the Front Puffin FPSO will take place at the end of August. In the meantime we continue to be encouraged by the performance of the reservoir to date. Laboratory assays have been delivered on Aje crude oil which show it to be as expected a high quality grade of approximately 42 degree API. Several international oil companies and trading houses have expressed interest in purchasing Aje crude.
Material reductions in operating costs have also been achieved at Aje, and continuing efforts are being made to secure further savings. Work continues for planning of Aje Phase 2 (additional Cenomanian oil wells) and Phase 3 (Turonian gas and condensate), and in evaluating the wider exploration potential on OML 113.
We confirm to the best of our knowledge that the condensed set of interim consolidated financial statements as of June 30, 2016 has been prepared in accordance with IAS 34 Interim Financial Reporting and gives a true and fair view of the Company's assets, liabilities, financial position and result for the period viewed in their entirety, and that the interim management report in accordance with the Norwegian Securities Trading Act section 5-6 fourth paragraph includes a fair review of any significant events that arose during the six-month period and their effect on the half-yearly financial report, and any significant related parties transactions, and a description of the principal risks and uncertainties for the remaining six months of the year.
Julien Balkany Hilde Ådland Alexandra Herger Chairman of the Board Non-Executive Director Non-Executive Director
Torstein Sanness Garrett Soden Non-Executive Director Non-Executive Director
| August 24, 2016 | Second quarter 2016 results |
|---|---|
| November 17, 2016 | Third quarter 2016 results |
| Bbl | One barrel of oil, equal to 42 US gallons or 159 liters |
|---|---|
| Bcf | Billion cubic feet |
| Bm3 | Billion cubic meter |
| BOE | Barrel of oil equivalent |
| Btu | British Thermal Units, the energy content needed to heat one pint of water by one degree Fahrenheit |
| IP | Initial production |
| Mcf | Thousand cubic feet |
| MMcf | Million cubic feet |
| MMbbl | Million barrels of oil |
| MMBOE | Million barrels of oil equivalents |
| MMBtu | Million British thermal units |
| MMm3 | Million cubic meters |
| Tcf | Trillion cubic feet |
This presentation does not constitute an offer to buy or sell shares or other financial instruments of Panoro Energy ASA ("Company"). This presentation contains certain statements that are, or may be deemed to be, "forward-looking statements", which include all statements other than statements of historical fact. Forward-looking statements involve making certain assumptions based on the Company's experience and perception of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. Although we believe that the expectations reflected in these forward-looking statements are reasonable, actual events or results may differ materially from those projected or implied in such forward-looking statements due to known or unknown risks, uncertainties and other factors. These risks and uncertainties include, among others, uncertainties in the exploration for and development and production of oil and gas, uncertainties inherent in estimating oil and gas reserves and projecting future rates of production, uncertainties as to the amount and timing of future capital expenditures, unpredictable changes in general economic conditions, volatility of oil and gas prices, competitive risks, counter-party risks including partner funding, regulatory changes including country risks where the Group's assets are located and other risks and uncertainties discussed in the Company's periodic reports. Forward-looking statements are often identified by the words "believe", "budget", "potential", "expect", "anticipate", "intend", "plan" and other similar terms and phrases. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation, and we undertake no obligation to update or revise any of this information.
For further information, please contact:
John Hamilton, Chief Executive Officer Qazi Qadeer, Chief Financial Officer [email protected] [email protected] Tel: +44 20 3405 1060 Tel: +44 20 3405 1060
Panoro Energy ASA/ Panoro Energy Limited Panoro Energy ASA/ Panoro Energy Limited
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