Last checked at 19 Apr 2016 11:56
19 April 2016
Evocutis plc
("Evocutis", or "the Company")
Interim Results for the six months ended 31 January 2016
Chairman's Statement
The Board presents the interim results for the six months ended 31 January 2016.
Review of Investments
Investment in Brazil Tungsten Holdings Limited ("BTHL"):The Company maintains its 10% equity interest in BTHL acquired in February 2015.
BTHL has advised that despite a difficult tungsten price environment, it has continued to focus on the development of its flagship Bodó mine in the Currais Novos region of Rio Grande do Norte state, Brazil, and continues with its required capital programme for mine development and mill construction with the aim of significantly increasing tungsten production during 2016.
It is expected that BTHL will now be on track to reach its Phase I target of 150 tonnes per day of ROM ore from underground by June 2016. This will place BTHL in a cash positive position even with the current difficult market for tungsten prices and allow it to benefit fully if tungsten prices recover. There have already been signs of improvement in the concentrate market with the price received by the BTHL rising by over U$20/Mtu (17%) since the beginning of the year. The strong fall in the Brazilian real versus the USD has helped significantly as almost all costs are in reals and receipts are in USD.
Since October last year, mining of ore from underground has been suspended and the focus has been entirely on development of the main shafts. A total of 92m of underground development was completed along with the associated infrastructure and BTHL is now preparing to begin first production from the Central decline. Development has been slow as the rock strength in some areas is poor and needs additional support. These areas coincide with the highest grade ore and assays taken have returned over 1.5% WO3 content. The typical grade for an underground tungsten mine is in the order of 0.5% and this grade is the reason that the Bodó mine can be cash positive even at the current low tungsten prices.
The treatment plant has been working on reduced hours and exclusively treating reject material stockpiled on site. Since October 2015 the plant has processed up to early March 2016, 9,742 tonnes of material producing a total of 13.2 tonnes of concentrate. This has been sold to buyers in Europe. Once Phase I is completed in June 2016, production is expected to rise to 12-14 tonnes per month as the underground ore is processed. BTHL has sufficient cash resources to last until Phase I is completed.
Investment in Horse Hill Developments Limited ("HHDL"):The Company currently owns a 2% interest in a special purpose company, Horse Hill Developments Ltd, which is the operator and 65% interest holder in two Petroleum Exploration and Development Licences ("PEDL") 137 and 246, in the northern Weald Basin north of Gatwick Airport.
In August 2015, Schlumberger independently verified Nutech's previous Horse Hill OIP estimates contained in PEDL137 and PEDL246. Schlumberger estimated a Mean OIP of 10,993 mmbbl, with Kimmeridge OIP of 8,262 mmbbl. Schlumberger's Mean OIP estimates are therefore 19% higher in total than Nutech's P50 OIP estimate over the two Horse Hill licences and 58% higher in the Kimmeridge.
In November 2015 and December 2015, respectively, the Environment Agency and the Oil and Gas Authority granted permits for the flow testing of the Horse Hill-1 discovery well.
Flow testing operations commenced in February 2016 and were completed in March 2016. Flow testing far exceeded expectations with an aggregate stable oil rate of 1,688 bbl per day achieved, from the Lower Kimmeridge, Upper Kimmeridge and Upper Portland reservoirs. The produced oil contained no water and no clear indication of any reservoir pressure depletion was observed.
Based on analysis of published reports from all significant UK onshore discovery wells, the 1,688 bbl per day flow rate is likely the highest aggregate stable rate from any onshore UK discovery well.
The way forward on Horse Hill will now involve seeking regulatory permissions to conduct extended production tests from all 3 zones at the site, followed by a horizontal sidetrack in the Kimmeridge and a possible new Portland development well.
All of the reviews and reports mentioned above state that the OIP volumes estimated should not be construed as recoverable resources or reserves.
Finance Review
The Company's net loss after taxation for the period was £85,000 (2015 - £62,000 loss).
Current assets including cash at 31 January 2016 amounted to £374,000 (31 January 2015: £503,000).
On 23 February 2016, the Company announced it had raised £350,000 through the issue of 500 million new shares at a placing price of 0.07 pence per share. The funds are to be used for general working capital purposes and to assist in seeking further investment opportunities.
Outlook
The past year has seen exceptionally challenging circumstances for natural resource companies, with commodity prices under severe pressure and a regulatory environment that has seen the introduction of new rules for investing companies on AIM. Despite these headwinds the board is pleased with the progress it has made with its two major investments.
As reported in the press, the flow test at Horse Hill has produced the highest flow rates of any onshore wildcat well in the UK, making this a particularly shrewd investment for the Company. The results have exceeded the Company's expectations and we look forward to additional news flow over the coming months. The board also has a further indirect interest in Horse Hill via its stake in Alba Mineral Resources.
We are also pleased that BTHL has so far been able to complete work on the underground development on time and within budget and wait expectantly for the rewards as the mine moves to a cash positive situation which management have indicated to us is expected to be during the 2nd half of this year.
The company also has a stake in Noricum which has multiple (gold and copper) near term production targets identified at its Bolnisi project in Georgia. We look forward to the drilling results there over the coming months.
In summary, during these tough times the board will vigorously pursue opportunistic acquisitions as funding becomes more challenging for many small companies. With cash at bank and no debt we are strongly placed to pick over the assets of those that fall by the wayside.
The Board would like to take this opportunity to thank our shareholders for their continued support and I look forward to reporting further progress over the next period and beyond.
Hamish Harris
Chairman
For further information, please contact:
Evocutis Plc | |
Hamish Harris/Donald Strang | +44 (0) 20 7440 0640 |
Nominated Adviser and Joint Broker: | |
Cairn Financial Advisers LLP | |
James Caithie/Liam Murray | +44 (0) 20 7148 7900 |
Joint Broker: | |
Peterhouse Corporate Finance | |
Duncan Vasey/Lucy Williams | +44 (0) 20 7469 0930 |
The interim results will be available electronically on the Group's website: www.evocutis.com.
Glossary
discovery | a discovery is a petroleum accumulation for which one or several exploratory wells have established through testing, sampling and/or logging the existence of a significant quantity of potentially moveable hydrocarbons |
electric logs | tools used within the wellbore to measure the rock and fluid properties of surrounding rock formations |
flow test | a flow test or well test involves testing a well by flowing hydrocarbons to surface, typically through a test separator. Key measured parameters are oil and gas flow rates, downhole pressure and surface pressure. The overall objective is to identify the well's capacity to produce hydrocarbons at a commercial flow rate |
limestone | a sedimentary rock predominantly composed of calcite (a crystalline mineral form of calcium carbonate) of organic, chemical or detrital origin. Minor amounts of dolomite, chert and clay are common in limestones. Chalk is a form of fine-grained limestone |
mean | or expected value, is the probability-weighted average of all possible values and is a measure of the central tendency either of a probability distribution or of the random variable characterised by that distribution |
P50 | a 50% probability that a stated volume will be equalled or exceeded |
reservoir pressure depletion | a reduction in reservoir pressure as indicated by downhole pressure gauges positioned in the well close to the zone being tested |
sandstone | a clastic sedimentary rock whose grains are predominantly sand-sized. The term is commonly used to imply consolidated sand or a rock made of predominantly quartz sand |
ROM | run of mine ore refers to ore in its natural, unprocessed state just as it is when blasted. |
WO3 | Tungsten oxide, also known as tungsten trioxide or tungstic anhydride |
Mtu | metric tonne units |
OIP | oil in place - the quantity of oil or petroleum that is estimated to exist originally in naturally occurring accumulations before any extraction or production |
Evocutis plc
Interim statement of comprehensive income - unaudited
For the six months ended 31 January 2016
UnauditedSix months ended31 January 2016 | UnauditedSix months ended31 January 2015 | AuditedYear ended31 July 2015 | |
£'000 | £'000 | £'000 | |
Continuing operations | |||
Administrative costs | (35) | (57) | (373) |
Reversal of/(Impairment) of available-for-sale asset | - | - | 72 |
Loss on disposal of available for sale asset | - | - | (66) |
Finance income | - | - | - |
Loss before tax | (35) | (57) | (367) |
Taxation | - | - | - |
Loss for the period from continuing operations | (35) | (57) | (367) |
Discontinued operations | |||
Loss for the period from discontinued operations | - | (5) | (9) |
Loss for the period and total comprehensive loss attributable to equity shareholders | (35) | (62) | (376) |
Other comprehensive income | |||
Increase in value of available for sale asset | (50) | - | 21 |
Other comprehensive income/(expenditure) for the period net of tax | (50) | - | 21 |
Total comprehensive income/(expenditure) for the period | (85) | (62) | (355) |
Loss per ordinary share | |||
Basic and diluted - continuing operations | (0.004p) | (0.01p) | (0.07p) |
Basic and diluted - discontinued operations | (0.004p) | (0.00p) | (0.07p) |
Evocutis plc
Interim statement of financial position - unaudited
As at 31 January 2016
UnauditedAt 31 January 2016 | UnauditedAt 31 January 2015 | AuditedAt 31 July 2015 | |
£'000 | £'000 | £'000 | |
ASSETS | |||
Non-current assets | |||
Intangible assets | - | 164 | - |
Available for sale investments | 1,169 | 138 | 1,219 |
1,169 | 302 | 1,219 | |
Current assets | |||
Trade and other receivables | 216 | 308 | 51 |
Cash and cash equivalents | 158 | 1,277 | 452 |
374 | 1,585 | 503 | |
Total assets | 1,543 | 1,887 | 1,722 |
LIABILITIES | |||
Current liabilities | |||
Trade and other payables | (74) | (73) | (154) |
(74) | (73) | (154) | |
Total liabilities | (74) | (73) | (154) |
Net assets | 1,469 | 1,814 | 1,568 |
EQUITY | |||
Equity attributable to equity holders of the company | |||
Ordinary share capital | 73 | 1,802 | 73 |
Deferred share capital | 1,729 | - | 1,729 |
Share premium reserve | 9,172 | 9,199 | 9,186 |
Share-based payments reserve | 174 | 114 | 174 |
Available for sale asset reserve | (29) | - | 21 |
Retained earnings | (9,650) | (9,301) | (9,615) |
Total equity | 1,469 | 1,814 | 1,568 |
Evocutis plc
Interim statement of changes in equity - unaudited
For the six months ended 31 January 2016
Ordinary Share Capital | Deferred share capital | Share Premium | Available for sale asset reserve | Share Based Payment Reserve | Retained earnings | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Unaudited | |||||||
At 1 August 2014 | 1,747 | - | 7,634 | 114 | (9,239) | 256 | |
Loss for the six month period ended 31 January 2015 | - | - | - | - | (62) | (62) | |
Total comprehensive loss | - | - | - | - | (62) | (62) | |
Share issue | 55 | - | 1,655 | - | - | 1,710 | |
Cost of share issue | - | - | (90) | - | - | (90) | |
At 31 January 2015 | 1,802 | - | 9,199 | 114 | (9,301) | 1,814 | |
Audited | |||||||
At 1 August 2014 | 1,747 | - | 7,634 | - | 114 | (9,239) | 256 |
Increase in value of available for sale assets | - | - | - | 21 | - | - | 21 |
Loss for the year | - | - | - | - | - | (376) | (376) |
Total comprehensive loss | - | - | - | - | - | (376) | (355) |
Transactions with owners: | |||||||
Reorganisation of share capital | (1,729) | 1,729 | - | - | - | - | - |
Issue of share capital | 55 | - | 1,655 | - | - | - | 1,710 |
Share issue costs | - | - | (103) | - | - | - | (103) |
Share-based payment charge | - | - | - | - | 60 | - | 60 |
At 31 July 2015 | 73 | 1,729 | 9,186 | 21 | 174 | (9,615) | 1,568 |
Unaudited | |||||||
At 1 August 2015 | |||||||
Decrease in value of available for sale assets | - | - | - | (50) | - | - | (50) |
Loss for the six month period ended 31 January 2016 | - | - | - | - | - | (35) | (11) |
Total comprehensive loss | - | - | - | (50) | - | (35) | (61) |
Cost of share issue | - | - | (14) | - | - | - | (14) |
At 31 January 2016 | 73 | 1,729 | 9,172 | (29) | 174 | (9,650) | 1,493 |
Evocutis plc
Interim statement of cash flows - unaudited
For the six months ended 31 January 2016
UnauditedSix months ended 31 January 2016 | UnauditedSix months ended 31 January 2015 | AuditedYear ended 31 July 2015 | |
£'000 | £'000 | £'000 | |
Cash flows from operating activities | |||
Loss after tax | (35) | (62) | (376) |
Impairment of available-for-sale asset | - | - | (72) |
Loss on sale of AFS Asset | - | - | 66 |
Revaluation of AFS Impairment losses | - | - | - |
Share-based payment charges | - | - | 60 |
Operating cash outflow before changes in working capital | (35) | (62) | (322) |
Movement in trade and other receivables | (165) | (293) | (36) |
Movement in trade and other payables | (80) | 52 | 133 |
Cash flow from operations | (280) | (303) | (225) |
Tax received | - | - | - |
Net cash flows used in operating activities | (280) | (303) | (225) |
Cash flow from investing activities | |||
Payments for investments in AFS assets | - | - | (1,198) |
Disposal proceeds from sale of AFS Asset | - | - | 144 |
Payments to acquire intangible assets | - | (164) | - |
Finance income | - | - | - |
Net cash outflow from investing activities | - | (164) | (1,054) |
Cash flows from financing activities | |||
Proceeds on issuing of ordinary shares | - | 1,710 | 1,710 |
Cost of issue of ordinary shares | (14) | (90) | (103) |
Net cash inflow from financing activities | (14) | 1,620 | 1,607 |
Net decrease in cash and cash equivalents | (294) | 1,153 | 328 |
Cash and cash equivalents at start of period | 452 | 124 | 124 |
Cash and cash equivalents at end of period | 158 | 1,277 | 452 |
Notes to the interim report
For the six months ended 31 January 2016
1 Basis of preparation
As permitted IAS 34, 'Interim Financial Reporting' has not been applied to these half-yearly results. The financial information of the Company for the six months ended 31 January 2016 have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively "IFRS") issued by the International Accounting Standards Board ("IASB") as adopted by the European Union ("adopted IFRS") and are in accordance with IFRS as issued by the IASB. The condensed interim financial information has been prepared using the accounting policies which will be applied in the Company's statutory financial statements for the year ending 31 July 2015.
The financial information shown in this publication is unaudited and does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The comparative figures for the financial year ended 31 July 2015 have been derived from the statutory accounts for 2015. The statutory accounts have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified and did not contain statements under the section 498(2) or 498(3) of the Companies Act 2006.
2 Loss per share
The calculation of the loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period.
UnauditedSix months ended31 January 2016 | UnauditedSix months ended31 January 2015 | AuditedYear ended31 July 2015 | |
£'000 | £'000 | £'000 | |
Loss on continuing activities | (35) | (57) | (367) |
Loss on discontinuing activities | - | (5) | (9) |
Loss on ordinary activities after tax | (35) | (62) | (376) |
Weighted average number of shares for calculating basic loss per share | 724,675,828 | 415,980,348 | 569,059,389 |
Basic and diluted - continuing activities | (0.004) | (0.01) | (0.069) |
Basic and diluted - discontinued activities | (0.000) | (0.00) | (0.001) |
Basic and diluted loss per share (pence) | (0.004) | (0.01) | (0.070) |
However, due to losses incurred in the year there is no dilutive effect from the potential exercise of the share options in existence.
3 Post balance sheet events
On 23 February 2016, the Company announced it had raised £350,000 through the issue of 500 million new shares at a placing price of 0.07 pence per share.
The Company also announced on 23 February 2016 that it had appointed Peterhouse Corporate Finance as the Company's joint broker with immediate effect.