TIDMADV

RNS Number : 8287M

Advance Energy PLC

26 January 2021

26 January 2021

Advance Energy plc

("Advance Energy" or the "Company")

Interim Results

Advance Energy plc (AIM:ADV), the energy company seeking growth through acquisition or farm-in to non-operated interests in discovered upstream projects, announces its half-yearly report for the six months ended 31 October 2020.

For further information, please contact:

Advance Energy plc +44 (0)1624 681 250

Leslie Peterkin (CEO) / Stephen West (CFO)

Strand Hanson Limited (Financial and Nominated Adviser) +44 (0)20 7409 3494

James Harris / Rory Murphy / Georgia Langoulant

Buchanan (Public Relations) +44 (0)20 7466 5000

Ben Romney / Kelsey Traynor

Tennyson Securities (Joint Broker) +44 (0)20 7186 9030

Peter Krens / Ed Haig-Thomas

Optiva Securities Limited (Joint Broker) +44 (0)20 3411 1881

Christian Dennis

The Interim Report will be available from the Company's website www.advanceplc.com

Chairman's Statement

Dear Shareholders,

We are pleased to report that the Company has made significant progress in the half-year to 31 October 2020 and in the period since then in carrying out its strategy to grow through acquisition or farm-in to non-operated interests in upstream oil and gas projects where there is an opportunity to add significant value in the short to medium term.

In particular, we are delighted to have agreed a potentially transformative transaction with Carnarvon Petroleum Limited to acquire up to a 50% indirect interest in the Buffalo Oil Field in Timor-Leste. This asset reflects our stated strategy perfectly. The teams at Advance Energy and Carnarvon believe the Buffalo Oil Field holds material unrealised value that can be unlocked through redevelopment.

The Buffalo Oil Field is a proven oil field that produced 21 MMbbls over 5 years in the early 2000s. Subject, inter alia, to raising the necessary finance and securing the requisite shareholder approval for the transaction, the Company's planned subscription in the Joint Venture Company for a consideration of up to US$20 million will be applied to funding the drilling of the B-10 appraisal well and certain PSC related costs, to appraise the independently certified 2C (probable contingent) oil resource of 31.1 MMbbls, with the intention for drilling to take place in late 2021.

The transaction is classified as a reverse takeover pursuant to the AIM Rules for Companies and accordingly the Company's shares were temporarily suspended from trading on AIM, and will remain suspended from trading on AIM until such time as either an Admission Document setting out details of the proposed Transaction is published or confirmation is given that the Transaction is not proceeding. We are confident that we can convey the compelling and value accretive nature of this transaction to the market as we seek, inter alia, to raise the funds that will enable the deal to proceed.

Meanwhile, we continue to build on our ambitious growth strategy and are in the early stages of negotiating a possible participation in other projects. So with this in mind, we view Buffalo as the first stepping stone to our growth ambitions of becoming a mid-cap player in the next few years, and would hope to conclude at least one other transaction this calendar year.

The accounts for the six months naturally do not reflect this progress, consisting as they do just of the corporate expenditure in the period of $631,000 and an accounting loss of the same amount. Whilst we show a net liability position of $317,000 on the balance sheet at 31 October 2020, this has been managed by the deferral of much of the expenditure, including directors' fees, and a capital raise of $410,000 (before costs) in November 2020.

The interests of the Directors and other members of the Advance Energy team are fully aligned with those of other shareholders, and we intend to demonstrate our confidence in the Buffalo transaction and aligning our interests even more closely through participation in the placing. We look forward to updating the market with the publication of the Admission Document and a Notice of EGM in the coming weeks.

Mark Rollins

Non-Executive Chairman

25 January 2021

Interim Consolidated Statement of Comprehensive Income

 
                                                 Unaudited                    Unaudited 
                                                Six months                   Six months 
                                                     ended        Audited         ended 
                                                    31 Oct     Year ended        31 Oct 
                                                      2020    30 Apr 2020          2019 
                                       Notes         $'000          $'000         $'000 
------------------------------------  ------  ------------  -------------  ------------ 
 
 Investment income/(losses): 
 Unrealised losses on investments                        -          (604)             - 
 Impairment of exploration asset                         -          (267) 
                                                         -          (871)             - 
                                      ------  ------------  -------------  ------------ 
 
 Asset evaluation and operating 
  expenses                                 4             -           (23)          (83) 
 Other administrative expenses             4         (643)          (293)         (419) 
 Net loss before Finance Costs 
  and Taxation                                       (643)        (1,187)         (502) 
 
 Finance costs                                          12           (44)          (26) 
 Loss before tax                                     (631)        (1,231)         (528) 
------------------------------------  ------  ------------  -------------  ------------ 
 Tax expense                                             -              -             - 
 
 Loss after tax                                      (631)        (1,231)         (528) 
------------------------------------  ------  ------------  -------------  ------------ 
 
 Total comprehensive loss after 
  tax                                                (631)        (1,231)         (528) 
------------------------------------  ------  ------------  -------------  ------------ 
 
 Total comprehensive loss                            (631)        (1,231)         (528) 
------------------------------------  ------  ------------  -------------  ------------ 
 
 Basic and diluted loss per share 
  attributable to owners of the 
  parent during the year 
  (expressed in US cents per share)        6        (0.04)         (0.11)        (0.06) 
------------------------------------  ------  ------------  -------------  ------------ 
 

The accompanying notes from an integral part of these consolidated financial statements.

Interim Consolidated Statement of Financial Position

 
                                            Unaudited    Audited   Unaudited 
                                               31 Oct     30 Apr      31 Oct 
                                                 2020       2020        2019 
                                    Notes       $'000      $'000       $'000 
---------------------------------  ------  ----------  ---------  ---------- 
 Non-current assets 
 Financial asset at fair value 
  through profit or loss                            -          -         604 
 Other investments                                  -          -         267 
                                                    -          -         871 
---------------------------------  ------  ----------  ---------  ---------- 
 Current assets 
 Other receivables                                 14         15          88 
 Cash and cash equivalents                        261        562          42 
                                                  275        577         130 
---------------------------------  ------  ----------  ---------  ---------- 
 Total assets                                     275        577       1,001 
---------------------------------  ------  ----------  ---------  ---------- 
 
 Current liabilities 
 Trade and other payables             7         (592)      (323)     (1,005) 
---------------------------------  ------  ----------  ---------  ---------- 
 Total liabilities                              (592)      (323)     (1,005) 
---------------------------------  ------  ----------  ---------  ---------- 
 
 
 Net assets                                     (317)        254         (4) 
---------------------------------  ------  ----------  ---------  ---------- 
 
 Equity attributable to equity holders 
  of the company 
 Share premium                                 18,665     18,665      17,630 
 Accumulated deficit                         (18,982)   (18,411)    (17,634) 
---------------------------------  ------  ----------  ---------  ---------- 
 Total shareholder funds                        (317)        254         (4) 
---------------------------------  ------  ----------  ---------  ---------- 
 

The accompanying notes from an integral part of these consolidated financial statements.

Interim Consolidated Statement of Changes in Equity

 
                                            Share premium   Accumulated     Total 
                                                                deficit    equity 
                                                   $'000s        $'000s    $'000s 
 Balance at 1 May 2019                             16,878      (17,131)     (253) 
 Loss for the period to 31 October 
  2019 (unaudited)                                      -         (528)     (528) 
----------------------------------------  ---------------  ------------  -------- 
 Total comprehensive loss                               -         (528)     (528) 
 
 Transactions with equity shareholders 
  of the parent: 
 Share based payments - options                         -            25        25 
 Proceeds from shares issued                          831             -       831 
 Cost of share issue                                 (79)             -      (79) 
 Balance at 31 October 2019 (unaudited)            17,630      (17,634)       (4) 
 
 Loss for the period to 30 April 
  2020                                                  -         (703)     (703) 
----------------------------------------  ---------------  ------------  -------- 
 Total comprehensive loss                               -         (703)     (703) 
 
 Transactions with equity shareholders 
  of the parent: 
 Share based payments - warrants                       49          (49)         - 
 Share based payments - options                         -          (25)      (25) 
 Proceeds from shares issued                        1,002             -     1,002 
 Cost of share issue                                 (16)             -      (16) 
 Balance at 30 April 2020 (audited)                18,665      (18,411)       254 
----------------------------------------  ---------------  ------------  -------- 
 
 Loss for the period to 31 October 
  2020 (unaudited)                                      -         (631)     (631) 
----------------------------------------  ---------------  ------------  -------- 
 Total comprehensive loss                               -         (631)     (631) 
 
 Transactions with equity shareholders 
  of the parent: 
 Share based payments - warrants                        -            60        60 
 Balance at 31 October 2020 (unaudited)            18,665      (18,982)     (317) 
----------------------------------------  ---------------  ------------  -------- 
 

The accompanying notes from an integral part of these consolidated financial statements.

Interim Consolidated Cash Flow Statement

 
                                                   Unaudited   Audited   Unaudited 
                                                      31 Oct    30 Apr      31 Oct 
                                                        2020      2020        2019 
                                           Notes       $'000     $'000       $'000 
---------------------------------------  -------  ----------  --------  ---------- 
 Cash flows from operating activities: 
 Loss before tax                                       (631)   (1,231)       (528) 
 Adjustments for: 
 Share-based payment                        5            240         -          25 
 Impairment of intangible asset                            -       267           - 
 
 Change in working capital items: 
 Movement in other receivables                             1        59           4 
 Movement in trade and other payables                     89     (529)         136 
---------------------------------------  -------  ----------  --------  ---------- 
 Net cash used in operations                           (301)   (1,434)       (363) 
---------------------------------------  -------  ----------  --------  ---------- 
 
 Cash flows from investing activities 
 Cost of financial asset at fair 
  value                                                  (-)         -       (604) 
 Net cash flows from investing 
  activities                                               -         -       (604) 
---------------------------------------  -------  ----------  --------  ---------- 
 
 Cash flows from financing activities 
 Proceeds from issue of share 
  capital                                                  -     1,833         831 
 Share issue costs                                         -      (95)        (79) 
 
 Net cash flows from financing 
  activities                                               -     1,738         752 
---------------------------------------  -------  ----------  --------  ---------- 
 
 Net increase in cash and cash 
  equivalents                                          (301)       304       (216) 
---------------------------------------  -------  ----------  --------  ---------- 
 Effect of exchange rate changes                           -         -           - 
 Cash and cash equivalents at 
  beginning of period                                    562       258         258 
---------------------------------------  -------  ----------  --------  ---------- 
 Cash and cash equivalents at 
  end of period                                          261       562          42 
---------------------------------------  -------  ----------  --------  ---------- 
 

The accompanying notes from an integral part of these consolidated financial statements.

Notes to the Interim Consolidated Financial Statements

   1        Reporting entity 

Advance Energy plc is a public limited company incorporated and domiciled in the Isle of Man whose shares are publicly traded on the AIM market of the London Stock Exchange.

The Company and its subsidiary, Resolute Oil & Gas (UK) Limited, are collectively referred to as the Group.

The principal activity of the Group during the period was the acquisition and development of oil and gas assets.

   2        Basis of accounting 

These interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting". These interim 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 Group's annual financial statements for the year ended 30 April 2020, which were prepared in accordance with IFRSs as adopted by the European Union. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statements.

In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those disclosed in the Group's statutory financial statements for the year ended 30 April 2020.

The interims are presented in US Dollars unless otherwise indicated.

There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial period beginning on or after 1 May 2020 that would be expected to have a material impact on the Group.

The consolidated financial statements of the Group as at and for the year ended 30 April 2020 are available upon request from the Company's registered office at 55 Athol Street, Douglas, Isle of Man or the Company website https://www.advanceplc.com

These interim consolidated financial statements have been approved and authorised for issue by the Company's Board of directors on 25 January 2021.

   3        Going concern 

The Group had negative $317,000 net assets at 31 October 2020. The Group currently has limited cash resources and will therefore need to secure additional financing to complete the acquisition shown in note 10 and provide for general working capital.

On 12 November 2020, the Company raised GBP300,000 (gross), equivalent to $401,000, by way of a placing of 136,363,636 new ordinary shares of no par value in the Company at a price of 0.22 pence per share (see note 10).

The Group intends to raise the additional funding to finance future acquisitions and provide for general working capital needs by way of additional capital through the issue of further ordinary shares. The Directors believe that the Group will be successful in raising the necessary finance.

Notes to the Interim Consolidated Financial Statements (continued)

Accordingly, the Directors have a reasonable expectation that the Company and the Group will continue in operational existence for the foreseeable future, and for a period of at least 12 months from the date of signing of these financial statements.

Whilst the Directors are confident of being able to raise such funding if required, there is no certainty that such funding will be available and/or the terms of such funding. The financial statements do not include the adjustments that would result if the Company and the Group were unable to continue as a going concern.

   4        Expenses 

Administration fees and expenses consist of the following:

 
                                                 Unaudited        Audited        Unaudited 
                                                Six months                      Six months 
                                                     ended     Year ended            ended 
                                                31 Oct 202     30 Apr 202 
                                                         0              0      31 Oct 2019 
                                                     $'000          $'000            $'000 
                                            --------------  -------------  --------------- 
  Corporate overheads: 
 
     *    Directors fees                               408          (146)              221 
 
     *    Professional fees                            174            241              116 
 
     *    Audit fees                                    12             32                - 
 
     *    Bad debt write off                             -            117               34 
 
     *    Administration costs                          49             49               48 
                                            --------------  -------------  --------------- 
                                                       643            293              419 
                                            --------------  -------------  --------------- 
  Asset evaluation and operating 
   expenses: 
 
     *    Office costs                                   -             13               13 
 
     *    Consulting and farm-in expenses                -           (36)               28 
 
     *    Travel and accommodation                       -             46               42 
                                            --------------  -------------  --------------- 
                                                         -             23               83 
                                            --------------  -------------  --------------- 
 
  Total expenses                                       643            316              502 
                                            --------------  -------------  --------------- 
 
   5        Directors remuneration 

The remuneration of those in office during the period ended 31 October 2020 was as follows:

 
                                     Unaudited                      Unaudited 
                                    Six months         Audited     Six months 
                                         ended                          ended 
                                   31 Oct 2020      Year ended    31 Oct 2019 
                                         $'000     30 Apr 2020          $'000 
                                                         $'000 
                                 -------------  --------------  ------------- 
 Salaries paid in cash                     156             413            223 
 Accrued entitlement to shares             240               -              - 
  and warrants 
 Directors' health insurance                12               3              - 
 Waiver of fees                              -           (562)              - 
                                 -------------  --------------  ------------- 
                                           408           (146)            223 
                                 -------------  --------------  ------------- 
 

Notes to the Interim Consolidated Financial Statements (continued)

Ross Warner (Non-Executive Director) is entitled to a fixed monthly fee of $5,000 payable in cash. Mark Rollins (Chairman) and Leslie Peterkin (Chief Executive Officer) are entitled to a fixed monthly fee of $5,000 and $10,000 respectively payable in cash, and $10,000 payable in shares each. Stephen West (Chief Financial Officer) is entitled to a fixed monthly fee of GBP4,082 payable in cash together with an amount of warrants in the Company calculated on a monthly basis by dividing GBP8,165 by the Company's mid-market price on the date of determination, being no later than the last day of each month ("Director Warrants"). The Director Warrants accrue monthly, have an exercise price of zero, expire five years from the issue date and vest three months from the issue date.

The accrued entitlement of shares and warrants includes a prior accrual of $60,000.

The accrued shares are recorded in note 8 and the accrued share based payment expense is as shown above. The corresponding warrants cost is recorded in Consolidated Statement of Changes in Equity.

   6          Earnings per share 

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

 
                                           Unaudited        Audited      Unaudited 
                                         Outstanding    Outstanding    Outstanding 
                                           at 31 Oct      at 30 Apr      at 31 Oct 
                                                2020           2020           2019 
 Loss attributable to owners 
  of the Group 
  (USD thousands)                              (631)        (1,231)          (528) 
 Weighted average number of ordinary 
  shares in issue (thousands)              1,560,637      1,107,577        890,057 
 Loss per share (US cents)                    (0.04)         (0.11)         (0.06) 
 

In accordance with International Accounting Standard 33 'Earnings per share', no diluted earnings per share is presented as the Group is loss making.

   7          Trade and other payables 

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.

 
                                   Unaudited        Audited      Unaudited 
                                 Outstanding    Outstanding    Outstanding 
                                   at 31 Oct      at 30 Apr      at 31 Oct 
                                        2020           2020           2019 
 Trade payables                          315            299            523 
 Accruals and other payables             277             24            482 
                               -------------  -------------  ------------- 
                                         592            323          1,005 
                               -------------  -------------  ------------- 
 

Notes to the Interim Consolidated Financial Statements (continued)

   8          Shares in issue 

The number of shares in issue throughout the period was 1,560,636,834. In addition to the shares in issue, as described in note 5, Mark Rollins and Leslie Peterkin receive part of their remuneration in new shares in lieu of cash. As at 31 October 2020, they each had an entitlement to receive 43,980,136 shares. Stephen West receives part of his remuneration in the form of zero cost warrants. As at 31 October 2020, he was entitled to receive 24,994,042 warrants.

The notional number of shares in issue taking into account the above entitlements and assuming the warrants are exercised would be 1,673,591,148. The Company intends to issue the shares and warrants to the directors in accordance with their entitlement in conjunction with a later capital-raising event.

In addition, after the period end new shares were issued for cash and to settle certain third party creditors, as described in note 10.

   9        Commitments and contingencies 

There were no capital commitments authorised by the Directors or contracted other than those provided for in these financial statements as at 31 October 2020 (30 April 2020: None).

There are 81,250,000 unvested options issued to the current directors and consultants that are due to vest in 2021.

There are 10,790,608 of unvested zero cost warrants to the current directors that are yet to vest.

   10      Subsequent events 

Placing and Issue of Equity

On 12 November 2020, the Company raised GBP300,000 (gross), equivalent to $401,000, by way of a placing of 136,363,636 new ordinary shares of no par value in the Company at a price of 0.22 pence per share. The funds are being used to progress new venture opportunities and for general working capital purposes.

In addition, the Company issued 21,416,515 ordinary shares to various creditors to settle liabilities amounting to $69,000.

The total number of shares in issue as at the date of this report is 1,718,416,985.

Reverse Takeover Transaction and Suspension of Trading

On 17 December 2020, the Company created a new wholly owned subsidiary, Advance Energy TL Limited ("AETL"), with which it entered into a subscription agreement with Timor-Leste Petroleum Pty Ltd ("CVNA") (a subsidiary of Carnarvon Petroleum Limited (ASX:CVN, "Carnarvon")) pursuant to which AETL will subscribe for equity such that AETL holds up to 50% of the total equity interest in Carnarvon Petroleum Timor, Unipessoal Lda (a subsidiary of CVNA incorporated in Timor-Leste) for a consideration of up to US$20 million.

The transaction is classified as a reverse takeover pursuant to the AIM Rules for Companies and accordingly the Company's shares were temporarily suspended from trading on AIM as of 17 December 2020 and will remain suspended from trading on AIM until such time as either an Admission Document setting out details of the proposed transaction is published or confirmation is given that the transaction is not proceeding.

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END

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