TIDMCHAR
RNS Number : 3975Q
Chariot Oil & Gas Ld
06 June 2018
6 June 2018
Chariot Oil & Gas Limited
("Chariot", the "Company" or the "Group")
2017 Final Results
Chariot Oil & Gas Limited (AIM: CHAR), the Atlantic margins
focused oil and gas exploration company, today announces its
audited final results for the year ended 31 December 2017.
2017 and Post Period Highlights:
Giant Scale Drilling Campaign Initiated
-- Drilling campaign initiated in Q1 2018 at zero cost with the
Rabat Deep 1 exploration well, Rabat Deep, Morocco, following
completion of farm-out agreement with Eni
o Rabat Deep 1 well, targeting the JP-1 prospect safely drilled
to a total depth of 3,180m
o No hydrocarbon accumulation was encountered but a thick top
seal and tight, fractured carbonates in the primary Jurassic target
were penetrated
o Electric log cores and side-wall cores are being analysed to
understand the implications on the prospectivity of the surrounding
area
-- Chariot funded to operate a further giant potential well in Q4 2018
o Prospect S, Namibia, (459mmbbls gross mean prospective
resources) anticipated to spud Q4 2018 - fully funded by placing
proceeds, partnering process ongoing
o Ocean Rig Poseidon drill ship contracted to drill one firm and
one optional well
-- Potential for an additional two wells in the near term, each offering the opportunity for transformational value to the Company and significant follow on potential
o Further partnering anticipated to fund additional prospect
drilling in H1 2019, either with back to back drilling in Namibia
(Prospect W (284mmbbls gross mean prospective resources)) or the
Lower Cretaceous prospectivity in Morocco (Kenitra-1 (464mmbbls
gross mean prospective resources, internal estimate))
Robust Financial Positioning
-- Debt free with a cash balance of US$15.2 million as at 31 December 2017
-- Farm-in recovery of Rabat Deep investment costs received
-- Continued capital discipline with 2017 annual cash overhead
reduced for the fourth consecutive year to US$4.2 million from
US$9.4 million in 2013
-- No remaining commitments across the entirety of the portfolio
-- Placing and open offer raised an additional net US$16.5
million in Q1 2018 - providing funds to allow the Company to
deliver a second well in 2018 and strength in partnering
negotiations
Staying Ahead in a Cyclical Market
-- Rigorous tendering processes carried out to fulfil
acquisition of 2D and 3D seismic over Mohammedia and Kenitra,
Morocco, at significantly reduced prices
-- David Brecknock, experienced Drilling Manager, hired to
undertake drilling preparations across Namibia and Morocco, with
Ocean Rig Poseidon secured for Namibia in the current low-cost
environment
-- Partnering strategy continues from a position of financial
strength and at a commercial advantage with the aim of maximising
retention of licence equity and drilling at the optimum point of
the cost cycle
Focused Portfolio Management
-- New venture licence secured: Kenitra Offshore, Morocco -
capturing the LKP prospects that extend from Mohammedia into this
area and the Kenitra-1 prospect
-- Innovative option negotiated following election not to enter
the next exploration phase in the Southern Blocks, Namibia
(non-cash impairment of US$51.3 million): opportunity to back-in
for 10% equity with remaining partners after the completion of
future exploration drilling for no financial consideration
-- Continued maturing the Company's diverse and giant scale prospect inventory:
Namibia:
- Competent Persons Report ("CPR") of 2016 seismic campaign
(culminating in a combined 6,100km(2) of 3D seismic data) confirmed
five new structural prospects (S, T, U, V and W), ranging from 283
- 459mmbbls in gross mean prospective resources
- Drilling preparations underway for Prospect S (459mmbbls gross
mean prospective resources), with the potential to drill W
back-to-back in the success case and on partnering
- Datarooms open
Morocco:
- Acquired and processed approximately 1,000km(2) 3D and 2,250km
2D seismic data over Kenitra and the adjacent Mohammedia licences,
interpretation ongoing with information from the Rabat Deep 1 well
to be evaluated and calibrated with this data to gain further
understanding of the prospectivity in this region
- Drilling preparations underway for Kenitra-1 and LKP-1a Lower
Cretaceous priority targets (464mmbbls and 350mmbbls gross mean
prospective resources respectively)
- Updated partnering process anticipated to commence in
mid-2018, incorporating the results of Rabat Deep 1
Brazil:
- Integrated seismic interpretation and CPR completed with a
large four-way dip- closed structure identified
- Portfolio consisting of seven prospective reservoir targets
individually ranging up to 366mmbbls
- Single vertical well located at Prospect 1 can penetrate the
TP-1, TP-3 and KP-3 stacked targets which have a summed on-licence
gross mean prospective resource of 911mmbbls
- Partnering process initiated with dataroom open
-- Material follow on potential identified in each region of interest
Outlook:
-- Target to drill a second well, Prospect S (Namibia), in Q4
2018 with the potential for an additional two wells in the near
term, (subject to partnering and/or outcome of adjacent drilling),
each with the capacity to transform the Company's value and with
material follow on potential
-- Maintain stability and a position of strength by continuing
to pursue the de-risking strategy:
o Use in-house technical capabilities to continue to mature the
current portfolio and develop a conveyor belt of giant drilling
opportunities and material value triggers
o Additional partnering to enable the acceleration of drilling
of the current and follow-on portfolio
o Apply capital discipline throughout the business
-- Capitalise on the current business environment
-- Continue to leverage knowledge of the Atlantic margins to
access additional highly prospective new ventures to lock in follow
on potential and opportunities beyond the current objectives
Larry Bottomley, Chief Executive of Chariot, commented:
"Over the course of 2017 we continued to deliver on all aspects
of our strategy - investing in the lower cost oil price environment
through extensive seismic acquisition, processing and
interpretation to develop our technical understanding and high
impact prospect inventory; completing a drilling partnership with
Eni, enabling us to initiate our drilling campaign at no cost to
the Company; and locking in additional prospectivity in
neighbouring acreage with the successful acquisition of Kenitra,
Morocco, as well as securing an innovative back-in option on legacy
acreage in Namibia.
Whilst the drilling results of the Rabat Deep 1 well were very
disappointing, the information from this well will be integral to
de-risking further prospectivity in the region. This well was the
first in our current drilling campaign and, with a diversified
portfolio, we look forward to additional drilling in the year
ahead, where Chariot's high impact portfolio will be tested in the
knowledge that, with this wider focus, we have secured follow on
potential for the success case, and additional drilling
opportunities across a variety of basins and play types.
With no remaining commitments across the portfolio we are in a
robust financial position to pursue our new venture strategy as
well as focus on maturing our remaining assets at the current low
point in the cost cycle. The funds raised earlier this year will
allow the Company to deliver a second well in 2018 and strengthen
our position in ongoing partnering negotiations, enabling us to
protect equity and optimise value whilst gaining third party
validation and a share in capital requirements for our priority
prospects, S and Kenitra-1."
Investor Conference Call:
Management will host a conference call for investors at 10.00am
(BST) today, 6 June 2018. Dial in details for the call are shown
below and participants should request to join the "Chariot Oil
& Gas - Private Investor Call".
Dial in number: +44 (0)330 336 9411
This announcement contains inside information for the purposes
of Article 7 of Regulation 596/2014.
For further information please contact:
Chariot Oil & Gas Limited
Larry Bottomley, CEO +44 (0)20 7318 0450
finnCap (Nominated Advisor and Broker)
Matt Goode, Christopher Raggett
(Corporate Finance)
Emily Morris (Corporate Broking) +44 (0)20 7220 0500
Celicourt Communications (Financial
PR)
Henry Lerwill +44 (0)20 7520 9261
NOTES TO EDITORS
ABOUT CHARIOT
Chariot Oil & Gas Limited is an independent oil and gas
exploration group. It holds licences covering two blocks in
Namibia, three blocks in Morocco and four blocks in the
Barreirinhas Basin offshore Brazil. All of these blocks are
currently in the exploration phase.
The ordinary shares of Chariot Oil & Gas Limited are
admitted to trading on the AIM, a market operated by the London
Stock Exchange under the symbol 'CHAR'.
Chairman's Statement
Overview
While we have seen some recent stabilisation in the oil markets,
during 2017 the industry continued to encounter challenging and
unpredictable conditions resulting in a reduction in global oil and
gas Capex and Opex spending for a third year in succession. Given
Chariot's focus on capital preservation and the steps taken in 2015
and 2016 to ensure a robust cash position, the Company was again
positioned to utilise these turbulent times to its strategic
advantage. Specifically, by investing in the technical development
of the Company's assets with the acquisition of substantial 2D and
3D seismic campaigns at the bottom of the oil services market, and
in looking to capitalise on unprecedented low rig rates for its
near term drilling campaign.
The recent disappointing well result in Rabat Deep demonstrates
the importance of the management team's continued determination to
build a balanced and sustainable drilling portfolio, offering
multiple opportunities for transformational value. Following the
transfer of operatorship to Eni in the Rabat Deep acreage where the
Rabat Deep 1 well was recently drilled, Chariot had no financial
exposure, having achieved its aspiration for zero cost exploration
in this region. The current market for partnering is tougher, but
this is balanced by a reduction in oil services costs, meaning that
Chariot can look to retain a greater equity in its assets at the
point of drilling, especially in light of the recent fundraise.
Chariot is now fully funded to operate the drilling of Prospect
S in Namibia where partnering programmes and preparations are
underway to deliver this high impact well in Q4 2018, with
optionality to add another two prospects to the exploration
programme, depending on well results and partnering progress. This
additional prospectivity was secured in 2016 and 2017 with further
new ventures in Morocco as part of the team's focus on risk
diversification and aim to lock in additional potential from
improved technical understanding of near term drilling. This
strategy was also put into effect in Namibia with a back-in option
in legacy acreage in the Southern Blocks secured in Q3 2017.
It is with this continued focus on the de-risking strategy,
governed by a diligent team, supportive partners and an effective
Board that we hope to achieve our goal of discovering material
accumulations of hydrocarbons.
Robust Financial Position
The Company ended the year with a robust balance sheet, with no
debt and a cash balance of US$15.2 million as at 31 December 2017.
This was achieved through the management team's continued efforts
to protect the Company's strong cash position, supported by prudent
decisions on expenditure, back costs received from its partners,
and a reduction in its annual cash overheads for the fourth
consecutive year - now less than half of what they were when
current management first came to the helm. This, in part, has been
possible owing to the continued impact of the 50% Board salary
decrease since 2015 as well as the Company restructure of 2016. In
maintaining capital discipline at the centre of our business we are
able to apply our strategy from a position of fiscal strength and
have the optionality to invest in opportunities as they arise.
Successful Placing
Post period we were pleased to receive interest from both
institutional and private investors who expressed a desire to make
further investment in the Company, and in Q1 2018 a placing and
open offer raised an additional net US$16.5 million. We see this as
a sign that equity market observers are growing in confidence in
the oil and gas sector and view Chariot's resilience in the
downturn and future exploration programme as a robust opportunity
for growth. Chariot is now funded to operate the drilling of
Prospect S, Namibia, in the latter part of this year, which has a
gross mean prospective resource of 459mmbbls and a potential upside
of 2.2Bnbbls in other prospects within the licence. As a result
this investment gives us more fire power in our decision making and
commercial strength in negotiations, particularly with regard to
capitalising on historically low rig rates and ongoing partnering
discussions.
Our Values
Throughout the year and despite a smaller headcount, we have
maintained our skills and knowledge base by retaining the core
commercial, financial and technical capabilities of our team,
ensuring the continued growth and forward progress of the Company.
This has been accomplished by having an effective Board that
provides strong leadership, engaging and challenging both the
executive and senior management teams across the business. We carry
out in-depth technical reviews in accordance with our financial
position and portfolio direction at quarterly meetings, and our
committees meet regularly to support the delivery of best practice
corporate standards in everything we do. This is further supported
by our external advisors with whom we retain strong relationships
and regular reviews.
This diligence at Board level creates a culture that emanates
through the rest of the team. Long term growth and profitability is
enhanced when businesses behave in a sustainable and responsible
manner, with respect to the environment, health and safety, and to
all their stakeholders. In particular, we recognise the importance
of the work carried out by and the continued co-operation,
correspondence and input of our in-country partners. Regular
meetings to share technical and operational developments within
each region facilitate communication and processes at all levels -
from government to local empowerment partners and service
companies. It is thanks to the continued support of these entities,
particularly the Governments and Energy Ministries and their
respective national oil companies, that Chariot has been able to
mature its portfolio and seek partnerships for the next stages of
exploration. We look forward to continuing to build on these strong
relationships as we enter the drilling phase.
Outlook
We will continue to adhere to our core values as we look to
execute the primary objective of creating value for our
shareholders by delivering the highest quality exploration
opportunities. We believe that we have built a strong platform for
long term growth at the same time as offering near term, material
value triggers.
Chariot's continued investment in the portfolio during a
downturn in the industry means that this year the Company will have
been exposed to two giant-scale wells whilst capturing the bottom
of the cost cycle for drilling. Although the outcome of the Rabat
Deep 1 well in Morocco was disappointing, Chariot's risk management
strategy and recent successful equity fundraise means that it is on
track and fully funded to drill Prospect S in Namibia in Q4 2018
and continue the development of the Company's broader portfolio in
Brazil and its other Moroccan permits.
It is an exciting year ahead but, as always, the Company will
continue to apply risk reduction strategies throughout the
portfolio due to the high risk - high reward nature of its
exploration programme, as well as the unpredictability of the
financial and resource markets. With our recently bolstered
financial resources, supported by steps we have taken to ready our
business for growth, we remain well prepared to capitalise on
opportunities as they arise.
George Canjar
Chairman
5 June 2018
Chief Executive Officer's Review
Chariot's continued focus over the last 12 months on capital
discipline, partnering and portfolio management has culminated in
the current drilling programme, targeting some of the world's
largest prospects of 2018, with the capacity to transform the
Company's value and offer substantial follow on potential in the
success case. At the same time, its technical focus ensures the
Company continues to mature the rest of the portfolio and its new
venture strategy has successfully sought to capitalise on any
further information gained from our near term drilling programme to
add to our longer term prospect inventory.
The importance of this de-risking strategy is highlighted
through the recent disappointing results of the Rabat Deep 1 well,
which tested one of the play types, a Jurassic Carbonate, within
the Company's wider portfolio focus. Through partnering Chariot was
able to participate in this well at no cost. At the same time as
using the information gained from this well to de-risk those
prospects with similar properties, with a diversified portfolio
Chariot can offer exposure to other high impact drilling
opportunities which fall across several basins in a number of play
types within the Atlantic Margin, and the Company looks forward to
the drilling of Prospect S in Namibia during Q4 2018.
Crucially, it is the in-house team that has been able to
identify these giant, high margin assets and manage them in a
challenging business environment that makes Chariot's offering
truly compelling. Using its strategic foresight the Company has
invested in the opportunities that have arisen from a lower for
longer oil price environment, taking advantage of significant
reductions in the seismic market and now having captured the same
effect on rig rates. Through this and our recently bolstered
funding position, we expect to achieve a balance of equity,
technical risk and cost through our ongoing partnering negotiations
with the aim of maximising our exposure to the drilling of our near
term giant prospects at the optimum point of the cost cycle.
Accelerated Drilling Campaign in a Low Cost Window of
Opportunity
In Q1 2018 Chariot participated in the first of three giant
potential wells that the Company is aiming to drill over the next
18 months. The Rabat Deep 1 well, targeting the JP-1 prospect in
Rabat Deep offshore Morocco, was drilled by the Rabat Deep
partnership to a total depth of 3,180m with the Saipem 12000 sixth
generation ultra-deepwater drillship. It penetrated a thick top
seal and encountered tight, fractured carbonates in the primary
target and consequently was plugged and abandoned with the data
collected used to calibrate existing data sets to understand the
implications on the prospectivity of the surrounding area.
Whilst the outcome of the well is very disappointing, having
farmed down the acreage at both the seismic and drilling investment
phase, Chariot was able to participate in a potentially
transformational well at zero cost to the Company. This may not be
achievable across the entirety of the portfolio, but Chariot aims
to capitalise on opportunities where it is able, and with the
recent successful fundraising it is funded to lock in the current
reduction in rig rates which, in response to decreased world-wide
exploration activity, are now a quarter of their previous cost.
This timing is crucial. With a recently stabilised oil price and
the reduced cost price environment encouraging more seismic
activity, we see signs of a return to exploration from the
industry, and with increasing demand for these services, will come
increasing prices. It is for this reason that we are looking to act
now, while this window of opportunity remains open.
Drilling preparations have therefore commenced for Prospect S
(audited gross mean prospective resources of 459mmbbls) in Namibia
in anticipation of a Q4 2018 spud and Kenitra-1 (gross mean
prospective resources of 464mmbbls) in Chariot's operated acreage
in Morocco where we are targeting drilling to commence in H1 2019,
depending on drilling outcomes and partnering processes. Management
believes that this preparatory work will avoid unnecessary delays
associated with its plans to drill, strengthen its position in
partnering negotiations and ensure it capitalises on the current
low-cost oil services environment.
As well as the financial capacity to do this, we now also have
the operational skill set with the addition of David Brecknock,
Drilling Manager, to the team in October 2017. David has held a
variety of drilling operations and management roles, principally in
deep-water drilling, with over 20 years of international experience
gained with Enterprise, Shell, BG, Devon, Perenco and Ophir. Most
recently David led a team which delivered a deep-water exploration
well in Cote d'Ivoire for less than US$20 million gross - a well
drilled in similar water depth and depth of primary target as
Prospect S in Namibia, which we aim to deliver safely and
efficiently under his leadership.
Partnering - Getting the Balance Right
Locking in the reduced rig costs is also deemed important to our
negotiating position in the ongoing partnering processes on our
Namibian and operated Moroccan acreage. The very process of
carrying out a dataroom and the potential partnering negotiations
that follow provides the third party validation and technical
de-risking that the Company looks for to ensure that the potential
of the asset is endorsed. The subsequent decisions are based on
balancing the asset's associated risk, with the cost and ultimate
value of success to Chariot - taking into account external
commercial factors such as the current economic environment.
Where seismic was carried out at the peak of the market cycle in
2014 on the Rabat Deep asset, for example, partnering was essential
to balance the cost of this and the rig market conditions at the
time. The resulting equity left in the asset was representative of
the anticipated financial outlay. At the moment, however, with rig
rates down from US$650,000/day (2012) to less than US$200,000/day
(2017), the costs of the upcoming drilling programme are vastly
reduced. As such, and given Chariot's recently strengthened
financial position, this balance in the partnering process has
shifted allowing the Company to retain larger equity in a low cost
well (as anticipated for Prospect S) instead of a smaller equity
position in a high cost well. It is thus that the Company will
continue to look to balance its equity stake and cost in its
licences while, at the same time as achieving third party
validation and capital discipline, delivering the greatest value
possible to its shareholders.
Successful partnering on these near term wells will also offer
the potential to liberate funds to extend the current drilling
programme. In the Central Blocks in Namibia, for example, with
success in Prospect S and with partnering, Chariot will aim to
drill the neighbouring Prospect W (284mmbbls gross mean prospective
resources) back-to-back and, by using the same rig, to benefit from
cost reduction through operational synergy. Similarly, at
Kenitra-1, with success and partnering the Company would aim to
drill LKP-1a (350 mmbbls gross mean prospective resources)
back-to-back in the neighbouring Mohammedia Permits. It is thus
that through the strong financial position of the Company and
potential additional partnering Chariot could drill up to a further
two prospects in the near term.
Focused Portfolio Management
Chariot continues to strive for a diverse portfolio that creates
a variety of opportunities for substantial play opening targets
with an optimum chance for long term success. As part of this
focus, the team has continued to analyse the wider opportunities
presented in the Atlantic Margin, particularly keeping in mind the
objective of locking in follow on potential that may result from
any success and improved technical understanding from near term
drilling. In this way, having identified prospectivity extending
into neighbouring acreage in the Jurassic and Lower Cretaceous
plays from Rabat Deep, the team secured the Mohammedia permit in
2016 and, during 2017, Kenitra, offshore Morocco with a 75% equity
holding - which now make up part of the near term drilling
programme.
In 2017 the team acquired and processed a further 1,027km(2) of
3D and 2,254km of 2D seismic in this operated Moroccan acreage,
concluding all remaining commitments at favourable rates. This,
combined with the calibrated results of the Rabat Deep 1 well, will
allow the team to improve the description of its drilling targets,
Kenitra-1 and LKP-1a, in the Cretaceous siliciclastic play.
The team also continues to work towards maturing the longer-term
prospect inventory from its current portfolio. This year the team
completed its analysis of the 3D seismic data it acquired in 2016
across its Namibian and Brazilian licences, integrating five new
prospects (S, T, U, V and W), ranging from 283 - 459mmbbls in gross
mean prospective resources, into the drilling inventory from the
former, and a large four way dip-closed structure in the latter, on
which an independent audit of prospective resources has been
completed, and a dataroom is currently open. The Brazil portfolio
consists of seven prospective reservoir targets individually
ranging up to 366mmbbls and collectively in excess of 1.4Bnbbls of
gross mean prospective resources. With well operations now funded
for Prospect S, it is intended that partnering followed by a
drilling campaign on the rest of these newly defined targets, along
with any additional new ventures, will secure the longevity and
extend the follow-on potential of the Company's portfolio beyond
the current objectives.
As well as looking to add prospectivity, the team also
consistently streamlines the portfolio to identify those parts
that, despite being giant in their potential, may present higher
risks. With this in mind, in August 2017, the Company reported that
it had decided not to enter the next period of exploration in the
Southern Blocks, Namibia. It has, however, secured an option to
back-in for 10% equity after the completion of future exploration
drilling in region for no financial consideration in exchange for
facilitating a partnering programme which will be undertaken by the
state oil company, NAMCOR. In doing so, the Company still retains
exposure to the upside on this acreage, whilst being able to focus
its funds on maturing its near-term drilling inventory.
Our Team
Crucial to these achievements is Chariot's in-house team. With a
combined knowledge base of over 200 years on the Atlantic Margins
we believe that Chariot has one of the best understandings of this
geology amongst our peer group and by continuing to apply its
technical strength, it aims to deliver on its goal; to discover
material accumulations of hydrocarbons. This is complemented by the
financial and commercial capabilities of the team in negotiating
excellent contract rates and terms, with a focus on capital
discipline ensuring for a robust fiscal position. We were also very
pleased to welcome the aforementioned David Brecknock to the team
in 2017 as Drilling Manager, in anticipation of safe, efficient and
cost-effective drilling operations in the year ahead.
With another challenging year within the oil and gas industry I
would like to thank the team for their continued hard work. The
recent upturn in the sector, including interest from the equity
markets, means Chariot is well positioned to take advantage of the
opportunities presented at this point of the cost cycle and looks
forward to the developments of the year ahead.
Outlook
Chariot remains on track in its goal of drilling three high
impact wells of transformational potential in the near term, with
the drilling of the Rabat Deep 1 well by the Rabat Deep partnership
complete and preparations underway for the drilling of Prospect S
in Q4 of this year and, depending on the outcome and partnering, a
further well, either in Namibia or Morocco in H1 2019. It is owing
to the continued focus on capital discipline, technical expertise
and the de-risking strategy that we have been able to initiate this
drilling campaign at no cost to the Company and we will continue to
seek a partnership balance in which the technical risk is measured
against the cost and its associated prize, to maximise the
retention of licence equity and achieve drilling at the optimum
point of the oil services cost cycle.
At the same time we remain vigilant of the potential ongoing
volatility in the market and will continue to ensure the stability
of the Company's long term. With no remaining commitments across
the portfolio we stand in a robust financial position from which we
can look to technically mature our current assets and seek partners
to enable the acceleration of drilling the follow-on portfolio. In
addition, we will continue to leverage our knowledge of the
Atlantic margins to access additional giant potential new ventures,
with the aim of offering exposure to a sustainable pipeline of high
impact drilling opportunities.
Larry Bottomley
Chief Executive Officer
5 June 2018
Chief Financial Officer's Review
Funding and Liquidity as at 31 December 2017
The Group continues to have a robust balance sheet with no debt,
cash of US$15.2 million as at 31 December 2017 (31 December 2016:
US$25.0 million) and, following the drilling of the Rabat Deep 1
well in Q1 2018 which Chariot achieved at zero cost, no remaining
commitments. The equity fundraise announced post year end raised an
additional net US$16.5 million providing funding for the planned
drilling in Q4 2018 of Prospect S in Namibia.
During 2017 the Group continued with the development of its
portfolio and business by investing c.US$13 million into its
exploration portfolio and administration activities (31 December
2016: c.US$17 million) primarily in the 2D and 3D seismic campaign
in Morocco. The timely acquisition of seismic data in Morocco
allowed the Group to fulfil its commitments early in the licence
phases at historically low rates, again demonstrating strong
capital discipline and leveraging the technical expertise and value
additive work of the highly experienced, industry respected,
in-house team.
The recovery of the Rabat Deep investment costs, received on
completion of the farm-out to Eni in January 2017, was supported by
careful stewardship of existing cash balances, as the effects of
the 2016 restructuring and continued focus on cost saving led to
further reductions in annual cash overheads, before any recovery
from partners, to US$4.2 million down from US$5.0 million in
2016.
As at 31 December 2017, US$7.6 million of the Group's cash
balances were held as security against licence work commitments.
The increase from US$6.2 million as at 31 December 2016 was
primarily due to the award of the Kenitra licence in 2017. In
February 2018 US$4.0 million of Moroccan bank guarantees were
released.
Financial Performance - Year Ended 31 December 2017
The Group's loss after tax for the year to 31 December 2017 was
US$55.4 million, which is US$48.6 million higher than the US$6.8
million loss incurred for the year ended 31 December 2016.
The vast majority of this US$48.6 million increase in the annual
loss is due to an impairment charge of US$51.3 million against
previously capitalised costs in the Namibian Southern Blocks due
its relinquishment in August 2017 compared with a US$5.2 million
impairment charge in Mauritania in 2016, together with a reduction
in net finance income of US$2.7 million combined with an overall
reduction in share based payments, other administrative expenses
and tax expense totalling US$0.2 million. This equates to a loss
per share of US$(0.21) compared to a loss per share of US$(0.03) in
2016.
The share based payments charge of US$0.9 million for the year
ended 31 December 2017 in relation to employee deferred share
awards was broadly consistent with US$0.8 million in the previous
year.
Other administrative expenses of US$3.4 million for the year
ended 31 December 2017 is US$0.1 million lower due to ongoing costs
savings (31 December 2016: US$3.5 million).
The finance income and expense net gain of US$0.2 million (31
December 2016: US$2.8 million net gain) comprises interest on cash
and foreign exchange movements on non-US$ cash.
Interest income of US$0.2 million for the year ended 31 December
2017 is significantly lower than the prior year as the vast
majority of the Group's cash is now held at lower interest rates in
US Dollars, as compared with the significant Brazilian Real cash
balance held throughout 2016 earning a higher interest rate (31
December 2016: US$1.2 million).
The foreign exchange loss on non-US$ cash of less than US$0.1
million for the year ended 31 December 2017 is also indicative of
the Group holding the majority of its cash in US Dollars. In the
prior year significant cash balances were held in Brazilian Real as
security against licence work commitments resulting in a higher
foreign exchange movement (31 December 2016: US$1.6 million
gain).
The tax expense of less than US$0.1 million in the year to 31
December 2017 (31 December 2016: US$0.2 million) relates to
Brazilian taxation levied on interest income with its decrease
consistent with lower Brazilian interest income received in
2017.
Exploration and Appraisal Assets as at 31 December 2017
During the year to 31 December 2017, the carrying value of the
Group's exploration and appraisal assets decreased by US$46.9
million to US$72.8 million from US$119.7 million as at 31 December
2016. This US$46.9 million decrease was due to the US$51.3 million
impairment charge against the Southern Blocks and US$3.0 million of
farm-in proceeds in Rabat Deep, Morocco, partly offset by US$7.3
million of portfolio investment undertaken in 2017.
The US$7.3 million portfolio investment is split as follows: in
Morocco, US$5.8 million was incurred mainly on 2D and 3D seismic
acquisition and processing; in Namibia, US$0.9 million was incurred
across all the Group's licences, with the majority relating to the
Central Blocks 3D seismic interpretation and preparations to drill;
and in Brazil, US$0.6 million was incurred mainly on the 3D seismic
interpretation.
Other Assets and Liabilities as at 31 December 2017
The Group's inventory balance of US$0.5 million as at 31
December 2017 has decreased from US$0.9 million at 31 December 2016
due to the disposal of some items of wellheads and casings.
As at 31 December 2017, the Group's net balance of current trade
and other receivables and current trade and other payables shows a
net current liability position of US$1.0 million (31 December 2016:
US$3.5 million) with the decrease primarily due to settlement in
the current year of outstanding payables for the seismic campaigns
in Brazil and Namibia.
Outlook
We will look to continue to apply the de-risking strategies of
maturing the portfolio, partnering to drill assets where funding is
needed, and applying capital discipline throughout the project
execution phase. With US$15.2 million of cash at 31 December 2017,
no debt and no commitments across the entirety of the portfolio,
the Group is well funded. In March 2018 this balance sheet was
further bolstered by an equity raise of US$16.5 million net,
allowing funding for the drilling of Prospect S in Namibia and
acting as a potential catalyst for future partnering discussions.
We thus look forward to an exciting year with the continuation of
the Company's drilling programme, providing additional value
triggers and the possibility for Chariot's giant potential prospect
inventory to be realised.
Julian Maurice-Williams
Chief Financial Officer
5 June 2018
Exploration Manager's Review of Operations
Chariot has built a diversified portfolio encompassing the
giant-potential, underexplored deep-water regions offshore Namibia,
Morocco and Brazil, which offer a range of risk and maturity in
three basins with four plays. Across its licences Chariot's
in-house team has evaluated new and existing 2D and 3D seismic data
sets, with the Company having acquired, processed and interpreted
in excess of 9,000 km 2D and 17,000 km(2) 3D data over the past
decade. From this, the Company has identified over three billion
barrels of gross mean prospective resources within the prospect
inventory from its current acreage and has three high-graded
drill-ready prospects ranging from 459mmbbls to 911mmbbls gross
mean prospective resources, all having significant follow-on
potential in diverse plays and trapping configurations. The year
2018 sees the initiation of a three well drilling campaign, testing
three of the four plays within the portfolio. From this campaign,
we hope to attain our goal of discovering material accumulations of
hydrocarbons and to apply the information from these wells,
successful or not, to calibrate the seismic data and further refine
our understanding of the potential of these underexplored
regions.
Period and Post Period Exploration Developments
During 2017 Chariot continued to invest in its portfolio to
capitalise on the current low cost environment. The first well in
its drilling programme was completed at no cost to the Company in
Rabat Deep, Morocco, in April 2018. Whilst the Rabat Deep 1 well
was unsuccessful, Chariot's operated neighbouring portfolio offers
a variety of high impact drilling opportunities in the near term in
other plays, which the team has continued to de-risk throughout the
period through seismic acquisition and studies.
New Venture Acquisitions
To capture this potential, Chariot secured the Kenitra Permit in
Morocco in Q1 2017, encompassing the broader LKP group of prospects
and the Kenitra prospect which now makes up part of the forward
drilling campaign. Chariot also secured back-in rights in legacy
acreage in Namibia.
Extensive Seismic Acquisition, Processing and Interpretation
Programmes
Through its extensive work programme, the Chariot in-house
sub-surface team has continued to refine its prospect inventory
with the completion of the evaluation of 3D seismic datasets
acquired in 2016 in Brazil and Namibia. This work has led to the
inclusion of five new structural prospects in Namibia and a diverse
portfolio of stratigraphic and structural closures in Brazil as
confirmed by a recently completed CPR.
In 2017 acquisition and processing of approximately 2,250km 2D
and 1,000km(2) 3D seismic in Mohammedia and Kenitra, Morocco, was
carried out under favourable commercial rates. This dataset is
currently being interpreted and will be calibrated with the recent
information from the drilling of the JP-1 prospect in Rabat Deep,
to refine the Lower Cretaceous drilling targets Kenitra-1 and
LKP-1a.
Partnering Progress
In Q1 2017 Chariot completed the transfer of operatorship in
Rabat Deep offshore Morocco to Eni in return for a carry on the
drilling of the commitment well Rabat Deep 1, offering the Company
exposure to transformational potential at no financial risk.
Partnering processes have also been initiated across the
remainder of its acreage on priority drilling targets.
Preparations for Drilling Operations 2018/2019
Having previously taken advantage of the low seismic acquisition
rates, Chariot is now focusing on seizing the opportunity of the
depressed deep-water drilling rig market and has launched drilling
preparations in Namibia and Morocco through the initiation of
Environmental Impact Assessments, procurement of long lead items
and through well design and well planning activities. This advanced
preparatory work will enable Chariot to have the flexibility to
capitalise on the current low-cost environment for drilling.
Chariot aims to operate the exploration drilling campaign on
Prospect S, Namibia in Q4 2018, and depending on the outcome of
this well, to secure a partner for back-to-back drilling in this
region on Prospect W, or to drill in Morocco the following
year.
Portfolio in Focus: Giant Prospectivity at Lowered Risk
Early stage exploration for giant opportunities carries high
technical risk and we continue to mitigate these risks through the
application of our de-risking strategy:
- Acquiring diverse assets across a range of basins and of
varied exploration maturity;
- Applying technology through the acquisition of extensive 2D
and 3D seismic data sets, state of the art processing and
performing high quality sub-surface analysis;
- Active portfolio management, which includes both
rationalisation through relinquishments and new acreage access, for
example through licence awards;
- Levered partnering, as previously achieved with Petrobras, BP,
Azinam, Cairn, Woodside and Eni.
Although Chariot's strategic application is key to being able to
deliver on its portfolio goals, it is the quality of the portfolio
that will be the ultimate determinant of our success. Despite the
different levels of exploration maturity, each asset is
characterised by flexible work programmes, excellent contract and
commercial terms and most importantly scale, with our current
drilling inventory containing high-graded prospects in excess of
450mmbbls each of gross mean prospective resources.
Drilling Target Water Trap and Play Type Follow-on Potential
Inventory Potential Depth
Prospect 459mmbbls* 1,650m 4-way dip-closed 4 structural prospects
S structure 2 stratigraphic
(PEL 71, prospects
Central Blocks)
------------ -------
Upper Cretaceous (283 - 469mmbbls*)
turbidite clastic
reservoir
------------ -------
Aptian source Summed mean > 2.2Bnbbls
------------ ------- --------------------------- ------------------------
Kenitra-1 464mmbbls** 750m Combination stratigraphic, 4 prospects
dip and fault-closed
trap
(Kenitra)
------------ -------
Lower Cretaceous (182 - 350mmbbls*)
clastic reservoir
------------ -------
Jurassic Source Summed mean > 1Bnbbls
------------ ------- --------------------------- ------------------------
Prospect 911mmbbls* 1,500m Stacked 4-way dip 4 additional targets
1 closed structure
(TP-1), and stratigraphic
targets (TP-3 & KP-3)
(BAR-M Licences Tertiary and Cretaceous (up to 290mmbbls*)
Brazil) turbidite reservoirs
Cretaceous source Summed mean 537mmbbls
------------ ------- --------------------------- ------------------------
* Netherland Sewell and Associates Inc. estimate of Gross Mean
Prospective Resources
** Internal Chariot estimate of Gross Mean Prospective
Resources
As well as offering a range of play types and investment
opportunities, these drill-ready targets fall in the lower cost
environment for deep-water projects. All prospects fall within
normal temperature and pressure environments, in deep-water of 750m
to 1,650m water depth and in basins unlikely to be affected by
challenging metocean conditions. As a result of this lower cost
environment, excellent contract commercial terms and large
prospective resource potential we can offer assets with high
margins and very robust economics to potential partners in the
event of success, each with material direct follow-on
potential.
Namibia
PEL-71, 'Central Blocks', (65% (Operator); Azinam 20%; NAMCOR
10%; Ignitus 5%)
Chariot was one of the first oil and gas explorers to secure
licence areas in deep-water offshore Namibia. As a result Chariot
holds first-mover advantage with its in-depth knowledge of the
Namibian geology and a significant acreage position totalling
approximately 16,800km(2) within the Walvis Basin, adjacent to
third-party wells which have proven mature source rock and
excellent quality reservoirs. The Company has in excess of
6,000km(2) of proprietary 3D seismic data, acquired in two separate
campaigns. This 3D data combined with its 2D proprietary data and
the participation in the ION NambiaSPAN multi-client 2D seismic
survey of 2015 which covered the entire offshore Namibian margin,
as well as the information from the drilling of the Kabeljou and
Tapir South wells, has provided invaluable detail on the regional
geological architecture of our acreage. In particular, this permits
an accurate depiction of the deeper basin structure, distribution
of source rock levels, definition of the main reservoir fairways
and critically the controls on generation of low-risk structural
traps. Importantly, it appears that Chariot's blocks are well
placed to capture charge from key source kitchens and the Company's
3D seismic programmes demonstrate the presence of large structural
closures within the licence.
Of note, five dip-closed structural traps have been identified
in the Upper Cretaceous turbidite clastic play fairway, with the
focus prospects being Prospect S (gross mean prospective resources
459mmbbls) - the 2018 drilling candidate, Prospect W (gross mean
prospective resource 284mmbbls) - the follow on drilling candidate
and Prospect B (469mmbbls gross mean prospective resources) - a
higher risk-reward stratigraphic trap which could be de-risked
through calibration of the seismic data with the first well
results. Preparation for drilling in Q4 2018 is underway for
Prospect S, with an Environmental Impact Assessment (the
Environmental Clearance Certificate being awarded in January 2018)
and drilling and geological operational work in progress. A
partnering process is ongoing with the aim of securing funding for
optional future drilling, for example on Prospect W, should
Prospect S be successful.
Additionally, during the year, and as part of the withdrawal
from the Southern Blocks (2714A and 2714B), Chariot secured an
option to back-in for 10% equity at no cost after exploration
drilling in return for which the Company will assist with the
farm-out process that will be led by NAMCOR, the Namibian State Oil
Company on this acreage.
Forward Plan 2018/19:
o Progress partnering process
o Complete detailed well engineering, tendering on drilling and
logistics services, and operational planning for the first
deep-water drilling campaign on Central Blocks
o Drill Prospect S in H2 2018
o Drill a follow-up well on Prospect W (subject to partnering
and dependent on outcome of Prospect S)
Remaining Commitments:
o No remaining commitments
Morocco
In Morocco, the Company holds acreage across three permit areas:
Rabat Deep, Mohammedia and Kenitra, which are situated up to 50km
offshore in northern Morocco and cover a combined area of
approximately 12,800km(2) . Following extensive technical analysis
of legacy 2D seismic data, and its own proprietary 2D and 3D
seismic, the team has identified potential in the two primary plays
that have been the source of industry activity along the margin
over recent years.
Rabat Deep (10% Chariot, 40% Eni (Operator), 25% Woodside, 25%
ONHYM (carried interest))
In Rabat Deep, Chariot is partnered with Eni (Operator),
Woodside (25%) and the state oil company ONHYM (25%). In 2017,
Chariot completed the transfer of operatorship to Eni in return for
a carry on the drilling of the commitment well, Rabat Deep 1, which
was completed in April 2018 with the Saipem 12000 rig, a sixth
generation ultra-deep-water drillship. The well did not encounter a
hydrocarbon accumulation and as a result, the well was plugged and
abandoned, however the extensive subsurface data collected will be
used to calibrate the existing seismic data sets to understand the
implications of the well results on the prospectivity of the
surrounding area.
Rabat Deep 1 Drilling Case Study
Rabat Deep 1 was safely drilled to a total measured depth of
3,180m to test the JP-1 prospect which had a pre-drill audited
estimation of 768mmbbls of gross mean prospective resources. The
well penetrated a thick top seal and drilled into the primary
target encountering tight, fractured carbonates as evidenced by
extensive losses of drilling fluid. As a consequence, only limited
cuttings were recovered from the primary target and some limited
hydrocarbon indications were observed. Electric log data and
sidewall cores have been acquired and detailed analyses are
currently being undertaken to determine why the reservoir was
tight. By gaining a greater understanding of the physical rock
properties we can carry out geophysical modelling to identify the
seismic signature of this tight reservoir and compare it against
the other seismic facies across the JP-1 structure and other
Jurassic carbonate leads and prospects in Rabat Deep and Chariot's
neighbouring acreage, particularly that of JP-2.
The results of the well will also be useful to de-risk the
younger Cretaceous siliciclastic play type in Chariot's adjoining
acreage. Within the thick seal section of the well the team has
interpreted thin sands from log evaluation and cuttings. Using
these logs we expect to be able to measure the physical rock
properties to undertake seismic modelling and fluid substitution to
calibrate and compare the LKP group of prospects and leads in the
Mohammedia and Kenitra permits and the Kenitra prospect in
Kenitra.
Mohammedia and Kenitra (75% Chariot (Operator), 25% ONHYM
(carried interest))
In line with its new venture strategy, Chariot used its depth of
understanding of the regional geology and associated hydrocarbon
play potential to expand its portfolio in Morocco, securing first
the Mohammedia permit in June 2016 and then, in early 2017, the
Kenitra permit. In Mohammedia and Kenitra, Chariot holds 75% equity
and operatorship, the remaining 25% being with ONHYM.
The Mohammedia licence area sits inboard of Rabat Deep and
covers an area of approximately 4,600km(2) with water depths of
less than 500m. The Kenitra Exploration Permit is adjacent to
Mohammedia covering an area of approximately 1,400km(2) with water
depths ranging from 200m to 1,500m. In Q1 2017, leveraging the cost
collapse of the seismic market to accelerate the fulfilment of its
licence commitments, the Company acquired approximately 1,000km(2)
of 3D and 2,250km of 2D, designed to investigate the extent of the
prospectivity in the Lower Cretaceous play and in the Jurassic
carbonate play which was the focus of the Rabat Deep 1 well. The
processing of these datasets has now been completed and the
interpretation process is ongoing. This will be further refined
through the calibrated information from the Rabat Deep 1 well, to
de-risk the prospectivity.
Previous 3D data acquired by Chariot in 2014 highlighted the LKP
group of prospects in the shallower Lower Cretaceous clastic play,
with the LKP-1a (350mmbbls gross mean prospective resources) being
a priority drilling target. Crucially, however, it is anticipated
that the new seismic data and insights from the Rabat Deep 1 well,
will provide further detail to de-risk Kenitra-1 (464mmbbls gross
mean prospective resources (internal estimate)). This prospect is
located across the boundary between the 2014 3D seismic data and
the 2017 3D and currently interpreted as an attribute supported
combination stratigraphic and fault-closed structural trap in the
Lower Cretaceous marine sequence and has been earmarked as a
priority drilling target. It sits within a prospect inventory of
the Mohammedia and Kenitra permits, which currently totals in
excess of 1 billion barrels of gross mean prospective
resources.
To enable the possibility for an accelerated drilling programme,
preparations for drilling on these priority prospects has been
initiated. This includes Environment Impact Assessment preparation,
preliminary geohazards and pore pressure analysis and conceptual
well engineering. To allow for the completion of the interpretation
of the 2017 seismic data and the incorporation of the results of
the Rabat Deep 1 well, an updated partnering process on Kenitra-1
and the LKP-1a prospect is anticipated to commence in mid-2018,
with the aim of securing partners to contribute to the funding of
Kenitra-1 in H1 2019 (subject to partnering success). Depending on
the outcome of the partnering process, the possibility exists for
the drilling of prospect LKP-1a back-to-back with the Kenitra-1
well (subject to success in Kenitra-1).
Forward Plan 2018/2019:
-- Rabat Deep:
o Evaluate and incorporate the understanding of the Rabat Deep 1
well data analysis to de-risk the prospectivity of the greater
area
-- Mohammedia and Kenitra:
o Complete 2D/3D seismic interpretation over Mohammedia &
Kenitra and calibrate this with the information from the Rabat Deep
1 well to fully describe priority drilling targets and additional
prospectivity
o Initiate an updated partnering process, anticipated
mid-2018
o Drill Kenitra-1 (Kenitra) with LKP-1a (Mohammedia)
back-to-back (subject to well results and partnering):
-- Kenitra-1 (464mmbbls gross mean prospective resources
(internal estimate)) is an attribute supported combination
stratigraphic and fault-closed structural trap in Lower Cretaceous
clastics
-- LKP-1a (350mmbbls gross mean prospective resources CPR) is an
attribute supported 3-way dip and fault closed Lower Cretaceous
clastic prospect in 350m water depth
Remaining Commitments:
-- Rabat Deep:
o No remaining commitments
-- Mohammedia and Kenitra:
o No remaining commitments
Brazil
BAR-M-292, 293, 313 and 314 (100% Chariot (Operator))
Following the highly successful drilling campaigns on the
conjugate margin of Cote d'Ivoire and Ghana, the 11(th) licensing
round in the Brazilian Barreirinhas basin, where the potential for
hydrocarbon generation is anticipated to be similar, was highly
competitive. Despite this competition, Chariot secured 100% of
licences BAR-M-292, 293, 313 and 314 on a seismic option and with a
low signature bonus whilst many of the neighbouring operators in
the region took on significantly higher signature bonus payments
and drilling commitments within the First Exploration Phase.
Whilst there have only been three deep-water wells drilled
within the basin to date, the information these have provided has
proven the presence of excellent quality Tertiary and Cretaceous
deep-water turbidite reservoirs. In addition, the presence of
Santonian and Cenomanian-Turonian source rocks have been
demonstrated in legacy shallow-water wells drilled in-board of
Chariot's acreage with evidence for sufficient burial for
hydrocarbon generation, which is supported by prevalent shows in
offset wells.
Chariot has now completed the evaluation of its proprietary
775km(2) 3D seismic survey. A Competent Person's Report ("CPR") has
been completed by Netherland Sewell and Associates Inc. ("NSAI")
over Chariot's Brazilian portfolio. This portfolio consists of
seven prospective reservoir targets in a range of trapping
configurations from purely structural and combination traps,
associated to a 200km(2) 4-way dip-closed structure which sits
principally over Block 314, to stratigraphic traps. The on-licence
gross mean prospective resource of individual targets range up to
366mmbbls, and a single vertical well located at Prospect 1 can
penetrate the TP-1, TP-3 and KP-3 stacked targets which have a
summed on-licence gross mean prospective resource of 911mmbbls.
Additionally, the portfolio contains multiple additional
structural, combination and stratigraphic closures in reservoir
targets in the Tertiary and Upper Cretaceous. The description of
this prospect inventory has been completed ahead of anticipated
third party drilling in neighbouring acreage which will test the
potential of the deeper outboard basin and directly de-risk the
Chariot acreage which is located within the same play fairway, but
critically in an up-dip setting. A partnering process on these
licences has been initiated with a dataroom now open.
Forward Plan 2018/2019:
-- Partnering process initiated for a partner to join in
drilling to follow a play opening commitment to be drilled by a
third-party in the neighbouring deep-water block
Remaining Commitments:
-- No remaining commitments
Duncan Wallace
Exploration Manager
5 June 2018
Consolidated Statement of Comprehensive Income for the Year
Ended 31 December 2017
Year ended Year ended
31 December 31 December
2017 2016
Notes US$000 US$000
Share based payments 20 (875) (787)
Impairment of exploration asset 11 (51,307) (5,173)
Other administrative expenses (3,370) (3,544)
-------------------------------------- ------ -------------- --------------
Total operating expenses (55,552) (9,504)
-------------------------------------- ------ -------------- --------------
Loss from operations 4 (55,552) (9,504)
Finance income 7 195 2,831
Finance expense 7 (36) -
-------------------------------------- ------ -------------- --------------
Loss for the year before taxation (55,393) (6,673)
Tax expense 9 (25) (159)
-------------------------------------- ------ -------------- --------------
Loss for the year and total
comprehensive loss for the
year attributable to equity
owners of the parent (55,418) (6,832)
-------------------------------------- ------ -------------- --------------
Loss per Ordinary share attributable 10 US$(0.21) US$(0.03)
to the equity holders of the
parent - basic and diluted
-------------------------------------- ------ -------------- --------------
All amounts relate to continuing activities.
The notes form part of these financial statements.
Consolidated Statement of Changes in Equity for the Year Ended
31 December 2017
Share based Total
payment Foreign attributable
Share Share Contributed reserve exchange Retained to equity
capital premium equity reserve deficit holders of
the parent
US$000 US$000 US$000 US$000 US$000 US$000 US$000
---------------- ------------ ------------- ------------- ------------ ------------ ------------ -------------
As at 1 January
2016 4,811 339,654 796 4,280 (1,241) (200,049) 148,251
Loss and total
comprehensive
loss for the
year - - - - - (6,832) (6,832)
Share based
payments - - - 787 - - 787
Transfer of
reserves due
to issue of
share awards 63 979 - (1,042) - - -
Transfer of
reserves due
to lapsed
share options - - - (311) - 311 -
As at 31
December 2016 4,874 340,633 796 3,714 (1,241) (206,570) 142,206
---------------- ------------ ------------- ------------- ------------ ------------ ------------ -------------
Loss and
total
comprehensive
loss for the
year - - - - - (55,418) (55,418)
Share based
payments - - - 875 - - 875
Transfer of
reserves due
to issue of
share awards 7 110 - (117) - - -
As at 31
December 2017 4,881 340,743 796 4,472 (1,241) (261,988) 87,663
---------------- ------------ ------------- ------------- ------------ ------------ ------------ -------------
The following describes the nature and purpose of each reserve
within owners' equity.
Share capital Amount subscribed for share capital at nominal
value.
Share premium Amount subscribed for share capital in excess of
nominal value.
Contributed equity Amount representing equity contributed by the
shareholders.
Share based payments reserve Amount representing the cumulative
charge recognised under IFRS2 in respect of share option, LTIP and
RSU schemes.
Foreign exchange reserve Foreign exchange differences arising on
translating into the reporting
currency.
Retained deficit Cumulative net gains and losses recognised in
the financial statements.
The notes form part of these financial statements.
Consolidated Statement of Financial Position as at 31 December
2017
31 December 31 December
2017 2016
Notes US$000 US$000
Non-current assets
Exploration and appraisal costs 11 72,770 119,730
Property, plant and equipment 12 133 36
----------------------------------- ------ ------------ ------------
Total non-current assets 72,903 119,766
----------------------------------- ------ ------------ ------------
Current assets
Trade and other receivables 13 1,328 2,123
Inventory 14 480 938
Cash and cash equivalents 15 15,233 25,021
----------------------------------- ------ ------------ ------------
Total current assets 17,041 28,082
----------------------------------- ------ ------------ ------------
Total assets 89,944 147,848
----------------------------------- ------ ------------ ------------
Current liabilities
Trade and other payables 16 2,281 5,642
Total current liabilities 2,281 5,642
----------------------------------- ------ ------------ ------------
Total liabilities 2,281 5,642
----------------------------------- ------ ------------ ------------
Net assets 87,663 142,206
----------------------------------- ------ ------------ ------------
Capital and reserves attributable
to equity holders of the parent
Share capital 17 4,881 4,874
Share premium 340,743 340,633
Contributed equity 796 796
Share based payment reserve 4,472 3,714
Foreign exchange reserve (1,241) (1,241)
Retained deficit (261,988) (206,570)
----------------------------------- ------ ------------ ------------
Total equity 87,663 142,206
----------------------------------- ------ ------------ ------------
The notes form part of these financial statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 5 June 2018.
George Canjar
Chairman
Consolidated Cash Flow Statement for the Year Ended 31 December
2017
Year ended Year ended
31 December 31 December
2017 2016
US$000 US$000
Operating activities
Loss for the year before taxation (55,393) (6,673)
Adjustments for:
Finance income (195) (2,831)
Finance expense 36 -
Depreciation 26 39
Share based payments 875 787
Impairment of exploration asset 51,307 5,173
-------------------------------------------- -------------- --------------
Net cash outflow from operating
activities before changes in working
capital (3,344) (3,505)
Decrease/(increase) in trade and
other receivables 861 (854)
Increase in trade and other payables 183 604
Decrease in inventories 458 -
------------------------------------------- -------------- --------------
Cash outflow from operating activities (1,842) (3,755)
Tax payment (32) (161)
Net cash outflow from operating
activities (1,874) (3,916)
-------------------------------------------- -------------- --------------
Investing activities
Finance income 189 1,205
Payments in respect of property,
plant and equipment (123) (13)
Farm-in proceeds 3,000 -
Payments in respect of intangible
assets (10,944) (13,596)
Net cash outflow used in investing
activities (7,878) (12,404)
-------------------------------------------- -------------- --------------
Net decrease in cash and cash equivalents
in the year (9,752) (16,320)
Cash and cash equivalents at start
of the year 25,021 39,713
Effect of foreign exchange rate
changes on cash and cash equivalent (36) 1,628
Cash and cash equivalents at end
of the year 15,233 25,021
-------------------------------------------- -------------- --------------
The notes form part of these financial statements.
Notes forming part of the financial statements for the year
ended 31 December 2017
1 General information
Chariot Oil & Gas Limited is a company incorporated in
Guernsey with registration number 47532. The address of the
registered office is Regency Court, Glategny Esplanade, St Peter
Port, Guernsey, GY1 1WW. The nature of the Company's operations and
its principal activities are set out in the Report of the Directors
and in the Exploration Manager's Review of Operations.
2 Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and IFRIC
interpretations, as issued by the International Accounting
Standards Board (IASB), as adopted by the European Union.
In accordance with the provisions of section 244 of the
Companies (Guernsey) Law 2008, the Group has chosen to only report
the Group's consolidated position, hence separate Company only
financial statements are not presented.
The financial statements are prepared under the historical cost
accounting convention on a going concern basis.
Going concern
The Directors are of the opinion that the Group has adequate
financial resources to enable it to undertake its planned programme
of exploration and appraisal activities for a period of at least 12
months.
New Accounting Standards
The following new standards and amendments to standards are
mandatory for the first time for the Group for the financial year
beginning 1 January 2017. The implementation of these standards and
amendments to standards has had no material effect on the Group's
accounting policies.
Standard Effective year
commencing on
or after
IAS 7 - Statement of Cash Flows (Amendments) 1 January 2017
---------------
IAS 12 - Income Taxes (Amendments) 1 January 2017
---------------
Annual Improvements to IFRSs - (2014-2016 1 January 2017
Cycle)
---------------
Certain new standards and amendments to standards have been
published that are mandatory for the Group's accounting periods
beginning after 1 January 2018 or later years to which the Group
has decided not to adopt early when early adoption is available.
The implementation of these standards and amendments is expected to
have no material effect on the Group's accounting policies. These
are:
Standard Effective year
commencing on
or after
IFRS 9 - Financial Instruments 1 January 2018
----------------
IFRS 15 - Revenue from Contract with Customers 1 January 2018
----------------
IFRS 16 - Leases 1 January 2019
----------------
IFRS 2 - Share Based Payments (Amendments) 1 January 2018
----------------
Annual Improvements to IFRSs - (2014-2016 1 January 2018
Cycle)
----------------
Annual Improvements to IFRSs - (2015-2017 1 January 2019*
Cycle)
----------------
IAS 28: Long-term Interests in Associates 1 January 2019*
and Joint Ventures
----------------
* Not yet endorsed by the EU.
Exploration and appraisal costs
All expenditure relating to the acquisition, exploration,
appraisal and development of oil and gas interests, including an
appropriate share of directly attributable overheads, is
capitalised within cost pools.
The Board regularly reviews the carrying values of each cost
pool and writes down capitalised expenditure to levels it considers
to be recoverable. Cost pools are determined on the basis of
geographic principles. The Group currently has four cost pools
being Central and Southern Blocks in Namibia, Morocco and Brazil.
In addition where exploration wells have been drilled,
consideration of the drilling results is made for the purposes of
impairment of the specific well costs. If the results sufficiently
enhance the understanding of the reservoir and its characteristics
it may be carried forward when there is an intention to continue
exploration and drill further wells on that target.
Where farm-in transactions occur which include elements of cash
consideration for, amongst other things, the reimbursement of past
costs, this cash consideration is credited to the relevant accounts
within the cost pools where the farm-in assets were located. Any
amounts of farm-in cash consideration in excess of the value of the
historic costs in the cost pools is treated as a credit to the
Consolidated Statement of Comprehensive Income.
Inventories
The Group's share of any material and equipment inventories is
accounted for at the lower of cost and net realisable value. The
cost of inventories comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to
their present location and condition.
Taxation
Income tax expense represents the sum of the current tax and
deferred tax charge for the year.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases, and is accounted for using the balance
sheet liability method. Deferred tax liabilities are recognised for
all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that have been
enacted or substantively enacted and are expected to apply in the
year when the liability is settled or the asset realised. Deferred
tax is charged or credited to the Consolidated Statement of
Comprehensive Income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Foreign currencies
Transactions in foreign currencies are translated into US
Dollars at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
are translated into US Dollars at the closing rates at the
reporting date and the exchange differences are included in the
Consolidated Statement of Comprehensive Income. The functional and
presentational currency of the parent and all Group companies is
the US Dollar.
Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost or fair value
on acquisition less depreciation and impairment. Depreciation is
provided on a straight line basis at rates calculated to write off
the cost less the estimated residual value of each asset over its
expected useful economic life. The residual value is the estimated
amount that would currently be obtained from disposal of the asset
if the asset were already of the age and in the condition expected
at the end of its useful life.
Property, plant and equipment are depreciated using the straight
line method over their estimated useful lives over a range of 3 - 5
years.
The carrying value of property, plant and equipment is assessed
annually and any impairment charge is charged to the Consolidated
Statement of Comprehensive Income.
Operating leases
Rent paid on operating leases is charged to the Consolidated
Statement of Comprehensive Income on a straight line basis over the
term of the lease.
Share based payments
Where equity settled share awards are awarded to employees or
Directors, the fair value of the awards at the date of grant is
charged to the Consolidated Statement of Comprehensive Income over
the vesting period. Non-market vesting conditions are taken into
account by adjusting the number of equity instruments expected to
vest at each balance sheet date so that, ultimately, the cumulative
amount recognised over the vesting period is based on the number of
awards that eventually vest. Market vesting conditions are factored
into the fair value of the awards granted. As long as all other
vesting conditions are satisfied, a charge is made irrespective of
whether the market vesting conditions are satisfied. The cumulative
expense is not adjusted for failure to achieve a market vesting
condition.
Where the terms and conditions of awards are modified before
they vest, the increase in the fair value of the awards, measured
immediately before and after the modification, is also charged to
the Consolidated Statement of Comprehensive Income over the
remaining vesting period.
Where shares already in existence have been given to employees
by shareholders, the fair value of the shares transferred is
charged to the Consolidated Statement of Comprehensive Income and
recognised in reserves as Contributed Equity.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if it has power
over the investee and it is exposed to variable returns from the
investee and it has the ability to use its power to affect those
variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of these
elements of control. The consolidated financial statements present
the results of the Company and its subsidiaries ("the Group") as if
they formed a single entity. Intercompany transactions and balances
between the Group companies are therefore eliminated in full.
Financial instruments
The Group's financial assets consist of a bank current account
or short term deposits at variable interest rates and other
receivables. Any interest earned is accrued and classified as
finance income. Trade and other receivables are stated initially at
fair value and subsequently at amortised cost.
The Group's financial liabilities consist of trade and other
payables. The trade and other payables are stated initially at fair
value and subsequently at amortised cost.
Joint operations
Joint operations are those in which the Group has certain
contractual agreements with other participants to engage in joint
activities that do not create an entity carrying on a trade or
business on its own. The Group includes its share of assets,
liabilities and cash flows in joint arrangements, measured in
accordance with the terms of each arrangement, which is usually pro
rata to the Group's interest in the joint operations. The Group
conducts its exploration, development and production activities
jointly with other companies in this way.
Critical accounting estimates and judgements
The Group makes estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experiences and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may deviate from
these estimates and assumptions. If these estimates and assumptions
are significantly over or under stated, this could cause a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year. The areas where this could impact the
Group are:
a) Areas of judgement
i. Recoverability of intangible assets
Expenditure is capitalised as an intangible asset by reference
to appropriate cost pools and is assessed for impairment when
circumstances suggest that the carrying amount may exceed its
recoverable value. This assessment involves judgement as to: (i)
the likely future commerciality of the asset and when such
commerciality should be determined; (ii) future revenues and costs
pertaining to any asset based on proved plus probable, prospective
and contingent resources; and (iii) the discount rate to be applied
to such revenues and costs for the purpose of deriving a
recoverable value.
ii. Treatment of farm-in transactions
All farm-in transactions are reflected in these financial
statements in line with the accounting policy on Exploration and
Appraisal Costs. Farm-in transactions are recognised in the
financial statements if they are legally complete during the year
under review or, if all key commercial terms are agreed and legal
completion is only subject to administrative approvals which are
obtained within the post balance sheet period or are expected to be
obtained within a reasonable timeframe thereafter.
b) Areas of estimation
i. Share based payments
In order to calculate the charge for share based compensation as
required by IFRS 2, the Group makes estimates principally relating
to the assumptions used in its pricing model as set out in note
20.
ii. Inventory provision
The Group assesses whether a provision is required for inventory
by comparing the cost to the net realisable value, which is
estimated based on available market prices. If the net realisable
value is lower than the cost the difference is charged to the
Consolidated Statement of Comprehensive Income.
3 Segmental analysis
The Group has two reportable segments being exploration for oil
and gas and corporate costs. The operating results of each of these
segments are regularly reviewed by the Board of Directors in order
to make decisions about the allocation of resources and assess
their performance.
31 December 2017
Exploration Corporate Total
for
Oil and Gas
US$000 US$000 US$000
------------- ---------- -----------------
Share based payment - (875) (875)
------------- ---------- -----------------
Administrative expenses (471) (2,899) (3,370)
------------- ---------- -----------------
Impairment of exploration
asset (51,307) - (51,307)
------------- ---------- -----------------
Finance income - 195 195
------------- ---------- -----------------
Finance expense - (36) (36)
------------- ---------- -----------------
Tax expense - (25) (25)
------------- ---------- -----------------
Loss after taxation (51,778) (3,640) (55,418)
------------- ---------- -----------------
Additions to non-current assets 7,347 123 7,470
------------- ---------- -----------------
Total assets 73,310 16,634 89,944
------------- ---------- -----------------
Total liabilities (978) (1,303) (2,281)
------------- ---------- -----------------
Net assets 72,332 15,331 87,663
------------- ---------- -----------------
31 December 2016
Exploration Corporate Total
for
Oil and Gas
US$000 US$000 US$000
------------- ---------- --------
Share based payment - (787) (787)
------------- ---------- --------
Administrative expenses (467) (3,077) (3,544)
------------- ---------- --------
Impairment of exploration
asset (5,173) - (5,173)
------------- ---------- --------
Finance income - 2,831 2,831
------------- ---------- --------
Tax expense - (159) (159)
------------- ---------- --------
Loss after taxation (5,640) (1,192) (6,832)
------------- ---------- --------
Additions to non-current assets 16,465 13 16,478
------------- ---------- --------
Total assets 120,668 27,180 147,848
------------- ---------- --------
Total liabilities (4,515) (1,127) (5,642)
------------- ---------- --------
Net assets 116,153 26,053 142,206
------------- ---------- --------
4 Loss from operations
31 December 31 December
2017 2016
US$000 US$000
------------ ------------
Loss from operations is stated after
charging:
------------ ------------
Impairment of exploration asset 51,307 5,173
------------ ------------
Operating lease - office rental 473 490
------------ ------------
Depreciation 26 39
------------ ------------
Share based payments - Long Term Incentive
Scheme 806 734
------------ ------------
Share based payments - Restricted Share
Unit Scheme 69 53
------------ ------------
Auditors' remuneration:
------------ ------------
Fees payable to the Company's Auditors
for the audit of the Company's annual
accounts 56 59
------------ ------------
Audit of the Company's subsidiaries pursuant
to legislation 15 14
------------ ------------
Fees payable to the Company's Auditors
for the review of the Company's interim
accounts 10 10
------------ ------------
Total payable 81 83
------------ ------------
5 Leases commitments
31 December 31 December
2017 2016
US$000 US$000
------------ ------------
Not later than one year 364 359
------------ ------------
Later than one year and not later than
five years 1,862 7
------------ ------------
Total 2,226 366
------------ ------------
The leases are operating leases in relation to the offices in
the UK and overseas.
6 Employment costs
Employees 31 December 31 December
2017 2016
US$000 US$000
------------ ------------
Wages and salaries 2,295 1,914
------------ ------------
Payment in lieu of notice / compromise
payment - 243
------------ ------------
Pension costs 83 102
------------ ------------
Share based payments 506 532
------------ ------------
Sub-total 2,884 2,791
------------ ------------
Capitalised to exploration costs (1,318) (1,397)
------------ ------------
Total 1,566 1,394
------------ ------------
Key management personnel 31 December 31 December
2017 2016
US$000 US$000
------------ ------------
Wages, salaries and fees 366 431
------------ ------------
Social security costs 40 89
------------ ------------
Payment in lieu of notice / compromise
payment - 236
------------ ------------
Pension costs - 3
------------ ------------
Share based payments 369 255
------------ ------------
Sub-total 775 1,014
------------ ------------
Capitalised to exploration costs (142) (188)
------------ ------------
Total 633 826
------------ ------------
The Directors are the key management personnel of the Group.
Details of the Directors' emoluments and interest in shares are
shown in the Directors' Remuneration Report.
7 Finance income and expense
Finance income 31 December 31 December
2017 2016
US$000 US$000
------------ ------------
Bank interest receivable 195 1,203
------------ ------------
Foreign exchange gain - 1,628
------------ ------------
Total 195 2,831
------------ ------------
Finance expense 31 December 31 December
2017 2016
US$000 US$000
------------ ------------
Foreign exchange loss 36 -
------------ ------------
Total 36 -
------------ ------------
8 Investments
The Company's wholly owned subsidiary undertakings at 31
December 2017 and 31 December 2016, excluding dormant entities,
were:
Subsidiary undertaking Principal activity Country of incorporation
Chariot Oil & Gas Investments Holding company Guernsey
(Namibia) Limited
------------------------ -------------------------
Chariot Oil & Gas Investments Oil and gas exploration Guernsey
(Mauritania) Limited
------------------------ -------------------------
Chariot Oil & Gas Investments Oil and gas exploration Guernsey
(Morocco) Limited
------------------------ -------------------------
Chariot Oil and Gas Statistics Service company UK
Limited
------------------------ -------------------------
Enigma Oil & Gas Exploration Oil and gas exploration Namibia
(Proprietary) Limited(1)
------------------------ -------------------------
Chariot Oil & Gas Investments Holding company Guernsey
(Brazil) Limited
------------------------ -------------------------
Chariot Brasil Petroleo e Oil and gas exploration Brazil
Gas Ltda
------------------------ -------------------------
Chariot Oil & Gas Finance Service company Guernsey
(Brazil) Limited(1)
------------------------ -------------------------
(1) Indirect shareholding of the Company.
9 Taxation
The Company is tax resident in the UK, however no tax charge
arises due to taxable losses for the year (31 December 2016:
US$Nil).
No taxation charge arises in Namibia, Morocco or the UK
subsidiaries as they have recorded taxable losses for the year (31
December 2016: US$Nil).
In Brazil, there were taxable profits due to interest received
on cash balances resulting in a tax charge payable of US$25,000 (31
December 2016: US$159,000). There was no deferred tax charge or
credit in either period presented.
Factors affecting the tax charge for the current year
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the UK applied
to losses for the year are as follows:
31 December 31 December
2017 2016
US$000 US$000
------------ ------------
Tax reconciliation
------------ ------------
Loss on ordinary activities for the
year before tax (55,393) (6,673)
------------ ------------
Loss on ordinary activities at the
standard rate of corporation tax in
the UK of 19.25% (31 December 2016:
20%) (10,663) (1,335)
------------ ------------
Non-deductible expenses 10,050 1,200
------------ ------------
Difference in tax rates in other jurisdictions 95 127
------------ ------------
Deferred tax effect not recognised 543 167
------------ ------------
Total taxation charge 25 159
------------ ------------
The Company had tax losses carried forward on which no deferred
tax asset is recognised. Deferred tax not recognised in respect of
losses carried forward total US$5.9 million (31 December 2016:
US$5.4 million). Deferred tax assets were not recognised as there
is uncertainty regarding the timing of future profits against which
these assets could be utilised.
10 Loss per share
The calculation of basic loss per Ordinary share is based on a
loss of US$55,418,000 (31 December 2016: loss of US$6,832,000) and
on 268,595,921 Ordinary shares (31 December 2016: 266,296,528)
being the weighted average number of Ordinary shares in issue
during the year. Potentially dilutive share awards are detailed in
note 20, however these do not have any dilutive impact as the Group
reported a loss for the year, consequently a separate diluted loss
per share has not been presented.
11 Exploration and appraisal costs
31 December 2017 31 December 2016
US$000 US$000
---------------------- -----------------
Net book value brought forward 119,730 108,438
---------------------- -----------------
Additions 7,347 16,465
---------------------- -----------------
Farm-in proceeds (3,000) -
---------------------- -----------------
Impairment (51,307) (5,173)
---------------------- -----------------
Net book value carried forward 72,770 119,730
---------------------- -----------------
As at 31 December 2017 the net book values of the four cost
pools are Central Blocks offshore Namibia US$50.5 million (31
December 2016: US$49.8 million), Southern Blocks offshore Namibia
US$Nil (31 December 2016: US$51.0 million), Morocco US$7.8 million
(31 December 2016: US$5.0 million) and Brazil US$14.5 million (31
December 2016: US$13.9 million).
Farm-in proceeds are in relation to the completion of the
farm-out of 40% of the Rabat Deep Offshore permits I-VI, Morocco,
to a wholly owned subsidiary of Eni, which was announced on 9
January 2017.
On 29 August 2017 the Company announced that it had elected not
to enter into the First Renewal Exploration Period of the Southern
Blocks offshore Namibia, causing an impairment of US$51.3
million.
As announced on 16 June 2016 the Company elected not to enter
into the First Renewal Phase of the C-19 licence in Mauritania
causing an impairment of US$5.2 million.
12 Property, plant and equipment
Fixtures, fittings Fixtures, fittings
and equipment and equipment
31 December 2017 31 December 2016
------------------- -------------------
US$000 US$000
------------------- -------------------
Cost
------------------- -------------------
Brought forward 1,635 1,622
------------------- -------------------
Additions 123 13
------------------- -------------------
Carried forward 1,758 1,635
------------------- -------------------
Depreciation
------------------- -------------------
Brought forward 1,599 1,560
------------------- -------------------
Charge 26 39
------------------- -------------------
Carried forward 1,625 1,599
------------------- -------------------
Net book value brought forward 36 62
------------------- -------------------
Net book value carried forward 133 36
------------------- -------------------
13 Trade and other receivables
31 December 2017 31 December 2016
US$000 US$000
----------------- -----------------
Other receivables and prepayments 1,328 2,123
----------------- -----------------
The fair value of trade and other receivables is equal to their
book value.
14 Inventory
31 December 2017 31 December 2016
US$000 US$000
----------------- -----------------
Wellheads and casing 480 938
----------------- -----------------
15 Cash and cash equivalents
31 December 2017 31 December 2016
Analysis by currency US$000 US$000
----------------- -----------------
US Dollar 14,733 21,184
----------------- -----------------
Brazilian Real 245 3,383
----------------- -----------------
Sterling 214 430
----------------- -----------------
Other currencies 41 24
----------------- -----------------
15,233 25,021
----------------- -----------------
As at 31 December 2017 and 31 December 2016 the US Dollar and
Sterling cash is held in UK and Guernsey bank accounts. All other
cash balances are held in the relevant country of operation.
As at 31 December 2017, the cash balance of US$15.2 million (31
December 2016: US$25.0 million) contains the following cash
deposits that are secured against bank guarantees given in respect
of exploration work to be carried out:
31 December 2017 31 December 2016
US$000 US$000
----------------- -----------------
Brazilian licences - 103
----------------- -----------------
Moroccan licences 7,550 5,750
----------------- -----------------
Namibian 2714B licence - 300
----------------- -----------------
7,550 6,153
----------------- -----------------
The funds are freely transferrable but alternative collateral
would need to be put in place to replace the cash security.
In February 2018 a bank guarantee for US$4.0 million in respect
of the Morocco licences was released.
16 Trade and other payables
31 December 2017 31 December 2016
US$000 US$000
----------------- -----------------
Trade payables 1,572 1,926
----------------- -----------------
Accruals 709 3,708
----------------- -----------------
Tax Payable - 8
----------------- -----------------
2,281 5,642
----------------- -----------------
The fair value of trade and other payables is equal to their
book value.
17 Share capital
Authorised
31 December 31 December 31 December 31 December
2017 2017 2016 2016
------------ ------------ ------------ ------------
Number US$000 Number US$000
------------ ------------ ------------ ------------
Ordinary shares
of 1p each(1,
2) 400,000,000 7,980 400,000,000 7,980
------------ ------------ ------------ ------------
Allotted, called up and fully paid
31 December 31 December 31 December 31 December
2017 2017 2016 2016
------------ ------------ ------------ ------------
Number US$000 Number US$000
------------ ------------ ------------ ------------
Ordinary shares
of 1p each(1) 268,873,197 4,881 268,352,392 4,874
------------ ------------ ------------ ------------
1. The authorised and initially allotted and issued share
capital on admission (19 May 2008) has been translated at the
historic rate of US$:GBP of 1.995. The shares issued since
admission have been translated at the date of issue, or, in the
case of share awards, the date of grant and not subsequently
retranslated.
2. On 27 March 2018 the Company's Shareholders' voted at a
General Meeting to authorise the deletion of article 3.1 of the
Company's Articles in its entirety to remove the concept of
authorised share capital which is no longer a recognised concept
under Guernsey law.
Details of the Ordinary shares issued are in the table
below:
Date Description Price No of shares
US$
31 December
2015 Opening Balance 264,274,904
---------------------- ------ -------------
7 June 2016 Issue of share award 0.34 337,663
---------------------- ------ -------------
7 June 2016 Issue of share award 0.14 778,475
---------------------- ------ -------------
7 June 2016 Issue of share award 0.26 695,653
---------------------- ------ -------------
7 June 2016 Issue of share award 0.33 41,666
---------------------- ------ -------------
7 June 2016 Issue of share award 1.25 13,334
---------------------- ------ -------------
7 June 2016 Issue of share award 0.50 35,772
---------------------- ------ -------------
7 June 2016 Issue of share award 0.13 50,542
---------------------- ------ -------------
7 June 2016 Issue of share award 0.24 127,876
---------------------- ------ -------------
21 June 2016 Issue of share award 0.50 114,904
---------------------- ------ -------------
21 June 2016 Issue of share award 0.33 133,333
---------------------- ------ -------------
21 June 2016 Issue of share award 0.14 109,375
---------------------- ------ -------------
21 June 2016 Issue of share award 0.11 186,254
---------------------- ------ -------------
21 June 2016 Issue of share award 0.18 231,885
---------------------- ------ -------------
21 June 2016 Issue of share award 0.20 80,000
---------------------- ------ -------------
21 June 2016 Issue of share award 0.12 35,555
---------------------- ------ -------------
26 July 2016 Issue of share award 4.38 7,000
---------------------- ------ -------------
26 July 2016 Issue of share award 0.50 325,203
---------------------- ------ -------------
26 July 2016 Issue of share award 0.39 243,229
---------------------- ------ -------------
26 July 2016 Issue of share award 0.15 165,156
---------------------- ------ -------------
26 July 2016 Issue of share award 0.08 260,717
---------------------- ------ -------------
3 October 2016 Issue of share award 0.20 80,000
---------------------- ------ -------------
3 October 2016 Issue of share award 0.12 23,896
---------------------- ------ -------------
31 December
2016 268,352,392
------ -------------
23 February
2017 Issue of share award 0.30 129,601
---------------------- ------ -------------
23 February
2017 Issue of share award 0.14 40,464
---------------------- ------ -------------
11 July 2017 Issue of share award 0.08 57,125
---------------------- ------ -------------
11 July 2017 Issue of share award 0.17 17,836
---------------------- ------ -------------
6 October 2017 Issue of share award 0.20 80,000
---------------------- ------ -------------
6 October 2017 Issue of share award 0.16 23,896
---------------------- ------ -------------
10 October 2017 Issue of share award 0.30 129,601
---------------------- ------ -------------
10 October 2017 Issue of share award 0.17 42,282
---------------------- ------ -------------
31 December
2017 268,873,197
------ -------------
18 Related party transactions
- Key management personnel comprises the Directors and details
of their remuneration are set out in note 6 and the Directors'
Remuneration Report.
- Alufer Mining Limited ("Alufer") is a company where Robert
Sinclair was a Director until 20 December 2016 and Adonis Pouroulis
is a Director. During the year ended 31 December 2017, Alufer
received administrative services from an employee of Chariot for
which it incurred fees payable to Chariot of US$24,053 (31 December
2016: US$75,384). The amount outstanding as at 31 December 2017 was
US$Nil (31 December 2016: US$11,357).
19 Financial instruments
The Board of Directors determine, as required, the degree to
which it is appropriate to use financial instruments or other
hedging contracts or techniques to mitigate risk. Throughout the
year ending 31 December 2017, no trading in financial instruments
was undertaken (31 December 2016: US$Nil). There is no material
difference between the book value and fair value of the Group cash
balances, short term receivables and payables.
Market risk
Market risk arises from the Group's use of interest bearing and
foreign currency financial instruments. It is the risk that future
cash flows of a financial instrument will fluctuate because of
changes in interest rates (interest rate risk) and foreign exchange
rates (currency risk). Throughout the year, the Group has held
surplus funds on deposit, principally with its main relationship
bank Barclays, on fixed short term deposits. The credit ratings of
the main relationship bank the Group holds cash with do not fall
below A or equivalent. The Group does not undertake any form of
speculation on long term interest rates or currency movements,
therefore it manages market risk by maintaining a short term
investment horizon and placing funds on deposit to optimise short
term yields where possible but, moreover, to ensure that it always
has sufficient cash resources to meet payables and other working
capital requirements when necessary. As such, market risk is not
viewed as a significant risk to the Group. The Directors have not
disclosed the impact of interest rate sensitivity analysis on the
Group's financial assets and liabilities at the year-end as the
risk is not deemed to be material.
This transactional risk is managed by the Group holding the
majority of its funds in US Dollars to recognise that US Dollars is
the trading currency of the industry, with an appropriate balance
maintained in Brazilian Real, Sterling and Namibian Dollars to meet
other non-US Dollar industry costs and on-going corporate and
overhead commitments.
At the year end, the Group had cash balances of US$15.2 million
(31 December 2016: US$25.0 million) as detailed in note 15.
Other than the non-US Dollar cash balances described in note 15,
no other material financial instrument is denominated in a currency
other than US Dollars. A 10% adverse movement in exchange rates
would lead to a foreign exchange loss of US$50,000 and a 10%
favourable movement in exchange rates would lead to a corresponding
gain; the effect on net assets would be the same as the effect on
profits (31 December 2016: US$384,000).
Capital
In managing its capital, the Group's primary objective is to
maintain a sufficient funding base to enable it to meet its working
capital and strategic investment needs. The Group currently holds
sufficient capital to meet its on-going needs for at least the next
12 months.
Liquidity risk
The Group's practice is to regularly review cash needs and to
place excess funds on fixed term deposits. This process enables the
Group to optimise the yield on its cash resources whilst ensuring
that it always has sufficient liquidity to meet payables and other
working capital requirements when these become due.
The Group has sufficient funds to continue operations for the
forthcoming year and has no perceived liquidity risk.
Credit risk
The Group's policy is to perform appropriate due diligence on
any party with whom it intends to enter into a contractual
arrangement. Where this involves credit risk, the Company will put
in place measures that it has assessed as prudent to mitigate the
risk of default by the other party. This could consist of
instruments such as bank guarantees and parent company
guarantees.
At the year-end the Group acts as Operator in one non-carried
joint venture relationship on one of the Group's licences and
therefore from time to time is owed money from its joint venture
partners. The joint venture partner which has a 20% interest in the
Central Blocks in Namibia is an entity which is part owned by one
of the world's largest seismic and geoscience companies.
As such, the Group has not put in place any particular credit
risk measures in this instance as the Directors view the risk of
default on any payments due from the joint venture partner as being
very low.
20 Share based payments
Share Option Scheme
During the year, the Company operated the Chariot Oil & Gas
Share Option Scheme ("Share Option Scheme"). The Company recognised
total expenses of US$Nil (31 December 2016: US$Nil) related to
equity settled share based payment transactions under the plan.
The options expire if they remain unexercised after the exercise
period has lapsed. For options valued using the Black-Scholes
model, there are no market performance conditions or other vesting
conditions attributed to the options.
The following table sets out details of all outstanding options
granted under the Share Option Scheme:
31 December 31 December
2017 2016
Number of Options Number of Options
------------------ ------------------
Outstanding at beginning of
the year 3,000,000 4,000,000
------------------ ------------------
Lapsed during the year - (1,000,000)
------------------ ------------------
Outstanding at the end of the
year 3,000,000 3,000,000
------------------ ------------------
Exercisable at the end of the
year 3,000,000 3,000,000
------------------ ------------------
The range of the exercise price of share options exercisable at
the year-end falls between US$0.36 (27p) - US$1.68 (125p) (31
December 2016: US$0.33 (27p) - US$1.54 (125p)).
The estimated fair values of options which fall under IFRS 2 and
the inputs used in the Black-Scholes model to calculate those fair
values are as follows:
Date of grant Estimated Share Exercise Expected Expected Risk Expected
fair value price price volatility life free dividend
rate
1 September
2011 GBP0.87 GBP1.29 GBP1.25 80% 5 years 4.3% 0%
------------- ---------- ---------- ------------ --------- ------ ----------
22 April
2013 GBP0.11 GBP0.186 GBP0.273 80% 5 years 1.5% 0%
------------- ---------- ---------- ------------ --------- ------ ----------
Expected volatility was determined by calculating the annualised
standard deviation of the daily changes in the share price.
Long Term Incentive Scheme ("LTIP")
The plan provides for the awarding of shares to employees and
Directors for nil consideration. The award will lapse if an
employee or Director leaves employment.
Shares granted when an individual is an employee will vest in
equal instalments over a three year period from the grant date and
shares granted when an individual is a Director or otherwise
specified will vest three years from the end of the year or period
that the award relates.
The Group recognised a charge under the plan for the year to 31
December 2017 of US$806,000 (31 December 2016: US$734,000).
The following table sets out details of all outstanding share
awards under the LTIP:
31 December 2017 31 December
2016
Number of awards Number of awards
------------------------------ -----------------
Outstanding at beginning of the
year 14,347,278 10,348,522
------------------------------ -----------------
Granted during the year 8,267,792 8,133,661
------------------------------ -----------------
Shares issued for no consideration
during the year (520,805) (3,905,162)
------------------------------ -----------------
Lapsed during the year (114,250) (229,743)
------------------------------ -----------------
Outstanding at the end of the
year 21,980,015 14,347,278
------------------------------ -----------------
Exercisable at the end of the
year 6,606,366 4,074,236
------------------------------ -----------------
Non-Executive Directors' Restricted Share Unit Scheme
("RSU")
The plan provides for the awarding of shares to Non-Executive
Directors for nil consideration. An award can be Standalone or
Matching.
Standalone share awards are one-off awards to Non-Executive
Directors which will vest in equal instalments over a three year
period and will lapse if not exercised within a fixed period on
stepping down from the Board.
Matching share awards will be granted equal to the number of
existing Chariot shares purchased by the Non-Executive Director in
each calendar year capped at the value of their gross annual fees
for that year. The shares will vest in equal instalments over a
three year period and will lapse if not exercised prior to stepping
down from the Board or if the original purchased shares are sold
prior to the vesting of the relevant Matching award. Any potential
Matching awards not granted in a calendar year shall be forfeited
and shall not roll over to subsequent years.
The Group recognised a charge under the plan for the year to 31
December 2017 of US$69,000 (31 December 2016: US$53,000).
The following table sets out details of all outstanding share
awards under the RSU:
31 December 2017 31 December
2016
Number of awards Number of awards
----------------- -----------------
Outstanding at beginning of the
year 1,559,873 1,421,267
----------------- -----------------
Granted during the year 631,979 463,767
----------------- -----------------
Shares issued for no consideration
during the year - (172,326)
----------------- -----------------
Lapsed during the year - (152,835)
----------------- -----------------
Outstanding at the end of the
year 2,191,852 1,559,873
----------------- -----------------
Exercisable at the end of the
year 1,225,677 532,978
----------------- -----------------
21 Contingent liabilities
From 30 December 2011 the Namibian tax authorities introduced a
withholding tax of 25% on all services provided by non-Namibian
entities which are received and paid for by Namibian residents.
From 30 December 2016 the withholding tax was reduced to 10%. As at
31 December 2017, based upon independent legal and tax opinions,
the Group has no withholding tax liability (31 December 2016:
US$Nil). Any subsequent exposure to Namibian withholding tax will
be determined by how the relevant legislation evolves in the future
and the contracting strategy of the Group.
22 Events after the balance sheet date
a) Share placing and open offer
On 27 March 2018 the Company announced the approval by
shareholders at a General Meeting of a placing of 82,582,747 new
Ordinary Shares and a further 13,911,954 new Ordinary Shares by
open offer at a price of 13 pence per share. The combined total of
96,494,701 new Ordinary Shares were admitted on 28 March 2018 and
subsequently the Company received net proceeds of US$16.5
million.
b) Result of the Rabat Deep 1 well
On 30 April 2018 the Company announced that the Rabat Deep 1
well on the Rabat Deep Permits in Morocco (Eni Maroc B.V. 40%
(operator), Woodside Energy (Morocco) Pty Ltd 25%, OHNYM 25%,
Chariot Oil & Gas Investments (Morocco) Limited 10%), had been
safely drilled to a total depth of 3,180m. Chariot was fully
carried for the drilling of the Rabat Deep 1 well as part of the
farmout to Eni which was approved in January 2017. The well, which
did not encounter a hydrocarbon accumulation, was subsequently
plugged and abandoned. The drilling result is a non-adjusting
post-balance sheet event as the recognition criteria for the
Moroccan cost pool under IFRS 6 were still met at the year end.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UGUQPQUPRGAA
(END) Dow Jones Newswires
June 06, 2018 02:00 ET (06:00 GMT)
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