ZEPHYR ENERGY PLC

Earnings Release • Sep 30, 2019

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RNS Number : 0457O

Rose Petroleum PLC

30 September 2019

Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement, this information is now considered to be in the public domain.

30 September 2019

Rose Petroleum plc

("Rose", the "Company" or the "Group")

Interim Results for the six months ended 30 June 2019

Rose Petroleum plc (AIM: ROSE), the North America-focused oil and gas company, is pleased to announce its unaudited interim results for the six months ending 30 June 2019.

A copy of the interim results report will shortly be available on the Company's website http://www.rosepetroleum.com.

Highlights

·    Bolstered operational and governance framework through restructuring of Board and management team;

·    Revised focus on upstream oil and natural gas opportunities in the U.S. Rocky Mountain region;

·    New strategy to grow asset portfolio through value-accretive production and development acquisitions;

·    First acquisition opportunity currently under an exclusivity agreement;

·    Review of Paradox Basin project to optimise project potential while reducing costs; and

·   Grant funding of a minimum US$1m, subject to contract, from the U.S. Department of Energy (the "DOE") and the University of Utah, for the development of Company's Paradox Basin project.

Colin Harrington, Chief Executive Officer, said:

"In the Company's recent Annual Report, I said that Rose had strong prospects for growth, both from its existing portfolio and from the potential of carefully targeted acquisitions. I now believe we have positioned the Company to deliver growth from both its existing portfolio and from carefully targeted acquisitions, and I'm excited about the next steps in our process of transformation."

Contacts:

Rose Petroleum plc Colin Harrington (CEO) Chris Eadie (CFO)	Tel: +44 (0)20 7225 4599 Tel: +44 (0)20 7225 4599
Allenby Capital Limited - AIM Nominated Adviser Jeremy Porter / James Reeve / Liz Kirchner	Tel: +44 (0)20 3328 5656
Turner Pope Investments - Joint Broker Andy Thacker	Tel: +44 (0)20 3621 4120
Cantor Fitzgerald Europe - Financial Adviser and Joint Broker David Porter	Tel: +44 (0)20 7894 7686
Novum Securities Limited - Joint Broker Colin Rowbury	Tel: +44 (0)20 7399 9427
Media enquiries: Allerton Communications Peter Curtain	Tel: +44 (0) 20 3633 1730 [email protected]

ROSE PETROLEUM PLC

INTERIM REPORT FOR THE SIX MONTHS TO 30 JUNE 2019

The Board of Rose Petroleum plc ("Rose", the "Company" or the "Group") is pleased to present its unaudited interim report for the six-month period to 30 June 2019.

CHIEF EXECUTIVE STATEMENT

OVERVIEW AND OUTLOOK

Since joining Rose in May 2019, I have worked with the team to restructure the Company and transform the existing asset base.  We have also developed a strategy to diversify through acquisition in order to deliver near-term value for shareholders. 

This new strategy, focused solely on the upstream sector in the Rocky Mountain region of the U.S., concentrates on an area with a significant number of production and development acquisition opportunities of a scale suited to our strengths and target project size. Our goal is to produce a tight, cost-effective path to near-term cash flow, and we are well underway with efforts to execute this strategy.

Over the past few months, the Company evaluated multiple possible transactions in this geographical area of focus, and I'm delighted to report that we currently have one such acquisition opportunity under an exclusivity agreement.  This potential transaction meets 100% of our acquisition criteria as described below and I look forward to providing further updates on progress shortly.

In regard to the existing corporate platform, in a short time we have augmented the Board with highly experienced individuals, reduced the operational cost base and restructured the organisation to ensure it is optimally positioned for future growth - a restructuring which will result in the closing of subsidiaries related to legacy ventures in Cuba, Mexico and Germany. We have also conducted a detailed review of our existing asset in the Paradox Basin (the "Paradox", "Paradox acreage" or "Paradox project"). While the Company remains convinced of the asset's scale and potential, the newly constituted Board believes the project should be repositioned in a way to maximize value for shareholders over the medium to longer term. We are working closely with our joint-venture partner, with the U.S. Bureau of Land Management (the "BLM") and the with the U.S. Department of Energy (the "DOE") and look forward to providing additional updates shortly.

BACKGROUND

Over the past four months, the Company significantly bolstered its operational and governance framework through the restructuring of the Board of Directors and management team, and conducted a rightsizing of the Group organisation to ensure the Company is well positioned to deliver on its new strategy.

With the team and structure now in place, the Board has turned its focus to optimising its existing assets and growing the asset portfolio through accretive acquisitions. 

In light of opportunities presented by current market and economic conditions, and as a result of the considerable experience of the new Board, the Company is now working to deliver a more balanced portfolio of production, development and exploration assets located in the Rocky Mountain region of the U.S.  

Over the coming months, the Company's efforts will continue to be focused on two discrete areas:

1)   The acquisition of near-term, low risk production and development acquisitions in the states of Colorado, Utah and Wyoming; and

2)    The creation of longer-term value from the Company's high potential appraisal project in the Paradox Basin.

ACQUISITION RATIONALE AND CRITERIA

In the Company's 2018 Annual Report, released in June 2019, the Board outlined its belief that strong financial returns could be generated from the highly fragmented smaller end of the U.S. oil exploration and production sector, and we are now in the process of restructuring Rose so that it can be a stable public growth vehicle targeting this part of the market. The Board believes that the construction of a balanced portfolio, exhibiting both free cash flow and long-term development opportunities, is core to successful growth. The Board's vision for a balanced portfolio includes:

1)    Production assets acquired at compelling valuations;

2)   Near-term, lower-risk yet highly economic development opportunities located in core acreage positions in established basins. In particular, we will target infill horizontal development drilling opportunities in basins long established through vertical production; and,

3)   Longer-term, high-potential appraisal and exploration projects designed to add significant scale, such as the current opportunity in the Paradox.

The Board believes that the Company already has significant long-term appraisal and exploration exposure through its Paradox Basin asset, and as such will concentrate Company acquisition efforts on near-term development and production opportunities. As part of this process, the Board has adopted the following high-level methodology for screening potential acquisitions based on the following factors, and all acquisitions will need to be consistent with the criteria listed below:

Geographic criteria:	Utah, Colorado or Wyoming (the "Rocky Mountain Region")
Portfolio criteria:	Near term development ("PUD") or accretive producing ("PDP") opportunities
Expertise criteria:	Prior management experience operating asset or similar assets
Cash flow criteria:	Cash flow generative within 12 months of acquisition
Entry criteria:	Proprietary acquisition angle (such as via land strategy, relationship, or unique view on upside opportunity) or uncommonly good value
Partner validation:	Strategic financial or industry partner validation
Running room:	Growth potential for future development on the asset acquired or via options for additional acreage acquisition

The Board believes that these specific criteria give the Company a clear focus, and we have already seen the benefits of this approach while appraising new opportunities. Through the network and experience of the new Board members, the Company has access to a number of attractive acquisition opportunities and we are pleased to announce that the Company is in exclusive negotiations in respect of one such asset that meets all of our pre-determined criteria as described above. 

While there is no guarantee that the Company's ongoing discussions will lead to a transaction, the Board is highly encouraged by recent progress and believes that the new strategy of the Company provides investors with near-term opportunities for growth.

PARADOX UPDATE

As mentioned above, the Company's new team has significant experience with the financing and development of U.S. based oil and gas projects. Since coming onboard, the team has undertaken a thorough technical and financial review of the Paradox project, and completed a detailed look at the historical activity carried out on the project and ongoing farm-in process. The Board also reviewed the timeframe and plan for spudding the first Paradox well in line with the expectations of the BLM, who continue to push for the development of the Paradox acreage as soon as commercially possible. 

The overwhelming conclusion from this review is that the scale and potential of the Paradox project are of sufficient magnitude to merit ongoing involvement in the project. We also believe that with more favourable positioning and better market conditions, investment from industry and financial partners is achievable. That said, farm-in discussions to date have taken longer than originally expected and current market conditions do not allow for the funding of the initial well at the present time. Further, the Board is cognisant of the need to balance the overall scale of the project with: 1) the current market backdrop, 2) timing obligations to the BLM, and 3) ongoing holding costs of the significantly sized acreage package. 

On the basis of all of these factors, the Board has elected to pursue a strategy for the Paradox which will include:

·    Focusing on the most prospective acreage (as identified by the 3D seismic acquisition undertaken by the Company and from the subsequent verification work carried out by Schlumberger);

·   Releasing acreage that the Company believes to be non-prospective or on too short a lease to merit further exploration work and / or expenditure; and

·    Actively acquiring further contiguous acreage in areas we consider most prospective.

This 'high-grading' process will enable Rose to secure the project for the long-term while at the same time reducing carrying costs while a farm-in partner is sought. The Board also believes that a concentrated focus on the most highly prospective acreage will increase the appeal of the project to potential funding partners.

The Company is working with its long-term JV partner to restructure the Paradox acreage, and both parties continue to be committed to working together for the long-term future of the project. 

In the Board's view, the high-grading of the Paradox Basin acreage will create a long-term sustainable future for the project, one which meets the Board's selection criteria and which will positively complement the Company's future balanced asset portfolio. We look forward to providing additional detail on this restructuring in the near future.

DOE Partnership and Grant

A key part of maximizing the value of the Paradox asset will be increasing the understanding and visibility of the Paradox Basin to a broader group of market participants. As such, the Company is pleased to announce, subject to contract, grant funding to Rose from the U.S. Department of Energy (the "DOE") and the University of Utah of a minimum US$1m. The overall study relates to "Improving Production in Utah's Emerging Northern Paradox Unconventional Oil Play" and raising the profile of the Northern Paradox Basin. The focus of the grant funding is to fully characterise, quantify and interpret the geological, structural, and geomechanical settings of the northern Paradox oil play in order to optimize production processes. The overall grant for the project amounts to in excess of US$10 million of which Rose will be eligible for a minimum of US$1 million. The overall grant is believed to be the largest single investment by the DOE into research on an unconventional play in a specific basin. The Board is delighted to have been a part of the group awarded this grant, and we believe the results from the project will be of great significance in the development of the Paradox project.

FINANCIAL REVIEW

The financial information is reported in United States Dollars ("US$").

Income Statement

The Group reports a net loss after tax from continuing operations of US$0.8 million or a loss of 0.55 US cents per share for the six months ended 30 June 2019 (30 June 2018: net loss after tax from continuing operations of US$0.5 million or a loss of 0.45 US cents per share).

The increased loss for the period when compared to the prior year comparative period is primarily the result of unrealised foreign exchange differences that arise on the restatement of the Company's loans to its subsidiaries. These foreign exchange differences resulted in an unrealised gain of US$0.1 million for the six months ended 30 June 2019 (30 June 2018: unrealised gain of US$0.5 million). The unrealised gain in this period is the result of the strengthening of the US dollar against sterling.

Administrative expenses for the period were lower than those incurred over the same period in the prior year at US$0.8 million (30 June 2018: US$1.0 million). The reduction was primarily the result of reduced staff and employee costs.

Balance Sheet

Intangible assets at 30 June 2019 were US$13.3 million (30 June 2018: US$12.5 million). The primary reason for the increase was the ongoing investment into the Paradox asset.

Cash and cash equivalents at 30 June 2019 were US$0.5 million (30 June 2018: US$2.0 million).

Cash conservation remains a key priority of the Board.

CONCLUSION

In the Company's recent Annual Report, I said I felt Rose had strong prospects for growth, both from its existing portfolio and from the potential of carefully targeted acquisitions. I now believe that we have ideally positioned the Company to deliver that growth and I'm very excited about the next steps in our process of transformation.

Colin Harrington                                              

Chief Executive Officer 

27 September 2019

ROSE PETROLEUM PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2019

		Unaudited six months ended 30 June	Unaudited six months  ended 30 June	Audited year ended 31 December
		2019	2018	2018
	Notes	US$'000	US$'000	US$'000
Continuing operations
Administrative expenses		(824)	(1,002)	(1,646)
Project development expenses		(146)	-	(178)
Impairment of intangible exploration and evaluation assets		-	-	(4)
Foreign exchange differences		126	459	1,084
Operating loss		(844)	(543)	(744)
Fair value loss on investments		-	-	(284)
Other income		27	-	264
Finance income		-	2	3
Loss on ordinary activities before taxation		(817)	(541)	(761)
Taxation charge		-	-	-
Loss for the period from continuing operations		(817)	(541)	(761)
Discontinued operations
Profit from discontinued operations, net of tax		-	52	860
(Loss)/profit for the period attributable to owners of the parent company		(817)	(489)	99
(Loss)/profit per Ordinary Share
From continuing operations
Basic and diluted, cents per share	3	(0.55)	(0.45)	(0.58)
From continuing and discontinued operations
Basic and diluted, cents per share	3	(0.55)	(0.41)	0.08

ROSE PETROLEUM PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2019

		Unaudited six months  ended 30 June		Unaudited six months  ended 30 June	Audited year ended 31 December
		2019		2018	2018
		US$'000		US$'000	US$'000
(Loss)/profit for the period attributable to owners of the parent company		(817)		(489)	99
Other comprehensive income Items that may be subsequently reclassified to profit or loss, net of tax
Foreign currency translation differences on foreign operations		217		906	2,394
Foreign currency translation differences on discontinued operations			-	(10)	-
		217		896	2,394
Total comprehensive income for the period attributable to owners of the parent company		(600)		407	2,493

ROSE PETROLEUM PLC

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 June 2019

					Unaudited as at  30 June	Unaudited as at  30 June	Audited  as at 31 December
					2019	2018	2018
			Notes		US$'000	US$'000	US$'000
	Non-current assets
	Investments			-		500	-
	Intangible assets	4		13,326		12,487	13,148
	Property, plant and equipment			19		23	22
				13,345		13,010	13,170
	Current assets
	Investments			-		-	464
	Trade and other receivables			398		466	426
	Cash and cash equivalents			461		1,965	616
				859		2,431	1,506
	Total assets			14,204		15,441	14,676
	Current liabilities
	Trade and other payables			(406)		(342)	(387)
	Total liabilities			(406)		(342)	(387)
	Net assets			13,798		15,099	14,289
	Equity
	Share capital	5		40,536		40,504	40,504
	Share premium account			36,796		36,521	36,472
	Warrant reserve			341		342	341
	Share-based payment reserve			3,702		3,580	3,645
	Cumulative translation reserves			(8,996)		(8,082)	(8,909)
	Retained deficit			(58,581)		(57,766)	(57,764)
	Equity attributable to owners of the parent company			13,798		15,099	14,289

ROSE PETROLEUM PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2019 (Unaudited)

	Share capital	Share premium account	Warrant reserve	Share-based payment reserve		Cumulative translation reserve
	US$'000	US$'000	US$'000	US$'000		US$'000
As at 1 January 2019	40,504	36,472	341	3,645			(8,909)
Transactions with owners in their capacity as owners:
Issue of equity shares	32	347	-	-	-
Expenses of issue of equity shares	-	(23)	-	-		-
Transfer to warrant reserve	-	-	-	-			-
Share-based payments	-	-	-	58			-
Effect of foreign exchange rates	-	-	-	(1)			-
Total transactions with owners in their capacity as owners	32	324	-	57			-
Loss for the period	-	-	-	-			-
Other comprehensive income:
Currency translation differences	-	-	-	-			217
Total other comprehensive income for the period	-	-	-	-			217
Total comprehensive income for the period	-	-	-	-			217
Currency translation differences on equity at historical rates	-	-	-	-			(304)
As at 30 June 2019	40,536	36,796	341	3,702			(8,996)

ROSE PETROLEUM PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2018 (Audited)

	Share capital	Share premium account	Warrant reserve	Share-based payment reserve		Cumulative translation reserve
	US$'000	US$'000	US$'000	US$'000		US$'000
As at 1 January 2018	40,463	35,657	-	3,687			(6,864)
Transactions with owners in their capacity as owners:
Issue of equity shares	41	1,304	-	-	-
Expenses of issue of equity shares	-	(148)	-	67		-
Transfer to warrant reserve	-	(341)	341	-			-
Share-based payments	-	-	-	172			-
Transfer to retained earnings in respect of forfeited options	-	-	-	(271)	-
Effect of foreign exchange rates	-	-	-	(10)			-
Total transactions with owners in their capacity as owners	41	815	341	(42)			-
Profit for the period	-	-	-	-			-
Other comprehensive income:
Currency translation differences	-	-	-	-			2,394
Total other comprehensive income for the period	-	-	-	-			2,394
Total comprehensive income for the period	-	-	-	-			2,394
Currency translation differences on equity at historical rates	-	-	-	-			(3,614)
Recycled foreign currency translations differences on discontinued operations	-	-	-	-			(825)
As at 31 December 2018	40,504	36,472	341	3,645			(8,909)

ROSE PETROLEUM PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2018 (Unaudited)

		Share capital		Share premium account			Warrant reserve
		US$'000		US$'000			US$'000
As at 1 January 2018		40,463		35,657			-
Transactions with owners in their capacity as owners:
Issue of equity shares		41		962			342
Expenses of issue of equity shares		-		(98)			-
Share-based payments		-		-			-
Transfer to retained earnings in respect of forfeit options		-		-			-
Effect of foreign exchange rates		-		-			-
Total transactions with owners in their capacity as owners		41		864			342
Loss for the period		-		-			-
Other comprehensive income:
Currency translation differences		-		-			-
Currency translation differences on discontinued operations		-		-			-
Total other comprehensive income for the period		-		-			-
Total comprehensive income for the period		-		-			-
Currency translation differences on equity at historical rates		-		-			-
As at 30 June 2018		40,504		36,521			342

ROSE PETROLEUM PLC

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2019

				Unaudited six months  ended 30 June	Unaudited six months ended 30 June	Audited year ended 31 December
				2019	2018	2018
		Appendices		US$'000	US$'000	US$'000
Net cash used in operating activities		a		(789)	(1,110)	(1,676)
Net cash from/(used in) investing activities		b		279	(346)	(1,135)
Net cash from financing activities		c		356	1,264	1,264
Net decrease in cash and cash equivalents				(154)	(192)	(1,547)
Cash and cash equivalents at beginning of period				616	2,185	2,185
Effect of foreign exchange rate changes				(1)	(28)	(22)
Cash and cash equivalents at end of period				461	1,965	616

ROSE PETROLEUM PLC

APPENDICES TO THE CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2019

				Unaudited six months  ended 30 June	Unaudited six months  ended 30 June	Audited year ended 31 December
				2019	2018	2018
				US$'000	US$'000	US$'000
a		Operating activities
		Loss before taxation from continuing operations		(817)	(541)	(761)
		Profit before taxation from discontinued operations		-	52	860
				(817)	(489)	99
		Fair value loss on investments		-	-	284
		Other income		(27)	-	(264)
		Finance income		-	(2)	(3)
		Adjustments for:
		Depreciation of property, plant and equipment		3	4	5
		Profit on disposal of property, plant and equipment		-	(15)	(6)
		Impairment of intangible exploration and evaluation assets		-	-	4
		Share-based payments		58	82	172
		Effect of foreign exchange rate changes		(100)	(572)	(2,023)
		Operating outflow before movements in working capital		(883)	(955)	(1,732)
		Decrease in trade and other receivables		29	96	260
		Increase/(decrease) in trade and other payables		65	(251)	(204)
		Net cash used in operating activities		(789)	(1,110)	(1,676)
b		Investing activities
		Interest received		-	2	3
		Purchase of intangible exploration and evaluation assets		(223)	(349)	(1,002)
		Proceeds on disposal of property, plant and equipment		-	1	6
		Proceeds on disposal of investments		502	-	-
		Net cash inflow on disposal of discontinued operations		-	-	53
		Loans advanced		-	-	(195)
		Net cash from/(used in) investing activities		279	(346)	(1,135)
c		Financing activities
		Proceeds from issue of shares		379	1,345	1,345
		Expenses of issue of shares		(23)	(81)	(81)
		Net cash from financing activities		356	1,264	1,264

ROSE PETROLEUM PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the six months ended 30 June 2019

1.  ACCOUNTING POLICIES  

Basis of preparation

This report was approved by the Directors on 27 September 2019.

The condensed consolidated interim financial statements have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the EU ('Adopted IFRSs')

The condensed consolidated interim financial statements are presented in United States Dollar ('US$') as the Group's trading operations, and the majority of its assets are primarily represented in US$.

The Company is domiciled in the United Kingdom. The Company's shares are admitted to trading on the AIM market.

Other than the adoption of IFRS 16, the current and comparative periods to June have been prepared using the accounting policies and practices consistent with those adopted in the annual financial statements for the year ended 31 December 2018, and with those expected to be adopted in the Group's financial statements for the year ended 31 December 2019. This is the first set of the Group's financial statements where IFRS 16 has been applied. There is no impact on the financial statements from the adoption of this standard.

Comparative figures for the year ended 31 December 2018 have been extracted from the statutory financial statements for that period which carried an unqualified audit report which included an emphasis of matter in respect of going concern, did not contain a statement under section 498(2) or (3) of the Companies Act 2006 and have been delivered to the Registrar of Companies.

The financial information contained in this report does not constitute statutory financial statements as defined by section 434 of the Companies Act 2006, and should be read in conjunction with the Group's financial statements for the year ended 31 December 2018. This report has not been audited or reviewed by the Group's auditors.

During the first six months of the current financial year there have been no related party transactions that materially affect the financial position or performance of the Group and there have been no changes in the related party transactions described in the last annual financial report.

Having considered the Group's current cash forecast and projections, and following detailed conversations with the Company's brokers and major shareholders, the Directors have a reasonable expectation that the Company and the Group have, or have access to, sufficient resources to continue operating for at least the next 12 months. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.

The principal risks and uncertainties of the Group have not changed since the publication of the last annual financial report where a detailed explanation of such risks and uncertainties can be found.

2.  DIVIDENDS

The Directors do not recommend the payment of a dividend for the period.

3. (LOSS)/PROFIT PER ORDINARY SHARE

Basic (loss)/profit per Ordinary Share is calculated by dividing the net (loss)/profit for the period attributable to owners of the parent company by the weighted average number of Ordinary Shares outstanding during the period. The calculation of the basic and diluted (loss)/profit per Ordinary Share is based on the following data:

				Continuing operations unaudited six months ended 30 June 2019 US$'000			Continuing and discontinued operations unaudited six months  ended  30 June 2019 US$'000	Continuing operations unaudited six months ended 30 June 2018 US$'000	Continuing and discontinued operations unaudited six months  ended 30 June 30 June 2018 US$'000	Continuing operations audited year ended 31 December 2018 US$'000	Continuing and discontinued operations audited year ended 31 December 2018 US$'000
	(Losses)/profits
	(Losses)/profits for the purpose of basic (loss)/profit per Ordinary Share being net (loss)/profit attributable to owners of the parent company		(817)			(817)		(541)	(489)	(761)	99
		Number '000			Number '000			Number '000	Number '000	Number '000	Number '000
	Number of shares
	Weighted average number of shares for the purpose of basic (loss)/profit per Ordinary Share		147,834			147,834		120,021	120,021	131,814	131,814
	(Loss)/profit per Ordinary Share
	Basic and diluted, cents per share		(0.55)			(0.55)		(0.45)	(0.41)	(0.58)	0.08

Due to the losses incurred, there is no dilutive effect from the existing share options, share based compensation plan or warrants.

4.  INTANGIBLE ASSETS

				Exploration and evaluation assets US$'000
Cost
	At 1 January 2018			17,863
	Additions			389
	Exchange differences			(2)
	At 30 June 2018			18,250
	Additions			665
	Exchange differences			3
	At 31 December 2018			18,918
	Additions			178
	Exchange differences			7
	At 30 June 2019			19,103
Impairment
	At 1 January 2018			5,765
	Exchange differences			(2)
	At 30 June 2018			5,763
	Impairment charge			4
	Exchange differences			3
	At 31 December 2018			5,770
	Exchange differences			7
	At 30 June 2019			5,777
Carrying amount
	At 30 June 2019			13,326
	At 30 June 2018			12,487
	At 31 December 2018			13,148

5.  SHARE CAPITAL

					Unaudited as at  30 June		Unaudited as at  30 June	Audited  as at 31 December
					2019		2018	2018
					Number '000		Number '000	Number '000
	Authorised
	Ordinary Shares of 0.1p each					7,779,297	7,779,297	7,779,297
	Deferred Shares of 9.9p each					227,753	227,753	227,753
						8,007,050	8,007,050	8,007,050
					Unaudited as at  30 June		Unaudited as at  30 June	Audited  as at 31 December
					2018		2017	2017
					US'000		US'000	US'000
	Allotted, issued and fully paid
	168,413,940 Ordinary Shares of 0.1p each (30 June 2018: 143,413,940: 31 December 2018 143,413,940)					231	199	199
	227,752,817 Deferred Shares of 9.9p each					40,305	40,305	40,305
						40,536	40,504	40,504

The Deferred Shares are not listed on AIM, do not give the holders any right to receive notice of, or to attend or vote at, any general meetings, have no entitlement to receive a dividend or other distribution or any entitlement to receive a repayment of nominal amount paid up on a return of assets on winding up nor to receive or participate in any property or assets of the Company. The Company may, at its option, at any time redeem all of the Deferred Shares then in issue at a price not exceeding £0.01 from all shareholders upon giving not less than 28 days' notice in writing.

ISSUED ORDINARY SHARE CAPITAL

On 10 May 2018, the Company issued 11,264,000 Ordinary Shares of 0.1p each at a price of 0.325p per share, raising gross proceeds of US$0.5 million (£0.4 million).

On 22 May 2018, the Company issued 19,505,231 Ordinary Shares of 0.1p each at a price of 0.325p per share, raising gross proceeds of US$0.85 million (£0.6 million).

On 30 May 2019, the Company issued 25,000,000 Ordinary Shares of 0.1p each at a price of 0.12p per share, raising gross proceeds of US$0.4million (£0.3 million).

In addition, for each share issued in May 2018, the subscriber received a warrant for a new Ordinary Share at a price of £0.65p per share, resulting in the issue of 30,769,231 warrants which are exercisable at any time until May 2020.

						Ordinary Shares Number '000	Deferred Shares Number '000
	At 1 January 2018					112,645	227,753
	Allotment of shares					30,769	-
	At 30 June and 31 December 2018					143,414	227,753
	Allotment of shares					25,000	-
	At 30 June 2019					168,414	227,753

6.  POST BALANCE SHEET EVENTS

All matters relating to events occurring since the period end are reported in the Chief Executive Statement.

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