TIDMCLNR
RNS Number : 2270P
Cluff Natural Resources plc
30 August 2017
Cluff Natural Resources Plc / Index: AIM / Epic: CLNR / Sector:
Natural Resources
30 August 2017
Cluff Natural Resources Plc ('CLNR' or 'the Company')
Interim Results
Cluff Natural Resources Plc, the AIM quoted natural resources
investing company, is pleased to announce its interim results for
the six months ended 30 June 2017.
Highlights
-- Scoping Study on Cadence-Scremerston and Basset Bunter
prospects on Licence P2248 in Southern North Sea indicated robust
economics and highly positive NPVs in various development
scenarios
-- Implied extrapolated NPV (un-risked) of GBP697 million for
the six identified prospects on P2248
-- Data room opened to secure partner(s) to participate in
drilling exploration wells on the Company's licences
-- Significant level of interest for farm-out - in dialogue with several interested parties
-- Actively pursuing a number of production and appraisal investment opportunities
-- Cash position of GBP893,000 as at 30 June 2017 (31 December
2016: GBP1.7 million; 30 June 2016: GBP955,000)
-- Cash used in operations for the period GBP687,508 (H1 2016: GBP665,836)
-- Loss for the period GBP774,288 (H1 2016: GBP662,473)
Chairman and CEO's Statement
Whilst we have added significant technical clarity to our two
licences in the Southern North Sea, it is difficult to fully
articulate the effort which we have invested in promoting the
farm-out of these licences; in pursuing our strategy to add
additional assets to our portfolio; and in preparing our bidding
strategy for the UK's 30(th) Licensing Round, frustratingly delayed
by the recent General Election. However, the Operating Review sets
out in detail the progress which we have made during the
period.
In April, we published a Scoping Study prepared by Xodus Group
which indicated robust economics for a range of development options
for just two of our lower risk prospects on Licence P2248: the
Cadence-Scremerston Prospect and the Bassett Bunter Sandstone. The
Study indicated highly positive NPV values in various P50
(Prospective Resources) development scenarios for both of these
prospects and an implied extrapolated un-risked NPV for the six
identified prospects on Licence P2248 of GBP697 million.
Independent confirmation of these prospects' commercial
viability reinforces the Company's view of the quality of our
existing assets and, as such, facilitating the drilling of one or
more of our Southern North Sea gas prospects remains our absolute
priority. We have had a very encouraging response to our farm-out
process and are in dialogue with a number of major oil and gas
companies. The sector has recently been characterised by a spate of
large M&A deals involving major regional players which has, we
believe, limited the ability of such companies to make investment
decisions while deals complete. However, it is anticipated that as
these deals are completed, more focussed E&P businesses are
emerging with an enhanced ability to invest in exploration in the
Southern North Sea.
The 30(th) Licencing Round, announced on 25 July 2017,
represents an exhilarating challenge. Over 800 blocks have been
made available for application by the UK's Oil & Gas Authority,
which includes a large inventory of prospects and undeveloped
discoveries. The Round closes on 21 November 2017 and awards are
expected to be made in Q2 2018. The 30(th) Round provides us with
the opportunity to further expand our portfolio of North Sea
licences and to take advantage of the more flexible "Innovate"
licence regime. We have already identified our target blocks and
our technical work to support our applications is well
underway.
Meanwhile, in addition to our intention to participate in the
30(th) Round, we are committed to further diversifying our
portfolio with an investment in one or more oil and gas assets. We
have been actively pursuing a number of opportunities, including
both onshore and offshore production and appraisal assets which
offer cash flow and, in the case of appraisal, significant value
enhancement, as and when commerciality is demonstrated. It is my
objective that we shall complete one or more of these deals in the
short to medium term.
There is so much focus now in the UK on heavily subsidised
renewables that the North Sea seems to have receded in significance
and yet, there remains in the North Sea, not only massive
infrastructure, but also the potential for discoveries of new
reserves of oil and particularly of gas, of which the UK is badly
in need. Ten years ago, the UK was self-sufficient in gas, whereas
now we import over 50% of our requirement from, inter alia, Norway,
Qatar, Algeria, Russia and Peru! This figure is increasing at an
alarming rate and security, as well as commerciality, must dictate
that the North Sea is an absolute priority for exploration.
Therefore, our mission is three-pronged: to farm-out our
existing licences and achieve drilling; to invest in additional
assets; and to add to our portfolio via participation in the 30(th)
Round.
Operating Review
Existing Licences - P2248 and P2252
Technical work has continued on the Company's 100% owned assets
P2248 and P2252 located in the Southern North Sea. In response to
initial constructive feedback received at the outset of the data
room process, the work has primarily focussed on addressing the key
risks associated with prospects and has significantly increased the
geological chance of success associated with a number of the
prospects.
The key emphasis has been on quantifying the fault seal risk
associated with the Cadence prospect on Licence 2248 and the
potential for direct hydrocarbon indicators (DHIs) to be associated
with amplitude anomalies for each of the Bunter prospects.
The detailed structural analysis of the Cadence prospect has
demonstrated clear fault linkages and the potential for the faults
to support very significant hydrocarbon column heights within the
Cadence structure and the Scremerston Formation in particular. The
analysis of the amplitude versus offset (AVO) characteristics of
the anomalies associated with each of the three Bunter Sandstone
prospects has clearly demonstrated a response which is analogous to
neighbouring fields and discoveries but which is not observed
elsewhere across the block. The results of the work have positively
impacted the view on technical risk associated with the prospects
and updated information has recently been communicated to those
parties involved in the data room process.
Following on from the Competent Persons Report published in
December 2016 an economic feasibility study was also completed for
key prospects on P2248 by Exodus Group. The analysis indicated
attractive economics for standalone prospects and significant
upside if exploration proved gas on multiple prospects. NPV(10)
valuations of GBP47.6 million and GBP41.8 million, for Cadence
Scremerston and the Bassett Prospect respectively, combined with
payback periods of less than three years and robust economics down
to a gas price of 35p/therm provide significant justification for
the proposed exploration drilling campaign on P2248.
Farm-out Process
Conditions within the UK Continental Shelf have remained
challenging for investment at the asset level, with limited farm-in
activity reported within the Southern North Sea during the previous
six months. We believe that this has been largely driven by large
corporate level M&A deals which have seen a number of key
regional players effectively paralysed while announced transactions
complete and newly acquired portfolios are assessed in detail.
While frustrating in the short term, the Board is encouraged by the
level of M&A activity in the UK North Sea which demonstrates
significant ongoing interest in the basin. The Board is also of
that view that many of the transactions, which involve separating
oil and gas exploration divisions from risk averse utilities and
conglomerates, will be highly positive for the UK Continental Shelf
in the medium to longer term and will result in the formation of
new focussed and funded E&P companies with a vested interest in
exploration within the Southern Gas Basin.
As mentioned in the Chairman and CEO's statement, the Company
has seen further interest from new parties in viewing the data room
and remains in dialogue with those companies who have shown
significant interest in the portfolio to date. The farm-out process
is however taking longer than anticipated. We will continue to
review market conditions and appetite with respect to achieving the
best possible result from the ongoing process, as well as
investigating alternative financing options for progressing
drilling on selected prospects.
As licences P2252 and P2248 are due to expire on 30 November
2017 the Company has also applied to the Oil & Gas Authority
for a continuation of licences P2252 and P2248 beyond this date
should additional time to conclude the farm-out process be
required.
30(th) Offshore Licencing Round Participation
The UK's 30(th) Offshore Licencing Round was announced by the
Oil & Gas Authority on 25 July 2017 with over 800 blocks in the
mature areas of the UKCS on offer. The Company intends to be an
active participant in this process and has high graded a number of
potential targets, including blocks which contain existing
discoveries and significant exploration upside. The round is open
for 120 days with applications to be submitted before 21 November
2017 with licence awards expected in Q2 2018.
Portfolio Growth
In addition to organic growth via licencing rounds the Company
has evaluated a number of more mature opportunities including lower
risk, higher impact appraisal projects and minority stakes in a
number of producing assets. Detailed assessment continues on
selected opportunities and the Company will continue to actively
seek appropriate exploration, appraisal and production
opportunities which have the potential to de-risk the portfolio and
add significant shareholder value.
Financial Review
In the six months to 30 June 2017 the Company incurred a loss
for the period of GBP774,288 compared with a loss of GBP662,473 for
the six months to 30 June 2016.
The current period loss includes non-cash share based payment
charges of GBP86,263, compared with GBP62,240 for the six months to
30 June 2016.
Cash used in operations for the six months to 30 June 2017 was
GBP687,508 (2016: GBP665,835). In addition, GBP148,419 of
expenditure incurred was capitalised (six months to 30 June 2016:
GBP174,189) representing costs directly related to the development
of the Company's two 100% owned Southern North Sea licences.
Cash balances as at 30 June 2017 stood at GBP892,969 (31
December 2016: GBP1,707,910; 30 June 2016: GBP955,035).
No ordinary shares have been issued since the Company's issue of
shares in November 2016. Therefore, the number of ordinary shares
in issue at 30 June 2017 remains unchanged at 329,393,532.
In May 2017 warrants over 9,340,000 ordinary shares expired,
leaving no further warrants outstanding over the Company's ordinary
shares.
In the financial statements for the year to 31 December 2016 the
Company stated that based on the cash balance at year end, and the
Company's commitments, the Company had adequate financial resources
to cover its budgeted exploration and development programme until
the fourth quarter of 2017. Based on current cash balances and the
Company's commitments, the funding position remains unchanged.
Further funding will therefore be required during the fourth
quarter of 2017 to allow the Company to meet its commitments and to
fully implement its strategy beyond this period. The Board
anticipates that these further funds will be raised, most likely by
way of equity, as the Company has done successfully in the
past.
JG Cluff
Chairman & Chief Executive
30 August 2017
Qualified Person
Andrew Nunn, a Chartered Geologist and Chief Operating Officer
of CLNR, is a "Qualified Person" in accordance with the Guidance
Note for Mining, Oil and Gas Companies, March 2006, of the London
Stock Exchange. Andrew has reviewed and approved the information
contained within this announcement.
UNAUDITED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE
LOSS
Period ended 30 June 2017
Note Period Period Year ended
ended ended 30 31 December
30 June June 2016 2016
2017
Unaudited Unaudited Audited
GBP GBP GBP
Administrative expenses:
Other administrative expenses (775,009) (664,351) (1,416,127)
Impairment of exploration
and evaluation assets - - (318,407)
---------- ------------ --------------
Total administrative expenses (775,009) (664,351) (1,734,534)
---------- ------------ --------------
Operating loss (775,009) (664,351) (1,734,534)
Finance income 721 1,878 3,928
Loss before taxation (774,288) (662,473) (1,730,606)
Taxation - - -
---------- ------------ --------------
Loss and comprehensive loss
for the period attributable
to equity holders of the
Company (774,288) (662,473) (1,730,606)
Loss per ordinary share (pence)
- From continuing operations:
basic and diluted 3 (0.24)p (0.30)p (0.70)p
UNAUDITED BALANCE SHEET
At 30 JUNE 2017
Note 30 June 30 June 31 December
2017 2016 2016
Unaudited Unaudited Audited
GBP GBP GBP
NON-CURRENT ASSETS
Intangible Assets 701,589 600,071 554,498
Property, Plant and Equipment 4,170 3,169 3,885
Investment in subsidiary - 501 1,101
Other receivables 53,688 53,688 -
----------- ----------- -----------
759,447 657,429 559,484
CURRENT ASSETS
Trade and other receivables 34,629 128,755 196,724
Cash and cash equivalents 892,969 955,035 1,707,910
----------- ----------- -----------
927,598 1,083,790 1,904,634
TOTAL ASSETS 1,687,045 1,741,219 2,464,118
CAPITAL AND RESERVES ATTRIBUTABLE
TO EQUITY HOLDERS OF THE COMPANY
Share capital 4 1,646,967 1,286,967 1,646,967
Share premium 7,761,977 6,425,099 7,761,977
Share-based payment reserve 668,456 500,346 582,193
Accumulated retained deficit (8,524,184) (6,705,811) (7,749,896)
----------- ----------- -----------
TOTAL EQUITY 1,553,216 1,506,601 2,241,241
CURRENT LIABILITIES
Trade and other payables 133,829 234,618 222,877
----------- ----------- -----------
TOTAL LIABILITIES 133,829 234,618 222,877
TOTAL EQUITY AND LIABILITIES 1,687,045 1,741,219 2,464,118
UNAUDITED STATEMENT OF CHANGES IN EQUITY
Period ended 30 June 2017
Share-
Share Share based Accumulated
capital premium payment Retained Total
reserve deficit equity
GBP GBP GBP GBP GBP
Balance at 1 January 2017 1,646,967 7,761,977 582,193 (7,749,896) 2,241,241
Comprehensive income for
the year
Loss for the period - - - (774,288) (774,288)
------------------------------------ ---------- ---------- ---------- -------------- ------------
Total comprehensive loss
for the period - - - (774,288) (774,288)
Contributions by and distributions
to owners
Share-based payment - - 86,263 - 86,263
Total contributions by
and distributions to owners - - 86,263 - 86,263
Balance at 30 June 2017
(Unaudited) 1,646,967 7,761,977 668,456 (8,524,184) 1,553,216
------------------------------------ ---------- -------------- ------------
Balance at 1 January 2016 996,111 6,037,175 529,292 (6,134,524) 1,428,054
Comprehensive income for
the year
Loss for the period - - - (662,473) (662,473)
------------------------------------ ---------- ---------- ---------- -------------- ------------
Total comprehensive loss
for the period - - - (662,473) (662,473)
Contributions by and distributions
to owners
Issue of shares 290,856 436,284 - - 727,140
Costs of share issue - (48,360) - - (48,360)
Share-based payment 62,240 - 62,240
Expired/lapsed options - - (91,186) 91,186 -
---------- ---------- ---------- -------------- ------------
Total contributions by
and distributions to owners 290,856 387,924 (28,946) 91,186 741,020
Balance at 30 June 2016
(Unaudited) 1,286,967 6,425,099 500,346 (6,705,811) 1,506,601
------------------------------------ ---------- ---------- ---------- -------------- ------------
Balance at 1 January 2016 996,111 6,037,175 529,292 (6,134,524) 1,428,054
Comprehensive income for
the year
Loss for the year - - - (1,730,606) (1,730,606)
Total comprehensive loss
for the year - - - (1,730,606) (1,730,606)
Contributions by and distributions
to owners
Issue of shares 650,856 1,876,284 - - 2,527,140
Costs of share issue - (151,482) - - (151,482)
Share-based payment - - 168,135 - 168,135
Expired/lapsed options - - (115,234) 115,234 -
---------- ---------- ---------- -------------- ------------
Total contributions by
and distributions to owners 650,856 1,724,802 52,901 115,234 2,543,793
---------- ---------- ---------- -------------- ------------
Balance at 31 December
2016 (Audited) 1,646,967 7,761,977 582,193 (7,749,896) 2,241,241
UNAUDITED CASHFLOW STATEMENT
Period ended 30 June 2017
Period ended 30 June 2017 Period ended 30 June 2016 Year ended 31 December
2016
Unaudited Unaudited Audited
GBP GBP GBP
Cash flows from operating
activities
Loss before taxation (774,288) (662,473) (1,730,606)
Adjustments for: -
Finance income (721) (1,878) (3,928)
Depreciation 835 2,721 3,838
Amortisation 1,327 2,246 3,798
Impairment of intangibles - - 318,407
Share-based payments 86,263 62,240 168,135
-------------------------- -------------------------- --------------------------
(686,584) (597,144) (1,240,356)
(Increase) / decrease in
trade and other receivables 86,632 (41,403) (54,679)
(Decrease) / increase in
trade and other payables (87,555) (27,288) (39,030)
-------------------------- -------------------------- --------------------------
Net cash used in operating
activities (687,508) (665,835) (1,334,065)
Cash flows from investing
activities
Purchase of intangible
assets (148,419) (174,189) (448,575)
Purchase of property, plant
and equipment (1,120) - (1,833)
Interest received 721 2,227 3,273
Investment in subsidiary (390) - (600)
Net cash used in investing
activities (149,208) (171,962) (447,735)
Cash flows from financing
activities
Proceeds on settlement of
related party loan 21,774 - -
Proceeds from share issue - 727,140 2,527,140
Expense of share issue - (48,360) (151,482)
-------------------------- -------------------------- --------------------------
Net cash from financing
activities 21,774 678,780 2,375,658
Increase / (decrease) in
cash and cash equivalents (814,941) (159,017) 593,858
Cash and cash equivalents at
beginning of period / year 1,707,910 1,114,052 1,114,052
-------------------------- -------------------------- --------------------------
Cash and cash equivalents at
end of period / year 892,969 955,035 1,707,910
Notes to the financial information
Period ended 30 June 2017
1. GENERAL
The interim financial information for the period to 30 June 2017
is unaudited and does not constitute statutory accounts within the
meaning of Section 434 of the Companies Act 2006.
2. ACCOUNTING POLICIES
The interim financial information in this report has been
prepared on the basis of the accounting policies set out in the
audited financial statements for the period ended 31 December 2016,
which complied with International Financial Reporting Standards as
adopted for use in the European Union ("IFRS").
IFRS is subject to amendment and interpretation by the
International Accounting Standards Board ("IASB") and the IFRS
Interpretations Committee and there is an on-going process of
review and endorsement by the European Commission.
The financial information has been prepared on the basis of IFRS
that the Directors expect to be applicable as at 31 December 2017,
with the exception of IAS 34 Interim Financial Reporting.
The Directors have adopted the going concern basis in preparing
the financial information. In assessing whether the going concern
assumption is appropriate, the Directors have taken into account
all relevant available information about the foreseeable
future.
The condensed financial information for the period ended 31
December 2016 set out in this interim report does not comprise the
Group's statutory accounts as defined in section 434 of the
Companies Act 2006.
The statutory accounts for the year ended 31 December 2016,
which were prepared under IFRS, have been delivered to the
Registrar of Companies. The auditors reported on these accounts;
their report was unqualified and did not contain a statement under
section 498(2) or 498(3) of the Companies Act 2006. The report did
however include reference to matters which the auditors drew
attention by way of emphasis regarding going concern.
In the financial statements for the year to 31 December 2016 the
Company stated that based on the cash balance at year end, and the
Company's commitments, the Company had adequate financial resources
to cover its budgeted exploration and development programme until
the fourth quarter of 2017. Based on current cash balances and the
Company's commitments, the funding position remains unchanged.
Further funding will therefore be required during the fourth
quarter of 2017 to allow the Company to meet its commitments and to
fully implement its strategy beyond this period. The Board
anticipates that these further funds will be raised, most likely by
way of equity, as the Company has done successfully in the
past.
3. LOSS PER SHARE
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Given the Company's reported loss for the period, share options
and warrants are not taken into account when determining the
weighted average number of ordinary shares in issue during the year
and therefore the basic and diluted loss per share are the
same.
Basic and diluted loss per share
Period ended Period ended Year ended
30 June 2017 30 June 2016 31 December 2016
Loss for the period (GBP) (774,288) (662,473) (1,730,606)
Weighted average number of ordinary shares (number) 329,393,532 220,809,251 246,340,146
Loss per share from continuing operations (0.24)p (0.30)p (0.70)p
============== ============== ==================
4. SHARE CAPITAL
a) Share Capital
The Company has one class of ordinary share which carries no
right to fixed income nor has any preferences or restrictions
attached.
Issued and fully paid:
30 June 30 June 31 December
2017 2016 2016
GBP GBP GBP
329,393,532 ordinary shares
of GBP0.005p each (June 2016:
257,393,532 ordinary shares) 1,646,967 1,286,967 1,646,967
5. COPIES OF INTERIM REPORT
Copies of the interim report are available to the public free of
charge from the Company at Cluff Natural Resources Plc, Third
Floor, 5-8 The Sanctuary, London SW1P 3JS during normal office
hours, Saturdays and Sundays excepted, for 14 days from today and
are available on the Company's website at
www.cluffnaturalresources.com.
Investing policy
In addition to the development of the UCG and North Sea licences
CLNR has acquired to date, the Company proposes to continue to
evaluate other potential oil and gas projects in line with its
investing policy, as it aims to build a portfolio of resource
assets and create value for shareholders. As disclosed in the
Company's AIM Admission Document in May 2012, the Company's
substantially implemented Investment Policy is as follows:
"The proposed investments to be made by the Company may be
either quoted or unquoted; made by direct acquisition or through
farm-ins; either in companies, partnerships or joint ventures; or
direct interests in oil & gas and mining projects. It is not
intended to invest or trade in physical commodities except where
such physical commodities form part of a producing asset. The
Company's equity interest in a proposed investment may range from a
minority position to 100 per cent. ownership.
The Board initially intends to focus on pursuing projects in the
oil & gas and mining sectors, where the Directors believe that
a number of opportunities exist to acquire interests in attractive
projects. Particular consideration will be given to identifying
investments which are, in the opinion of the Directors,
underperforming, undeveloped and/or undervalued, and where the
Directors believe that their expertise and experience can be
deployed to facilitate growth and unlock inherent value.
The Company will conduct initial due diligence appraisals of
potential projects and, where it is believed further investigation
is warranted, will appoint appropriately qualified persons to
assist with this process. The Directors are currently assessing
various opportunities which may prove suitable although, at this
stage, only preliminary due diligence has been undertaken.
It is likely that the Company's financial resources will be
invested in either a small number of projects or one large
investment which may be deemed to be a reverse takeover under the
AIM Rules. In every case, the Directors intend to mitigate risk by
undertaking the appropriate due diligence and transaction analysis.
Any transaction constituting a reverse takeover under the AIM Rules
will also require Shareholder approval.
Investments in early stage and exploration assets are expected
to be mainly in the form of equity, with debt being raised later to
fund the development of such assets. Investments in later stage
projects are more likely to include an element of debt to equity
gearing. Where the Company builds a portfolio of related assets, it
is possible that there may be cross holdings between such
assets.
The Company intends to be an involved and active investor.
Accordingly, where necessary, the Company may seek participation in
the management or representation on the Board of an entity in which
the Company invests with a view to improving the performance and
use of its assets in such ways as should result in an upward
re-rating of the value of those assets.
Given the timeframe the Directors believe is required to fully
maximise the value of an exploration project or early stage
development asset, it is expected that the investment will be held
for the medium to long term, although disposal of assets in the
short term cannot be ruled out in exceptional circumstances.
The Company intends to deliver Shareholder returns principally
through capital growth rather than capital distribution via
dividends, although it may become appropriate to distribute funds
to Shareholders once the investment portfolio matures and
production revenues are established.
The Directors believe that the Investing Policy can be
substantially implemented within 18 months of Admission. If this is
not achieved, the Company will seek Shareholder consent for its
Investing Policy or any changes thereto at the next annual general
meeting of the Company and on an annual basis thereafter, until
such time that its Investing Policy has been implemented. If it
appears unlikely that the Investing Policy will be achieved, the
Directors may consider returning the remaining funds to
Shareholders.
Given the nature of the Investing Policy, the Company does not
intend to make regular periodic disclosures or calculations of its
net asset value.
The Directors consider that as investments are made, and new
investment opportunities arise, further funding of the Company will
be required."
**ENDS**
For further information please contact the following:
Cluff Natural Resources Plc Tel: +44 (0) 20 7887 2630
Algy Cluff / Graham Swindells /
Andrew Nunn
Allenby Capital Limited (Nominated Adviser Tel: +44 (0) 20 3328 5656
& Broker)
David Hart / Alex Brearley / Asha Chotai (Corporate
Finance)
Chris Crawford / Katrina Perez (Corporate
Broking)
St Brides Partners Ltd Tel: +44 (0) 20 7236 1177
Lottie Brocklehurst / Frank Buhagiar
(Financial PR)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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