TIDMARG
RNS Number : 1334K
Argos Resources Ltd
19 September 2016
19 September 2016
ARGOS RESOURCES LIMITED
("Argos" or "the Company")
2016 Interim Financial Results
Argos Resources Limited (AIM: ARG.L), the Falkland Islands based
company focused on the North Falkland Basin, is pleased to announce
its interim financial results for the six months ended 30 June
2016.
Highlights
-- $4 thousand loss from expensed overhead (H1 2015: $0.8 million);
-- $0.5 million cash reserves at 30 June 2016 (YE 2015: $0.5 million);
-- Force Majeure under the Farmout Agreement resulted in
deferral of the planned exploration well on the Rhea prospect;
-- Participation Agreement between the Company, Noble and Edison
replaced the Farmout Agreement ensuring continued funding.
Mr. Ian Thomson, Chairman of Argos, said:
"It was very disappointing to have been so close to drilling
commencing on our Licence, only to suffer the delay which ensued
from the cancellation of the rig contract. However, a new
Participation Agreement was completed promptly and in a very
co-operative way between the Parties ensuring that our Overriding
Royalty Interest in the Licence continues into the future and our
ongoing running costs are covered, so we remain well positioned.
Both Noble and the Company continue to be very positive about the
exploration potential of the Licence Area."
For further information:
Argos Resources Limited (+500 22685) Cenkos Securities plc
(Nomad & Broker)
www.argosresources.com Derrick Lee (+44 131 220 9100)
Ian Thomson, Chairman Neil McDonald (+44 131 220 6939)
John Hogan, Managing Director
Chairman's Statement
On 12 February 2016 Argos received notification from Noble, the
Operator of Licence PL001, in which Argos holds a 5% Overriding
Royalty Interest, that it had cancelled its contract on the Eirik
Raude drilling rig for operational reasons and as a consequence it
was exercising its rights under the terms of the Farmout Agreement
between Noble, Edison and Argos to declare Force Majeure. This
meant that the planned exploration well on the Rhea prospect, on
Licence PL001, would not be drilled during the 2015/16 drilling
campaign using the Eirik Raude deepwater rig.
On 22 February 2016 the Company announced that a new
Participation Agreement between the Company, Noble and Edison to
reflect the various changes created as a consequence of Force
Majeure had replaced the Farmout Agreement. The principal terms of
the Participation Agreement are to confirm the continuation of the
Company's 5% Overriding Royalty Interest in Licence PL001; to
confirm that Noble and Edison will make quarterly cash payments to
the Company totalling GBP300,000 per annum and to agree to seek an
extension of the Second Licence Phase to allow additional time for
a well to be drilled as required under the terms of the
Licence.
On 5 August 2016 the Company announced that a three-year
extension to Licence PL001 had been approved by the Executive
Council of the Falkland Islands Government and by the UK Secretary
of State for Foreign and Commonwealth Affairs. This approval will
extend the current Second Phase of the Licence to November 2019,
after which a Third Licence Phase of 10 years is available to the
Licensees.
Financial overview
Losses for the Group for the six months to 30 June 2016 were $4
thousand (2015: $0.8 million) giving a loss per share of 0.002
cents (2015: 0.35 cents).
Administrative expenses were $0.3 million compared to $0.7
million for the same period in 2015.
Net assets of $29.3 million have decreased marginally by $4
thousand since December 2015 as a result of the small loss
incurred.
Financial outlook
Following the implementation of cost saving measures earlier in
2016 the cash proceeds being received under the Participation
Agreement will fully fund the Group until first oil production.
Ian Thomson OBE
Chairman
Consolidated statement of comprehensive income
Period ended 30 June 2016
6 months
ended 6 months Year
30 ended ended
June 30 June 31 December
2016 2015 2015
unaudited unaudited audited
Note $'000 $'000 $'000
Other income 308 - -
Administrative expenses (265) (750) (1,115)
Finance income 1 1 2
Foreign exchange losses (48) (6) (41)
------------------------- ------ ----------- ----------- -------------
Loss before tax (4) (755) (1,154)
------------------------- ------ ----------- ----------- -------------
Loss from operations
attributable to owners
of the parent (4) (755) (1,154)
------------------------- ------ ----------- ----------- -------------
Total comprehensive
income for the period
attributable to owners
of the parent (4) (755) (1,154)
------------------------- ------ ----------- ----------- -------------
Basic and diluted loss
per share (cents) 2 (0.002) (0.35) (0.53)
------------------------- ------ ----------- ----------- -------------
Consolidated statement of financial position
As at 30 June 2016
As at As at As at
30 June 30 June 31 December
2016 2015 2015
unaudited unaudited audited
Note $'000 $'000 $'000
Assets
Non-current assets
Capitalised exploration
expenditure 28,921 29,100 28,921
Plant and equipment 1 6 3
---------------------------------------- ----------- ----------- -------------
28,922 29,106 28,924
Current assets
Other receivables 13 90 52
Cash and cash equivalents 532 789 451
---------------------------------------- ----------- ----------- -------------
Total current assets 545 879 503
---------------------------------------- ----------- ----------- -------------
Total assets 29,467 29,985 29,427
---------------------------------------- ----------- ----------- -------------
Liabilities
Total and current liabilities
Other payables (138) (279) (94)
Total net assets 29,329 29,706 29,333
---------------------------------------- ----------- ----------- -------------
Capital and reserves
attributable to
equity holders of the
company
Share capital 6,669 6,643 6,669
Share premium 30,071 30,071 30,071
Retained losses (7,411) (7,008) (7,407)
---------------------------------------- ----------- ----------- -------------
Total shareholders'
equity 29,329 29,706 29,333
---------------------------------------- ----------- ----------- -------------
Consolidated statement of cash flows
Period ended 30 June 2016
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
unaudited unaudited audited
$'000 $'000 $'000
Cash flows from operating
activities
Loss for period (4) (755) (1,154)
Adjustments for:
Finance income (1) (1) (2)
Depreciation 2 9 13
Net cash outflow from operating
activities
before changes in working
capital (3) (747) (1,143)
Decrease in other receivables 39 6 16
Increase in other payables 91 192 46
--------------------------------- ----------- ----------- -------------
Net cash inflow/(outflow)
from operating activities 127 (549) (1,081)
--------------------------------- ----------- ----------- -------------
Investing activities
Interest received 1 1 3
Exploration and development
expenditure - (22) (22)
Proceeds from the farmout
transaction - - 2,750
Costs directly attributable
to farmout transaction - - (2,543)
Net cash inflow/(outflow)
from investment activities 1 (21) 188
--------------------------------- ----------- ----------- -------------
Financing activities
Issue of ordinary shares
(share options exercised) - - 26
--------------------------------- ----------- ----------- -------------
Net cash inflow from financing
activities - - 26
--------------------------------- ----------- ----------- -------------
Net increase/(decrease)
in cash and cash equivalents 128 (570) (867)
Cash and cash equivalents
at beginning of period 451 1,363 1,363
Exchange losses on cash
and cash equivalents (47) (4) (45)
--------------------------------- ----------- ----------- -------------
Cash and cash equivalents
at end of period 532 789 451
--------------------------------- ----------- ----------- -------------
Consolidated statement of changes in equity - unaudited
Period ended 30 June 2016
Retained
Share earnings/ Total
Share
capital premium (deficit) equity
$'000 $'000 $'000 $'000
At 1 January 2015 6,643 30,071 (6,253) 30,461
Total comprehensive
income for period
to 30 June 2015 - - (755) (755)
At 30 June 2015 6,643 30,071 (7,008) 29,706
--------------------------- ---------- --------- ------------ ---------
Total comprehensive
income for period
to 31 December
2015 - - (399) (399)
Shares issued (share
options exercised) 26 - - 26
At 31 December
2015 6,669 30,071 (7,407) 29,333
--------------------------- ---------- --------- ------------ ---------
Total comprehensive
income for period
to 30 June 2016 - - (4) (4)
At 30 June 2016 6,669 30,071 (7,411) 29,329
--------------------------- ---------- --------- ------------ ---------
Notes to the interim report - unaudited
Period ended 30 June 2016
1 Accounting policies
General information
Argos Resources Limited is a limited liability company
incorporated and domiciled in the Falkland Islands under
registration number 10605. The address of its registered office is
Argos House, H Jones Road, Stanley, Falkland Islands.
This consolidated interim report was approved for issue by the
directors on 16 September 2016.
Basis of preparation
The financial information included within this interim report
has not been reviewed nor audited and is based on the consolidated
financial statements of Argos Resources Limited and its subsidiary
Argos Exploration Limited ("the Group"). The consolidated financial
statements are prepared in compliance with the recognition and
measurement requirements of International Financial Reporting
Standards as adopted by the European Union (IFRSs) and
interpretations of those standards as issued by the International
Accounting Standards Board (IASB). They do not include all
disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the
2015 annual report. These accounts have been prepared in accordance
with the accounting policies that are expected to be applied in the
report and accounts of Argos Resources Limited for the year ending
31 December 2016.
The comparative financial information for the year ended 31
December 2015 has been derived from the full statutory financial
statements for that period which were prepared in compliance with
IFRSs. The Independent Auditors' Report on the annual report and
financial statements for 2015 was unqualified and did not draw
attention to any matters by way of emphasis.
The IASB has issued various new and revised standards,
amendments and interpretations to existing standards that are not
effective for the financial year ending 31 December 2016 and have
not been adopted early. The directors do not expect these standards
and interpretations to have material impact on the financial
statements.
Going concern
There is a risk that Noble and Edison withdraw from the
Participation Agreement. In such circumstances the licence would
revert back to Argos, subject to government approval, but funding
would need to be found to cover overheads. Given that Noble and
Edison have committed to the Participation Agreement, their
withdrawal is considered unlikely.
The terms of Licence PL001 provide that a well must be drilled
by the end of the Second Licence Phase in November 2016 if the
Licence is to be extended into Phase 3. Noble and Edison have
secured a three year extension to 2019 of the Second Licence Phase
from the Government to allow for additional time for such a well to
be drilled.
The directors consider that the Group is therefore fully funded
for the foreseeable future and that the Group's available financial
resources are adequate to provide working capital for the
foreseeable future, being at least 12 months from the date on which
the financial statements were signed. The financial statements have
therefore been prepared on a going concern basis.
Notes to the interim report - unaudited
Period ended 30 June 2016
1 Accounting policies (continued)
Significant accounting judgements, estimates and assumptions
The Group makes certain estimates and assumptions regarding the
future in relation to intangible assets and impairment of these
assets. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed as follows:
Overriding royalty interest (ORRI)
As part of the farmout transaction the Group retained an ORRI of
5% of gross revenues from all hydrocarbon discoveries developed
within the Licence and following completion in September 2015 the
accumulated historical E&E cost was re- classified as "royalty
interests".
The Group considers that the ORRI is similar in economic terms
to holding a direct interest in the underlying licence as there is
only a right to receive benefit from the ORRI on production and
many of the risks faced by the Group are the same as those faced by
the owner of the licence. These risks are seen as:
Existence risk - whether oil is found in commercially
extractable quantities;
Production risk - whether the operator is able to get any
discovery to commercial production;
Timing risk - commencement and quantity as determined by the
operator;
Price risk - determined by future commodity supply and
demand.
The Group believes therefore that the most appropriate method of
accounting for the retained ORRI is to classify it as an intangible
asset in accordance with IAS 38.
As an initial fair value cannot be reliably determined the ORRI
intangible has been measured at cost, which was the carrying amount
of the E&E asset given up, with no gain or loss. The ORRI is
therefore presented as an intangible asset and will be carried at
cost less accumulated amortisation and any impairment
provision.
Income receivable under the participation agreement
The quarterly income receivable under the participation
agreement has been credited to the income statement on the basis
that the purpose is to cover overhead.
Impairment
The ORRI will be assessed for indicators of impairment at each
period end under IAS 36. If such an indication is identified, the
recoverable amount of the asset is estimated in order to determine
the extent of any impairment. The recoverable amount is the higher
of fair value less costs to sell and value in use. In assessing
value in use, the estimated cash flows are discounted to their
present value using a pre-tax discount rate. If the recoverable
amount of the asset is estimated to be less than its carrying
value, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is also recognised in the
income statement.
Notes to the interim report - unaudited
Period ended 30 June 2016
1 Accounting policies (continued)
Should an impairment loss subsequently reverse, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment been recognised. A reversal of an impairment loss is
also recognised in the income statement.
On production the income generated by the ORRI will be
recognised as revenue in the income statement and the intangible
asset will be amortised on a systematic basis.
2 Loss per share
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
unaudited unaudited audited
Number Number Number
Shares in issue brought
forward (2 pence shares) 219,713,205 218,863,205 218,863,205
Options exercised - - 850,000
----------------------------- ------------- ------------- -------------
Shares in issue carried
forward (2 pence shares) 219,713,205 218,863,205 219,713,205
----------------------------- ------------- ------------- -------------
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
unaudited unaudited audited
Loss for the period ($'000) (4) (755) (1,154)
Weighted average number
of ordinary
shares in issue during
the period 219,713,205 218,863,205 219,265,945
----------------------------- ------------- ------------- -------------
Basic and diluted loss
per ordinary share (cents) (0.002) (0.35) (0.53)
----------------------------- ------------- ------------- -------------
In accordance with IAS 33 as the Group is reporting a loss for
this period, the preceding interim period and the year to 31
December 2015 the share options are not considered dilutive because
the exercise of share options would have the effect of reducing the
loss per share.
Notes to the interim report - unaudited
Period ended 30 June 2016
3 Events after the reporting date
Argos holds an Overriding Royalty Interest in Licence PL001
which was due to expire in November 2016. On 5 August 2016 the
Company announced that a three-year extension to Licence PL001 had
been approved by the Executive Council of the Falkland Islands
Government and by the UK Secretary of State for Foreign and
Commonwealth Affairs. This approval will extend the current Second
Phase of the Licence to November 2019, after which a Third Licence
Phase of 10 years is available to the Licensees.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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