RE: Good enough for Schroders plc24 Jul 2018 16:40
Columbus Energy Resources (CERP) has announced full year results for the year ending December 2017. The new team, which took charge in May 2017, has recapitalised the company, which ended the year with a cash position of £4m, and began an ambitious operational overhaul seeking to realise the significant value potential of the underlying assets whilst instilling capital discipline.
Revenues were up 5% YoY, to £4.8m while the loss from operations widened to £4.3m from £4m, largely due to the costs associated with closing the Spanish assets. Due to a lower impact from impairments, the net loss narrowed from £11.9m to £5m YoY.
These results, however, largely reflect the last of the old regime and the turnaround being enacted is yet to show through fully. Operational improvements began to take effect from August and so the full year numbers reflect little of the positive working practices and low cost enhancements which took production from 365bopd in July 2017 to a peak of 562bopd by the end of the year.
Group production averaged 368bopd, down 21% YoY, primarily as a result of the reduced contribution from the Spanish assets which have been shuttered. This was modestly lower than our estimate based on management guidance of 399bopd for the full year and was largely due to the challenges of coarse sand impacting on pumps. CERP has now applied new techniques to alleviate this. Group revenues were, however, up 5% YoY at £4.8m driven by a recovery in oil prices and the increased production contribution from Goudron in the latter part of the year. We highlight that revenues from Trinidad increased 24% YoY to £4.5m while Spanish revenues declined 68% YoY to £0.3m and these have been discontinued for 2018.
Cost of sales were modestly higher, up 8% YoY to £3.6m reflecting CERP’s largely fixed operating cost base, however, as a result of a stronger top line CERP generated a small gross profit of £78k versus a loss of £148k in the prior year. The closure of the Spanish operations did, however, increase SG&A costs by around £700k and following the successful agreements in Q1 2018 in relation to the La Cora concession these can be considered a one off. Excluding Spain, CERP reduced SG&A by 11.5% YoY. However, as a consequence the loss from operations widened YoY to £4.2m from £4m.
Finance charges increased to £824k from a negligible net amount YoY owing to the use of the Lind facility which the new team successfully renegotiated during 2017 raising the conversion price to 4.5p. CERP reduced its outstanding debt through the year from £1.87m to £1.21m despite Lind exercising its right to lend a further US$0.75m during the year. The debtposition at the end of March was approximately £0.69m demonstrating continued further progress in this regard.
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