TIDMWEN
RNS Number : 0942W
Wentworth Resources PLC
21 April 2021
PRESS RELEASE 21 April 2021
WENTWORTH RESOURCES PLC
("Wentworth" or the "Company")
Final Results for the year ended 31 December 2020
Declaration of Final Dividend
Publication of Sustainability Report
Wentworth (AIM: WEN), the independent, Tanzania-focused natural
gas producer is pleased to announce its audited financial results
for the year ended 31 December 2020 along with its proposed final
dividend declaration for the full year 2020. All values are
expressed in US dollars unless stated otherwise.
As a domestic natural gas business in Tanzania, our purpose is
to empower people with affordable, low carbon and reliable energy
by working to close the energy access gap. As a responsible
company, we recognise the importance of providing our stakeholders
with greater transparency around how we execute on this strategy
and perform against key environmental, social and governance (ESG)
criteria. To this end, Wentworth is pleased to announce the launch
of its inaugural Sustainability Report. The report is available on
the Company's website at: www.wentplc.com .
HIGHLIGHTS
Health and Safety
-- The health and safety of our people, partners and local
communities remains our priority; zero fatalities in 2020 and a
Lost Time Incident Rate ("LTIR") of zero for the fourth year
running
-- Robust precautionary measures remain in place related to
COVID-19 to ensure the ongoing safety of our staff; to date, there
have been zero reported cases of COVID-19 at Mnazi Bay
Financial
-- Declaring a final dividend in respect of FY 2020 of 1.0 pence
per share ($2.6 million); a total dividend distribution in respect
of 2020 of $3.8 million (1.5 pence per share) representing an
increase of 27% from 2019 ($3.0 million) and a yield of
approximately 6.7% (calculated on an annualised basis)
-- Strong and resilient financial performance against a challenging macro-economic backdrop
-- Revenues of $18.9 million (2019: $18.6 million), underpinned
by long-term fixed gas price contracts
-- Adjusted earnings before interest, taxes, depreciation,
amortization and exploration (EBITDAX) of $9.7 million (2018: $8.8
million)
-- Debt free with cash on hand of $17.8 million at 31 December 2020
-- TPDC continues to remain fully current with all invoices for gas sales
Operational
-- Production averaged 65.5 MMscf/day (2019: 70.3 MMscf/day),
lower due to fluctuating demand but in line with guidance of 60-70
MMscf/day
-- Capacity from existing wells and production facilities
increased to in excess of 100 MMscf/day
-- Low operational cost of production of $0.69 / Mscf
-- Wentworth's share of Gross 2P Reserves as at 31 December 2020
estimated by RPS to be 90.8 Bcf with a post-tax NPV10 of $116.6
million
Corporate
-- Ongoing commitment to a progressive capital returns policy
-- Tanzania focused growth continues to be a key focus to
capitalise on existing operational track record
-- Continued process of Board refreshment, with Bob McBean
retiring as Chairman at the AGM and John Bentley stepping down
during the year
-- At least one new Non-Executive Director to be appointed
during 2021 with the aim of bringing further diversity to the
Board
Sustainability
-- Ongoing ESG strategy remains a priority with a focus on
measurement and mitigation strategies for climate-related impacts
in 2021
Sustainability Report
-- Published inaugural Sustainability Report for 2020; it
addresses how we manage the impacts of our business by upholding
relevant international standards and how we take our responsibility
to our stakeholders, society and the environment seriously
-- Announced membership of the United Nations ("UN") Global
Compact, underlining our commitment to operating responsibly in
line with the UN's Ten Principles on human rights, labour,
environment and anti-corruption and to take strategic action to the
support the UN's Sustainable Development Goals
Social and Environmental Impact
-- The power access gap in Tanzania is growing despite domestic
energy supply increasing; transformational growth is needed in
domestic energy supply to deliver the Government's target of
universal access by 2030 through low-cost, low carbon solutions
that will secure a just transition for Tanzania
-- Natural gas will play a critical role in meeting this target
to support cheaper and more reliable electricity as well as
facilitating an enabling environment to supplement carbon-free
renewable energy systems, such as hydro and solar
-- Natural gas constitutes 50% of Tanzania's energy mix:
o Production from Mnazi Bay constitutes 50% of the gas produced
into the grid
o 30% of Tanzania's electricity customers rely on Mnazi Bay
gas
-- Wentworth and its partners play an important role in
delivering on UN Sustainable Development Goal 7, ensuring universal
access to affordable, reliable and modern energy services
2021 Outlook
-- Record quarter performance to date with average production
volumes for Q1 2021 of 84.74 MMscf/day (gross) compared with Q1
2020 average of 63.60 MMscf/day (gross)
-- All-time production volume highs at Mnazi Bay of 110.65
MMscf/day including monthly average production of 101.85 MMscf/day
(gross) during March 2021, demonstrating the ability to supply
greater than 100 MMscf/day (gross) consistently during periods of
high demand
-- 2021 Mnazi Bay production guidance remains unchanged at 65-75
MMscf/day (gross), considering the seasonal rainy season typically
impacts demand for natural gas during Q2
Dividend
The directors propose that a final dividend of 1.0 pence per
ordinary share be paid to the holders of the ordinary shares who
are on the register of members of the Company at 6.00 p.m. on 25
June 2021. The proposed final dividend will bring distributions to
shareholders with regard to the financial year ended 31 December
2020 to $3.8 million, an increase of 27% from 2019 distributions of
$3.0 million and in line with the Company's stated commitment to a
sustainable and progressive dividend. If approved by shareholders,
the dividend will be paid according to the timetable below.
Final Dividend Payment Timetable:
Ø Ex-Dividend Date: 24 June 2021
Ø Record Date: 25 June 2021
Ø UK Payment Date (for shareholders who hold shares on the UK
Register): 23 July 2021
Ø VPS Payment Date (for shareholders who hold shares on the VPS
Register): 6 August 2021
Shareholders who hold their shares on the VPS Register on the
Record Date shall receive the dividend in NOK. The exchange rate
shall be determined on the UK Payment Date and the Company shall
inform VPS shareholders via RNS as soon as practicable thereafter
of the NOK sum per share they will receive which shall be settled
on the VPS Payment Date.
Results Conference Calls
Analyst call
The Company is holding a conference call for analysts at 9.30am
BST today, Wednesday 21 April 2021.
To register for the call, please click on the following
link:
https://secure.emincote.com/client/wentworth/wentworth006/vip_connect
You can view the presentation during the call via the following
link:
https://secure.emincote.com/client/wentworth/wentworth006
Investor call
The Company is holding a conference call for investors at
12.30pm BST today, Wednesday 21 April 2021, via Investor Meet
Company.
To register for the call, please click on the following
link:
https://www.investormeetcompany.com/wentworth-resources-plc/register-investor
Katherine Roe, CEO, commented:
"2020 challenged the status quo for every community in every
society around the world. Despite a challenging macro-economic and
industry backdrop, Wentworth has proven itself to be resilient.
"The corporate transformation that has been underway has made
our fundamentals stronger - with no debt, fixed price contracts, a
simplified corporate structure and ongoing cash generation. Having
returned $3.0 million to shareholders in 2019, I'm delighted that
despite facing the greatest post-war crisis history has ever seen,
we are set to increase our returns for 2020 by distributing a
further $3.8 million.
"This positive trend looks set to continue into 2021 with record
production during Q1 due in large part to industrial demand growth,
reaffirming our view that asset production is dictated more by
demand constraints than by field limitations. However, we remain
responsible in our approach to guidance which is unchanged for now
as we await the effects of the resumption of supply following
maintenance at the Songo Songo gas field and clarity on hydropower
capacity after the current rainy season.
"The resilience of the Tanzanian economy in 2020, the ambitions
of the Tanzanian government to attract further foreign investment
and the strengthening demand from industrial customers underscores
our confidence in the future demand growth in the country. We look
forward to working with our partners, including TPDC, to fulfil the
Government and the UN's ambitions to deliver universal energy
access by 2030.
"I would like to pay tribute to Bob McBean as he ends his 11
year leadership of Wentworth. He leaves the Board with the Company
in great health to pursue his ongoing vision of Wentworth as a
champion in the East African gas sector."
Enquiries: Katherine Roe, katherine.roe@wentplc.com
Chief Executive Officer +44 (0) 7841 087 230
Wentworth
AIM Nominated Adviser and Joint Broker
Callum Stewart
Ashton Clanfield
Stifel Nicolaus Europe Limited Simon Mensley +44 (0) 20 7710 7600
Joint Broker
Richard Crichton
Peel Hunt LLP Alexander Allen +44 (0) 20 7418 8900
Communications Adviser
Sara Powell
FTI Consulting Ben Brewerton +44 (0) 20 3727 1000
CHAIRMAN'S STATEMENT
2020 has been a year unlike any seen for several generations.
While I won't dwell on the impact of the COVID-19 pandemic on all
our lives, I will say that the resilience of humanity to adapt in
the face of change is cause for hope. Despite the uncertainty we
face, I have no doubt that once the spread of the pandemic is
contained, life will resume - hopefully with a renewed sense of
perspective, optimism, and gratitude.
Continued financial strength
For Wentworth, 2020 has been a remarkable year. Our strong
operational profile and agility has not only seen us weather the
economic storm but thrive in the face of adversity. Being solely a
natural gas producer with a fixed price contract, we have not been
subject to the volatile price swings that have created financial
difficulties faced by other E&Ps. This has resulted in us
outperforming many of our oil and gas sector peers on the London
Stock Exchange.
While others faced financial challenges, we continued to
strengthen our balance sheet. Our rigour has enabled us to continue
providing sustainable returns to our shareholders. Having
introduced our divided policy and maiden dividend in 2019, we
increased our dividend payout by 20% in 2020. This commitment puts
us as one of only three AIM-listed exploration and production
companies to be paying an annual dividend to shareholders.
Ongoing demand for natural gas
Operationally, our single producing asset at Mnazi Bay in
Southern Tanzania continues to perform well. Demand has remained
stable on an annualised basis despite a slight decline in 2020, and
we expect ongoing growth over the coming years in line with
Tanzania's ambition to achieve universal energy access by 2030.
With the important role natural gas plays in the country's energy
mix, we are confident that Wentworth is well positioned to benefit
from any increase in demand.
Growth as our focus
Over the past year we continued to reduce G&A expenditure,
although we incurred additional legal costs from exploring and
negotiating a couple of specific growth opportunities. Despite many
positive conversations, restrictions from the COVID-19 pandemic
made negotiations challenging. Looking to the year ahead, we are
optimistic that as the global situation improves, we will continue
those discussions. Our focus is on exploring opportunities in East
Africa - primarily in Tanzania where our operational focus and
unique proposition sits.
Our goal for the next year will be to focus on pursuing the
right growth opportunities both within our existing asset and
beyond that to support our existing stable operations. Whilst we
are not budgeting for any significant capital projects in 2021, we
are continuing to work with our Operator, Maurel et Prom
("M&P"), on an optimal field development plan. A minimal work
programme will allow us to strengthen our balance sheet further by
year-end. This solid financial base will also give us the ability
to leverage our position in any competitive negotiations where
appropriate; it is paramount to us that any growth will be
responsible and only on terms that protect our existing shareholder
returns and core asset value.
A departing note
Sadly this will be my last Chairman's message as I will be
stepping down at the end of June. I am doing so knowing that
Wentworth is in the best financial shape of its 11-year history. I
am extremely proud of what has been accomplished since Wentworth
acquired its East African assets and would like to thank all who
have helped along the way, not only the Company Directors and
employees both past and present, but also our joint venture
partners and the Governments of both Tanzania and Mozambique.
I would also like to take this opportunity to thank our staff in
Dar es Salaam for their unwavering commitment during this difficult
time. A special thanks too to Katherine Roe, our CEO, for her work
ethic and outstanding contribution to the Company over the past
year. Katherine has been a joy to work with and will continue to
steer us forward into 2021 and beyond.
Finally, I would like to thank all our shareholders for their
continued support in a year when the health of family and loved
ones has been the main concern for all.
Robert McBean
Chairman
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year-ended 31 December
Note 2020 2019
$000 $000
----------- ------------
Total revenue 5 18,991 18,636
Production and operating costs (3,837) (3,935)
Depletion 14 (5,607) (6,236)
------------------------------------- ----- ----------- ------------
Total cost of sales (9,444) (10,171)
Gross profit 9,547 8,465
Recurring administrative costs 7 (5,448) (5,883)
New venture and pre - licence costs (1,558) (609)
Management restructuring costs - (489)
Share-based payment charges 21 (300) (63)
Depreciation 14 (4) (2)
Total costs (7,310) (7,046)
Profit from operations 2,237 1,419
Finance income 10 146 306
Finance expense 10 (154) (738)
------------------------------------- ----- ----------- ------------
Profit before tax 2,229 987
Current tax expense 25 (112) (132)
Deferred tax income 25 1,311 1,511
------------------------------------- ----- ----------- ------------
1,199 1,379
Net and comprehensive profit after
tax 3,428 2,366
------------------------------------- ----- ----------- ------------
Net profit per ordinary share
Basic and diluted (US$/share) 23 0.02 0.01
------------------------------------- ----- ----------- ------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 31 December 31 December
2020 2019
$000 $000
------------------------------------ -----
ASSETS
Current assets
Cash and cash equivalents 17,787 13,487
Trade and other receivables 11 4,847 6,075
22,634 19,562
------------------------------------ ----- ------------
Non-current assets
Exploration and evaluation assets 13 8,129 8,129
Property, plant and equipment 14 72,307 77,559
Deferred tax asset 25 6,859 5,548
------------------------------------ ----- ------------ ------------
87,295 91,236
------------------------------------ ----- ------------ ------------
Total assets 109,929 110,798
------------------------------------ ----- ------------ ------------
LIABILITIES
Current liabilities
Trade and other payables 16 2,382 2,125
Current portion of long-term loans 18 - 1,714
2,382 3,839
------------------------------------ ----- ------------
Non-current liabilities
Decommissioning provision 19 1,514 1,085
------------------------------------ -----
1,514 1,085
------------------------------------ ----- ------------ ------------
Equity
Share capital 22 416,426 416,426
Equity reserve 22 26,656 26,651
Accumulated deficit (337,049) (337,203)
------------------------------------ ----- ------------ ------------
106,033 105,874
------------------------------------ ----- ------------
Total liabilities and equity 109,929 110,798
------------------------------------ ----- ------------ ------------
The financial statements of Wentworth Resources plc, registered
number 127571 were approved by the Board of Directors and
authorised for issue on 21 April 2021.
Signed on behalf of the Board of Directors.
Katherine Roe
Chief Executive Officer
21 April 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Number of Share Equity Accumulated Total
Note shares capital reserve deficit equity
$000 $000 $000 $000
-------------------------------- ------ ----------------------------- ----------- --------- ------------- ---------
Balance at 31 December
2018 186,488,465 416,426 26,588 (338,536) 104,478
Dividends 24 - - - (1,033) (1,033)
Net profit and comprehensive
profit - - - 2,366 2,366
Share based compensation 21 - - 63 - 63
-------------------------------- ------ -----------------------------
Balance at 31 December
2019 186,488,465 416,426 26,651 (337,203) 105,874
Dividends 24 - - - (3,274) (3,274)
Net profit and comprehensive
profit - - - 3,428 3,428
Share based compensation 21 - - 300 - 300
Repurchase of own shares 20 (295) - (295)
Balance at 31 December
2020 186,488,465 416,426 26,656 (337,049) 106,033
-------------------------------- ------ ----------------------------- ----------- --------- ------------- ---------
CONSOLIDATED STATEMENT OF CASH FLOWS
Year-ended 31 December
Note 2020 2019
$000 $000
---------------------------------------------- ----- --- ---
Operating activities
Net profit for the year 3,428 2,366
Adjustments for:
Depreciation and depletion 14 5,611 6,238
Finance costs, net 28 8 432
Deferred tax 25 (1,311) (1,511)
Share based compensation 21 300 63
8,036 7,588
Change in non-cash working capital 28 1,513 410
---------------------------------------------- -----
Net cash generated from operating activities 9,549 7, 998
---------------------------------------------- ----- --- --- ------------ -----------
Investing activities
Additions to property, plant and equipment 28 (60) (20)
Reduction of TPDC receivable 28 - 5,238
Interest income 82 21
---------------------------------------------- ----- --- ---
Net cash from investing activities 22 5, 239
---------------------------------------------- ----- --- --- ------------ -----------
Financing activities
Principal term loan repayments 18 (1,664) (6,661)
Interest on term loan 18 (38) (593)
Interest/renewal fee on overdraft facility 17 - (18)
Payment of contingent PTTEP liability - (848)
Dividends paid 24 (3,274) (1,033)
Repurchase of own shares 20 (295) -
---------------------------------------------- ----- --- --- ------------ -----------
Net cash used in financing activities (5,271) (9,153)
---------------------------------------------- ----- --- --- ------------ -----------
Net change in cash and cash equivalents 4,300 4,084
Cash and cash equivalents, beginning
of the period 13,487 9,403
---------------------------------------------- ----- --- ---
Cash and cash equivalents, end of the
period 17,787 13,487
---------------------------------------------- ----- --- --- ------------ -----------
NOTES TO THE ACCOUNTS
1. Incorporation and basis of preparation
Wentworth Resources plc ("Wentworth" or the "Company") is an
East Africa-focused upstream natural gas production company. These
audited consolidated financial statements include the accounts of
the Company and its subsidiaries (collectively referred to as
"Wentworth Group of Companies" or the "Group"). The Company is
actively involved in oil and gas exploration, development and
production operations. Wentworth is incorporated in Jersey and
shares of the Company as at 31 December 2020 were held and listed
on the AIM part of the London Stock Exchange (ticker: WEN).
The Company's principal place of business is located at 4th
Floor, St Paul's Gate, 22 - 24 New Street, St Helier, Jersey, JE1
4TR
The Group maintains offices in Jersey, Tanzania and the United
Kingdom.
Basis of presentation and statement of compliance
These consolidated financial statements have been prepared on a
historical cost basis and have been prepared using the accrual
basis of accounting. The consolidated financial statements are
prepared in accordance with International Financial Reporting
Standard ("IFRS") as issued by the International Accounting
Standards Board ("IASB") in conformity with the requirements of the
Companies (Jersey) Law 1991.
The consolidated financial statements were approved by the Board
of Directors on 21 April 2021.
Over 12-months have passed since the emergence of COVID-19 as an
issue of unprecedented international consequence in early 2020.
Whilst it is true that the longer international trade is frustrated
by the necessity or quarantine protocols, the more severe the
long-term impact on the worldwide economic recovery will be, we do
have a better understanding of both the operational and financial
impact upon our business and are well placed to deal with any
reasonable eventualities.
Over the past 12-months, we have continued to strengthen our
working capital position whilst at the same time increasing
dividend returns to shareholders and continuing to model and, where
possible, mitigate potential downside scenarios. Ultimately,
however, it will be the macro-economic environment that influences
the impact upon the wider Group and there can be no certainty as to
what this final outcome will be despite the positivity surrounding
the various accelerated vaccination programmes and the early
indications that these are beginning to make a difference with
respect to retransmission rates. We continue to apply the judgement
that the business will continue, anticipating minimal disruption,
and do not at this stage foresee this to be material in nature to
it. We do, however, continue to monitor the situation as it
progresses and are mindful of the speed in which circumstances may
change, both for the better or for the worse.
Functional and presentation currency
These consolidated financial statements are presented in US
dollars which is the functional currency the majority of its
subsidiaries.
Basis of consolidation
These consolidated financial statements include the accounts of
the Company and its subsidiaries. Subsidiaries are entities that
the Company controls. An investor controls an investee when it is
exposed, or has rights, to variable returns from its involvement
with the investee and can affect those returns through its
authority over the investee. The existence and effect of potential
voting rights are considered when assessing whether a company
controls another entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Company. They are
deconsolidated from the date that control ceases. The legal
entities within the Wentworth Group of Companies are disclosed
within note 15. All inter- company transactions, balances and
unrealised gains on transactions between the parent and subsidiary
companies are eliminated on consolidation.
The Group holds a 31.94% participation interest in the Mnazi Bay
Concession through two subsidiaries. Wentworth Gas Limited ("WGL"),
which is a wholly owned subsidiary, owns a 25.40% participation
interest and CMBL owns a 16.38% participation interest of which the
Group's proportionate share is 6.54% (i.e. Wentworth's interest of
39.925% interest in CMBL multiplied by 16.38% participation
interest). CMBL is considered a jointly controlled entity and
accounted for as a joint operation rather than a joint venture. The
Group the group accounts for its share of CMBL assets and
liabilities as CMBL has contractual agreements which establish that
the parties to the joint arrangement have rights to the assets and
obligations for the liabilities of ownership in proportion to their
interest in the arrangement.
Going Concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report. The financial position of the
Group, its cash flows and liquidity position are described in the
Financial Review contained within this report.
With the world continuing to struggle to come to terms with the
unprecedented events of the COVID-19 pandemic and the risk
presented to the continued health and well-being of our workforce
alongside the disruption that preventative measures have had on the
global supply chain in placing restrictions on the transportation
of goods, services and personnel set to continue for some time to
come, considerable time and resource has been allocated by
Directors and senior management in ensuring that Wentworth is best
placed to be able to continue to safely produce gas from Mnazi Bay
alongside the Operator, Maurel et Prom. Given the essential nature
of services provided and the forecasted impact of the virus in the
country, the Group notes that an interruption of production and
unavailability of key workforce is remote. The Directors however
are mindful of the speed with which circumstances may change, both
for the better or for the worse, and all modelling is based on
information that we currently have available to us.
The Group has a long established and collaborative relationship
with the Government of the United Republic of Tanzania, having
operated in-country for many years, however the Directors do
recognise that the Group is dependent upon the continued collection
of gas sales invoices and ongoing operational support of the
Government as its sole gas sales customer through its operating
agencies TPDC and TANESCO.
The Directors have, therefore, judged that on a risk-weighted
basis, which takes into consideration both the probability of
occurrence and an estimate of the financial impact, the continued
timely settlement of gas-sales invoices by the Government of the
United Republic of Tanzania continues to be the most significant
risk currently faced by the Group. To this end, should no
settlement of future gas sales invoices be received from the date
of approval of these financial statements, we have assessed that
the Group would be able to continue to operate for a period of up
to 17 months without the need for a further injection of working
capital.
Further to this based on the application of reasonable and
foreseeable sensitivities, which include potential changes in
demand, capital spend and operating costs, the Directors believe
that the Group is well placed to manage its financial exposures The
Directors have judged that owing to a combination of the stability
of this relationship which has seen payment terms continue to
improve during 2019 and its much improved financial position having
fully repaid all of its fixed-term debt in January 2020, the Group
has sufficient cash resources for its working capital needs,
committed capital and operational expenditure programmes for at
least the next 17 months based on the Directors worst case scenario
of no settlement of future gas sales as noted above.
Consequently, the Directors are confident that the Group will
have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the
financial statements and therefore have prepared the financial
statements on a going concern basis.
Changes in accounting policies
A number of new standards are effective from 1 January 2020 but
they do not have material effect on the Group's financial
statements.
New and amended standards
The following amended standards and interpretation are effective
for financial years commencing on or after 1 January 2021. The
Group does not intend to adopt the standards below, before their
mandatory application date.
Standard Description Effective date EU Endorsement Status UK Endorsement Status
IFRS 9, IAS 39 and IFRS Interest Rate Benchmark 1 January 2021 Endorsed Given these amendments
7 (Amendments) Reform. were endorsed by the EU
before 31 December 2020
they are part of the
EU-IFRS as it stands at
31 December 2020 and
therefore are UK
endorsed. UK effective
date
1 January 2021.
------------------------ --------------- ---------------------- ------------------------
IAS 1 (Amendments) Presentation of 1 January 2021 Endorsed
financial statements'
on classification of
liabilities.
------------------------ --------------- ---------------------- ------------------------
IFRS 17 Insurance Contracts. 1 January 2022 Endorsed
------------------------ --------------- ---------------------- ------------------------
Future accounting pronouncements
The Company intends to adopt the above listed standards and
interpretations in its financial statements for the annual period
beginning 1 January 2021. The Company does not expect the
interpretation to have a material impact on the financial
statements.
2. Summary of accounting policies
The principal accounting policies applied in the preparation of
these Company and Group consolidated financial statements are set
out below. These policies have been consistently applied to all the
years presented, unless otherwise stated.
Joint arrangements
The analysis of joint arrangements requires management to
analyse numerous agreements and the requirements of IFRS 10 and
IFRS 11. Several judgements and estimates are made by management
including whether joint control exists and the extent of exposure
to the underlying assets and liabilities of the joint arrangement.
By virtue of the provisions contained within the underlying
shareholder agreements, to which Cyprus Mnazi Bay Limited (see
below for accounting considerations of this entity) and Wentworth
Holdings Gas Limited, a wholly owned subsidiary of Wentworth
Resources plc, are parties to, management have assessed that the
Company has a joint arrangement through its 31.94% ownership in the
license and accounts for this interest as a joint operation as no
single individual shareholder may exercise absolute control over
the entity. The agreement is bilateral, with Maurel & Prom
Mnazi Bay Holdings SAS (M&P) and whilst the Operator may make
day-to-day decisions, the overall strategic direction of the
partnership requires unanimous consent between M&P and
Wentworth. M&P hold 48.06% share in the license and 20% is
owned by TPDC. As such the Group is entitled to its share of
production from the license and therefore revenue generated from
the sale of this output. Wentworth also recognise its share of all
expenses incurred the joint arrangement, its right to the assets,
as well as its share of the liabilities
and obligations. Accounting treatment of CMBL
The Group holds a 31.94% participation interest in the Mnazi Bay
Concession through two subsidiaries. Wentworth Gas Limited ("WGL"),
which is a wholly owned subsidiary, which owns a 25.40%
participation interest and Wentworth Holdings (Jersey) Limited, a
wholly owned subsidiary whom hold 39.925% in Cyprus Mnazi Bay
Limited ("CMBL"), which owns a 16.38% participation interest of
which the Group's proportionate share is therefore 6.54% (i.e.
Wentworth's interest of 39.925% interest in CMBL multiplied by
16.38% participation interest). CMBL is considered a jointly
controlled entity and accounted for as a joint operation rather
than a joint venture. The Group therefore recognises its share of
production from the license and therefore revenue generated from
the sale of this output. It also recognises its share of all
expenses incurred the joint arrangement, its right to the assets,
as well as its share of the liabilities and obligations."
Financial instruments
The Group recognises financial assets and liabilities on its
balance sheet when it becomes a party to the contractual provisions
of the instrument.
(i) Financial assets
Classification and initial measurement
Financial assets within the scope of IFRS 9 are classified as
financial assets at amortised cost, fair value through profit or
loss or fair value through other comprehensive income. The Group
determines this classification at initial recognition depending on
the business model for managing the financial asset and the
contractual terms of the cash flows.
The Group's financial assets include cash and cash equivalents,
trade and other receivables.
When financial assets are initially recognised, they are
measured at fair value being the consideration given or received
plus directly attributable transaction costs. Any gain or loss at
initial recognition is recognised in the income statement.
The Group's financial assets measured at amortised cost are held
for the collection of contractual cash flows where those cash flows
have specified dates and represent solely payments of principal and
interest, such as cash and cash equivalents or trade
receivables.
The Group's financial assets measured at fair value through
profit or loss are those financial assets where the contractual
cash flows do not solely represent payments of principal and
interest, such as trade receivables.
Subsequent measurement
Financial assets held for the collection of contractual cash
flows that are solely payments of principal and interest (and
classified as amortised cost) are subsequently measured at
amortised cost using the effective interest rate method ("EIR").
Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part
of the EIR. The EIR amortisation is included in finance income in
the income statement. Allowance for impairment is estimated on a
case-by-case basis.
Derecognition
A financial asset is derecognised when the Group loses control
over the contractual rights that comprise that asset. This occurs
when the rights are realised, expire or are surrendered.
Impairment of financial assets
The Group assesses on a forward-looking basis the expected
credit losses that might arise on financial assets measured at
amortised cost. This assessment considers the probability of a
default event occurring that could result in the expected cash
flows due from a counterparty falling short of those contractually
agreed.
Expected credit losses are estimated for default events possible
over the lifetime of a financial asset measured at amortised cost.
However, where the financial asset is not a trade receivable
measured at amortised cost and there have been no significant
increases in that financial asset's credit risk since initial
recognition, expected credit losses are estimated for default
events possible within 12 months of the reporting date.
(ii) Financial liabilities
Classification and initial measurement
Financial liabilities within the scope of IFRS 9 are classified
as financial liabilities at amortised cost or fair value through
profit or loss. The Group determines the classification of its
financial liabilities at initial recognition.
The Group's financial liabilities include trade and other
payables, other liabilities and borrowings which are classified as
amortised cost. Trade payables may be designated and measured at
fair value through profit or loss when doing so eliminates or
significantly reduces a measurement or recognition inconsistency
that would otherwise arise from measuring assets or liabilities on
a different basis.
All financial liabilities are recognised initially at fair value
while financial liabilities at amortised cost additionally include
directly attributable transaction costs.
Subsequent measurement
Trade and other payables, borrowings and other financial
liabilities are subsequently measured at amortised cost using the
EIR method after initial recognition. Gains and losses are
recognised in the income statement through the EIR amortisation
process. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortisation is included in
finance costs in the income statement.
A gain or loss on a financial liability measured at fair value
through profit or loss is recognised in the income statement in the
period in which it arises.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another on
substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in the
income statement.
(iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount reported in the balance sheet when there is an
enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise the assets
and settle the liabilities simultaneously.
(iv) Fair value of financial instruments
At each reporting date, the fair value of financial instruments
that are traded in active markets is determined by reference to
quoted market prices, without any deduction for transaction costs.
For financial instruments not traded in an active market, the fair
value is determined using appropriate valuation techniques. Such
techniques may include using recent arm's length market
transactions, reference to the current fair value of another
instrument that is substantially the same, discounted cash flow
analysis or other valuation models.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, term deposits
and short-term highly liquid investments with the original term to
maturity of three months or less, which are convertible to known
amounts of cash and which, in the opinion of management, are
subject to an insignificant risk of changes in value.
Long-term receivables
Long-term receivables plus applicable accrued interest are
initially recognised at their fair value based on the discounted
cash flows. The discounted cash flows are reviewed at least every
year to adjust for variations in the estimated future cash flows
with the change in estimate reported in profit or loss. The
discount rate is based on the credit quality and term of the
financial instrument. The financial instrument is subsequently
valued at amortised costs by accreting the instrument over the life
of the asset. The accretion is reported in profit or loss.
Exploration and evaluation ("E&E") exploration assets
E&E costs, including costs of licence acquisition, technical
services and studies, exploratory drilling, whether successful or
unsuccessful, and testing and directly attributable overhead, are
capitalised as E&E assets according to the nature of the assets
acquired. These costs are accumulated in cost centres by well,
field or exploration area pending determination of technical
feasibility and commercial viability.
E&E assets are assessed for impairment if (i) sufficient
data exists to determine technical feasibility and commercial
viability, and (ii) facts and circumstances suggest that the
carrying amount exceeds the recoverable amount.
The technical feasibility and commercial viability of extracting
a resource is generally considered to be determinable when proven
and/or probable reserves are determined to exist. A review of each
exploration licence or field is carried out, at least annually, to
ascertain whether it is technically feasible and commercially
viable. Upon determination of technical feasibility and commercial
viability, intangible E&E assets attributable to those reserves
are first tested for impairment with the unimpaired amounts
reclassified from E&E assets to a separate category within
tangible assets within PP&E referred to as oil and gas
interests.
Costs incurred prior to the legal awarding of petroleum and
natural gas licences, concessions and other exploration rights are
recognised in profit or loss as incurred.
PP&E - oil and natural gas properties
Items of PP&E, which include oil and gas development and
production assets, are measured at cost less accumulated depletion
and depreciation and accumulated impairment losses. PP&E assets
include costs incurred in developing commercial reserves and
bringing them into production, such as drilling of development
wells, tangible costs of facilities and infrastructure
construction, together with the E&E expenditures incurred in
finding the commercial reserves that have been reclassified from
E&E assets as outlined above, the projected cost of retiring
the assets and any directly attributable general and administrative
expenses. Expenditures on developed oil and natural gas properties
are capitalised to PP&E when it is probable that a future
economic benefit will flow to the Company as a result of the
expenditure and the cost can be reliably measured. The initial cost
of an asset is comprised of its purchase price or construction
cost, any costs directly attributable to bringing the asset into
operation, the initial estimate of any decommissioning obligations
associated with the asset and borrowing costs on qualifying assets.
When significant parts of an asset with PP&E, including oil and
gas interests, have different useful lives, they are accounted for
as separate items (major components). Costs incurred subsequent to
the determination of technical feasibility and commercial viability
and the costs of replacing parts of PP&E are recognised as
capitalised oil and gas interests only when they increase the
future economic benefits embodied in the specific asset to which
they relate. Subsequent changes in estimated decommissioning
obligation due to changes in timing, amounts and discount rates are
included in the cost of the asset. Such capitalised oil and gas
interests generally represent costs incurred in developing proved
and/or probable reserves and bringing in or enhancing production
from such reserves and are accumulated on a field or geotechnical
area basis. The carrying amount of any replaced or sold component
is derecognised. The costs of the day-to-day operating of PP&E
are recognised in profit or loss as incurred.
Depletion
The net carrying amount of PP&E is depleted on a field by
field unit of production method by reference to the ratio of
production in the year to the related proven and probable reserves.
If the useful life of the asset is less than the reserve life, the
asset is depreciated over its estimated useful life using the
straight-line method. Future development costs are estimated
considering the level of development required to produce the proven
and probable reserves. These estimates are reviewed by third party
independent reserves engineers. Changes in factors such as
estimates of reserves that affect unit-of-production calculations
are dealt with on a prospective basis. Capital costs for assets
under construction included in development and production assets
are excluded from depletion until the asset is available for use,
that is, when it is in the location and condition necessary for it
to be capable of operating in the manner intended by
management.
Disposals
Oil and natural gas properties are derecognised upon disposal or
when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss on derecognition of
the asset, including farm out transactions or asset sales or asset
swaps, is calculated as the difference between the proceeds on
disposal, if any, and the carrying value of the asset, is
recognised in profit or loss in the period of derecognition.
PP&E - office and other equipment
Office and other equipment are carried at cost less accumulated
depreciation and impairment losses. Depreciation of the cost of
these assets less residual value is charged to profit and loss on a
straight-line basis over their estimated useful economic lives of
between three and five years.
Leases
IFRS 16 Leases applies to all leases, including subleases, but
does not apply to leases to explore for or use minerals, oil,
natural gas and similar non-regenerative resources.
The Company has elected not to recognise right-of-use assets and
lease liabilities for lease of low-value assets and short-term
leases. The Company recognises the lease payments associated with
these leases as an expense on a straight-line basis over the lease
term.
Decommissioning obligation
Decommissioning obligations are recognised for legal obligations
related to the decommissioning of long-lived tangible assets that
arise from the acquisition, construction, development or normal
operation of such assets. A liability for decommissioning is
recognised in the period in which it is incurred and when a
reasonable estimate of the liability can be made with the
corresponding decommissioning provision recognised by increasing
the carrying amount of the related long-lived asset. The recognised
decommissioning provision is subsequently allocated in a rational
and systematic method over the underlying asset's useful life. The
initial amount of the liability is accreted by charges to the
profit or loss to its estimated future value.
Impairment
The carrying values of production assets, exploration and
evaluation expenditures that have been capitalised and property,
plant and equipment are assessed for impairment when indicators of
such impairment exist. In performing impairment reviews, assets are
categorised into the smallest identifiable groups (cash generating
units) that generate cash flows independently. If any indication of
impairment exists, the estimated recoverable amount of the asset or
cash generating unit ("CGU") is calculated.
If the carrying amount of the asset or CGU exceeds its
recoverable amount, it is impaired with the loss charged to the
income statement so as to reduce the carrying amount to its
recoverable amount.
Impairment losses are recognised in the income statement in
those expense categories consistent with the function of the
impaired asset or CGU.
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such indication exists,
the Group makes an estimate of the recoverable amount.
(i) Calculation of recoverable amount
The recoverable amount of an asset or CGU is the greater of its
value in use and fair value less costs to sell. In assessing value
in use, the estimated future cash flows of the asset or CGU in its
present condition are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. In
determining fair value less costs to sell, consideration will be
given to whether the value of the asset or CGU can be determined
from an active market (e.g. recognised exchange) or a binding sale
agreement which are classified as level 1 in the fair value
hierarchy under IFRS 13 'Fair Value Measurements'. Where this is
not determinable, fair value less costs to sell for a CGU is
usually estimated with reference to a discounted cash flow model,
similar to the method used for value in use, but may include
estimates of future production, revenues, costs and capital
expenditure not currently included in the economic model.
Additionally, cash flow estimates include the impact of tax and are
discounted using a post-tax discount rate. An estimate made on this
basis is classified as level 3 in the fair value hierarchy.
(ii) Reversals of impairment
A previously recognised impairment loss is reversed only if
there has been a change in the estimates used to determine the
asset's recoverable amount since the last impairment loss was
recognised. If this is the case, the carrying amount of the asset
is increased to its recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does
not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had been
recognised for the asset in prior years. Such reversals are
recognised in the income statement. Impairment losses recognised in
relation to
goodwill are not reversed for subsequent increases in the recoverable amount.
Share capital
The proceeds from the exercise of share options and the issuance
of shares from treasury are recorded as share capital in the amount
for which the option, warrant, or treasury share enables the holder
to purchase a share in the Company.
Proceeds for shares in excess of the nominal value are recorded
within share premium.
Share issuance costs
Commissions paid to underwriters, and other related share issue
costs, such as legal, auditing and advisory, on the issue of the
Company's shares are charged directly to share capital, net of tax
within the share premium account.
Share based payments
The fair value of the options at the date of the grant is
determined using the Black-Scholes option pricing model and share
based compensation is accrued and charged to profit or loss, with
an offsetting credit to equity reserve over the vesting periods. A
forfeiture rate is estimated on the grant date and is adjusted to
reflect the actual number of options that vest.
Capitalisation of interest
The Company capitalises interest expense incurred during the
construction phase of the projects, except E&E assets which
were funded by the related financing.
Revenue recognition
Natural gas revenues are recognised upon the transfer of control
over its gas to its customers, TPDC and TANESCO, which is when
delivery is made to them through the offtake network.
Investment income is accrued on a time basis by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that discounts estimated future cash
receipts through the expected life of the financial asset to that
asset's net carrying value.
Income taxes
Tax expense comprises current and deferred tax. Tax is
recognised in the profit or loss except to the extent it relates to
items recognised in other comprehensive income ("OCI") or directly
in equity.
Current income tax
Current tax expense is based on the results for the period as
adjusted for items that are not taxable or not deductible. Current
tax is calculated using tax rates and laws that were enacted or
substantively enacted at the end of the reporting period.
Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is
subject to interpretation. Provisions are established where
appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax
Deferred taxes are the taxes expected to be payable or
recoverable on differences between the carrying amounts of assets
and liabilities in the consolidated statement of financial position
and their corresponding tax basis. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profits are expected to be available
against which deductible temporary differences to the tax basis can
be utilised. Deferred income tax assets and liabilities are not
recognised if the temporary difference arises from the initial
recognition of goodwill, if any, or from the initial recognition
(other than in a business combination) of other assets in a
transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and joint
arrangements except where the reversal of the temporary difference
can be controlled, and it is probable that the difference will not
reverse in the foreseeable future.
Deferred tax assets are reviewed at each reporting period and
reduced to the extent that it is no longer probable that sufficient
future taxable profits are expected to be available to allow all or
part of the asset to be recovered. Deferred tax assets are
recognised for taxable temporary differences arising on investments
in subsidiaries to the extent that it is probable that the
temporary difference will reverse in the foreseeable future and
future taxable profits are expected to be available against which
the temporary difference can be utilised.
Foreign currency translation
Items included in the financial statements of the Company and
its subsidiaries are measured using the currency of the primary
economic environment in which the legal entity operates (the
"functional currency"). Foreign currency transactions are
translated into the functional currency using the exchange rates
prevailing at the dates of the transaction. Foreign exchange gains
and losses resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities not
denominated in the functional currency of an entity are recognised
in profit or loss.
The functional currency of all Wentworth subsidiaries is US
dollars except for Wentworth Resources (UK) Limited which is Pound
Sterling. The assets and liabilities of this Company are translated
into US dollars at the period-end exchange rate. The income and
expenses of the Company are translated to US dollars at the average
exchange rate for the period.
Translation gains and losses are included in other comprehensive
income; however, this subsidiary has limited operations so there is
no significant amount of foreign exchange gains and losses to
include in other comprehensive income. All other foreign exchange
gains and losses are recognised in profit or loss.
Earnings or loss per share ("EPS")
Basic earnings or loss per share is calculated by dividing
profit or loss attributable to owners of the Company (the
numerator) by the weighted average number of ordinary shares
outstanding (the denominator) during the period. The denominator is
calculated by adjusting the shares outstanding at the beginning of
the period by the number of shares bought back or issued during the
period, multiplied by a time-weighting factor.
Diluted EPS is calculated by adjusting the earnings and number
of shares for the effects of all dilutive potential ordinary shares
deemed to have been converted at the beginning of the period or if
later, the date of issuance. The effects of anti-dilutive potential
ordinary shares are ignored in calculating diluted EPS.
3. Critical accounting judgements and key sources of estimation uncertainty
In applying the Group's accounting policies, the preparation of
consolidated financial statements requires management to make
estimates, judgments and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities as at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual amounts may differ materially from
these estimates due to changes in general economic conditions,
changes in laws and regulations, changes in future operating plans
and the inherent imprecision associated with estimates. Significant
estimates and judgments used in the preparation of these
consolidated financial statements include the assessment of
impairment triggers related to E&E and PP&E assets and
recognition of a deferred tax asset.
Recoverable value of Mnazi Bay E&E and PP&E costs
Significant accounting Judgements
The Directors review the carrying value of the Groups assets to
determine whether there are any indicators if impairment such that
the carrying values of the assets may not be recoverable. The
assessment of whether an indicator of impairment or reversal
thereof has arisen requires considerable judgement, taking account
of factors such as future operational and financial plans,
commodity prices and the competitive environment.
Oil and gas assets are inherently judgemental to value. The
amounts capitalised represent active projects and investments.
These amounts are expensed to profit or loss as unless the
determination process over whether reserves are recoverable or not
is not completed and there are no indications of impairment at the
reporting date or commercial reserves are established. Indictors of
impairment include but are not limited to; declines in market
value; company net assets in excess of market capitalisation;
obsolescence or physical damage; economic performance worse than
expected; or substantive expenditure in the specific area is
neither budgeted nor planned. The outcome of ongoing production and
exploration activities and whether their carrying values will
ultimately be recovered is inherently uncertain and requires
significant judgement.
Management performs impairment testing on the Company's
producing and non-producing assets when indicators of impairment
are present. The assessment of impairment indicators is subjective
and considers the various internal and external factors such as the
financial performance of individual CGUs, market capitalisation and
industry trends.
Key sources of estimation uncertainty
The preparation of discounted cash flows used to assess the
recoverable amount of the Groups CGU includes management's
estimates of future operating costs, economic and regulatory
environments, capital expenditures requirements, long term field
plans and other factors including discount rates and the total
level of reserves deemed to be commercial.
The valuation underpinning the carrying value of producing and
non-producing assets are largely dependent on supply and demand
variables.
The gas sales price is fixed, and the cost base of production
operations is also largely fixed in nature. Whilst the benefits of
increased production volumes are clear, the opposite is equally
true during operational downtime, prolonged or permanent gas supply
outages which may in turn impact upon the commerciality of the
field. Mnazi Bay currently has 5 producing wells and formally
signed the Commercialisation of Discovery making all terms
contained within the Mnazi Bay GSA legally binding and fully in
effect from 10 September 2019. The Mnazi Bay JV is committed to
supplying a minimum quota of natural gas to TPDC and TANESCO of 80
MMscf/day rising to 130 MMscf/day for the entire remaining term of
the GSA and is guaranteed of future revenue streams via a take or
pay provision of 85% of these amounts. This greatly strengthens and
formally ratifies the long-term commerciality of the Mnazi Bay
asset, and as such it would require significant reductions in daily
production operations to trigger an indication of impairment under
IFRS 6 and IAS 36 and a subsequent write down in the book value of
the Mnazi Bay asset which currently totals $72.3 million.
At the year-end, a full impairment test was conducted on the
Mnazi Bay production asset as there was an indication of impairment
with respect to the discrepancy between the market capitalisation
of the Company at 31 December 2020 of $46.4 million and the
carrying value of $72.3 million. The full impairment testing
ultimately determined that the recoverable amount was significantly
higher than the market value at the year-end which had been
externally corroborated by the RPS third party Independent Reserves
Assessment Report valuation (NPV10) of $116.6 million.
Equally, due to there being no formal agreement between Mnazi
Bay partners to sanction further expenditure on non-producing
assets, a full impairment test was also undertaken carrying value
of $8.1 million at the year-end. The impairment test ultimately
determined that the value-in-use exceeded the carrying amount and
that no impairment was required.
In both of the above cases, the impairment testing was conducted
over the licence term, which expires in 2031.
The key assumptions that went into the impairment modelling
related to:
-- Production supply and demand forecasting, which was largely
in-line with the RPS independent reserves assessment modelling;
-- Gas sales invoice settlement terms, which have been
extrapolated from both historic and future expectations on
terms;
-- Operating cost forecasts, noting both fixed and variable
elements of production operating costs and the impact of future
development expenditures;
-- Future field development expenditures and their anticipated timings;
-- Cost pool recovery expenditures available for future recovery; and
-- Known tax and fiscal changes to the extent that an
interpretation of the legislation was required.
Sensitivities were run on the following variables:
-- Field production per well, noting that the engineering
solutions utilized on Mnazi Bay allow for the production of
multiple hydrocarbon bearing horizons from certain wells;
-- The operating and development costs of producing gas from Mnazi bay.
-- The impact of increased sales invoice delinquency upon future cash flows; and
-- Currency settlement denomination variables, currently in US
dollars, noting that in certain circumstances an election for
settlement in Tanzanian Shillings may be made by TPDC;
Reserves estimates
Significant accounting judgements
The Directors use judgement and experience to determine the
timing and quantum of volumes recovered from producing fields in
order to be able to calculate a probabilistic base-case
value-in-use for its assets. This valuation may vary in response to
changes in field performance over time and the Company expects that
there will likely be revisions upward or downward based on updated
information such as the results of future drilling, oil and gas
production levels and reservoir performance.
Key sources of estimation uncertainty
Oil and natural gas reserves, prepared by an external
independent reserve evaluator as at 31 December 2020, are used in
the calculation of depletion, impairment and impairment reversal
determinations and recognition of deferred tax asset. Reserve
estimates are based on engineering data, estimated future prices
and costs, expected future rates of production and the timing of
future capital expenditures; all of which are subject to many
uncertainties and certain input assumptions. A summary of the
independent RPS reserves assessment report for the year-ended 31
December 2020 can be found within the Strategic Report's Mnazi Bay
Production Operations section of this report in which 2P field
reserves are assessed to be 90.8 BCF with an indicative NPV10 of
$117 million.
Taxes
Significant accounting judgements
The Directors make judgements in relation to the recognition of
various taxes levied on the Group, which are both payable and
recoverable. Judgement applies as the Group operates in countries
where the legal and tax systems are less developed, which increases
the requirement for management to make assumptions as to whether
certain payments will be required related to matters such as income
taxes, value added taxes, and other indirect taxes as well as
outcomes of any tax disputes which would affect the recognition of
tax liabilities and deferred tax assets. A provision is recognized
in the financial statements for such matters if it is considered
probable that a future outflow of cash resources will be required.
The provision, if any, is subject to management estimates and
judgements with respect to the outcome of the event, the costs to
defend, the quantum of the exposure and past practice in the
country.
Key sources of estimation uncertainty
Estimates may be made to determine the amount of taxes
recoverable, principally deferred tax assets. The commencement of
commercial production and gas sales under the Gas Sales Agreement,
allowed for the recognition of a deferred tax asset within the
financial statements. The amount that the company recognizes is
subject to the following estimates:
-- The timing of future profits for the utilization of tax
losses from the current tax pools which are based on management
assessments and forecasts of future performance;
-- The effective tax rate at which the losses will be utilized
at throughout the Group which is currently the tax rate of Tanzania
as this is where all of the Group's operations are;
-- The status of any current tax assessments and disputes and
their impact on the deferred tax pool on a probabilistic basis;
-- Any material changes in legislation that may impact upon the
fiscal regime on which the deferred tax asset is computed.
Changes in these estimates within a reasonably possible range in
the next 12 months are not expected to significantly alter the
carrying amount of the Group's taxes that are recoverable.
The Group engages early with tax authorities where it has or
will enter into a large or complicated transaction that is subject
to interpretation and, in Tanzania, completed its most recent TRA
audit for the years of 2016 and 2017 in December 2020, the result
of which was an agreed assessment for taxes totalling $126k. A
further, smaller, amount was assessed by the TRA for withholding
taxes deemed due for the year-ended 31 December 2018 which the
company is in continuing discussions over.
4. Segment information
The Company conducts its business through the Tanzania ("Mnazi
Bay Concession") segment. Gas operations include the exploration,
development, and production of natural gas and other hydrocarbons.
The Corporate segment activities include investment income,
interest expense, financing related expenses, share based
compensation relating to corporate activities and general corporate
expenditures. Inter-segment transfers of products, which are
accounted for at market value, are eliminated on consolidation.
Net income/(loss) for the year-ended 31 December 2020
Tanzania Corporate Consolidated
Operations
$000 $000 $000
--------------------------------------- ------------ -------------- --------------
Total revenue 18,991 - 18,991
Production and operating
costs (3,837) - (3,837)
Depletion (5,607) - (5,607)
--------------------------------------- ------------ -------------- --------------
Total cost of sales (9,444) - (9,444)
Gross profit 9,547 - 9,547
Recurring administrative
costs (2,415) (3,033) (5,448)
New venture and pre - licence
costs (1,558) (1,558)
Share-based payment charges (72) (228) (300)
Depreciation and depletion (3) (1) (4)
--------------
Total costs (2,490) (4,820) (7,310)
Profit/(loss) from operations 7,057 (4,820) 2,237
Finance income 36 110 146
Finance costs (154) - (154)
--------------------------------------- ------------ -------------- --------------
Profit/(loss) before tax 6,939 (4,710) 2,229
Current tax expense (160) 48 (112)
Deferred tax 1,311 - 1,311
--------------------------------------- ------------ -------------- --------------
1,151 48 1,199
--------------------------------------- ------------ -------------- --------------
Net profit/(loss) and comprehensive
profit/(loss) from continued
operation 8,090 (4,662) 3,428
--------------------------------------- ------------ -------------- --------------
Net income/(loss) for the year-ended 31 December 2019
Tanzania Corporate Consolidated
Operations
$000 $000 $000
--------------------------------------- ------------ ------------- -------------
Total revenue 18,636 - 18,636
Production and operating
costs (3,935) - (3,935)
Depletion (6,236) - (6,236)
--------------------------------------- ------------ ------------- -------------
Total cost of sales (10,171) - (10,171)
Gross profit 8,465 - 8,465
Recurring administrative
costs (2,939) (2,944) (5,883)
New venture and pre - licence
costs - (609) (609)
Management restructuring
costs - (489) (489)
Share-based payment charges (23) (40) (63)
Depreciation and depletion - (2) (2)
Total costs (2,962) (4,084) (7,046)
Profit/(loss) from operations 5,503 (4,084) 1,419
Finance income - 306 306
Finance costs (338) (400) (738)
--------------------------------------- ------------ ------------- -------------
Profit/(loss) before tax 5,165 (4,178) 987
Current tax expense (83) (49) (132)
Deferred tax 1,511 - 1,511
--------------------------------------- ------------ ------------- -------------
1,428 (49) 1,379
--------------------------------------- ------------ ------------- -------------
Net profit/(loss) and comprehensive
profit/(loss) from continued
operation 6,593 (4,227) 2,366
Selected balances at 31 December 2020
Tanzania Mozambique Corporate Consolidated
Operations (Discontinued)
$000 $000
$000 $000
---------------------------- -------------- ------------------ ------------ ---------------
Current assets 8,535 101 13,998 22,634
Exploration and evaluation
assets 8,129 - - 8,129
Property, plant and
equipment 72,305 - 2 72,307
Deferred tax asset 6,859 - - 6,859
---------------------------- -------------- ------------------ ------------ ---------------
Total assets 95,828 101 14,000 109,929
---------------------------- -------------- ------------------ ------------ ---------------
Current liabilities 1,436 - 946 2,382
Non-current liabilities 1,514 - - 1,514
---------------------------- -------------- ------------------ ------------ ---------------
Total Liabilities 2,950 - 946 3,896
---------------------------- -------------- ------------------ ------------ ---------------
Capital additions for the year-ended 31 December 2020
Additions to property,
plant
and equipment 357 - 2 359
------------------------ ------ ---- ----
Selected balances at 31 December 2019
Tanzania Mozambique Corporate Consolidated
Operations (Discontinued)
$000 $000
$000 $000
---------------------------- -------------- ------------------ ------------ ---------------
Current assets 8,758 118 10,686 19,562
Exploration and evaluation
assets 8,129 - - 8,129
Property, plant and
equipment 77,556 - 3 77,559
Deferred tax asset 5,548 - - 5,548
---------------------------- -------------- ------------------ ------------ ---------------
Total assets 99,991 118 10,689 110,798
---------------------------- -------------- ------------------ ------------ ---------------
Current liabilities 3,356 - 483 3,839
Non-current liabilities 1,085 - - 1,085
---------------------------- -------------- ------------------ ------------ ---------------
Total Liabilities 4,441 - 483 4,924
---------------------------- -------------- ------------------ ------------ ---------------
Capital additions for the year-ended 31 December 2019
Additions to property,
plant
and equipment 18 - 2 20
------------------------ --------------- ---- ---
5. Revenue
2020 2019
$000 $000
------- -------
Revenue from gas sales 18,881 18,601
Revenue from condensate sales 49 35
Other revenue 61 -
18,991 18,636
------- -------
Other revenue represents the recovery of corporate income taxes
incurred through adjustments to TPDC gas sales entitlements.
6. Leases
Amounts recognised in profit or loss
The following amounts have been recognised in the income
statement for which the Company is a lessee under IFRS 16:
2020 2019
$000 $000
----- -----
Expenses relating to short-term leases 152 250
----- -----
Amounts recognised in statement of cash flows
2020 2019
$000 $000
------ ------
Cash outflow for leases 152 250
------ ------
7. Expenses and auditor's remuneration
2020 2019
$000 $000
------ ------
Employee salaries and benefits 2,289 2,277
Contractors and consultants 1,043 972
Travel and accommodation 116 248
Professional, legal and advisory 431 829
Office and administration 513 638
Corporate and public company costs 1,056 919
------ ------
5,448 5,883
------ ------
Auditor's remuneration:
Audit of these financial statements 163 111
Audit of financial statements of subsidiaries of the Company 125 151
Taxation compliance services 79 62
Other tax advisory services 21 60
388 384
------ ------
8. Staff numbers and costs
The average number of persons employed during the year, analysed
by category, was as follows:
2020 2019
---------- ----------
Number of employees
----------------------
Senior Managers 1 1
Managers and supervisors 5 5
Support staff 8 9
---------- ----------
14 15
---------- ----------
The aggregate payroll costs were as follows:
2020 2019
$000 $000
------ ------
Salaries 798 775
Social security costs 107 167
Bonuses 126 116
Other payroll costs 177 141
1,208 1,199
------ ------
9. Directors' remuneration
2020 2019
$000 $000
------ ------
Director's remuneration 972 1,062
Bonuses 313 152
Contractual termination payments 100 -
Pensions 43 44
Severance payments - 489
Other benefits 69 68
LTIP charges 228 43
1,725 1,858
------ ------
The aggregate of remuneration of the highest paid Director was
$699k (2019: $391k). Contractual termination payments relate to
amounts paid to Bob McBean who will be standing down as Company
chairman in 2021. Severance payments include amounts paid to Eskil
Jersing, who resigned as Chief Executive Officer in 2019.
For additional segregation by Director, refer to Total
Remuneration of Executive Director Table and Total Remuneration of
Non-Executive Executive Directors Table contained within the
Remuneration Committee Report.
10. Finance income and finance costs
2020 2019
$000 $000
-------- --------
Finance income
Interest income 82 21
Foreign exchange gain 37 -
Other finance income 27 285
146 306
-------- --------
Finance costs
Accretion - decommissioning provision (130) (116)
Interest expense (13) (493)
Foreign exchange loss - (129)
Expected credit losses on TANESCO receivable (note 11) (11) -
(154) (738)
-------- --------
11. Trade and other receivables
2020 2019
$000 $000
-------- --------
Trade receivable from TPDC 1,943 4,014
Other receivable from TPDC 215 513
Trade receivable from TANESCO 1,316 789
Other receivables 1,373 759
-------- --------
4,847 6,075
-------- --------
At the year-end $1.3 million was receivable from TANESCO
representing fourteen months of gas sales (2019: $790k representing
eight months of gas sales). Due to the age of the receivable at the
year-end and the likely time it will take to recover the debt, the
an expected credit loss of $11k at a loss rate of 0.4% has been
recognised (2019: $nil).
Other receivables from TPDC represent income tax of $215k (2019:
$513k) paid by Wentworth Gas Limited, a wholly owned subsidiary of
the Company. The income tax is anticipated to be recovered from
TPDC's share of profit gas within the next 12-months under the
terms of the Mnazi Bay PSA, which provides such a mechanism for the
recovery of all corporate taxes.
Other receivables include VAT recoverable of $600k (2019:
$279k), gas condensate sales of $47k (2019: $35k), corporate tax
prepayments of $508k (2018: $312k) and corporate tax receivable
$48k (2019: nil). In accordance with IFRS 9 the Company notes no
material expected credit losses.
12. Tanzania Government receivables
As at 31 December 2021, the undiscounted Tanzanian Government
receivable is $6.5 million (2019: $6.5 million).
$000
Balance at 31 December 2018 -
Accretion 516
Change in estimated timing of receipt (516)
Balance of amortised cost at 31 December -
2019
Accretion 565
Change in estimated timing of receipt (565)
------
Balance of amortised cost at 31 December -
2020
------
The Group has an agreement with the Government of the United
Republic of Tanzania (TANESCO, TPDC and the Ministry of Energy and
Minerals) to be reimbursed for all the project development costs
associated with Umoja T&D expenditures at cost. An audit of the
Mtwara Energy Project ("MEP") development expenditures was
completed in November 2012 and costs of approximately $8.1 million
were verified to be reimbursable. After deducting costs associated
with the Tariff Equalisation Fund and VAT input credits associated
with the MEP totalling $1.6 million, the amount agreed to be
reimbursed was $6.5 million.
During 2017, the Government initiated its first review of the
costs to verify the balance owing by it. On 8 February 2018 the
Government issued the results which differed from the previously
audited and approved gross receivable of $6.5 million, which the
Group maintains was accurate and correct.
The Government is conducting a second review and due to the age
and uncertainty surrounding the receivable and its recoverability,
the Group made a provision in-full during 2018 against the carrying
amount without prejudice to the ongoing commercial discussions with
the Government, the Group has reviewed this at the year-end and
continues to feel the provision is appropriate.
13. Exploration and evaluation assets
Tanzania
$000
---------
Cost
Balance at 31 December 2019 and 2020 8,129
---------
At the year-end, E&E assets totalled $8.1 million (2019:
$8.1 million) and represent the cost of seismic acquisition and
interpretation studies on Mnazi Bay on prospective but, as yet,
non-producing areas of the concession licence. The costs incurred
in evaluating these prospects have been capitalised and, to the
extent that it is possible to do so given their maturity, have been
assessed as being recoverable in full. The Mnazi Bay Concession
agreement will expire in 2031.
At the year-end the carrying value of these assets were assessed
for impairment and due to there being no formal agreement between
Mnazi Bay partners to sanction further expenditure at this time, a
full impairment test was undertaken. The impairment test ultimately
determined that the value-in-use exceeded the carrying amount and
that no impairment was required.
14. Property, plant and equipment
Natural gas properties Office and other equipment Total
$000 $000 $000
----------------------- ------------------------------------ --------
Cost
Balance at 31 December 2018 104,025 609 104,634
Additions 18 2 20
Balance at 31 December 2019 104,043 611 104,654
Additions 58 2 60
Change in decommissioning liability 299 - 299
Balance at 31 December 2020 104,400 613 105,013
----------------------- ------------------------------------ --------
Accumulated depreciation and depletion
Balance at 31 December 2018 (20,254) (603) (20,857)
Depreciation and depletion (6,236) (2) (6,238)
Balance at 31 December 2019 (26,490) (605) (27,095)
Depreciation and depletion (5,607) (4) (5,611)
Balance at 31 December 2019 (32,097) (609) (32,706)
--------- ------ ---------
Carrying amounts
31 December 2019 77,553 6 77,559
31 December 2020 72,303 4 72,307
During the year a full impairment test was conducted on the
Mnazi Bay asset as there was an indication of impairment with
respect to the discrepancy between the market capitalisation at 31
December 2020 of $46.4 million and the carrying value of $72.3
million. The full impairment test ultimately determined that the
recoverable amount was significantly higher than the market value
of the Company at the year-end which had been externally
corroborated by the RPS third party Reserves Report valuation
(NPV10) of $116.6 million. Refer to note 3 for additional detail
regarding the assumptions used within the impairment testing.
During the year, the Group made cash additions to PPE totalling
$60k (2019: $20k). A change to the assumptions used in calculating
the decommissioning and abandonment provisions resulted in further
non-cash additions of $299k (2019: $nil) (see note 19).
15. Subsidiary and joint undertakings
The subsidiary and joint undertakings at 31 December 2020
are:
Name of Company Country of Class Types Percentage Nature
incorporation of shares of ownership holding of business
held
-------------------------- --------------- ----------- -------------- ----------- -------------
Wentworth Resources United Kingdom Ordinary Direct 100% Investment
(UK) Limited holding
company
Wentworth Holding Jersey Ordinary Direct 100% Investment
(Jersey) Limited holding
company
Wentworth Tanzania Jersey Ordinary Indirect 100% Investment
(Jersey) Limited holding
company
Wentworth Gas (Jersey) Jersey Ordinary Indirect 100% Investment
Limited holding
company
Wentworth Gas Limited Tanzania Ordinary Indirect 100% Exploration
production
company
Cyprus Mnazi Bay Cyprus Ordinary Indirect 39.925% Exploration
Limited (1) production
company
Wentworth Mozambique Mauritius Ordinary Indirect 100% Investment
(Mauritius) Limited holding
company
Wentworth Moçambique Mozambique Ordinary Indirect 100% Investment
Petroleos, Limitada holding
(2) company
(1) CMBL is considered a jointly controlled entity and accounted
for as a joint operation rather than a joint venture (see note 1
for further details).
(2) The Wentworth Moçambique Petroleos, Limitada is in the
process of liquidation after relinquishment of the Tembo Block
Appraisal Licence.
16. Trade and other payables
2020 2019
$000 $000
-------- ----------------
Payable to Maurel et Prom (Operator) 884 1,303
Trade payables 181 150
Other payables and accrued expenses 1,317 672
2,382 2,125
-------- ----------------
Other payables and accrued expenses include bonuses and payment
in lieu of leave of $451k (2019: 228k), legal fees of $422k (2019:
nil), audit fees of $364k (2019: $203k) and other third party
services of $80k (2019: $241k).
17. Overdraft credit facility
The Company overdraft credit facility with a Tanzanian
Government owned bank of $2.5 million expired on 5 April 2020. The
Company is in discussions with respect to renewing the facility on
equivalent or better terms with a number of counterparties in
Tanzania, however, no firm commitment has yet been made.
No interest expense or renewal fees were incurred during the
year-ended December 2020 (2019: $18k) on the overdraft credit
facility.
18. Long-term loans
On 8 December 2014, Wentworth Gas Limited, a wholly owned
subsidiary of the Company, entered into a $20.0 million loan
facility to finance the field infrastructure development of the
Mnazi Bay Concession in Tanzania.
The term of the loan was initially forty-eight months in
duration commencing on the first draw-down date and bore interest
at six-month LIBOR rate plus 750 basis points, subject to a minimum
(floor) of 8% p.a. and a maximum (ceiling) of 9.5% p.a. Security
was in the form of a debenture creating a first ranking charge over
the assets of the WGL (assets of WGL include a 25.4% participation
interest in the Mnazi Bay Concession), assignment over the TPDC
long-term receivable and assignment of revenues generated from the
Mnazi Bay Concession.
During 2017, the Company executed amendments to the credit
facility agreement, which included the restructuring of principal
loan repayments and added provisions. The new provisions were not
finalised at the time of the execution of the amendment to the
credit facility agreement. On 6 June 2018, the Company formalised
the new provisions, which became effective 6 June 2018.
The new provisions contain a requirement for the Company to
maintain two financial covenants both calculated on 30 June and 31
December. The Debt Service Coverage Ratio provides that the Company
has adequate cover to meet its loan interest and principal
repayment obligations for the next twelve months, while the Loan
Life Coverage Ratio provides that adequate free discounted cash
flow coverage is maintained for all future loan repayments over the
full life of the loan.
The $20.0 million credit facility is subject to interest rate of
six-month LIBOR rate plus 750 basis points subject to a minimum
(floor) of 8.5% p.a. and no maximum (ceiling). As at 30 January
2020 when the last installment was settled, the six-month interest
rate was 9.42%.
The credit facility was fully settled on 30 January 2020.
During the year-ended 31 December 2020, the Company incurred
interest expense on long-term loans of $13k (2019: $0.5 million)
with finance costs accretion of $25k (2019: $0.3 million). A total
of $38k was settled in cash during 2020 (2019: $0.6 million).
$000
----------
Credit facilities balance
Balance as at 01 January 2019 8,779
Loan repayments (6,661)
----------
Total changes from financing cash flows (6,661)
----------
Other changes
Interest expense 474
Interest paid (593)
Finance cost accretion (285)
Total other charges (404)
----------
Balance as at 31 December 2019 1,714
Loan repayments (1,664)
----------
Total changes from financing cash flows (1,664)
----------
Interest expense 13
Interest paid ( 38 )
Finance cost accretion (25)
----------
Total other charges (50)
Balance as at 31 December 2020 -
19. Decommissioning and abandonment provision
The Company's decommissioning provision results from net
ownership interests in petroleum and natural gas assets including
well sites, pipeline gathering systems, and processing facilities
in Tanzania. The operator of the Mnazi Bay Concession has estimated
the Company's share of the undiscounted inflation-adjusted amount
of cash flows required to settle decommissioning obligations for
the infrastructure within the Mnazi Bay Concession to be $4.23
million. The costs expected to be incurred in 2030. The obligations
have been estimated using existing technology at current prices
inflated and discounted using discount rates that reflect current
market assessments of the time value of money and the risks
specific to each liability.
A reconciliation of the decommissioning obligations is provided
below:
2020 2019
$000 $000
------ ------
Balance at 1 January 1,085 969
Change in accounting estimates 299 -
Accretion 130 116
Balance at 31 December 1,514 1,085
------ ------
During the year the discount rate used for calculating the
current provision was amended to 8.3% from 12.0% in 2019 to better
reflect a United States Doller interest rate from a Tanzanian
Shilling interest rate as it was felt that this would likely be the
denomination of any the final liability. At the same time, the
inflation rate was updated and amended to 1.36% from 2.03% in 2019.
These amendments have materialised an additional charge in the
current period of $299k (2019: $nil).
20. Repurchase of own shares
On 18 December 2020, the Company entered into a settlement
agreement with a dissenting shareholder to purchase 702,874
ordinary shares of the Company at NOK 2.91 ($0.339) per ordinary
share less dividend payments made with respect to those shares from
the notification of dissent. The cost to the Company with respect
to this buyback was NOK 1.89 million ($222k).
On 21 December 2020, the Company entered into a second
settlement agreement with a separate dissenting shareholder to
purchase a further 236,452 ordinary shares of the Company at NOK
2.91 ($0.338) per ordinary share less dividend payments made with
respect to those shares from the notification of dissent. The cost
to the Company with respect to this buyback was NOK 649k
($80k).
The following table summarises dissenting shareholder
settlements and fair valuation:
Gross amount Dividend Settled
$000 deducted amount $000
$000
------------------------------------- ------------- ---------- -------------
Settlement of 702,874 ordinary
shares at NOK 2.91 (US$0.339) each 237 (17) 220
Settlement of 236,452 ordinary
shares at NOK 2.91 (US$0.338) each 80 (5) 75
Exchange rate difference 1 - -
------------------------------------- ------------- ---------- -------------
318 (22) 295
------------------------------------- ------------- ---------- -------------
The $295k was recognised within equity reserves at 31 December
2020 (see note 22) and was transferred to the share capital reserve
on 3 February 2021, the date that the shares were cancelled and
removed from the Company register.
21. Share-based payments
2020 2019
$000 $000
---------------------------------------------------------------------------- ------
Share based compensation recognised in the statement of Comprehensive loss 300 63
---------------------------------------------------------------------------- ------ ------
Movement in the total number of share options outstanding and
their related weighted average exercise prices are summarised as
follows:
2020 2019
------------------------------- -------------------------------
Number of Weighted average Number of Weighted average
options exercise price options exercise price
(US$)(1) (US$)
------------ ----------------- ------------ -----------------
Outstanding at 1
January 6,385,497 0.57 12,560,301 0.49
Granted 3,428,214 - 495,422 -
Forfeited - - (5,020,226) 0.29
Lapsed (2,000,000) 0.67 (1,650,000) 0.62
Outstanding at 31
December 7,813,711 0.30 6,385,497 0.57
------------ ----------------- ------------ -----------------
The following table summarises share options outstanding and
exercisable at 31 December 2020:
Outstanding Exercisable
Exercise Exercise Number of options Weighted average Number of options
price (NOK) price (US$)(1) remaining
life (years)
------------- ---------------- ------------------ ----------------- ------------------
- - 942,593 9.9 -
- - 2,485,621 9.0 -
- - 1,385,497 8.4 -
3.85 0.45 750,000 5.0 750,000
4.08 0.47 250,000 2.3 250,000
5.18 0.60 1,500,000 3.2 1,500,000
5.57 0.64 500,000 0.3 500,000
7,813,711 3,000,000
------------------ ----------------- ------------------
The following table summarises share options outstanding and
exercisable at 31 December 2019:
Outstanding Exercisable
Exercise Exercise Number of options Weighted Number of options
price (NOK) price (US$)(1) average
remaining
life (years)
------------- ---------------- ------------------ -------------- ------------------
- - 1,385,497 9.4 -
3.85 0.44 750,000 6.0 750,000
3.60 0.41 1,600,000 0.8 1,600,000
4.08 0.46 250,000 3.3 250,000
5.18 0.59 200,000 4.4 200,000
5.18 0.59 1,700,000 4.2 1,700,000
5.57 0.63 500,000 1.3 500,000
6,385,497 5,000,000
------------------ -------------- ------------------
(1) The US Dollar to Norwegian Kroner exchange rate used for
determining the exercise price at 31 December 2020 is 0.11676.
22. Share capital and reserves
2020 2019
$000 $000
--------------------------------- -------- --------
Authorised, called up, allotted
and fully paid
--------------------------------- -------- --------
186,488,465 (2019: 186,488,465)
ordinary shares 416,426 416,426
--------------------------------- -------- --------
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
Reserves
2020 2019
$000 $000
--------- ---------
Balance at 1 January 26,651 26,588
LTIP charges 300 63
Repurchase of own shares (note 20) (295) -
--------- ---------
Balance at 31 December 26,656 26,651
--------- ---------
The buyback of stock from dissenting shareholders totalling
939,326 ordinary shares (note 20) was settled in-full in December
2020, cancelled and removed from the share register on 3 February
2021. At 31 December 2020 these shares were included within equity
reserves.
23. Earnings per share
Basic and diluted eps
2020 2019
$000 $000
------------ ------------
Net profit for the period 3,428 2,366
------------ ------------
Weighted average number of ordinary shares outstanding 186,488,465 186,488,465
Weighted average number of own ordinary shares repurchased (31,426) -
------------ ------------
186,457,039 186,488,465
Dilutive effect of share options outstanding 4,813,711 2,135,497
Dilutive weighted average number of ordinary shares outstanding 191,270,750 188,623,962
------------ ------------
Undiluted net profit per ordinary share 0.02 0.01
------------ ------------
Diluted net profit per ordinary share 0.02 0.01
------------ ------------
During the year-ended 31 December 2020 3,000,000 options (2019:
4,250,000 options) were excluded from the dilutive weighted average
number of shares outstanding because they were anti-dilutive.
On 18 December 2020 and 21 December 2020, the Company
repurchased own ordinary shares 702,874 and ordinary shares 236,452
respectively from dissenting shareholders. On 3 February 2021, the
Company cancelled all repurchased ordinary shares 939,326. (see
note 20).
24. Dividends
The following dividends were declared and paid by the Company
during the year.
2020 2019
$000 $000
------------------------------------------------- ------ ------
0.9 pence (US$ 0.01137; NOK 0.10872) per
ordinary share (2019: 0.45 pence; US$ 0.00583;
NOK 0.0514) 2,120 1,033
0.48 pence (US$ 0.00619; NOK 0.05683) per 1,154 -
ordinary share
------------------------------------------------- ------ ------
Total dividend paid 3,274 1,033
------------------------------------------------- ------ ------
On 26 June 2020, the Company paid the full year 2019 dividend of
NOK 0.10872 (GBP 0.9 pence, US$ 0.01137) per ordinary share, being
a total dividend distribution of $2.1 million.
On 23 October 2020, Company paid 2020 interim dividend of NOK
0.05683 (GBP 0.48 pence, US$ 0.00619) per ordinary share, being a
total dividend distribution of $1.1 million.
25. Income taxes
Income taxes
The Company's income tax expense for the year-end 31 December is
as follows:
2020 2019
$000 $000
---------- ----------
Profit before income taxes 2,229 987
---------- ----------
Expected income tax (recovery) expense at combined Tanzanian rate of 30% (2019: 30%) 669 296
Rate differentials 506 541
Share based compensation - 12
Tanzania cost gas excluded from taxable income (3,530) (3,367)
Movement in deferred tax assets not previously recognised and other adjustments 1,156 1,139
Income tax expense (1,199) (1,379)
---------- ----------
The Company operates in multiple jurisdictions with complex tax
laws and regulations which are evolving over time. The Company has
taken certain tax positions in its tax filings and these filings
are subject to audit and potential reassessment after the lapse of
considerable time. Accordingly, the actual income tax impact may
differ significantly from that estimated and recorded by
management.
The Company has unrecognised deductible temporary differences
that result in unrecognised deferred income tax assets of:
2020 2019
$000 $000
-------- ---------
Non-capital losses 3,717 20,262
Property and equipment (325) (263)
Accounts receivables and others - 16
3,392 20,015
-------- ---------
The total non-capital losses of the Company are $116.6 million
(2019: $163.6 million) of which$105.1 million are in Tanzania,
$10.3 million (2019: $5.8 million) are in the UK and $1.2 million
(2019: $0.7 million) are in Jersey.
A deferred tax asset is recognised to the extent that it is
probable that taxable profit will be available against which
deductible temporary differences and the loss carry forwards can be
utilised. A deferred tax asset of $6.9 million as at 31 December
2020 (2019: $5.5 million) is attributable to the accumulated tax
loss carry-forward of the Company's Tanzanian subsidiary, which are
expected to be offset against future taxable income. Recognition of
the tax asset is supported by the proven and probable reserves as
determined by a third-party external reserves engineer, RPS
Canada.
2020 2019
$000 $000
-------- --------
Balance at 1 January 5,548 4,036
Deferred income tax assets recognised
in profit or loss:
Non-capital losses (179) 820
Asset retirement obligations and 33 (50)
Deferred income tax liabilities recognised
in profit or loss:
PP&E 1,454 1,200
Receivables 3 (458)
Balance at 31 December 6,859 5,548
-------- --------
26. Financial instruments
The Company's activities expose it to a variety of financial
risks: credit risk, liquidity risk and market risk (currency
fluctuations, interest rates and commodity prices). The Company's
overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse
effects on the Company's financial performance. A full description
of the risks and key risks affecting the business is noted in the
Business Risks section of the Strategic Report.
Credit risk
Wentworth's credit risk exposure is equal to the carrying value
of its cash and cash equivalents, trade, other and long-term
receivables.
Trade and other receivables are comprised predominantly of
amounts due from government owned entities in Tanzania and Value
Added Tax ("VAT") in Tanzania.
The Group's ongoing exposure to trade receivables from TANESCO,
the state power company, relates to the gas sales from the Mnazi
Bay Concession to a TANESCO owned 18-megawatt gas-fired power plant
located in Mtwara, Tanzania. At 31 December 2020, the Mnazi Bay
Concession partners were owed 14 months of invoices for gas sales
made to TANESCO, with $1.3 million owing to Wentworth (2019: $789k
). Due to the age of the TANESCO receivable at the year-end and the
likely time it will take to recover the debt, the an expected
credit loss of $11k at a loss rate of 0.4% has been recognised
(2019: $nil). The Company continues to engage in discussions with
TANESCO to accelerate the settlement of amounts past due.
During 2015, the Group commenced gas sales to TPDC under a
long-term gas sales agreement, the operator of the new
transnational gas pipeline in Tanzania. Credit risk relating to
sales to TPDC is substantially mitigated through a two-part payment
guarantee structure. The first part relates to a prepayment amount
of approximately three to four months of gas deliveries at current
sales volumes which has been received and is held by the Operator
of the Mnazi Bay Concession. The second part is a one-month
replenishable letter of credit which is not yet executed but
expected to be executed during 2020. At 31 December 2020, the Mnazi
Bay Concession partners were owed one month gas sales invoices,
with $1.9 million owing to Wentworth (2019: $4.0 million).
Subsequent to year-end, TPDC has paid $3.5 million net to
Wentworth.
At 31 December 2020, an undiscounted long-term receivable of
$6.5 million (2019: $6.5 million) related to the Group's disposal
of transmission and distribution assets, and the costs associated
with the MEP incurred in prior years by a wholly owned subsidiary
of Wentworth (see note 12). On February 6, 2012, the Company,
TANESCO, TPDC and MEM reached an agreement that the Group's cost of
historical operations in respect of the Mtwara Energy Project
should be reimbursed.
During 2017, the Government initiated its first review of the
costs to verify the balance owing by it. On 8 February 2018 the
Government issued the results which differed from the previously
audited and approved gross receivable of $6.5 million, which the
Group maintains was accurate and correct.
The Government is conducting a second review and due to the age
and uncertainty surrounding the receivable and its recoverability
the Group made a provision in-full during 2018 against the carrying
amount without prejudice to the ongoing commercial discussions with
the Government; the Group has reviewed this at the year-end and
continues to feel the provision is appropriate.
The Group's cash and cash equivalents of $17,787 as at 31
December 2020 (2019: $13,487). The cash and cash equivalents are
held with financial institutions which are rated below. Wherever
possible ratings are provided by Fitch Ratings, however, where no
rating was available from either Fitch Ratings or either of the
other major international credit rating agencies such as Standard
& Poors or Moodys, the bank's local credit rating was used:
2020 2019
Financial Institutions Rating Cash held Cash held
$000 $000
----------------------------------- ---------- ----------- -----------
Santander A+ 7,296 10,303
Standard Bank BB- 6,049 105
FirstRand Bank BB- 4,066 2,134
Citibank Group A 219 24
Mauritius Commercial Bank Limited BB- 107 107
Tanzania Postal Bank - 31 789
RBC Royal Bank AA 14 11
Barclays A+ 3 12
Petty cash N/A 2 2
---------- ----------- -----------
17,787 13,487
---------------------------------------------- ----------- -----------
The exposure to credit risk as at:
2020 2019
$000 $000
------- -------
Trade and other receivables 4,847 6,075
Cash and cash equivalents 17,787 13,487
------- -------
22,634 19,562
------- -------
Aged trade and other receivables
Current 31-60 61-90 >90
1-30 days days days days Total
$000 $000 $000 $000 $000
----------- ------ ------ ------ --------
Balance at 31 December
2020
Trade receivables 2,128 94 84 954 3,260
Other receivables 1,061 - - 526 1,587
----------- ------ ------ ------ --------
3,189 94 84 1,480 4,847
----------- ------ ------ ------ --------
Balance at 31 December
2019
Trade receivables 1,720 1,736 94 1,254 4,804
Other receivables 448 - - 823 1,271
----------- ------ ------ ------ --------
2,168 1,736 94 2,077 6,075
----------- ------ ------ ------ --------
The movement in the allowances for impairment in respect of
trade receivables and contract assets during the year was as
follows (see note 11):
2020 2019
$000 $000
------ ------
Balance as at 1 January - -
Impairment loss recognized 11 -
Impairment loss reversed - -
Amount written off - -
11 -
------ ------
Liquidity risk
Liquidity risk is the risk that the Company will not have
sufficient funds to meet its liabilities as they become payable.
Other than routine trade and other payables, incurred in the normal
course of business.
The table below summarises the maturity profile of the Company's
financial liabilities based on contractual undiscounted payments
including future interest payments on long-term loans.
Less than 1 to 2 2 to 5 Total
1 year years years $000
$000 $000 $000
------------ ------- ------- ------
Balance at 31 December
2020
Trade and other payables 2,382 - - 2,382
2,382 - - 2,382
------------ ------- ------- ------
Balance at 31 December
2019
Trade and other payables 2,125 - - 2,125
Long-term loans 1,714 - - 1,714
Future interest 18 18
3,857 - - 3,857
------------ ------- ------- ------
The fair value of the Company's trade and other payables
approximates their carrying values due to the short-term nature of
these instruments. The fair value of the long-term loans
approximates their carrying amounts as they bear market rates of
interest. The fair value of the other liability approximates its
carrying amount.
The Company has a working capital surplus at 31 December 2020
and generated positive cash flow from operations in 2020. The
Company plans to pay its financial liabilities in the normal course
of operations and fund future operating and capital requirements
through operating cash flows, bank debt, bank overdraft credit
facility and equity raises, when deemed appropriate. Operating cash
flow of the Company is dependent upon the purchasers of natural
gas, TPDC and TANESCO, continuing to meet their payment obligations
on a timely manner. Any delays in collecting funds from these
purchasers for an extended period of time could negatively impact
the Company's ability to pay its financial liabilities in a timely
manner in the normal course of business (see also Capital
management section).
Market risk
Market risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in
market prices. Market risk is comprised of foreign currency risk,
interest rate risk and other price risk (e.g. commodity price
risk). The objective of market risk management is to manage and
control market price exposures within acceptable limits, while
maximising returns.
Commodity price risk
Commodity price risk is the risk that the Company suffers
financial loss as a result of fluctuations in oil or natural gas
prices. The Company's exposure to commodity price risk is mitigated
as the sale prices for gas sold by the Company is fixed under the
existing gas sale and purchase agreements. An increase of 1% in the
gas production would result in an increase of $58 (2019: $57k) in
revenue.
Foreign exchange risk
Foreign exchange rate risk is the risk that the Company suffers
financial loss as a result of changes in the value of an asset or
liability or in the value of future cash flows due to movements in
foreign currency exchange rates. Wentworth operates internationally
and is exposed to foreign exchange risk arising from various
currency exposures, primarily with respect to the Tanzanian
Shilling and Pound Sterling against its functional currency of its
operating entities, the US dollar. The Company's objective is to
minimise its risk by borrowing funds in US dollars as revenues are
paid to the US dollar. In addition, the Company holds substantially
all its cash and cash equivalents in US dollars and converts to
other currencies only when cash requirements demand such
conversion.
Current receivables and liabilities denominated in various
currency:
Pound Sterling Tanzanian Other Currency United States
$000 Shilling $000 Dollar Total
$000 $000 $000
--------------- ---------- --------------- -------------- --------
Balance at 31 December
2020
Cash and cash equivalents 95 110 123 17,459 17,787
Trade and other receivables 935 384 92 3,436 4,847
Trade and other payables (74) (101) (5) (2,202) (2,382)
956 393 210 18,693 20,252
--------------- ---------- --------------- -------------- --------
Pound Sterling Tanzanian Other Currency United States
000 Shilling $000 Dollar Total
$000 $000 $000
Balance at 31 December
2019
Cash and cash equivalents 1,442 47 120 11,878 13,487
Trade and other receivables 105 1,000 92 4,878 6,075
Trade and other payables (62) (52) (10) (2,001) (2,125)
--------------- ---------- --------------- -------------- --------
1,485 995 202 14,755 17,437
--------------- ---------- --------------- -------------- --------
A 10% increase/decrease of the Pound Sterling against US dollar
would result in a change in profit or loss before tax of $39 (2019:
$28k). In addition, a 10% increase/decrease of the Tanzanian
shilling against the US dollar would result in a change in profit
or loss before tax of approximately $2k (2019: $5k).
Financial instrument classification and measurement
The Company classifies the fair value of financial instruments
according to the following hierarchy based on the amount of
observable inputs used to value the instrument:
-- Level 1 - Quoted prices are available in active markets for
identical assets or liabilities as of the reporting date. Active
markets are those in which transactions occur in sufficient
frequency and volume to provide pricing information on an ongoing
basis.
-- Level 2 - Pricing inputs are other than quoted prices in
active markets included in Level 1. Prices in Level 2 are either
directly or indirectly observable as of the reporting date. Level 2
valuations are based on inputs, including expected interest rates,
share prices, and volatility factors, which can be substantially
observed or corroborated in the marketplace.
-- Level 3 - Valuation in this level are those with inputs for
the asset or liabilities that are not based on observable market
data.
The following table shows the carrying amounts and fair values
of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value
information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable
approximation of fair value.
Carrying amount Fair value Level 1 Level 2 Level 3 Carrying amount Fair value Level 1 Level 2 Level 3
2020 2020 2020 2020 2020 2019 2019 2019 2019 2019
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Loans and
receivables
Cash and
cash
equivalent 17,787 - - - - 13,487 - - - -
Trade and
other
receivables
(note 11) 4,810 4,799 - 4,799 - 6,075 - - - -
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Total
financial
assets 22,597 4,799 - 4,799 - 19,562 - - - -
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Financial
liabilities
measured at
amortised
cost
Trade and
other
payables
(note 16) (2,382) - - - - (2,125) - - - -
Long-term
loans (note - - - - - (1,714) - - - -
18)
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Total
financial
liabilities (2,382) - - - - (3,839) - - - -
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Total
financial
instruments 20,215 4,799 - 4,799 - 15,723 - - - -
---------------- ----------- -------- -------- -------- ---------------- ----------- -------- -------- --------
Capital management
The Company's objectives when managing capital are to safeguard
the Company's ability to continue as a going concern, in order to
develop its oil and gas properties and maintain a flexible capital
structure for its projects for the benefit of its stakeholders. In
the management of capital, the Company includes the components of
shareholders' equity as well as cash and long-term liabilities.
The Company manages the capital structure and adjusts it in
light of changes in economic conditions and the risk
characteristics of the underlying assets. As part of its capital
management process, the Company prepares budgets and forecasts,
which are used by management and the Board of Directors to direct
and monitor the strategy, ongoing operations and liquidity of the
Company. Budgets and forecasts are subject to judgement and
estimates such as those relating to future gas demand and ultimate
timing of collectability of trade receivables for gas sales. These
factors may not be within the control of the Company, which may
create near term risks that may impact the need to alter the
capital structure. The Company continues to effectively manage its
relationships with its gas purchasers to ensure timely collection
and with external lenders such that lending facilities are
available to the Company as and when needed. The Company may
attempt to issue new shares, enter into joint arrangements or
acquire or dispose of assets in order to maintain or adjust the
capital structure. Management reviews the capital structure on a
regular basis to ensure that the above-noted objectives are met.
The Company's overall strategy remains unchanged from the prior
year.
27. Related party transactions
Transactions with key management personnel
Details of Directors' remuneration, which comprise key
management personnel, are provided below:
2020 2019
$000 $000
-------- --------
Short-term employee benefits 1,497 1,815
LTIP charges 228 43
-------- --------
1,725 1,858
-------- --------
28. Supplemental cash flow information
Change in non-cash working capital:
2020 2019
$000 $000
-------- --------
Net change in non-cash working capital related to operating activities:
Trade and other receivables 1,229 1,477
Trade and other payables 284 (1,067)
-------- --------
1,513 410
-------- --------
Cash movements from investing activities in the Statements of
Cash Flows consists of the following:
Property, plant TPDC receivable
and equipment $000
$000
---------------- ----------------
Year-ended 31 December 2020
Total additions (see note 14) 359 -
Addition decommissioning and abandonment ( 299 ) -
asset (see note 19)
---------------- ----------------
Cash additions/(reductions) 60 -
---------------- ----------------
Year-ended 31 December 2019
Total additions/(reductions) 20 (5,238)
Cash additions/(reductions) 20 (5,238)
---------------- ----------------
Closing balance of liabilities arising from financing
liabilities:
Long-term Contingent Total
Loan liability liability
$000 $000 $000
------------------------ ----------- -----------
Balance as at 01 January
2020 1,714 - 1,714
Changes from financing cash
flows
Principal term loan repayments (1,664) - (1,664)
Total changes from financing
cash flows (1,664) - (1,664)
------------------------ ----------- -----------
Other changes
Interest expense 13 - 13
Interest paid (38) - (38)
Finance cost accretion (25) - (25)
Total liabilities related
to other charges (50) (50)
------------------------ ----------- -----------
Balance as at 31 December - - -
2020
------------------------ ----------- -----------
Balance as at 1 January 2019 8,779 848 9,627
Changes from financing cash
flows
Principal term loan repayments (6,661) - (6,661)
Contingent liability payment - (848) (848)
------------------------ ----------- -----------
Total changes from financing
cash flows (6,661) (848) (7,509)
------------------------ ----------- -----------
Other changes
Interest expense 474 - 474
Interest paid (593) - (593)
Finance cost accretion (285) - (285)
Total liabilities related
to other charges (404) - (404)
Balance as at 31 December
2019 1,714 - 1,714
2020 2019
$000 $000
-------- --------
Finance income
Interest income 82 21
Foreign exchange gain 37 -
Accretion - finance cost 27 285
-------- --------
146 306
-------- --------
Finance costs
Accretion - decommissioning provision (130) (116)
Interest expense (13) (493)
Foreign exchange loss - (129)
Discount on receivable (11) -
(154) (738)
-------- --------
Finance costs/(income), net (8) (432)
-------- --------
29. Commitments
Lease payments
The Group has office locations in Jersey, Tanzania and the
United Kingdom. The future minimum lease payments associated with
these office premises as at 31 December 2020 is $38k committed for
year 2021.
30. Subsequent events
On 14 January 2021, the Company provided a financial and
operational update, setting 2021 production guidance at 65-75
MM/scf/day (gross).
On 2 February 2021, the Company announced the completion of the
Independent Reserves Assessment Report in which Wentworth's share
of gross 2P Reserves as at 31 December 2020 was estimated by RPS
Group to be 142.2 Bcf (23.7 MMboe) with a post-tax NPV10 of $116.6
million.
On 19 February 2021, the Company announced its membership to the
United Nations (UN) Global Compact, a voluntary initiative to
promote the development, implementation and disclosure of
responsible business practices.
About Wentworth Resources
Wentworth Resources plc (AIM: WEN) is a leading, domestic
natural gas producer in Tanzania with a core producing asset at
Mnazi Bay in the onshore Rovuma Basin in Southern Tanzania. The
power demand base in-country is growing and with an ambitious
universal energy access target set by the Government for 2030,
Wentworth has a vital role to play in increasing access by ensuring
a reliable, affordable and growing supply of natural gas into the
local market. In 2019, Wentworth launched its sustainable dividend
policy and remains committed to responsible growth that maintains
returns for shareholders.
Cautionary note regarding forward-looking statements
This press release may contain certain forward-looking
information. The words "expect", "anticipate", believe",
"estimate", "may", "will", "should", "intend", "forecast", "plan",
and similar expressions are used to identify forward looking
information.
The forward-looking statements contained in this press release
are based on management's beliefs, estimates and opinions on the
date the statements are made in light of management's experience,
current conditions and expected future development in the areas in
which Wentworth is currently active and other factors management
believes are appropriate in the circumstances. Wentworth undertakes
no obligation to update publicly or revise any forward-looking
statements or information, whether as a result of new information,
future events or otherwise, unless required by applicable law.
Readers are cautioned not to place undue reliance on
forward-looking information. By their nature, forward-looking
statements are subject to numerous assumptions, risks and
uncertainties that contribute to the possibility that the predicted
outcome will not occur, including some of which are beyond
Wentworth's control. These assumptions and risks include, but are
not limited to: the risks associated with the oil and gas industry
in general such as operational risks in exploration, development
and production, delays or changes in plans with respect to
exploration or development projects or capital expenditures, the
imprecision of resource and reserve estimates, assumptions
regarding the timing and costs relating to production and
development as well as the availability and price of labour and
equipment, volatility of and assumptions regarding commodity prices
and exchange rates, marketing and transportation risks,
environmental risks, competition, the ability to access sufficient
capital from internal and external sources and changes in
applicable law. Additionally, there are economic, political, social
and other risks inherent in carrying on business in Tanzania. There
can be no assurance that forward-looking statements will prove to
be accurate as actual results and future events could vary or
differ materially from those anticipated in such statements.
Notes and Glossary
These assessments are made in accordance with the standards
defined in the Petroleum Resources Management System (Revised 2018)
sponsored by SPE, WPC, AAPG, SPEE, SEG, SPWLA, and EAGE.
Cameron Snow, Head of Subsurface and Business Development, is a
geologist with 15 years' experience across North America, South
America, Africa, and Europe. He holds a BS in Geology from North
Carolina State University, an MS in Geology from Utah State
University, a PhD in Geological and Environmental Science from
Stanford University, and an MBA from Imperial College London. Mr.
Snow has read and approved the technical disclosure in this
regulatory announcement.
2P Proved + Probable Reserves, those additional Reserves
which analysis of geoscience and engineering data
indicate are less likely to be recovered than Proved
Reserves but more certain to be recovered than
Possible Reserves. It is equally likely that actual
remaining quantities recovered will be greater
than or less than the sum of the estimated Proved
plus Probable Reserves
Bcf/Bscf Billion standard cubic feet
------------------------------------------------------
Gross Reserves Reserves volumes before deductions for royalty
------------------------------------------------------
MMscf Million standard cubic feet
------------------------------------------------------
MMscf/d Million standard cubic feet per day
------------------------------------------------------
Mscf Thousand standard cubic feet
------------------------------------------------------
NPV Net present value (at a specified discount rate
and specified discount date)
------------------------------------------------------
Reserves Quantities of petroleum anticipated to be commercially
recoverable by application of development projects
to known accumulations from a given date forward
under defined conditions.
------------------------------------------------------
Inside Information
The information contained within this announcement is deemed by
Wentworth to constitute inside information as stipulated under the
Market Abuse Regulation (EU) no. 596/2014 ("MAR"). On the
publication of this announcement via a Regulatory Information
Service ("RIS"), this inside information is now considered to be in
the public domain.
-Ends-
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END
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