Petro Matad Limited
('Petro Matad' or the 'Company' or the 'Group')
Interim results for the six months ended 30 June 2023 and Operational Update
LONDON, 28 September 2023: Petro Matad Limited, the AIM quoted Mongolian oil company, announces its unaudited interim results for the six months ended 30 June 2023 and provides an operational update.
Key Company Updates
· The Company continues to push the Government to complete the regulatory formalities to allow completion operations at Heron 1 to commence. The Provincial Government has been very slow to respond which is putting the plan to complete the well before winter at risk.
· The local district authorities have however indicated that they are open to the Company operating in parallel with the slow-moving bureaucracy if Central Government supports the Company in doing so. This option is now being pursued as a priority.
· The 2022/23 Mongolian Exploration Tender Round continues with Petro Matad submitting two applications for new blocks and actively looking at one more area to determine if a third application is merited.
· Our renewable energy JV, SunSteppe Renewable Energy, is actively pursuing two projects, a battery energy storage facility and a green hydrogen project as it continues to push into the Mongolian renewable energy sector. Both projects have the potential to generate revenue in the near term.
Financial Summary 1H 2023
The Group posted a loss of USD 1.90 million for the 6-month period ended 30 June 2023, which compares to a loss of USD 1.62 million for the comparable period in 2022. The Company's cash balance at 30 June 2023 was USD 8.39 million (USD 0.82 million in cash and USD 7.57 million in Financial Assets - which are term deposits with a term of 3 months or more), which compares to a cash balance of USD 6.62 million (USD 3.10 million in cash and USD 3.52 million in Financial Assets) on 30 June 2022.
As previously announced, a successful fundraise totalling USD 6.6 million of gross proceeds was completed in February 2023, primarily to fund exploration drilling in the Company's operated Block V and to advance renewable energy opportunities through a newly established joint venture. Despite the continuing frustration with the delays in progressing the development of the Heron discovery it was very encouraging that both the placing and retail offer were over-subscribed.
Operational Summary 1H 2023
On the Company's Block XX where the Heron discovery is ready for the first phase of development to begin, the land access issue, and thus commencement of production operations, remained delayed through the first half of 2023 subject to registration of the Exploitation Area as Special Purpose Land in accordance with Mongolia's Land Law. Significant progress was made to secure the certification and all ministries in the Mongolian Government confirmed their support. The documentation for the certification was completed by end June for submission to Cabinet in July 2023.
In parallel, the Company finalised negotiations with DQE Drilling on a long-term drilling contract which will be submitted to industry regulator the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) for discussion and approval. Commercial negotiations advanced with PetroChina for the use of its production infrastructure on neighbouring Block XIX.
On the Company's Block V exploration PSC in central Mongolia, the Velociraptor 1 well was drilled on a high impact prospect in June/July with the full support of the local communities. The well was drilled on schedule and within budget but as has been reported previously, despite encountering more than 350 metres of good quality reservoir sections, the well was dry and it has been plugged and abandoned.
MRPAM's 2022/23 Exploration Tender Round continued through the first half of the year and the Company has made applications for two blocks. Negotiations of the contractual terms are ongoing.
In early 2023, Petro Matad completed the formation of a joint venture company, SunSteppe Renewable Energy (SRE), to develop renewable energy projects in Mongolia with the goal of reaching construction ready status on its first projects within 24 months. Priority projects included a battery energy storage system project designed to help improve the stability of Mongolia's electricity grid and so reduce coal consumption for power generation and allow the dispatch of more renewable energy from projects already in operation. The joint venture is also pursuing off-grid projects to supply renewable energy to mining projects where operators are keen to decarbonise their operations.
Operational Update and look ahead
Block XX: The Cabinet approved the special purpose certification of the Block XX Exploitation Area in early July, following which the Company has been pushing hard for the Government to complete the regulatory formalities and so allow completion operations at Heron 1 to commence. Whilst good progress has been made with Central Government agencies, the Tripartite Agreement between the Land Agency, the Ministry of Mining and Heavy Industry (MMHI) and the Provincial Government which regulates the management of special purpose land has yet to be finalized. The Land Agency issued the draft in July and MMHI quickly responded positively but the Provincial Government wants to complete herder compensation first and this further bureaucratic delay may jeopardise the chance to put Heron 1 on production before the winter operational shut down. In response, the Company is urging central and provincial authorities to speed up the remainder of the process and, with the special purpose certification now approved, Petro Matad has asked the district authorities to allow Heron 1 operations to go ahead in parallel with the slow-moving bureaucracy at central and provincial levels. The district representatives have signaled their willingness to consider this so long as the Central Government supports the initiative and MRPAM has confirmed its support and is preparing a letter to that effect. The Company continues to direct all its efforts at getting Heron 1 on stream before the oilfield contractors shut down for the winter.
Block V: The post-well evaluation of Velociraptor 1 is progressing.
New acreage: In addition to the two applications lodged for new blocks earlier in the year, Petro Matad is looking at one more area in the 2022/23 exploration tender round to determine if a third application is merited.
Renewables: Post the period end, the Company's renewable energy vehicle, SRE, has made very good progress. In consultation with the Ministry of Energy, the need for a 50MW/150MWh battery energy storage facility in central Mongolia was defined. SRE's team has completed the required feasibility studies and the grid connection study for the project has been approved by the National Dispatching Centre. All required documentation has been submitted to and accepted by the Technology Committee of the Ministry of Energy. Once the committee's approval is in hand, the License for Construction of the facility will be requested. SRE expects that this project can be brought to construction ready status with a power purchase agreement and tariffs in place by mid-2024. SRE has access to land already under lease for the facilities within two kilometres of the tie in point and the footprint is small. The development costs of this project are low and the project is expected to offer a double-digit rate of return and could be online and generating revenue by 2025.
A second project involving a utility scale wind farm to supply renewable energy to generate green hydrogen for use at a mine operation in the South Gobi is also progressing with a forecast timescale similar to SRE's battery storage project. The project is designed to demonstrate the viability of green hydrogen as a fuel for use in the mining industry in Mongolia and SRE is very excited to be involved. This initiative has the strong support of the Mongolian Government and a memorandum of understanding has been signed with the Ministry of Energy.
SRE and Petro Matad will determine, once these two projects reach construction ready status, how best to fund them. Debt funding for similar projects is already established in Mongolia, leaving open the possibility that SRE can aspire to stay involved in the construction phase and establish itself as a key renewable power producer in the country.
The potential for renewable energy in Mongolia is huge with solar and wind power set to make up an increasing part of the country's energy mix in the coming decades. This has been embraced by lawmakers, with Mongolia ratifying international conventions including the Paris Agreement. SRE has made good progress so far and has identified several other projects for consideration. We look forward to progressing this exciting new venture that has the potential to generate revenue in the near term.
Mike Buck, CEO of Petro Matad, said:
"The slow pace of the completion of the regulatory process that will allow us to commence the Heron development is extremely frustrating. Whilst we are pushing hard with all agencies, and we have equipment and contractors ready to mobilise, unless the pace suddenly quickens it is now unlikely that we will get the Tripartite Agreement signed in time. However, we are working on a limited access agreement at district level and leaving no stone unturned to give us the chance to achieve our goal of getting Heron 1 onstream before winter.
Meanwhile, it is pleasing to see that our renewable energy initiative is moving ahead. The battery storage project has considerable follow-on potential since the Ministry of Energy has identified a significant need for energy storage in various locations throughout the country. The Government is very keen to see if green hydrogen can be used effectively, whilst the mine operators are looking to decarbonise their operations and SRE's project targets these goals whilst also providing the potential for an excellent commercial return for the developer.
As ever we appreciate our shareholders' patience as we work through the final stages of getting Heron 1 on stream and in particular, those shareholders that have been with us on this journey since the Heron discovery and before. I look forward to updating you further on our renewable energy initiative and our other ventures."
Further operational updates will be provided in due course.
- Ends -
Further information please contact:
| Petro Matad Limited | |
| Mike Buck, CEO | +976 7014 1099 / +976 7575 1099 |
| | |
|
Shore Capital (Nominated Adviser and Broker) | |
| Toby Gibbs
| +44 (0) 20 7408 4090 |
| Zeus (Joint Broker) Simon Johnson, Louisa Waddell
| +44 (0) 20 3829 5000 |
| FTI Consulting (Communications Advisory Firm) | |
| Ben Brewerton Christopher Laing | +44 (0) 20 3727 1000 |
About Petro Matad
Petro Matad is the parent company of a group focussed on oil exploration, as well as future development and production in Mongolia. At the current time, Petro Matad holds 100% working interest and the operatorship of two Production Sharing Contracts with the Government of Mongolia. Block XX has an area of 218 square kilometres in the far eastern part of the country and Block V has an area of 7,937 square kilometres in the central western part of the country.
Petro Matad Limited is incorporated in the Isle of Man under company number 1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle of Man, IM1 1EQ.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF-YEAR ENDED 30 JUNE 2023
|
|
| Consolidated | |
|
|
| 30 Jun 2023 | 30 Jun 2022 |
|
|
| $'000 | $'000 |
|
| | | |
| Continuing Operations | | | |
| Revenue | | | |
| Consulting service revenue | | 100 | - |
| Interest Income | | 11 | 20 |
| Other Income | | 30 | - |
| | | 141 | 20 |
| | | | |
| Expenditure | | | |
| Consultancy fees | | (62) | (79) |
| Depreciation and amortisation | | (89) | (73) |
| Employee benefits expenses | | (892) | (874) |
| Exploration expenditure | | (52) | (75) |
| Other expenses | | (948) | (542) |
| Profit/(Loss) from continuing operations before income tax | | (1,902) | (1,623) |
| Income tax expense | | - | - |
| Profit/(Loss) from continuing operations after income tax | | (1,902) | (1,623) |
| Net Loss |
| (1,902) | (1,623) |
|
|
|
| |
| Other comprehensive income/(loss) | | | |
| Exchange rate differences on translating foreign operations | | 5 | (82) |
| Other comprehensive income/(loss), net of income tax | | 5 | (82) |
| Total comprehensive loss | | (1,897) | (1,705) |
|
| |
| |
| Profit/(Loss) attributable to owners of the parent | | (1,902) | (1,623) |
| | |
| |
| Total comprehensive income/(loss) attributable to owners of the parent | | (1,897) | (1,705) |
| | | | |
| Earnings/(loss) per share (cents per share) | | | |
| - Basic and diluted earnings/(loss) per share | | (0.18) | (0.18) |
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
|
| Consolidated | ||
|
| 30 Jun 2023 | 31 Dec 2022 | 30 Jun 2022 |
|
| $'000 | $'000 | $'000 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | 815 | 1,476 | 3,096 |
| Trade and other receivables | 346 | 2,607 | 9 |
| Prepayments | 215 | 138 | 183 |
| Financial assets | 7,572 | 1,017 | 3,524 |
| Inventory | 218 | 215 | 218 |
| Total Current Assets | 9,166 | 5,453 | 7,030 |
| | | | |
| Non-Current Assets | | | |
| Exploration and evaluation | 15,275 | 15,275 | 15,275 |
| Investment in SunSteppe Power LLC | 468 | - | - |
| Property, plant and equipment | 266 | 261 | 90 |
| Right-of-Use asset | 38 | 92 | 30 |
| Total Non-Current assets | 16,047 | 15,628 | 15,395 |
| TOTAL ASSETS | 25,213 | 21,081 | 22,425 |
| | | | |
| LIABILITIES | | | |
| Current liabilities | | | |
| Trade and other payables | 317 | 456 | 392 |
| Lease liability | - | - | - |
| Total Current Liabilities | 317 | 456 | 392 |
| TOTAL LIABILITIES | 317 | 456 | 392 |
| NET ASSETS | 24,896 | 20,625 | 22,033 |
|
| | | |
| EQUITY | | | |
| Issued capital | 160,177 | 154,057 | 154,057 |
| Reserves | 61 | 8 | 93 |
| Accumulated losses | (135,342) | (133,440) | (132,117) |
| TOTAL EQUITY | 24,896 | 20,625 | 22,033 |
CONDENSED CASH FLOW STATEMENT
FOR THE HALF-YEAR ENDED 30 JUNE 2023
|
| Consolidated | |
|
| 30 Jun 2023 | 30 Jun 2022 |
|
| $'000 | $'000 |
|
| | |
| Cash flows from operating activities | | |
| Payments to suppliers and employees | 166 | (1,509) |
| Consulting service revenue | 100 | - |
| Interest received | 11 | 20 |
| Net cash flows from/(used in) operating activities | 277 | (1,489) |
| |
| |
| Cash flows from investing activities |
| |
| Purchase of property, plant and equipment | (26) | (16) |
| Purchase of financial assets | (6,555) | 3,521 |
| Investment in SunSteppe Power LLC | (468) | - |
| Proceeds from the disposal of plant and equipment | - | - |
| Net cash flows from/(used in) investing activities | (7,049) | 3,505 |
| |
| |
| Cash flows from financing activities |
| |
| Proceeds from issue of shares | 6,523 | - |
| Capital raising costs | (403) | - |
| Payments of lease liability principal | (13) | - |
| Net cash flows from/(used in) financing activities | 6,107 | - |
| |
| |
| Net increase/(decrease) in cash and cash equivalents | (665) | 2,016 |
| Net foreign exchange differences | 4 | (82) |
| Cash and cash equivalents at beginning of period | 1,476 | 1,162 |
| Cash and cash equivalents at end of period | 815 | 3,096 |
STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 30 JUNE 2023
|
| Consolidated | |||
|
| Attributable to equity holders of the parent | |||
|
|
Issued Capital $'000 |
Accumulated Losses $'000 |
Other Reserves $'000 |
Total $'000 |
|
|
|
|
|
|
| As at 1 January 2022 | 154,057 | (130,524) | 182 | 23,715 |
| Income/(Loss) for the period | - | (1,623) | - | (1,623) |
| Other comprehensive income | - | - | (82) | (82) |
| Total comprehensive income/(loss) for the period | 154,057 | (132,147) | 100 | 22,010 |
| Transactions with owners in their capacity as owners | | | | |
| Issue of share capital | - | - | - | - |
| Cost of capital raising | - | - | 23 | 23 |
| Share based payments | - | 30 | (30) | - |
| As at 30 June 2022 | 154,057 | (132,117) | 93 | 22,033 |
| | | | | |
| | | | | |
| As at 1 January 2023 | 154,057 | (133,440) | 8 | 20,625 |
| Income/(Loss) for the period | - | (1,902) | - | (1,902) |
| Other comprehensive income | - | - | 5 | 5 |
| Total comprehensive income/(loss) for the period | 154,057 | (135,342) | 13 | 18,728 |
| Transactions with owners in their capacity as owners | | | | |
| Issue of share capital | 6,523 | - | - | 6,523 |
| Cost of capital raising | (403) | - | - | (403) |
| Share based payments | - | - | 48 | 48 |
| As at 30 June 2023 | 160,177 | (135,342) | 61 | 24,896 |
1. CORPORATE INFORMATION
The financial report covers the consolidated entity of Petro Matad Limited and its controlled entities.
Petro Matad Limited, a company incorporated in the Isle of Man on 30 August 2007, has six wholly owned subsidiaries: Capcorp Mongolia LLC and Petro Matad LLC (both incorporated in Mongolia), Central Asian Petroleum Corporation Limited ("Capcorp"), Petromatad Invest Limited and Petro Matad Energy Limited (all incorporated in the Cayman Islands), Petro Matad Energy Limited (incorporated in the Isle of Man) and Petro Matad Singapore Pte Ltd (incorporated in Singapore). The Company has also entered into a joint venture with SunSteppe Power LLC (a renewables energy company focused on generation of clean energy in Mongolia), which is incorporated in Mongolia and is a 50% owned subsidiary of Petro Matad LLC.
Petro Matad Limited trades on the Alternative Investment Market (AIM), which is a sub-market of the London Stock Exchange, under the symbol MATD. Its major shareholder is Petrovis Matad Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The half-year financial report does not include all of the notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.
The half-year financial report should be read in conjunction with the annual Financial Report of Petro Matad Limited as at 31 December 2022. The half-year consolidated financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 31 December 2022.
It is also recommended that the half-year financial report is considered together with any public announcements made by Petro Matad Limited and its controlled entities during the half-year ended 30 June 2023.
(a) Basis of Preparation
The half-year consolidated financial report is a general purpose financial report, which has been prepared in accordance with the requirements of International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ('IASB'). The half-year financial report has been prepared on a historical cost basis, except where stated.
The financial report is presented in US dollars and all values are rounded to the nearest thousand dollars ($'000).
For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting period.
(b) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group as at 31 December each year.
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.
A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity transaction.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
3. CONTRIBUTED EQUITY
|
|
| CONSOLIDATED | ||||||
|
|
|
| 30 Jun 2023 | 31 Dec 2022 | ||||
|
|
|
| $'000 | $'000 | ||||
| Ordinary shares (i) 1,113,883,601 shares issued and fully paid. (31 Dec 2022: 898,761,649) | | 160,177 | 154,057 |
| ||||
| | | 160,177 | 154,057 |
| ||||
(i) Ordinary shares
Full paid ordinary shares carry one vote per share and carry the right to dividends.
| Movement in ordinary shares on issue | Number of Shares | Issue Price$ | $'000 |
| At 1 January 2023 | 898,761,649 | | 154,057 |
| Issue of shares through direct subscriptions on 10 Feb 2023 | 33,333,332 | $0.031 | 1,025 5,340
|
| Issue of shares through its broker, Shore Capital on 10 Feb 2023
2023 | 94,787,994 | $0.030 | 2,866 |
| Issue of shares through its broker, Zeus on 10 Feb 2023 | 67,000,626 | $0.030 | 2,027 |
| Open Offer shares on 10 Feb 2023 | 20,000,000 | $0.030 | 605 |
| Cost of capital raising | | | (403) |
| Share based payment | | | - |
| At 30 June 2023 | 1,113,883,601 |
| 160,177 |
|
|
|
|
|
4. RESERVES
A detailed breakdown of the reserves of the Group is as follows:
| |
Merger reserve | Equity benefits reserve | Foreign currency translation | Total |
| Consolidated | $'000 | $'000 | $'000 | $'000 |
| | | | | |
| As at 1 July 2022 | 831 | 563 | (1,301) | 93 |
| Currency translation differences | - | - | (67) | (67) |
| Expiry of Options | - | (3) | - | (3) |
| Share based payments | - | (15) | - | (15) |
| As at 31 December 2022 | 831 | 545 | (1,368) | 8 |
| | | | | |
| Currency translation differences | - | - | 5 | 5 |
| Share based payments | - | 48 | - | 48 |
| As at 30 June 2023 | 831 | 593 | (1,363) | 61 |
EARNINGS/(LOSS) PER SHARE
The following reflects the income and share data used in the total operations basic and diluted earnings/(loss) per share computations:
|
| CONSOLIDATED | |
|
| 30 Jun 2023 | 30 Jun 2022 |
| Basic earnings/(loss) per share | | |
| Total basic earnings/(loss) per share (US$ cents per share) (note a) | (0.18) | (0.18) |
| | | |
| Diluted earnings/(loss) per share | | |
| Total diluted earnings/(loss) per share (US$ cents per share) (note b) | (0.18) | (0.18) |
| | | |
| (a) Basic earnings/(loss) per share | | |
| The profit/(loss) and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows: | | |
| | | |
| | | |
| Net profit/(loss) attributable to ordinary shareholders (US$'000) | (1,902) | (1,623) |
| | | |
| Weighted average number of ordinary shares for the purposes of basic earnings per share ('000) | 1,067,531 | 898,762 |
| | | |
| (b) Diluted earnings/(loss) per share | | |
| The profit/(loss) and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows: | | |
| | | |
| | | |
| Net profit/(loss) attributable to ordinary shareholders (US$'000) | (1,902) | (1,623) |
| | | |
| Weighted average number of ordinary shares for the purposes of basic earnings per share ('000) | 1,067,531 | 898,762 |
Share Options and Conditional Share Awards could potentially dilute basic loss per share in the future, however they have been excluded from the calculation of diluted loss per share because they are anti-dilutive for both years presented.
5. EVENTS AFTER THE REPORTING DATE
None.
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