TIDMNGP
RNS Number : 3973T
Niche Group (The) PLC
06 December 2011
Embargoed: 0700hrs, 6 December 2011
The Niche Group plc
("Niche" or the "Company")
Preliminary Results for the Twelve Months Ended 30 June 2011
Niche, the AIM listed investment company with interests in gas
exploration and development activities onshore Turkey, announces
preliminary results for the twelve months ended 30 June 2011.
Chairman's Statement
I am pleased to provide my first Chairman's Statement to
accompany our annual report for the year to 30 June 2011.
Substantial progress has been made on two fronts:
-- Corporate: to further develop, fund and implement our investment strategy; and
-- Operational: the progress of our investee companies to develop and monetise assets.
Corporate Development
Funding & Investments
Niche Group's strategy is to invest in the natural resources
sector. Since our initial convertible loan to Oman Resources in
2010, we have focused on the Turkish energy market which the board
considers represents a significant opportunity for value creation,
both through the near-term implementation of gas production and the
upside offered by further exploration activity. This strategy has
been well supported by the investment community and Niche Group has
raised gross funds of GBP26,317,212 during the period under review.
Such funding enabled Niche Group, during the period, to:
i. lend a further GBP13,660,000 to Oman Resources to fund
additional farm-ins, drilling and infrastructure programmes,
thereby increasing the convertible loans to Oman Resources to
GBP18,610,000 which would convert, either at Niche Group's option
or automatically on the occurrence of certain specified events,
into 35.7% of Oman Resources, and if the loans are not repaid by
the due date being 30 December 2011, Niche Group, by exercising its
security (as described in the Directors' Report), would end up
owning 100% of Oman Resources; and
ii. acquire a 5% interest in Arar Petrol ve Gaz AUPAS for
GBP8,000,000
With the benefit of substantial asset development since Niche
Group's initial convertible loan, Oman Resources has seen its asset
base of best estimate gross recoverable Reserves, Contingent and
Prospective Resources increase significantly, as detailed in their
Competent Person's Report, (issued October 2011).
At the same time as Niche Group's most recent convertible loan
to Oman Resources, the Company acquired a 5% stake in Arar Petrol
ve Gaz AUPAS ("Arar"). Founded in 2002, Arar has grown to become
the second largest petroleum licence holder in Turkey with 21
exploration licences, including the Konya and Hatay Blocks, in
which Oman Resources has a 50% interest. Arar's acreage offers a
combination of low risk development opportunities and frontier
exploration. It has drilled over 50 wells over the past decade and
is a fully integrated oil and gas company with staff and equipment
for in-house seismic and interpretation, logging and drilling.
Fatih Alpay, the founder of Arar, has more than 26 years of
drilling experience as an independent contractor for international
oil companies in Turkey and internationally.
I am pleased to welcome Mr Alpay as a significant shareholder in
Niche Group following his personal acquisition, in April 2011, of
14,285,700 Niche Group shares equivalent to approximately 2.1% of
the Company.
Board Changes
Shortly after joining in November 2011, as a non-executive
director, the board asked me to lead the Company as its Executive
Chairman. The board would like to place on record its thanks to
Nigel Little, who stepped down from the board due to ill health,
for his significant contribution to the development of Niche Group
to date.
The board was pleased to appoint Chris Weafer in September 2011
as Non-executive Director. Chris is an expert in the upstream oil
and gas industry and continues his thirty year career as a
top-ranking strategist and investment analyst. We will look to make
further strategic board appointments when appropriate.
Financial Results
As an investing company, Niche Group has no revenues. The
Company recorded a loss for the year of GBP774,438 (2010:
GBP895,201). This loss includes GBP208,764 (2010: GBP40,522) in
respect of share based payments. The Company had cash at bank at 30
June 2011 of GBP1.87million.
As Niche Group has loaned significant sums of money to Oman
Resources, I consider it appropriate for me to expand on the
corporate activities of Oman Resources.
Oman Resources Operational Development
Licence portfolio
Oman Resources significantly expanded its licence interests in
onshore Turkey by farming in for a 50% interest in a further three
blocks in the Hatay region, operated by Arar (the "Operator"). The
Hatay Blocks, numbered AR/ARR/4396, AR/ARR/4395 and AR/ARR/4394 are
situated in the Iskenderun Basin, close to the Eastern
Mediterranean Sea. The blocks offer the potential for near term gas
production from shallow accumulations, as well as larger, deeper
potential. This increases Oman Resources' licence portfolio to four
blocks in which it holds a 50% interest.
Seismic acquisition and interpretation
The Operator completed a 226 line-km 2D seismic acquisition
programme over the southern portion of the Konya Block 4077, funded
by Oman Resources. The data were sent for processing in Ankara and
Houston. The new data confirms the presence of a large structural
high with multiple fault closures in the western part of the block,
and improves our understanding of the overall prospectivity of
Block 4077. In addition, a number of potential leads have been
identified in the eastern portion of the block.
The new seismic, combined with existing seismic data for Block
4077, was incorporated with the first Competent Persons Report
("CPR") in July 2011 and updated in October 2011.
Resources Update
The latest independent evaluation of the recoverable
hydrocarbons across Oman Resources' assets in Turkey - the CPR -
was carried out by Senergy (GB) Ltd. The CPR showed:
-- Best estimate Reserves on Hatay Block 4396 of 46.5 Bcf gas
recoverable net to Oman Resources following Senergy's upgrade of
Prospective Resources to Reserves
-- Best estimate Prospective Resources across Hatay Blocks 4395
& 4394 of 63.4 Bcf gas recoverable net to Oman Resources
-- Best estimate combined Reserves + Resources across the Hatay
Blocks of 109.9 Bcf gas recoverable net to Oman Resources
-- Best estimate Reserves, Contingent and Prospective Resources
across Oman Resources' whole portfolio of 259.4 Bcf gas recoverable
net to Oman Resources (previously 162 Bcf, July 2011)
-- Best estimate NPV10 attributable Reserves, un-risked
Contingent Resources and Prospective Resources across Oman
Resources' whole portfolio of US$583.4 million net to Oman
Resources
A full summary of the current recoverable Reserves and
Prospective Resources in the Hatay licences and the Contingent
Resources in the Konya licence can be found in the Company's
announcement to the market made on 27 October 2011 which can be
found on the Company's website at
www.nichegroupplc.co.uk/investor-relations/announcments.aspx.
Konya Block 4077
The most significant developments on this block relate to the
Gulhanim-2 well (G-2). This well encountered three separate
hydrocarbon-bearing zones. Gas and gas condensate discoveries,
previously announced, were made at Shallow (post-salt) and
Intermediate (pre-salt) depths. A third, Deeper (pre-salt), pay
zone encountered a 38m gross interval of porous and permeable
carbonates. A combination of oil and gas was encountered in each of
the pay zones of the deeper discovery. The Deeper zone encountered
gas and gas condensate/oil at each of the three intervals,
indicating the potential for near-term production of gas and oil
from the well, initially from the Deeper zone, in carbonates of the
Caldag Formation. Fluid samples of the oil were tested on site and
were confirmed to be a light gravity crude oil - ranging from 37 to
approximately 55 degrees API.
The Operator cleaned the well and stabilised the well pressure
to prepare for production testing from the Caldag pay zone and we
look forward to progress reports.
Operations continue at the G-1 well. The well was temporarily
plugged back to 1300m, and two shallow sand intervals were
perforated (1124-11130m & 1277-1283 m). Acid stimulation is
planned before testing the two intervals. It is recalled that
equivalent sands in the G-2 well had very good gas shows.
Hatay Blocks
Block 4396
Block 4396 contains the Hamam-1 well, the first well on Oman
Resources' assets to produce gas to an onsite compressed natural
gas bottling plant, selling to local gas markets at present in
small volumes. The Operator has submitted its application for
construction of the 30km pipeline tie-in to the main existing
network. BOTAS pipeline pricing for natural gas was US$8.5/mcf. The
Hamam-1 well tested earlier this year with a stabilised flow rate
of 3.5mmcf/gas per day.
A new appraisal well, Ciftlik-1, has recently been spudded to
test potential shallow gas accumulations northwest of Hamam-1.
Work-over operations are planned for two older wells,
Yesiltepe-1 & -2.
Block 4395
The Operator spudded the Kastal-1 Exploration Well to test the
first of two prospects identified in Block 4395, targeting the
Miocene sandstones of the Kizildere Fm. Kastal-1 was temporarily
suspended because of drilling problems. Work-over operations are
planned for two older wells (Gozlugol-1 and Gokdere-5).
Block 4394
Workover operations are planned for the Cumalar-1 well.
Outlook
The board is firmly of the opinion that the Turkish oil and gas
sector represents a substantial opportunity for value creation, as
illustrated in the latest determinations of the CPR. The Company is
uniquely positioned, through its relationship with one of Turkey's
most established petroleum licence holders/operators, to gain
access to this opportunity and has made great progress in
establishing a foothold. I have, since joining the board, been in
discussions with Oman Resources with a view to maximising the value
represented to Niche Group shareholders from its convertible loans
in Oman Resources and I look forward to updating shareholders
regarding this at the appropriate time.
Stuart Thomas
Executive Chairman
5 December 2011
Enquiries:
The Niche Group plc
Rakesh Patel
Tel. +44 (0)20 8371 3071
Daniel Stewart & Co. Plc - Nominated Advisor and Joint
Broker
Oliver Rigby / David Hart
Tel. +44 (0)20 7776 6550
Canaccord Genuity - Joint Broker
Charles Berkeley / Henry Fitzgerald-O'Connor
Tel: +44 (0) 20 7050 6500
M: Communications
Ben Simons
Tel. +44 (0)20 7920 2340
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE
2011
Year ended Year ended
30 June 30 June
2011 2010
GBP GBP
Administrative expenses (833,792) (205,113)
Share based payments (208,764) (40,522)
Operating loss (1,042,556) (245,635)
Gain / (loss) on disposal of
available for sale investment 24,696 (324,557)
Transfer to income statement
of fair value reserve relating
to impaired assets (18,877) (19,318)
Costs relating to aborted acquisition - (202,480)
Finance income 262,299 17,100
Finance costs - (120,311)
Loss on ordinary activities before
taxation (774,438) (895,201)
Tax on loss on ordinary activities - -
Loss for the year (774,438) (895,201)
Fair value adjustment on available
for sale investments 54,600 (3,682)
Total comprehensive loss for
the year (719,838) (898,883)
Loss per share (pence)
- Basic & diluted (0.19) (0.50)
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE
2011
Share Share Share Fair value Retained Total
Capital Premium based payments reserves earnings
reserve
GBP GBP GBP GBP GBP GBP
As at 1 July 2009 1,029,515 110,026 - (41,113) (992,427) 106,001
Total comprehensive
loss for the year - - - (3,682) (895,201) (898,883)
Transfer to income
statement of fair
value reserve relating
to impaired assets - - - 19,318 - 19,318
Share based payment - - 40,522 - - 40,522
Issue of share capital 1,804,432 4,348,000 - - - 6,152,432
Costs associated
with issue of shares - (320,411) - - - (320,411)
As at 1 July 2010
Total comprehensive 2,833,947 4,137,615 40,522 (25,477) (1,887,628) 5,098,979
gain / (loss) for
the year - - - 54,600 (774,438) (719,838)
Transfer to income
statement of fair
value reserve relating
to impaired assets - - - 18,877 - 18,877
Share based payment - - 208,764 - - 208,764
Issue of share capital 4,081,558 22,235,652 - - - 26,317,210
Costs associated
with issue of shares - (2,243,934) - - - (2,243,934)
As at 30 June 2011 6,915,505 24,129,333 249,286 48,000 (2,662,066) 28,680,058
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011
As at As at
30 June 30 June
2011 2010
GBP GBP
ASSETS
Non-current assets
Investments - available for
sale 8,063,001 20,727
Financial assets - loans and
receivables - 4,950,000
8,063,001 4,970,727
Current assets
Financial assets - loans and
receivables 18,610,000 -
Trade and other receivables 294,976 23,687
Cash and cash equivalents 1,877,713 270,129
20,782,689 293,816
LIABILITIES
Current liabilities
Trade and other payables (165,632) (165,564)
Net Current Assets 20,617,057 128,252
NET ASSETS 28,680,058 5,098,979
SHAREHOLDERS' EQUITY
Called up share capital 6,915,505 2,833,947
Share premium account 24,129,333 4,137,615
Fair value reserves 48,000 (25,477)
Share based payments reserve 249,286 40,522
Retained earnings (2,662,066) (1,887,628)
TOTAL EQUITY 28,680,058 5,098,979
The financial statements were approved by the board of directors
and authorised for issue on 5 December 2011 and signed on its
behalf by:
R Patel
Director
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2011
Year ended Year ended
30 June 30 June
2011 2010
GBP GBP
Cash flows from operating activities
Cash expended from operations (842,716) (79,443)
Net cash outflow from operating
activities (842,716) (79,443)
Cash flows from investing activities
Available for sale financial assets (8,000,000) -
acquired
Loans & receivables financial assets
acquired (13,660,000) (4,950,000)
Proceeds from sale of available
for sale investments 37,022 188,000
Costs relating to aborted acquisition - (202,480)
Net cash used in investing activities (21,622,978) (4,964,480)
Cash flows from financing activities
Proceeds from issue of ordinary
shares 26,317,212 5,537,951
Proceeds from loans - 31,613
Costs of issue of shares (2,243,934) (320,411)
Net cash inflow from financing
activities 24,073,278 5,249,153
Net increase in cash and cash equivalents 1,607,584 205,230
Cash, cash equivalents at the beginning
of year 270,129 64,899
Cash and cash equivalent at end
of year 1,877,713 270,129
Basis of preparation
The principal activity of the Company is the investment in gas
exploration, development and production companies, initially in
Turkey.
The financial statements have been prepared and approved by the
Directors in accordance with International Financial Reporting
Standards as adopted by the European Union ('IFRS') and with those
parts of the Companies Act 2006 applicable to companies reporting
under IFRS.
The financial statements have been prepared under the historical
cost convention or fair value where appropriate. The significant
accounting policies adopted are described below.
The carrying value of both the convertible loans to Oman
Resources amounting to GBP18,610,000 and the Company's 5%
investment in ARAR of GBP8,000,000 are included at fair value,
which the Directors consider not to be impaired.
The Directors have reached this conclusion based upon the latest
CPR which provided a potential Net Present Value of US$583.4M
(GBP365m) net to each of Oman Resources and ARAR, which consists of
$140.9M net attributable reserves (Proved and Probable), $135.3M
net Un-risked Contingent resources and $307.2M Un-risked Contingent
resources, in respect of the exploration licences in which Oman
Resources has a participating interest with ARAR. The loans are
currently convertible at the Company's option into 35.7% of Oman
Resources which equates to a potential Net Present Value share of
GBP130m. Using the same rationale, the 5% direct interest in ARAR
has a potential Net Present Value share of GBP18.25m.
The principal risk associated with the loans is that Oman
Resources is not able to repay the loan on the repayment date. The
conversion option mitigates the risk of Oman Resources being unable
to repay the loan. If the loan is not repaid or converted by 30
December 2011, then Niche would exercise its security and take
control of Oman Resources and continue to participate in the
arrangements with ARAR, except that Niche Group which currently has
conversion rights to an interest in 35.7% in Oman Resources would
own with 100% of Oman Resources which has a 50% interest in the
Konya and Hatay block licences.
We note that following uncertainties exist in respect of the
carrying value of the convertible loans to Oman Resources and the
Company's investment in ARAR:
-- the Company will be unable to realise the carrying value of
its investment in ARAR or in Oman Resources, (if under the terms of
the convertible loans, it assumes full control of Oman
Resources);
-- that Oman Resources and ARAR are unsuccessful in discovering
and developing oil and gas reserves;
-- the Company, together with ARAR, are unable to develop such
reserves, due to insufficient funds or other factor that could
affect development to commercial production.
The Directors have utilised the CPR as a basis for forming an
opinion on carrying values, although it is noted that this report
includes key assumptions, risk and uncertainties. These
include:
-- the ability of Oman Resources and ARAR to fund the
significant capital expenditure requirement;
-- the underlying uncertainties that exist within the oil and gas industry;
-- an estimate of resources that was based on data provided by ARAR;
-- the ability of ARAR to successfully discover and develop the reserves identified;
-- the possibility of dilution of attributable Net Present Value
should funds be raised from third parties.
INVESTMENTS - AVAILABLE FOR SALE
Listed Unlisted 2011 Listed Unlisted 2010
investments investments Total investments investments Total
2011 2011 2010 2010
GBP GBP GBP GBP GBP GBP
Fair value
At 1 July 20,727 - 20,727 24,409 50,000 74,409
Additions - 8,000,000 8,000,000 - 462,557 462,557
Disposals (12,326) - (12,326) - (512,557) (512,557)
Net gains
/ (losses)
transferred
to equity 54,600 - 54,600 (3,682) - (3,682)
_________ __________ _________ _________ _________ ________
At 30 June 63,001 8,000,000 8,063,001 20,727 - 20,727
_________ __________ _________ _________ _________ _________
The fair value of listed investments is based on their current
bid prices in an active market. Unlisted investments are recorded
at cost less impairment. Unlisted investments are instruments that
do not have a quoted market price in an active market and their
fair value cannot be measured reliably. The range of reasonable
fair value estimates is significantly wide and the probabilities of
the various estimates cannot be reasonably assessed as they relate
to the underlying gas reserves in blocks which are currently being
explored by a third party company.
At the balance sheet date, GBP18,877 (2010: GBP19,318) of losses
had been transferred from equity into the income statement.
During the year, the Company acquired a 5% interest in Arar
Petrol ve Gaz AUPAS ("ARAR" or the "Operator"), a petroleum
exploration company in Turkey, for a consideration of
GBP8,000,000.
FINANCIAL ASSETS - LOANS AND RECEIVABLES
2011 2010
GBP GBP
Non-current assets at 1 July 4,950,000 -
Non-current assets transferred to (4,950,000) -
current assets
Non-current asset additions - 4,950,000
Current asset additions 13,660,000 -
Current assets transferred from non-current
assets 4,950,000
Non-current assets at 30 June - 4,950,000
Current assets at 30 June 18,610,000 -
During the year, the Company entered into a succession of
convertible loan agreements (the "Loans") and provided
GBP13,660,000 of financing to Oman Resources, over a period of 9
months. The convertible loans are repayable on 30(th) December 2011
unless converted into ordinary shares in Oman Resources equivalent
to 35.7% of its current issued share capital. Where either (a) Oman
Resources completes a fundraising of US$10m or more by way of issue
of shares or (b) Oman Resources' shares are listed on AIM or on a
recognised investment exchange or (c) Oman Resources is acquired
and such acquisition constitutes a reverse takeover for the
purposes of the AIM Rules, then the loans will automatically
convert into ordinary shares in Oman Resources. Otherwise, the
conversion is at the sole option and discretion of the Company and
can be made at any time up to the repayment date (though all loans
must be converted at the same time). The loans bear interest at
three per cent per annum compounded each month until the repayment
date.
The convertible loans are secured by: (a) Oman Resources'
assignment by way of security to the Company of Oman Resources'
contractual rights under the Joint Operating Agreement and the Farm
In Agreement; (b) a charge over all the shares held in Oman
Resources by Sorbus Holdings S.A.; (c) a charge over all the shares
held in Oman Resources by Ghana Oil & Gas Limited; and (d) a
charge over any shares held by Oman Resources in SFA Grup Petrol ve
Gaz Anonim Sirketi if Oman Resources exercises its option to
acquire such shares in accordance with the Farm In Agreement.
The risks associated with the recoverability of the convertible
loans are included under Principal Risks and Uncertainties in the
Directors' Report, in the Accounting policies - Sources of
estimation uncertainty and in the basis of preparation note.
Annual Report & Accounts
The annual report and accounts, together with a notice of the
Annual General Meeting and proxy form, have been posted to
shareholders. The annual report and accounts will be available for
shareholders and members of the public at the Company's Registered
Office, Aston House, Cornwall Avenue, London N3 1LF or on the
Investor Relations Section of the Company's website at
www.nichegroupplc.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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