Last checked at 30 Sep 2010 08:30
Petro Matad Limited ("Petro Matad" or the "Company")
Interim results for the six months ended 30 June 2010
LONDON, 30 September 2010: Petro Matad Limited ('Petro Matad' or 'the Company'), the AIM quoted Mongolian oil explorer, announces its unaudited interim results for the six months ended 30 June 2010 and updates shareholders on events since the period end.
Highlights:
o Initial drilling success from Company's first exploration well
o Drilling programme ongoing
o Funding secured to accelerate development of the Company's assets
o Strong technical team appointed
o New institutional shareholders
Enquiries:
Petro Matad Limited
Douglas J. McGay- CEO
+976 11 331099
Westhouse Securities Limited
Richard Baty/Petre Norton
+44 (0)20 7601 6100
CHIEF EXECUTIVE OFFICER'S STATEMENT
The first 6 months of 2010 was a period of significant development for Petro Matad. The Company achieved many milestones of growth and expansion but the most important event was the spudding of the first well, Davsan Tolgoi 1 ("DT-1"), on the Davsan Tolgoi Prospect at the Company's wholly owned Block XX.
Since the end of the period under review, the Company has made significant progress in both its exploration and corporate activities. The most important of which was the success of DT-1 which was then followed by the closure of our recent fund raise.
Technical Team
Petro Matad has put in place a strong technical team to progress both the advanced prospect of Block XX and Petro Matad's less developed Production Sharing Contracts ("PSCs"), Blocks IV and V, as well as investigate other opportunities in Mongolia.
In late 2009, we appointed our Chief Operations Officer, Mr Rodney Graham and commissioned him to locate and recruit a world-class petroleum exploration team to reside in Mongolia and head our Company's exploration effort. Accordingly, on 24 March, the Company appointed Dr James Coogan as its Exploration Manager. Dr Coogan is an American petroleum geologist with 28 years of experience in industry, government and academic settings, and has extensive experience in geological terrains that are analogous to the North Asian basins in which the Company operates. Further appointments of Dr Kurt Constenius as Chief Geophysicist, and another American geologist, Mr Justin Tully, completed the first stage of the initial exploration team. They have been complemented by Mongolian national professionals and are in residence in Mongolia. This is a proud achievement by Petro Matad, it being the first "in-residence" professional western technical team in the history of Mongolian petroleum exploration.
On 23 June, the Company also announced that it had secured the services of Frank Witteman as Wellsite Geologist and Petrophysicist for its three well drill programme and was contracting global oilfield services group, Weatherford International, to acquire an advanced wireline log suite and carry out petrologic and geochemical analysis. The Company also contracted a team of experienced American drilling supervisors and managers to manage its 2010 drilling programme. Petro Matad now has the personnel, and contractors to take full advantage of the exploration opportunities presented by its PCSs and drilling operations.
DT-1
The Company spudded its first exploration well, DT-1, on Block XX towards the end of the period, on 23 June. DT-1 was drilled vertically and reached a depth of 1,220 metres on 14 July. The well passed through the Tsagaantsav formation from 1,075m to 1,146m, then entered metamorphic basement. The entire 71m section of the Tsagaantsav formation contained oil shows and elevated mud gas, with indications of live oil through six sandstone and conglomerate units totalling about 35m in aggregate. Several of these intervals included very good shows that included cut, fluorescence, oil staining and a strong petroliferous odour. Good reservoir quality was indicated by fast drilling breaks through all sandstone and conglomerate intervals.
The uppermost oil shows consisted of volcaniclastic sandstone and conglomerates that are characteristic of Tsagaantsav reservoirs. The 3D seismic prognosis was re-interpreted utilising the actual downhole observations. This corroborated that the well drilled the structural crest of the local four-way closure, with progressively thickening lower Tsagaantsav sandstones southwards and eastwards from the well.
Wireline logs indicated good log porosities (25% average) and very good permeability concentrated in six sandstone zones, with a total net pay of 12 metres. The reservoir quality at DT-1 was attributed to a lack of compaction combined with early and continuous entrapment of hydrocarbons along the crest of the Davsan Tolgoi anticline, which formed the highest structural closure within the Tamtsag Basin.
The subsequent completion of the wireline testing of DT-1 confirmed that good reservoir quality should be expected along the length of the Davsan Tolgoi trend relative to the Tolson Uul oil fields in the deeper, more northerly part of the Tamtsag Basin. Furthermore, this is another step toward confirming our original model of the Davsan Tolgoi structure being a regional trap for the Tolson Uul basin. We are very happy with the initial results from our first well to date, and look forward to the completion of the analysis and tests.
The remaining wells of the 2010 drilling programme will be designed to maximise our knowledge and confirm the potential of the main Davsan Tolgoi anticline.
DT-2
On 31 August, after the period under review, Petro Matad announced that it had spudded the Davsan Tolgoi-2 well ("DT-2").
As at the date of publication of these interim results, drilling at DT-2 is proceeding.
Blocks IV and V
Following the spudding of DT-1, the Company commissioned a 2D seismic survey on its Blocks IV and V in central Mongolia. This is the first ever seismic survey done in this region of Mongolia, a matter of considerable pride for the Company. Under Petro Matad's management and supervision Mongolian geophysical contracting company, Khet LLC, undertook the 345 km survey, covering 7 seismic lines. It has now been completed and the results are being processed before interpretation by our in-house professional team.
In addition, Mongolian geophysical consultants, Geosan LLC, are performing an in-fill gravity survey over the entire two blocks. The 4,500 station survey will be added to the previous modern gravity data, providing a 2km x 2km grid over the entire 71,040km 2 combined area of the Blocks.
The existing gravity data delineated five sub-basins that are the initial focus of the seismic programme, and the preliminary results of the seismic survey confirm this, thereby increasing our knowledge of the depths of those sub-basins.
Seismic acquisition during 2010, rather than during 2011 as originally planned, was the result of rapid advancement of the Company's geological knowledge of the central Mongolian basins. The Company's in-house exploration team completed field expeditions with the assistance of international and Mongolian experts that identified prospective structures and confirmed principal elements of Mesozoic hydrocarbon systems across the Blocks. They also confirmed hydrocarbon material at surface and discovered more occurrences than historical records had indicated.
The above activities streamlined the exploration programme and advanced the goal of defining potential drillable targets in a much shorter time frame than originally envisaged.
The Company is increasingly optimistic about the potential of Blocks IV and V.
Financing
On 22 February the Company welcomed the European Bank for Reconstruction and Development (the "EBRD") as a shareholder when it received the first of two tranches of US$3 million. Following the second tranche on 14 June, the EBRD became, at that time, an 18.5% shareholder in Petro Matad thereby illustrating its confidence in Petro Matad and the Mongolian private sector.
The EBRD has participated in the recent fundraising (detailed below) to a significant degree.
On 16 September, after the period under review, the Company announced a fundraising of up to US$46.8 million through a placing of new shares to both new and existing shareholders. The net proceeds of the share issues will enable the Company to accelerate its drilling programme on Block XX. The Company now intends to test all appropriate wells in its three well programme instead of the single test that was previously budgeted in 2010. Weather permitting; Petro Matad plans to drill a fourth well in Davsan Tolgoi in 2010.
It is also proposed to commission further seismic surveys in other parts of Block XX. Priority will be in the southern portion of the Block, where Petro Matad has previously identified and partially explored other sub-basins. In addition, the Company will commence supplementary exploration of the other leads and prospects outlined in the northern part, adjacent to Davsan Tolgoi.
The Company will apply part of the net proceeds to additional exploration on Blocks IV and V with extra 2D seismic surveying and stratigraphic borehole drilling. In addition, other exploration opportunities in Mongolia will be assessed and if promising, pursued. This share issue allows Petro Matad to continue to explore Mongolia for oil and gas in an even more effective manner.
Finally, this fundraising will also enable an appropriate expansion of the facilities and services needed to support the Company's prime activity, the exploration for oil and gas in Mongolia. An increase in our commitment to corporate governance, social action and our technical services group are just a few of the areas that will benefit from the funding.
Board Appointees
Petro Matad will also benefit at board level from the experience of both the EBRD and Petrovis with the appointment of Mary Ellen Collins, a nominee of the EBRD, and Davaanyam Enkhchimeg, Chief Executive Officer of Petrovis, as non-executive directors of the Company on 17 May. Ms Collins has extensive financial experience and a proven track record of working with companies in the emerging markets and Ms Enkhchimeg has expertise in both Mongolian and international commerce. Both new directors will be valuable liaisons between Petro Matad and its two largest shareholders.
The Company now has an extremely diverse and well balanced board and is immensely proud of its international and local appointees.
Summary
The period under review and subsequent events have been an exciting time of achievement for the Board, management and staff of Petro Matad, which, we trust, has also pleased and gratified our shareholders. During that time we held a competition amongst management and staff for a corporate motto. The joint winners (a Mongolian and an American) created the following: "The Power of Oil for the Land of Eternal Sky". The events of 2010 seem to have made substantial progress for Petro Matad to be able to bring that motto to reality.
We look forward to updating shareholders on Petro Matad's progress over the coming months.
Douglas J. McGay
Chief Executive Officer
30 September 2010
About Petro Matad Limited
Petro Matad is the parent company of a group focused on oil exploration, as well as future development and production in Mongolia. The group holds the sole operatorship of three Production Sharing Contracts with the Government of Mongolia. The principal asset is the PSC for Block XX, a petroleum block of 14,250km² in the far eastern part of the country. The two other blocks, IV and V are located in central Mongolia and jointly cover 71,040km².
Petro Matad Limited is incorporated in the Isle of Man under company number 1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle of Man, IM1 1EQ.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF-YEAR ENDED 30 JUNE 2010
|
|
| Consolidated |
| |
|
|
| 30 Jun 2010 | 30 Jun 2009 | |
|
|
| US$'000 | US$'000 | |
|
|
|
|
| |
| Continuing Operations |
|
|
| |
| Revenue |
|
|
| |
| Interest Income |
| 21 | 51 | |
| Other Income |
| 5 | - | |
|
|
| 26 | 51 | |
|
|
|
|
| |
| Expenditure |
|
|
| |
| Consultancy fees |
| (59) | (171) | |
| Depreciation and amortisation |
| (21) | (8) | |
| Employee benefits expenses |
| (916) | (553) | |
| Exploration expenditure |
| (1,309) | (261) | |
| Finance costs |
| - | - | |
| Other expenses |
| (569) | (408) | |
| Profit/(loss) from continuing operations before income tax |
| (2,848) | (1,350) | |
| Income tax expense |
| - | - | |
| Profit/(loss) from continuing operations after income tax |
| (2,848) | (1,350) | |
| Net Profit/(loss) |
| (2,848) | (1,350) | |
|
|
|
|
| |
| Other comprehensive income |
|
|
| |
| Exchange rate differences on translating foreign operations |
| 46 | - | |
| Other comprehensive income, net of income tax |
| 46 | - | |
| Total comprehensive income |
| (2,802) | (1,350) | |
|
|
|
|
| |
| Profit/(loss) attributable to owners of the parent |
| (2,848) | (1,350) | |
|
|
|
|
| |
| Total comprehensive income attributable to owners of the parent |
| (2,802) | (1,350) | |
|
|
|
|
| |
| Earnings/(loss) per share (cents per share) |
|
|
| |
| - Basic and diluted earnings/(loss) per share |
| (2.08) | (1.39) | |
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2010
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| Consolidated |
| ||
|
| 30 Jun 2010 | 31 Dec 2009 | 30 Jun 2009 | |
|
| US$'000 | US$'000 | US$'000 | |
| ASSETS |
|
|
| |
| Current Assets |
|
|
| |
| Cash and cash equivalents | 8,608 | 5,215 | 3,189 | |
| Trade and other receivables | 63 | 34 | 54 | |
| Prepayments and other assets | 82 | 103 | 20 | |
| Total Current Assets | 8,753 | 5,352 | 3,263 | |
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|
|
|
| |
| Non-Current Assets |
|
|
| |
| Exploration and evaluation | 15,275 | 15,275 | 15,275 | |
| Property, plant and equipment | 249 | 199 | 92 | |
| Total Non-Current assets | 15,524 | 15,474 | 15,367 | |
| TOTAL ASSETS | 24,277 | 20,826 | 18,630 | |
|
|
|
|
| |
| LIABILITIES |
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|
| |
| Current liabilities |
|
|
| |
| Trade and other payables | 1,033 | 796 | 295 | |
| Provision for annual leave | 7 | - | - | |
| Total Current Liabilities | 1,040 | 796 | 295 | |
| TOTAL LIABILITIES | 1,040 | 796 | 295 | |
| NET ASSETS/(LIABILITIES) | 23,237 | 20,030 | 18,335 | |
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|
|
|
| |
| EQUITY |
|
|
| |
| Issued capital | 40,892 | 35,115 | 29,994 | |
| Retained earnings | (19,699) | (16,851) | (13,121) | |
| Reserves | 2,044 | 1,766 | 1,462 | |
| TOTAL EQUITY | 23,237 | 20,030 | 18,335 | |
CONDENSED CASH FLOW STATEMENT
FOR THE HALF YEAR ENDED 30 JUNE 2010
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| Consolidated | |
|
| 30 Jun 2010 | 30 Jun 2009 |
|
| US$'000 | US$'000 |
|
|
|
|
| Cash flows from operating activities |
|
|
| Payments to suppliers and employees | (2,385) | (1,121) |
| Interest received | 2 | - |
| Net cash flows from/(used in) operating activities | (2,383) | (1,121) |
|
|
|
|
| Cash flows from operating activities |
|
|
| Purchase of property, plant and equipment | (70) | (4) |
| Net cash flows from/(used in) investing activities | (70) | (4) |
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|
|
|
| Cash flows from financing activities |
|
|
| Proceeds from issue of shares | 6,003 | 1,066 |
| Capital raising costs | (157) | - |
| Net cash flows from/(used in) financing activities | 5,846 | 1,066 |
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents | 3,393 | (59) |
| Cash and cash equivalents at beginning of period | 5,215 | 3,248 |
| Cash and cash equivalents at end of period | 8,608 | 3,189 |
STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEAR ENDED 30 JUNE 2010
|
| Consolidated |
| ||||
|
| Attributable to equity holders of the parent | |||||
|
|
Issued Capital US$'000 |
Accumulated Losses US$'000 |
Other Reserves US$'000 |
Total US$'000 | ||
|
|
|
|
|
| ||
| As at 1 January 2009 | 28,928 | (11,771) | 1,240 | 18,397 | ||
| Loss for the period | - | (1,350) | - | (1,350) | ||
| Total income/expense for the period | - | (1,350) | - | (1,350) | ||
| Transactions with owners in their capacity as owners |
|
|
|
| ||
| Issue of share capital | 1,066 | - | - | 1,066 | ||
| Share based payments | - | - | 222 | 222 | ||
| As at 30 June 2009 | 29,994 | (13,121) | 1,462 | 18,335 | ||
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|
|
|
|
| ||
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|
|
| ||
|
|
|
|
|
| ||
| As at 1 January 2010 | 35,115 | (16,851) | 1,766 | 20,030 | ||
| Loss for the period | - | (2,848) | - | (2,848) | ||
| Other comprehensive income | - | - | 46 | 46 | ||
| Total comprehensive income for the period | - | (2,848) | 46 | (2,802) | ||
| Transactions with owners in their capacity as owners |
|
|
|
| ||
| Issue of share capital | 6,003 | - | - | 6,003 | ||
| Cost of capital raising | (226) | - | - | (226) | ||
| Share based payments | - | - | 232 | 232 | ||
| As at 30 June 2010 | 40,892 | (19,699) | 2,044 | 23,237 | ||
1. CORPORATE INFORMATION
The financial report covers the consolidated entity of Petro Matad Limited and its controlled entities.
Petro Matad Limited is a company incorporated in the Isle of Man on 30 August 2007, which has 4 wholly owned subsidiaries, Capcorp Mongolia LLC and Petro Matad LLC, situated in Mongolia, and Central Asian Petroleum Corporation Limited and Petromatad Invest Limited, incorporated in the Cayman Islands.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The half-year financial report does not include all of the notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.
The half-year financial report should be read in conjunction with the annual Financial Report of Petro Matad Limited as at 31 December 2009. The half-year consolidated financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 31 December 2009.
It is also recommended that the half-year financial report be considered together with any public announcements made by Petro Matad Limited and its controlled entities during the half-year ended 30 June 2010.
(a) Basis of Preparation
The half-year consolidated financial report is a general purpose financial report, which has been prepared in accordance with the requirements of Australian equivalents to International Financial Reporting Standards ("IFRS") and AASB 134. The half-year financial report has been prepared on a historical cost basis, except where stated.
The financial report is presented in US dollars and all values are rounded to the nearest thousand dollars ($'000).
For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting period.
(b) Basis of consolidation
The half-year consolidated financial statements comprise the financial statements of Petro Matad Limited and its controlled subsidiaries ('the Group').
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.
3. CONTRIBUTED EQUITY
|
| CONSOLIDATED | ||||||
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| 30 June 2010 | 31 December 2009 | ||||
|
|
| US$'000 | US$'000 | ||||
| Ordinary shares (i) 153,734,646 shares paid up (31 Dec 2009: 125,341,789) |
| 40,892 | 35,115 |
| |||
|
|
| 40,892 | 35,115 |
| |||
(i) Ordinary shares
Full paid ordinary shares carry one vote per share and carry the right to dividends.
| Movement in ordinary shares on issue |
No. of Shares | Issue Price US$ | US'$000 |
| At 31 December 2009 | 125,341,789 |
| 35,115 |
| Issue of 13,730,103 shares at 14 pence each
| 13,730,103 | $0.218 | 3,000
|
| Vesting of 18,750 options with exercise price of 11 pence each | 18,750 | $0.163 | 3 |
| Issue of 14,644,004 shares at 14 pence each
| 14,644,004 | $0.205 | 3,000 |
| Capital raising costs |
|
| (226) |
| At 30 June 2010 | 153,734,646 |
| 40,892 |
4. RESERVES
A detailed breakdown of the reserves of the Group is as follows:
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|
Merger reserve | Equity benefits reserve | Foreign currency translation | Total |
| Consolidated | USD$'000 | USD$'000 | USD$'000 | USD$'000 |
|
|
|
|
|
|
| As at 1 June 2009 | 831 | 631 | - | 1,462 |
| Currency translation differences | - | - | (76) | (76) |
| Option premium on convertible notes |
|
|
| - |
| Share based payments | - | 380 | - | 380 |
| As at 31 December 2009 | 831 | 1,011 | (76) | 1,766 |
|
|
|
|
|
|
| Currency translation differences | - | - | 46 | 46 |
| Share based payments | - | 232 | - | 232 |
| As at 30 June 2010 | 831 | 1,243 | (30) | 2,044 |
5. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing net profit / (loss) for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the net profit / (loss) attributable to ordinary shareholders (after deducting interest on the convertible redeemable preference shares) by the weighted average number of ordinary shares outstanding during the period (adjusted for the effects of dilutive options and dilutive convertible redeemable preference shares).
|
| CONSOLIDATED | ||||
|
| 30 June 2010 | 30 June 2009 | |||
| Basic earnings per share |
|
|
| ||
| Total basic loss per share (US$ cents per share) (note a) | (2.08) | (1.39) |
| ||
|
|
|
|
| ||
| Diluted earnings per share |
|
|
| ||
| Total diluted loss per share (US$ cents per share) (note b) | (2.08) | (1.39) |
| ||
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|
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|
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| (a) Basic earnings per share |
|
|
| ||
| The loss and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows: |
|
|
| ||
|
|
|
| |||
|
|
|
|
| ||
| Net loss attributable to ordinary shareholders (US$'000) | (2,848) | (1,350) |
| ||
|
|
|
|
| ||
| Weighted average number of ordinary shares for the purposes of basic earnings per share ('000) |
|
|
| ||
| 136,975 | 96,863 |
| |||
|
|
|
|
| ||
| (b) Diluted earnings per share |
|
|
| ||
| The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows: |
|
|
| ||
|
|
|
| |||
|
|
|
|
| ||
| Net loss attributable to ordinary shareholders (US$'000) | (2,848) | (1,350) |
| ||
|
|
|
|
| ||
| Weighted average number of ordinary shares for the purposes of basic earnings per share ('000) |
|
|
| ||
| 136,975 | 96,863 |
| |||
The warrants, options and performance awards could potentially dilute basic earnings per share in the future, however they have been excluded from the calculation of diluted earnings per share because they are anti-dilutive for the either of the periods presented.
6. EVENTS AFTER THE BALANCE SHEET DATE
On 21 September 2010 the Company issued a total of 13,640,203 ordinary shares of US$0.01 each at a placing price of £1.35 per share (approximately US$2.08 per share) (the "Placing Price") through a private placement to clients of Westhouse Securities Limited. In addition, the Company has received confirmations for and will issue up to 8,843,675 new shares through direct subscriptions at the Placing Price.
On 24 September 2010, European Bank for Reconstruction and Development (the "EBRD") notified the Company that it will conditionally subscribe for 3,367,003 new ordinary shares of US$0.01 each in the Company at the Placing Price per Share (the "EBRD Subscription"). Following the EBRD Subscription of approximately US$7 million, the aggregate amount raised by the Company in its September fundraising is approximately US$54 million.
No other matters or circumstances have arisen after the balance sheet date that have significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future periods.