Last checked at 22 Jun 2011 07:00
22 June 2011 | ||
Independent Resources PLC | ||
("Independent Resources" or "the Company") | ||
Interim report | ||
For the Six months ended 31 March 2011 | ||
Highlights | ||
Rivara: | Uncorroborated media speculation that crucial and long-awaited environmental clearance has been granted. | |
Aim to strengthen ownership profile to realise value. | ||
Ribolla: | Third-party expert reviews re-confirm magnitude of the play, farm-out discussions underway. | |
Ksar Hadada: | Block renewed for a further 3 years, shallow 500,000 acre Silurian oil-shale play under review. | |
• | Net cash at 31 March 2011: £2.8 million. | |
• | Committed 3rd-party funding at subsidiaries as at 31 March 2011: £4.75 million. | |
• | Interim loss before taxation: £467,000 (2010: £164,000). | |
• | Loss per share for the interim period: 1.0p (2010: 0.2p). | |
Chairman's Statement
The period was very hard on all of us for a variety of reasons but we finally pulled it off in the end. The experience is not something I'd like to re-live anytime soon. To the extent that I have a lot at stake in our company's success let me say that it is my personal mission to begin realising value from our investments. The period leading up to June this year was particularly frustrating. Some of this was self-inflicted and some of this was imposed on us. Let me briefly explain the choices we made, what we accomplished, and where we intend to go.
Rivara
In arguably the most important development since our Company's AIM admission, the Environmental Impact Assessment Commission ("VIA Commission") a decision-making body of Italy's Ministry of Environment is reported to have cleared the project to proceed. The Company has not yet received formal notification of this event.
Rivara, as most of you already know, has the potential to become the most competitive merchant gas storage facility on the continent. It sits in Europe's third-largest gas market and on the main natural gas trunk-line that links Europe's future gas supplies to market, and increasingly so. The need for flexibility in gas supply management is becoming more critical all the time. As the old take-or-pay gas supply contracts expire and become increasingly rigid, as the market and the number of participants grow, and as the existing nuclear infrastructure reaches the end of its useful life, high-performance gas storage facilities, such as Rivara, capable of handling large volumes will become even more essential than they are already. Today in Italy we are still rationing storage supply and barely keeping up with increasingly disruptive weather patterns. Key suppliers have become less reliable, infrastructure has failed and there is near-universal consensus that new infrastructure must be built to cope. In this context, putting forward what we believe will be Europe's lowest-cost supplier of gas storage capacity, we feel confident that there is a lot of value in the project.
Whilst some legitimate safety concerns had to be addressed during the environmental approval process, the principle causes of the delay to Rivara have been a mixture of parochial politics, bureaucracy and institutional overlap. Purely technical questions are not difficult to address and document, although this does take time as it involves the application of rigorous, leading-edge and multidisciplinary geoscience expertise. The political aspects are harder to manage when they are fractured, contentious and in evolution, which is the case in this part of the world. Rivara is an aquifer storage (a deep porous reservoir, saturated with brine) and although aquifers have routinely been used all over the world to store gas, they have never been used in Italy. Rather, Italy relied on its dominant operator to convert its technically suitable depleted gas fields into storage facilities. In a culture averse to change, anything "new" is suspect, particularly if it is not home-grown. With the environmental clearance, the national government has finally accepted that there are no good reasons not to allow the project to proceed. Naturally, we are pleased that they agree with us. But that is still not enough, as we have said many times. We intend to undertake a significant appraisal programme to demonstrate and optimise the future facility's technical performance. This will also allow us to make new down-hole measurements with the latest technology to silence those critics who, in good or bad faith, remain sceptical. In reality, such an appraisal has always been part of the programme if only because it is a vital step before the Final Investment Decision to build the plant. As we have often stated, why would anyone build a €300 million underground facility, designed to contain over twice that value in gas, if there were any doubt about its safety and reliability?
We recognise that these delays have created very serious investor fatigue and have had an impact on the project's credibility. In 2008, long before the recent environmental clearance, ERG acquired a 15% stake in the project for 9.5 million Euros, valuing IRG's stake in the project at 54 million Euros. There could be some merit in doing something similar, if only to demonstrate what the project is worth now. Needless to say, we will need to compare such a scenario with the value the market is putting on our shares. Right now that decision looks straightforward, but perhaps this will change.
Our job on Rivara in the meantime is to put the issues of the past behind us and work with local stakeholders who objectively have a lot to gain from Rivara. The project can help balance local budgets, provide both short and long-term employment, and generally reinforce the local economy for many years to come. The near-term objective, under the auspices of the Ministry of Industry, is to reach a sensible agreement with the Emilia- Romagna Region, the province, and the local communities on such matters. Following this, we intend to execute the appraisal programme with the objective of documenting the technical, legal, and financial package underpinning the Final Investment Decision. Our strategy includes the participation in Rivara of a large, integrated natural gas operator. Should we execute such a plan, the Company would eventually hold a much smaller - but much more valuable - stake in the project. Naturally, such a scenario would be expected to significantly reward patient shareholders.
Ribolla
We announced an update on Ribolla fairly recently. The "self-inflicted frustration" to which I alluded at the outset was related to Ribolla. Having gone through a cycle of operations on the play last year we realised that the resource was as much an unconventional shale-gas play as a Coal Bed Methane play. The target zone was deeper than we had initially envisaged and the techniques required to exploit this resource would have to come from the playbooks of an experienced unconventional gas operator. In the context of delays at Rivara we were unwilling to ask shareholders to finance a significant new round of operations - it would have been unnecessarily dilutive. The decision to farm-out, or finance the project at source, was therefore easy. What was not easy was finding a suitably credible third-party expert to review the asset and secure a quality report in final form. The process took too long but we are very happy with the high-quality work that finally emerged in the reports by DeGolyer and MacNaughton and Fugro-Robertson.
There is no doubt that the resource is very significant. Original gas in place and gross prospective gas resources (mean estimates) for the main coal seam, together with associated low-grade coal and organic matter-rich shale are, respectively, 15.2 and 4.5 billion cubic metres (537 and 160 billion cubic feet). An additional and promising 40-50m thick organic rich section has been identified, which remains under assessment. Farm-out negotiations have commenced with a number of companies which have experience in optimising development of analogous unconventional gas projects and have indicated an interest in Ribolla. The data room is expected to be opened shortly and we hope to invite a suitable partner to finance and execute a multi-well test programme, using the best available techniques. A number of financial institutions have expressed potential interest in funding the asset, which, although certainly welcome, is not our current objective. We remain convinced that a capable unconventional gas operator would be best placed to help us more fully and more quickly realise the value in Ribolla.
Ksar Hadada
Last year the Company was carried during significant operations on our Tunisian interests. Those efforts were not successful and the previous operator withdrew from the joint venture. Ksar Hadada is an exploration permit onshore Tunisia near the Libyan border that remains highly prospective. The permit's Operator, PetroAsian Energy (Tunisia) Ltd, has a 78.03% Working Interest and IRG holds an 18.97% Working Interest. The JV is focusing on a new reservoir compartment of the Sidi-Toui Cambro-Ordovician prospect, as well as the very significant volume of oil-bearing Silurian Hot Shale, which is pervasive and effectively underlies the entire residual area of the permit at relatively shallow depth. The permit was recently renewed by the Tunisian authorities for an additional three years after the JV relinquished 3,360 km2 of the previously-held 5,612 km2 and committed to a new well and 100km of new 2D seismic. Ksar Hadada remains a non-core asset for the Company but one that we believe remains a very attractive opportunity. We expect third-party interest in the oil shale play but it is premature to speculate on how things will play out on Ksar Hadada.
Outlook
Our objectives in the months ahead are clear, achievable and value accretive for shareholders. We have a flexible financial position, giving us the means to reach our goals and remain highly motivated through our ownership position. Our knowledge of and experience with our assets, coupled with this financial flexibility, will allow us to grow significantly in the year ahead while providing excellent returns for shareholders. I look forward to providing further updates over the next few months.
For further information, please visit www.ir-plc.com or contact: | ||
Grayson Nash | Independent Resources plc | +39 06 4549 0720 |
Allan Piper | Tavistock Communications | 020 7920 3150 |
Simon Hudson | ||
Jonathan Wright/ Stewart Dickson | Seymour Pierce Limited | 020 7107 8000 |
(Corporate Finance) | ||
Richard Redmayne/David Banks | ||
(Corporate Broking) | ||
Independent Resources PLC | |||||
Consolidated statement of comprehensive income | |||||
Six months ended 31 March 2011 | |||||
Unaudited | Unaudited | ||||
1 October 2010 to | 1 October 2009 to | ||||
Notes | 31 March 2011 | 31 March 2010 | |||
Continuing operations | £ | £ | |||
Revenue | 2 | 20,663 | - | ||
Cost of sales | - | - | |||
Gross profit | 20,663 | - | |||
Administrative expenses | (626,234) | (583,148) | |||
Operating loss | (605,571) | (583,148) | |||
Financial income | 5 | 138,147 | 419,278 | ||
Financial expense | - | - | |||
Loss on ordinary activities before taxation | (467,424) | (163,870) | |||
Taxation | 3 | - | 65,000 | ||
Loss for the period | (467,424) | (98,870) | |||
Other comprehensive income: | |||||
Exchange difference on translating foreign operations | 358,139 | (336,895) | |||
Total comprehensive loss for the period | (109,285) | (435,765) | |||
Loss attributable to: | |||||
Owners of the parent | (455,220) | (85,476) | |||
Non-controlling interests | (12,204) | (13,394) | |||
(467,424) | (98,870) | ||||
Total comprehensive loss attributable to: | |||||
Owners of the parent | (129,897) | (383,768) | |||
Non-controlling interests | 20,612 | (51,997) | |||
(109,285) | (435,765) | ||||
Loss per share | 4 | ||||
From continuing operations: | |||||
Basic | (1.0) | (0.2) | |||
Diluted | (1.0) | (0.2) | |||
Independent Resources PLC |
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Consolidated statement of financial position |
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As at 31 March 2011 |
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Unaudited | Audited | Unaudited |
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31 March | 30 September | 31 March |
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2011 | 2010 | 2010 |
| |||
£ | £ | £ |
| |||
Non-current assets |
| |||||
Property, plant and equipment | 63,330 | 75,716 | 92,582 |
| ||
Goodwill | 450,766 | 450,766 | 5,253,670 |
| ||
Other intangible assets | 8,885,715 | 7,990,178 | 7,844,545 |
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9,399,811 | 8,516,660 | 13,190,797 |
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Current assets |
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Other receivables | 5,313,900 | 5,457,781 | 5,951,988 |
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Current taxation assets | 88,582 | 88,588 | - |
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Cash and cash equivalents | 2,831,000 | 3,894,310 | 3,310,929 |
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8,233,482 | 9,440,679 | 9,262,917 |
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Current liabilities |
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Trade and other payables | (645,273) | (582,558) | (546,653) |
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Current taxation liabilities | - | - | (73,500) |
| ||
Provisions | - | (309,759) | - |
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(645,273) | (892,317) | (620,153) |
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Net current assets | 7,588,209 | 8,548,362 | 8,642,764 |
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Net assets | 16,988,020 | 17,065,022 | 21,833,561 |
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Equity attributable to equity holders of the parent |
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Share capital | 458,369 | 458,369 | 415,739 |
| ||
Share premium | 15,287,351 | 15,287,351 | 12,881,702 |
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Shares to be issued | - | - | 4,802,904 |
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Share option reserve | 32,283 | 389,844 | 389,844 |
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Foreign currency translation reserve | 1,155,618 | 830,295 | 1,139,116 |
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Retained earnings | (1,306,433) | (1,241,057) | 808,972 |
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15,627,188 | 15,724,802 | 20,438,277 |
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Non-controlling interests | 1,360,832 | 1,340,220 | 1,395,284 |
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Total equity | 16,988,020 | 17,065,022 | 21,833,561 |
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Independent Resources PLC | |||||||||
Consolidated statement of changes in equity | |||||||||
Six months ended 31 March 2011 | |||||||||
Foreign | |||||||||
Shares | Share | currency | Non- | ||||||
Retained | Share | Share | to be | option | translation | controlling | Total | ||
earnings | capital | premium | Issued | reserve | reserve | Total | interests | equity | |
£ | £ | £ | £ | £ | £ | £ | £ | £ | |
1 October 2009 | 894,448 | 415,739 | 12,881,702 | 4,802,904 | 389,844 | 1,437,408 | 20,822,045 | 1,447,281 | 22,269,326 |
Loss for the period | (85,476) | - | - | - | - | - | (85,476) | (13,394) | (98,870) |
Exchange differences | - | - | - | - | - | (298,292) | (298,292) | (38,603) | (336,895) |
Total comprehensive income | |||||||||
for the period | 808,972 | 415,739 | 12,881,702 | 4,802,904 | 389,844 | 1,139,116 | 20,438,277 | 1,395,284 | 21,833,561 |
31 March 2010 | 808,972 | 415,739 | 12,881,702 | 4,802,904 | 389,844 | 1,139,116 | 20,438,277 | 1,395,284 | 21,833,561 |
1 October 2010 | (1,241,057) | 458,369 | 15,287,351 | - | 389,844 | 830,295 | 15,724,802 | 1,340,220 | 17,065,022 |
Loss for the period | (455,220) | - | - | - | - | - | (455,220) | (12,204) | (467,424) |
Exchange differences | - | - | - | - | - | 325,323 | 325,323 | 32,816 | 358,139 |
Total comprehensive income | |||||||||
for the period | (1,696,277) | 458,369 | 15,287,351 | - | 389,844 | 1,155,618 | 15,594,905 | 1,360,832 | 16,955,737 |
Share-based payments | - | - | - | - | 32,283 | - | 32,283 | - | 32,283 |
Share options lapsed | |||||||||
in the period | 389,844 | - | - | - | (389,844) | - | - | - | - |
31 March 2011 | (1,306,433) | 458,369 | 15,287,351 | - | 32,283 | 1,155,618 | 15,627,188 | 1,360,832 | 16,988,020 |
Independent Resources PLC | |||||
Consolidated statement of cash flows | |||||
Six months ended 31 March 2011 | |||||
Unaudited | Unaudited | ||||
1 October 2010 to | 1 October 2009 to | ||||
31 March 2011 | 31 March 2010 | ||||
£ | £ | ||||
Cash flows from operating activities | |||||
Loss before taxation | (467,424) | (163,870) | |||
Adjustments for: | |||||
Depreciation of property, plant and equipment | 14,623 | 15,487 | |||
Loss on disposal of property, plant and equipment | - | 29,517 | |||
Financial income | (138,147) | (419,278) | |||
(590,948) | (538,144) | ||||
Decrease/ (increase) in other receivables | 251,881 | (134,053) | |||
Decrease in trade and other payables | (247,044) | (168,357) | |||
Share-based payments | 32,283 | - | |||
Exchange rate difference on investment | 161,103 | (174,602) | |||
Cash used in operations | (392,725) | (1,015,156) | |||
Income taxes received | 6 | - | |||
Net cash used in operating activities | (392,719) | (1,015,156) | |||
Cash flows used in investing activities | |||||
Interest received | 30,147 | 30,278 | |||
Purchase of intangible assets | (700,374) | (993,762) | |||
Purchase of property, plant and equipment | (364) | (47,834) | |||
Net cash used in investing activities | (670,591) | (1,011,318) | |||
Net decrease in cash and cash equivalents | (1,063,310) | (2,026,474) | |||
Cash and cash equivalents at beginning of the period | 3,894,310 | 5,337,403 | |||
Cash and cash equivalents at end of the period | 2,831,000 | 3,310,929 | |||
Independent Resources PLC | |||||||||||
Notes to the interim financial information | |||||||||||
Six months ended 31 March 2011 | |||||||||||
1. | Accounting policies | ||||||||||
General information | |||||||||||
The interim financial information is for Independent Resources plc ("the company") and subsidiary undertakings (together, the "Group"). The company is registered in England and Wales and incorporated under the Companies Act 2006. The consolidated financial information is presented in GBP ("£") unless otherwise stated. | |||||||||||
Basis of preparation | |||||||||||
The interim financial information, for the period from 1 October 2010 to 31 March 2011, has been prepared under the historical cost convention and in accordance with International Financial Reporting Standards and International Accounting Standards as adopted by the European Union, and on the going concern basis. They are in accordance with the accounting policies set out in the statutory accounts for the year ended 30 September 2010. | |||||||||||
The Interim Report is unaudited and does not constitute statutory financial statements. The financial information for the year ended 30 September 2010 does not constitute statutory accounts, as defined in section 435 of the Companies Act 2006 but is based on those statutory financial statements. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. | |||||||||||
The interim consolidated financial statements for the six months ended 31 March 2011 have been prepared in accordance with IAS 34, Interim Financial Reporting. | |||||||||||
The operations of Independent Resources Plc are not affected by seasonal variations. | |||||||||||
The directors do not propose a dividend for the period (2010: nil). | |||||||||||
The Interim Report for the six months ended 31 March 2011 was approved by the Directors on 20 June 2011. | |||||||||||
Copies of the Interim Report are available from the Company's website www.ir-plc.com. | |||||||||||
2. | Business segments | ||||||||||
The group has adopted IFRS 8 Operating segments from 1 October 2009. Per IFRS 8, operating segments are based on internal reports about components of the group, which are regularly reviewed and used by the Board of Directors being the Chief Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance. The group's reportable operating segments are as follows: | |||||||||||
a. | Parent company | ||||||||||
b. | Rivara | ||||||||||
c. | Ribolla Basin CBM & Shale Gas Assets | ||||||||||
d. | Ksar Hadada | ||||||||||
The CODM monitors the operating results of each segment for the purpose of performance assessments and making decisions on resource allocation. Performance is based on assessing progress made on projects and the management of resources used. Segment assets and liabilities are presented inclusive of inter segment balances. | |||||||||||
The group did not generate any revenue during the year to 30 September 2010. In the period to 31 March 2011 revenue of £20,663 was generated in the Ribolla Basin CBM & Shale Gas Assets operating segment, which is based in Italy. This revenue was in relation to the ongoing work in Tunisia and not related to the Ribolla project itself. | |||||||||||
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Ribolla Basin |
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Parent | CBM & Shale |
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company | Rivara | Gas Assets | Ksar Hadada | Consolidation | Total |
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£ | £ | £ | £ | £ | £ |
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Six months to 31 March 2011 |
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Interest revenue | 28,860 | 109,282 | 5 | - | - | 138,147 |
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Interest expense | - | - | - | - | - | - |
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Depreciation | - | 1,464 | 13,159 | - | - | 14,623 |
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Impairment of |
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intangible assets | - | - | - | - | - | - |
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Income tax | - | - | - | - | - | - |
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Loss for the period |
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before taxation | 41,330 | 12,972 | (230,336) | (91,573) | (199,817) | (467,424) |
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Assets | 13,213,220 | 10,034,474 | 4,703,744 | 130,226 | (10,448,371) | 17,633,293 |
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Liabilities | (57,533) | (3,689,244) | (4,628,316) | (433,232) | 8,163,052 | (645,273) |
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Six months to 31 March 2010 |
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Interest revenue | 30,586 | 388,324 | 368 | - | - | 419,278 |
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Interest expense | - | - | - | - | - | - |
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Depreciation | 1,726 | 1,145 | 12,616 | - | - | 15,487 |
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Impairment of |
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intangible assets | - | - | - | - | - | - |
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Income tax | 65,000 | - | - | - | - | 65,000 |
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Loss for the period |
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before taxation | (320,239) | 273,701 | (282,430) | 44 | 165,054 | (163,870) |
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Assets | 16,924,269 | 9,655,637 | 3,717,913 | 1,072,552 | (8,916,657) | 22,453,714 |
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Liabilities | (124,811) | (3,018,260) | (3,998,776) | (1,077,935) | 7,599,629 | (620,153) |
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The geographical split of non-current assets arises as follows: | ||||
United | ||||
Kingdom | Overseas | Total | ||
£ | £ | £ | ||
31 March 2011 | ||||
Intangible assets | - | 8,885,715 | 8,885,715 | |
Goodwill | - | 450,766 | 450,766 | |
Property, plant and equipment | - | 63,330 | 63,330 | |
31 March 2010 | ||||
Intangible assets | - | 7,844,545 | 7,844,545 | |
Goodwill | - | 5,253,670 | 5,253,670 | |
Property, plant and equipment | - | 92,582 | 92,582 | |
3. | Taxation | |||
The current tax credit for the period to 31 March 2010 arises from the anticipated carry back of tax losses arising in the period to obtain a refund of tax previously paid in the United Kingdom. | ||||
The group has tax losses available to be carried forward in certain subsidiaries and the parent. With anticipated substantial lead times for the group's projects, and the possibility that these may therefore expire before their use, it is not considered appropriate to anticipate an asset value for them. | ||||
4. | Loss per share |
The calculation of basic and diluted earnings per share at 31 March 2011 was based on the loss attributable to ordinary shareholders of £442,307. The weighted average number of ordinary shares outstanding during the period ending 31 March 2011 and the effect of dilutive ordinary shares to be issued are shown below. | |
Contingently issuable shares such as included within the share option scheme or in connection with the acquisition of Independent Gas Management srl have not been treated as dilutive. The market conditions in respect of the first tranche of share options issued, and in connection with the acquisition of Independent Gas Management srl, were not met and no shares are issuable in respect of them. The market conditions in respect of the remaining contingently issuable shares within the share option scheme have not been met at 31 March 2011. | |
31 March 2011 | 31 March 2010 | ||||
£ | £ | ||||
Net loss for the period | (455,220) | (85,476) | |||
Basic weighted average ordinary shares | |||||
in issue during the period | 45,836,867 | 41,573,867 | |||
Diluted weighted average ordinary shares | |||||
in issue during the period | 45,836,867 | 41,573,867 | |||
5. | Net financial income |
Net financial income includes £108,000 (Period to 31 March 2010 - £389,000) relating to the increase in the net present value of receivables which are measured at amortised cost due to the unwinding of the effective interest implicit in the discounting calculations. | |
Registered office | |
Independent Resources plc | |
Tower Bridge House, St. Katharine's Way, London E1W 1DD | |
Email: mailbox@ir-plc.com | |
Commercial office | |
Piazza Mondadori 3, 20122 Milano, Italy | |
Telephone: +39 02 4547 3380 | |
Fax: +39 02 4547 3381 | |
Email: mailbox@ir-plc.com | |
Technical office | |
Viale Liegi 41, 00198 Rome, Italy | |
Telephone: +39 06 4549 0720 | |
Fax: +39 06 4549 0721 | |
Email: mailbox@ir-plc.com | |