Adm Energy Regulatory News (ADME)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014 (WHICH FORMS PART OF DOMESTIC UK LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN. 

30 September 2021

ADM Energy PLC  

("ADM", the "Group" or the "Company")

Full Year Results

Publication of Annual Report

ADM Energy PLC (AIM: ADME; BER and FSE: P4JC), a natural resources investing company, announces its audited full year results for the 12 months ended 31 December 2020.

Investment Highlights - OML 113

· Delivered strategic agreement with EER (Colobos) Nigeria Limited to increase ADM's interest in the field - revenue interest nearly doubled from 5% to 9.2% and ADM's share of net 2P reserves increased from 8.9 MMboe to 16.4 MMboe

· Worked closely with operating partners to safely manage the impact of the pandemic and navigate the temporary low oil price environment:

o Production from both the Aje-4 and Aje-5ST2 wells continued uninterrupted aside from planned maintenance work, with oil stored on the FPSO while prices recovered

o Reduced operating costs at a project level by 42% on average, including a decrease in the FPSO lease cost

o Breakeven cost of production reduced to US$28 per barrel, comfortably below the prevailing crude oil price - ensuring Aje remained profitable at a project level

· Total oil production in 2020 of 698,649 bbls and barrels of oil per day of 1,909 bopd (99.2 bopd net to ADM*). The drop in volume reflected the decision by the JV partners to carry out a more thorough and extended period of maintenance on the FPSO while oil prices were depressed.

· Post period, disposed of 188,778 shares in Superdielectrics Ltd for a total consideration of £849,501, a profit of £656,003 on ADM's original investment

* Includes increase in revenue interest from 5% to 9.2% after 9 December 2020 

Financial and Corporate Highlights

· Revenue was £0.8m (2019: £2.5m), reflecting the decision not to participate in the 13th lifting in March 2020, a lower oil volume lifted from the FPSO as well as a lower realised oil price during the period

· Operating costs reduced by 42% to £1.4m (2019: £2.4m)

· Loss before and after tax was £6.9m (2019: £1.7m)

· Raised £0.85m for general working capital purposes and issued additional short-term debt of £0.3 million. Post period, in March 2021, the Group announced an equity fundraising of approximately £1,220,000.

· Signed an MOU with Trafigura Pte Ltd, the multi-billion-dollar global trading house, for a strategic alliance to develop investment opportunities in the African energy sector

· Strengthened the Board and technical team with industry expertise and high-level contacts

o Appointed Sir Henry Bellingham, former UK Government Minister for Africa, and Dr Stefan Liebing, Chairman of the German-African Business Association, as Non-executive Directors

o Post period, appointed Oliver Andrews, former Chief Investment Officer at the Africa Finance Corporation, as Non-executive Chairman

o Added two oil and gas veterans, Darrell McKenna and Dr Satinder Purewal, to the technical team, and post-period Dr Babatunde Pearse appointed Chief Engineer with responsibility to oversee next phase of the Aje development

· Dual listed on the Berlin and Frankfurt stock exchanges to support growth and increase visibility to investors in Germany, Europe's largest retail investment market

Osamede Okhomina, CEO of ADM Energy, said: "Despite the challenges faced in 2020, I am pleased to report that ADM ended the year with a solid foundation for future growth. The dramatic drop in oil prices presented an opportunity to acquire attractive assets at substantially depressed valuations, such as our increased interest in OML 113. We nearly doubled our share of 2P reserves and production from the Aje Field in advance of development plans to significantly increase production by drilling new wells. This provides a route to material value generation from our existing asset base alone.

"We remain in the market for new opportunities to accelerate our growth. Our management and technical teams are actively assessing investment propositions on a regular basis and progressing those that are most compelling. It remains a buyer's market and ADM is in a strong position to de-risk projects through our technical expertise and access to capital. We continue to pursue high-quality assets in West Africa with substantial upside and the potential to further accelerate our future growth."

Enquiries:

About ADM Energy PLC

ADM Energy PLC (AIM: ADME; BER and FSE: P4JC) is a natural resources investing company with an existing asset base in Nigeria. ADM Energy holds a 9.2% profit interest in the oil producing Aje Field, part of OML 113, which covers an area of 835km² offshore Nigeria. Aje has multiple oil, gas, and gas condensate reservoirs in the Turonian, Cenomanian and Albian sandstones with five wells drilled to date.

ADM Energy is seeking to build on its existing asset base in Nigeria and target other investment opportunities across the West African region in the oil and gas sector with attractive risk reward profiles such as proven nature of reserves, level of historic investment, established infrastructure and route to early cash flow.

Operating Review

ADM successfully met the challenges of 2020 by ensuring that its operations continued in a safe and effective manner, while positioning the business for growth. The Company's aim is to be a multi-asset company with an interest in high-quality assets, which offer the potential for material production upside. During the year, ADM continued to execute on this strategy by acquiring undervalued 2P reserves without the risks associated with high-cost exploration. This included increasing the Company's interest in the Aje Field, a producing asset with substantial potential in the near and medium term.

ADM's technical expertise and access to capital put it in a strong position to significantly de-risk the development of its assets, thereby ensuring it unlocks their underlying potential and creates value for shareholders.

Aje Field

The Aje Field on OML 113 offshore Nigeria is an oil producing asset which is rich in gas and condensate reserves. It is strategically located 24km offshore Lagos where it benefits from increasing local energy demand, particularly for gas, which is viewed as a replacement fuel for diesel and commands a premium. The field is also within close proximity to the West African Gas Pipeline which presents a potential opportunity for gas monetisation in neighbouring countries such as Benin and Togo.

Completion of EER Transaction

ADM consolidated its interest in OML 113 during the financial year and nearly doubled its reserves, net revenue, and production share in the asset. The Group increased its revenue interest from 5% to 9.2% by acquiring 25% of the interest, rights, and obligations held by EER (Colobos) Nigeria Limited ("EER"). This has increased ADM's share of net 2P reserves from 8.9 MMboe to 16.4 MMboe.

Operations

ADM worked closely with the operating partners to safely manage the impact of the pandemic and ensure that, aside from planned maintenance work, production continued uninterrupted at Aje.

Oil Production:

* Includes increase in revenue interest from 5% to 9.2% after 9 December 2020

Two liftings took place during 2020. Due to the prevailing low oil price at the time, ADM elected to not participate in the 13th lifting in March 2020, a decision that has been vindicated by the recovery of brent crude to US$70+ per barrel. The Company participated in the 14th lifting in October 2020, which totalled 557,091 barrels with a net share of 33,056 barrels to ADM. Post period, the 15th lifting was completed in April 2021 for a total of 225,000 barrels, equating to an increased net share to ADM of 27,675 barrels post completion of the EER transaction. The drop in volume reflected the decision by the JV partners to carry out a more thorough and extended period of maintenance on the FPSO while oil prices were depressed.

The economic shutdowns imposed around the world in response to COVID-19 precipitated a sudden drop in oil demand and severely impacted crude prices. In light of the low oil price environment, the partners successfully reduced operating costs at project level by 42% on average, including a decrease in the FPSO lease cost. As a result, the breakeven cost of production was reduced to US$28 per barrel, comfortably below the prevailing crude oil price. This ensured that Aje remained profitable at a project level, even despite lower production volumes and crude oil prices. It also provided a base for operational leverage as prices increased during the year and post period, with production stored on the FPSO, which has a storage capacity of up to 755,808 barrels.

An impairment of £4.6 million was recognised (2019: nil) on our share of the Aje asset due to a change to a 'fair value' implied by the purchase price (excluding contingent portion) of the recently announced PetroNor E&P Ltd/Panoro Energy ASA ("Petronor/Panoro") transaction, which as at 31 December 2020 was considered by the Directors to represent the most relevant and reliable available indicator of value against a backdrop of market and operation uncertainty prevalent at the time.

The Company has also recognised a Contingent Liability as per note 22 of the Annual Report and Accounts published today, this is to reflect an ongoing audit at project level on OML 113. ADM expects the audit findings in the second half of 2021 which will give the Company clarity going forward on project level debt.

Field Development Plan

The Partners are finalising discussions to reach a Final Investment Decision on a new development plan at Aje. This process will be supported by the appointment of Dr Babatunde Pearse as the Company's new Chief Engineer. An industry veteran with an IOC background, Dr Pearse has been appointed to plan the next phase of the Aje development and oversee Front End Engineering Design ("FEED") studies to support the Final Investment Decision.

The development plan includes the drilling of three new wells, which could potentially significantly increase production of oil and gas liquids from 1,909 bopd in 2020 to up to 9,000 bopd (approximately 900 barrels per day net to ADM). It will also monetise the Dry Gas rich Aje field, where it has been estimated there is over 1.1 trillion cubic feet ("Tcf") of Gas initially in Place ("GIIP"). This is able to supply the Lagos market and can be sold to the West Africa Gas Pipeline. The Partners continue to explore various methods of financing, one of which is the US$100 million pre-offtake conditional pre-finance for approved projects that the Company may access with Trafigura.

The development plan has been delayed as PetroNor and Panoro Energy ASA agreed to a further extension of the completion long stop date from 30 June 2021, due to challenges related to COVID-19, for the previously announced purchase of Panoro's fully-owned subsidiaries that hold 100% of the shares in Pan Petroleum Aje Limited.

Financing and Pipeline

During the year, we signed an MoU with Trafigura Pte Ltd, the multi-billion-dollar global trading house. The intention is to create a strategic alliance where ADM will act as the sponsor for investment opportunities, with Trafigura providing up to US$100 million in approved project finance as well as up to US$20 million of convertible loan notes. We have engaged Trafigura on a number of potential deals to date and maintain a strong relationship, extending the agreement for a further 12 months post period.

Barracuda Field

Post period, we acquired a controlling interest in a Risk Sharing Agreement (RSA) for the development of the large-scale Barracuda Field. Located in OML 141, the Barracuda Field is an existing discovery and near-term production asset, which covers 103 km2 in the swamp/shallow waters of the Niger Delta.

The Company announced in the period that it will commission a Competent Person's Report ("CPR") on the Barracuda Field. ADM has received a draft of a preliminary report however it is not yet finalised pending further technical appraisal. Once finalised, ADM will be in a better position to conclude the full CPR report as well as its strategy for the Barracuda field.

Nigerian Marginal Field Bid Round

In September 2020, ADM submitted a bid with the Nigerian Department of Petroleum Resources (DPR) for a marginal field in the 2020 Marginal Field Bid Round ("Bid Round"). A total of 57 marginal fields are available to participating companies covering onshore, swamp and shallow offshore fields. The process of awarding certain fields commenced earlier this year and ADM remains in discussion with multiple prospective partners. The Company will assess all potential fields on their individual merits, however, in light of attractive opportunities elsewhere, the Bid Round is no longer a strategic priority.

Corporate

During the year, the Company successfully dual listed ADM shares on the Berlin and Frankfurt stock exchanges. The move has increased visibility to investors in Germany, Europe's largest retail investment market.

ADM also strengthened its Board by adding further expertise and contacts to oversee the Company's ambitious growth strategy. Lord Henry Bellingham, the former UK Government Minister for Africa, joined as a Non-Executive Director along with Dr Stefan Liebing, Chairman of the prestigious German-African Business Association. Lionel Therond also joined as Chief Financial Officer (a non-Board role). Sergio Lopez stepped down as Non-executive Director to pursue other interests.

Post period, the Company appointed Oliver Andrews as the new Non-executive Chairman following the departure of Peter Francis due to personal circumstances. Mr Andrews is the former Chief Investment Officer at the Africa Finance Corporation, one of the largest investment funds in Africa. Over the last 35 years, he has overseen investments of approximately US$10 billion and originated investments deals in natural resources and infrastructure across the continent, worth US$100 billion.

In addition, ADM bolstered its technical team to advance the Company's existing assets and evaluate new prospects. It enlisted non-Board advisers, Darrell McKenna (Surface Facilities and Drilling Lead) and Dr Satinder Purewal (Petroleum Engineering Lead), and, post period, Dr Babatunde Pearse as Chief Engineer. All three are industry experts with extensive experience in the world's most prominent IOCs and field development projects. Dr Pearse is primarily responsible for planning the next phase of the Aje development and oversees FEED studies to support the Final Investment Decision.

Financial Review

The financial results of the Group were negatively impacted by lower oil prices due to the Covid crisis and lower lifting volume due to maintenance activities on the FPSO. ADM also recognised an impairment on the carrying value of its Aje asset. Nevertheless, lower operating costs somewhat mitigated the revenue impact whilst continued assessment of M&A opportunities provides a solid foundation to build from in the future.

Revenue and profit

For the year ended 31 December 2020, the Group's revenue decreased by 68% to £0.8 million (2019: £2.5 million). The lower revenue reflects a lower oil volume lifted from the FPSO as well as a lower realised oil price during the period.

Operating costs decreased by 42% to £1.4 million (2019: £2.4 million) as costs cutting initiatives were taken by the Aje partnership to mitigate the impact of low oil prices.

However, administrative expenses increased by 52% to £2.6 million (2019: £1.7 million) as M&A evaluation activity increased substantially.

An impairment of £4.6 million was recognised (2019: nil) on the Company's share of the Aje asset due to a change to a 'fair value' implied by the purchase price (excluding contingent portion) of the recently announced Petronor/Panoro transaction, which as at 31 December 2020 was considered by the Directors to represent the most relevant and reliable available indicator of value against a backdrop of market and operation uncertainty prevalent as at 31 December 2020.

An unrealised gain of £0.7 million was recognised (2019: nil) to reflect a 339% appreciation of the Group's minority stake in Superdielectrics implied by their October 2020 equity raise since the purchase of the Company's stake in 2017-2018. This gain was realised post period end.

As a result, the loss after taxation increased to £6.9 million (2019: £1.7 million loss). The Directors do not propose a dividend (2019: £nil).

Cash flows and liquidity

After adjusting for the conversion of warrants issued in settlement of fees and working capital movements, cash outflow from operating activities decreased to £0.95 million (2019: £1.5 million outflow).

During the period, the Group raised additional equity of £0.85 million for general working capital purposes, and issued additional short-term debt of £0.3 million.

As of 31 December 2020, the Group had cash and cash equivalents of £30,000 (31 December 2019: £15,000).

Post period, in March 2021, the Group announced an equity fundraising of approximately £1,220,000.

Outlook

ADM's existing asset base provides exposure to large-scale 2P reserves and a route to material production upside. The Company remains confident of the commercial viability of further development at Aje and will continue to engage proactively with the other partners to progress the Field Development Plan. The FEED studies to be overseen by Chief Engineer Dr Pearse will define the project requirements for detailed engineering, procurement, and construction of facilities to support the Final Investment Decision.

These projects provide a strong base from which to grow the business through additional acquisitions. With many IOCs embarking on large-scale divestment programmes, it remains a buyer's market and a market primarily funded by the International Trading Companies, and thus with Trafigura's support ADM is in an even stronger position. Added to this is ADM's ability to de-risk projects through the Company's technical expertise and access to the broader capital markets. In line with the Company's investment strategy, ADM continues to seek high-quality assets in West Africa at depressed valuations with substantial upside for shareholders.

Annual Report and Accounts

The Company's Annual Report and Accounts will be posted shortly to shareholders and will be made available on the Company's investor relations website at www.admenergyplc.com.

Group Income Statement and Statement of Comprehensive Income

For the year ended 31 December 2020

Group and Company Statements of Financial Positionas at 31 December 2020

Group Statement of Changes in Equity

For the year ended 31 December 2020

Company Statement of Changes in Equity

For the year ended 31 December 2020

Group and Company Statements of cash flows

For the year ended 31 December 2020

Notes to the Financial Statements

For the year ended 31 December 2020

1. General Information

The Company is a public limited company incorporated in the United Kingdom and its shares are listed on the AIM market of the London Stock Exchange. The Company is an investment company, mainly investing in natural resources and oil and gas projects. The registered office of the Company is as detailed in the Company Information on page 2.

The information included in this announcement has been extracted from the Company's report and accounts and, therefore, as references and page numbers may be incorrect. Shareholders should read the Company's report and accounts in full which can be found on its website.

2. Principal Accounting Policies

The principal accounting policies adopted in the preparation of these financial statements are set out in the full report and accounts which is available from the Company's website, www.admenergyplc.com. These policies have been consistently applied throughout all periods presented in the financial statements.

As in prior periods, the Group financial statements have been prepared in accordance with International Accounting Standards and interpretations issued by the International Accounting Standards Board (IASB) International Financial Reporting Standards (IFRS) as adopted by the European Union. The financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies below.

The current period covered by these financial statements is the year to 31 December 2020. The comparative figures relate to the year ended 31 December 2019. The financial statements are presented in pounds sterling (£) which is the functional currency of the Group.

An overview of standards, amendments and interpretations to IFRSs issued but not yet effective, and which have not been adopted early by the Group are presented below under 'Statement of Compliance'.

STATEMENT OF COMPLIANCE

New standards, amendments and interpretations adopted by the Company

The company has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2020:

· Prepayment Features with Negative Compensation - Amendments to IFRS 9;

· Annual Improvements to IFRS Standards 2015-2017 Cycle;

· Plan Amendments, Curtailment or Settlement - Amendments to IAS 19;

There are several standards, amendments to standards and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has not yet adopted. The most significant of these are as follows, which are all effective for the period beginning 1 January 2021:

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2020 and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company.

The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2020 and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Company.

3. Going Concern

At 31 December 2020, the Group recorded a loss for the year of £6,904,000 and had net current liabilities of £3,392,000, after allowing for cash balances of £30,000.

Since the year end, the Group has raised additional equity funding of £1,220,000 and realised £850,000 from the sale of investments to provide for working capital requirements, and the Directors have prepared cashflow forecasts for the period to 30 September 2022 to assess whether the use of the going concern basis for the preparation of the financial statements is appropriate. In the short term, the Group will require further additional funding in order to meet its liabilities as they fall due and continue to operate as a going concern. The Directors have taken into consideration the level and timing of the Group's working capital requirements (which takes into account recent reductions in costs and control of discretionary spending to preserve cash flow) and has also considered the likelihood of successfully securing funding to meet these needs. In particular, consideration has been given to ongoing discussions around further third-party investment and the extent to which these discussions are advanced both in respect of short and longer term funding. The Directors acknowledge that while they have an expectation that funding will be secured based on this assessment, at the date of approval of these financial statements, no such funding has been unconditionally committed. Therefore, while the Directors have a reasonable expectation that the Group has the ability to raise the additional finance required in order to continue in operational existence for the foreseeable future, the uncertainty surrounding the ability and likely timing of securing such finance indicates that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Were no such funding to be secured, the Group would have no realistic alternative but to halt operations and prepare its financial statements on a non-going concern basis.

4. Earnings and Net Asset Value Per Share

The basic and diluted earnings per share is calculated by dividing the loss attributable to owners of the Group by the weighted average number of ordinary shares in issue during the year.

The weighted average number of shares used for calculating the diluted loss per share for 2020 and 2019 was the same as that used for calculating the basic loss per share as the effect of exercise of the outstanding share options was anti-dilutive.