KEA PETROLEUM PLC For Immediate Release 27 February 2015
Kea Petroleum plc("Kea" or the "Group" or the "Company")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 NOVEMBER 2014Kea Petroleum plc (AIM: KEA), the oil and gas exploration company focused on New Zealand, announces its interim results for the six month period ended 30 November 2014.
Key points in the year to date
• Review of strategic options announced on 16 February 2015 to consider all opportunities to maximise shareholder value owing to the prevailing oil price environment
• Rockpoint Corporate Finance Limited appointed to advise in the strategic review
• Puka site shut-in on 28 January 2015 and further cost-cutting measures introduced to preserve working capital
• Discussions continue with potential partners for the Mercury, Mauku and Shannon prospects in a very challenging farm-out environment
• Administrative expenses in the period reduced to £881,000 (H1 2013: £1.8 million)
• Sales of £831K in the six month period (H1 2013: £1.2 million) and net loss of £8.5 million (H1 2013:net loss of £1.1 million) with the net loss reflecting the £7.5 million write-off of exploration costs relating to the Douglas and Wingrove wells
Kea Petroleum's Chairman, Ian Gowrie-Smith, said:
"Whilst Kea was making progress in the Taranaki Basin and continues to have some highly prospective opportunities, the unexpected and fundamental change in the oil price environment has created too many challenges for our business. Consequently, we launched a strategic review last month with the objective of considering all options for maximising shareholder value. We are still early in that process and we will update shareholders in due course."
For further information please contact:
Kea Petroleum plc Tel: +44 (0)20 7340 9970
David Lees, Executive Director
WH Ireland Limited Tel: +44 (0) 20 7220 1666
James Joyce
Buchanan Tel: +44 (0)20 7466 5000
Mark Court
Sophie Cowles
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CHAIRMAN'S STATEMENTDear Shareholders,
The recent collapse in the price of oil, which no one appears to have foreshadowed, has made the Puka field uneconomic and hence, as recently announced, the Puka production station was shut down. Also as a result of falling oil prices, the farm-out market has become very challenging. Against this backdrop, and without sufficient financial resources ourselves, the Company has had no option other than to offer itself for sale as a whole or for some of its parts.
Kea announced its strategic review on 16 February 2015 to consider all opportunities for maximising shareholder value. The Company is being advised during this process by Rockpoint Corporate Finance Limited. The Company has taken a number of further cost cutting measures to preserve its working capital, which remains tight.
The loss posted in the six month period includes the write-off of £7.5 million of previously capitalised costs relating to the drilling and testing of the Wingrove and Douglas wells in 2010/2011.
Kea is assisting a number of potential funding partners to complete their technical due diligence of the Shannon prospect, confirming our view that it is an exciting and potentially significant prospect. We will provide further updates for shareholders as appropriate.
Ian Gowrie-Smith
Chairman
27 February 2015
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KEA PETROLEUM PLCCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Six months ended 30 November 2014
Six months ended 30 November
Six months ended 30
November
Year ended
31 May
Revenue | 831 | 1,198 | 2,087 |
Cost of sales | (593) | (459) | (1,756) |
Gross profit | 238 | 739 | 331 |
Administration expenses | (881) | (1,796) | (2,213) |
Exploration costs written off | (7,470) | - | (1,571) |
Operating loss | (8,113) | (1,057) | (3,453) |
Finance income | 9 | 6 | 14 |
Finance Cost | (421) | - | (420) |
Foreign Exchange (losses) | - | (12) | 40 |
Loss before taxation | (8,525) | (1,063) | (3,819) |
Taxation | - | - | - |
Loss for the period | (8,525) | (1,063) | (3,819) |
Other comprehensive income: | |||
Exchange differences on translating foreign operation | (137) | (411) | (1,044) |
Total comprehensive loss for the period | (8,662) | (1,474) | (4,863) |
Loss per share Basic and fully diluted (pence per share) | (1.1)p | (1.51)p | (5.36)p |
The loss for the period and total comprehensive loss for the period are 100% attributable to equity shareholders of the parent undertaking.
The accompanying accounting policies and notes form an integral part of these financial statements.
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 November 2014 Company Registration 7023751
30 November 2014 | 30 November 2013 | 31 May 2014 | |
Unaudited | Unaudited | Audited | |
£'000 | £'000 | £'000 | |
Current Assets Cash and cash equivalents | 684 | 102 | 823 |
Trading Stock and WIP | 199 | 83 | 244 |
Trade and other receivables | 307 | 553 | 330 |
1,190 | 738 | 1,397 | |
Non-Current Assets Property, plant & equipment | 1,182 | 1,286 | 1,254 |
Production & Development Assets | 7,173 | 6,762 | 7,021 |
Intangible Oil & gas exploration assets | 1,993 | 11,455 | 9,794 |
10,348 | 19,503 | 18,069 | |
Total Assets | 11,538 | 20,241 | 19,466 |
Current Liabilities | |||
Trade and other payables | 336 | 467 | 936 |
Borrowings | - | - | 515 |
Derivative Financial Instruments | - | - | 434 |
Total liabilities | 336 | 467 | 1,885 |
Shareholders' Equity Issued capital | 9,399 | 6,974 | 7,751 |
Share premium | 30,423 | 29,353 | 29,828 |
Merger reserve | 125 | 125 | 125 |
Share option reserve | 3,094 | 3,030 | 3,054 |
Warrants reserve | 135 | 135 | 135 |
Translation reserve | (276) | 494 | (139) |
Investment in Own Shares | (1,637) | (1,557) | (1,637) |
Retained earnings | (30,061) | (18,780) | (21,536) |
Total equity | 11,202 | 19,774 | 17,581 |
Total Equity and Liabilities | 11,538 | 20,241 | 19,466 |
The financial statements were approved by the Board of Directors on 27 February 2015
P. Wright
Director
-
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 November 2014
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KEA PETROLEUM PLC
CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30 November 2014
Six months ended 30 November
Six months ended 30
November
Year ended
31 May
Net cash flow from operating activities (2,243) (2,632) (2,852) Cash flows from investing activities
Interest received 9 6 7
Expenditure on oil and gas exploration assets - (19) (49) Expenditure on Production and development assets (419) (121) (649) Purchase of property, plant and equipment - (629) (628)
Net cash used in investing activities (410) (763) (1,319) Cash flows from financing activities
Proceeds from share issues 2,243 - 1,252
Debt liability - - 949
Investment in Own Shares - - (80) Net cash generated from financing activities 2,243 - 2,121
Net decrease in cash and cash equivalents (410) (3,395) (2,050) Cash and cash equivalents at beginning of period 823 2,788 2,788
Foreign exchange differences - net 271 709 85
Cash and cash equivalents at balance sheet date 684 102 823
Reconciliation of cash flows from operating activities with loss for the period
Loss for the period (8,525) (1,063) (3,819) Movements in Working Capital
Trade and other receivables 23 417 715
Trade and other payables (1,549) (2,382) (1,910) Depreciation 59 61 107
Stock and WIP 45 - (155) Derecognition of unsuccessful expenditure 7,470 - 1,571
Depletion on development & production assets 203 - 281
Interest received (9) (6) (7) Share option expense 40 341 365
Net cash flow from operating activities (2,243) (2,632) (2,852)
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NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 NOVEMBER 2014
1. Basis of preparation
This interim financial information has been prepared on a going concern basis in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and on an historical cost basis, and in accordance with the Companies Act 2006 that applies to companies reporting under IFRS. The accounting policies, methods of computation and presentation used in the preparation of the interim financial information are the same as those used in the Group's audited financial statements for the year ended 31 May 2014.
The financial information in this statement does not constitute full statutory accounts within the meaning of Section
434 of the Companies Act 2006. The financial information for the six months ended 30 November 2014 is unaudited. The comparative information for the year ended 31 May 2014 was derived from the Group's audited financial statements for that period as filed with the Registrar of Companies. It does not constitute the financial statements for that period. The auditor's report on those financial statements was unqualified and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006, but contained an emphasis of matter paragraph on going concern.
The Group has incurred a loss of £8,525,000 for the 6 months ended 30 November 2014. In common with other junior exploration companies, the Group is reliant on raising further funds periodically through equity finance, including share options and warrants, or possibly debt facilities to achieve its long term objectives.
The directors have prepared operating cashflow forecasts and projections which assume a minimum level of expenditure to conform with the requirements of the Group's exploration licences for the 12 months from the date of signing this interim statement, which show a funding shortfall in 2015. The directors are in discussions with
potential investors to secure additional funding that would cover the shortfall, but an agreement has not yet been signed. If the Group is unable to secure this funding and cannot find alternative sources of financial support, the Group may cease to be a going concern. In these circumstances adjustments may be required to reflect the position that assets may not be realised at the amounts currently disclosed in the Statement of Financial Position, and additional liabilities may be incurred.
The directors have concluded that the combination of these circumstances represents a material uncertainty that may cast significant doubt upon the Group's ability to continue as a going concern. Nevertheless after making enquiries, and considering the uncertainties described above, the directors have an expectation that the Group will have access to adequate resources to continue in operational existence for the foreseeable future and for these reasons, they continue to adopt the going concern basis in preparing the annual report and Group financial statements.
Six months ended 30
November
Year ended
31 May
Loss for the period attributable to equity shareholders (8,525) (1,063) (3,819)
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Basic and diluted loss per share (1.1)p (1.51)p (5.36)p
Six months ended 30
November
Year ended
31 May
Number of shares
Number of shares
Issued ordinary shares at start of the period 775,082,470 697,442,407 697,442,407
Ordinary shares issued in the period 164,787,097 - 77,640,063
Issued ordinary shares 939,869,567 697,442,407 775,082,470
Consolidation and subdivision (845,882,610)
Issued New ordinary shares at end of period 93,986,957 69,744,241 77,508,247
Weighted average number of shares in issue for the period. 88,341,592 697,442,407 711,684,429
On 28 November 2014, a share consolidation was approved. On that date 939,869,567 ordinary shares of 1p were converted into 93,986,957 new ordinary shares of 1p and 93,986,957 deferred shares of 9p. The deferred shares of
9p carry no significant rights. The weighted average number of shares for comparative purposes have been adjusted to 69,744,241 (previously 697,442,407).
The diluted loss per share does not differ from the basic loss per share as the exercise of share options would have the effect of reducing the loss per share and is therefore not dilutive. The weighted average number of shares used in calculating the basic earnings per share has been adjusted to remove the shares in issue held by the Employee
Benefit Trusts.
Ordinary
Shares
Nominal
Value
Deferred shares
Premium Total
Authorised share capital
(£0.01) (£0.09) net of costs
£'000 £'000 £'000 £'000
Ordinary shares of £0.01 each 1,000,000,000 10,000 10,000
Issued, called up and fully paid - Ordinary shares of £0.01 each
Opening Balance 30 November
2013 (unaudited) 697,442,407 6,974
- 29,353 36,327
Issue of shares 77,640,063 777 - 475 1,252
Warrants exercised - - - - -
31 May 2014 (audited) 775,082,470 7,751 - 29,828 37,579
Issue of shares 164,787,097 1,648 - 595 2,243
Consolidation and subdivision (845,882,610) (8,459) 8,459 - -
30 November 2014 (unaudited) 93,986,957 940 8,459 30,423 39,822
In January 2014 the Company shut in the Puka production station as a result of mechanical problems with Puka-1
and the low oil price.
In February 2014 the Company announced a strategic review including the possibility of offers within the context of a "formal sale process" in accordance with Note 2 on Rule 2.6 of the City Code on Takeovers and Mergers.
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