28 Feb 2019 07:00
28 February 2019
Red Emperor Resources NL
Half Year Report for the Six Months Ended 31 December 2018
The Board of Red Emperor Resources NL (ASX/AIM: RMP) ("RMP", "Red Emperor" or the "Company"), the natural resource exploration company with oil and gas interests on the Alaska North Slope and in South East Asia, is pleased to announce its unaudited interim results for the 6 months to 31 December 2018.
Please see below extracts from the Company's Half Year Report for the period ended 31 December 2018, being the:
- Directors' Report
- Consolidated Statement of Profit or Loss and Other Comprehensive Income
- Consolidated Statement of Financial Position
- Consolidated Statement of Changes in Equity
- Consolidated Statement of Cash Flows
A copy of the full Half Year Report is available on the Company's website - www.redemperorresources.com
For further information, please visit www.redemperorresources.com or contact:
Red Emperor Resources NL | +61 8 9212 0102 |
Greg Bandy |
|
|
|
Strand Hanson Limited (Nominated Adviser) | +44 (0) 20 7409 3494 |
James Harris |
|
|
|
Brandon Hill Capital (UK Broker) | +44 (0) 203 463 5010 |
|
|
708 Capital Pty Ltd (Australian Broker) | +61 (0) 2 9112 2500 |
|
|
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.
Directors' Report
The Directors are pleased to present their report for Red Emperor Resources NL ("Red Emperor" or the "Company") and its subsidiaries (the "Group") for the half year ended 31 December 2018.
DIRECTORS
The persons who were directors of Red Emperor during the half year and up to the date of this report are:
· Greg Bandy (Managing Director)
· Aaron Bertolatti (Director & Company Secretary)
· Jason Bontempo (Non-Executive Director)
REVIEW OF OPERATIONS
Alaska North Slope
During the reporting period, Red Emperor, along with 88 Energy Limited (ASX/AIM: 88E) ("88 Energy") and Otto Energy Limited (ASX: OEL) ("Otto") (collectively, the "Consortium Partners"), executed formal "Definitive Agreements", including a Participation Agreement, with Great Bear Petroleum Ventures II LLC ("Great Bear") to acquire the majority of Great Bear's working interest in four leases on the western flank of the Alaska North Slope region, specifically ADL#s 391718, 391719, 319720 & 391721; collectively the "Western Blocks". Refer to the Company's announcement of 30 July 2018 for further details.
The consortium operator, 88 Energy, via its wholly owned subsidiary, Captivate Energy Alaska, Inc, subsequently executed a rig contract with Nordic-Calista Services for the drilling of the "Winx" Prospect, located on the Western Blocks, North Slope of Alaska. Winx is a 3D seismic defined oil prospect in the successful Nanushuk play fairway with a gross mean unrisked prospective resource of 400 million barrels ("MMbbls") (126MMbbls net to Red Emperor) and a geological chance of success in the range of 25-30%. Refer to the Company's announcement of 25 June 2018 for further details.
Cautionary Statement: The estimated quantities of petroleum that may be potentially recovered by the application of a future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation are required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
The primary objective of the Winx-1 well ("Winx-1") is the Nanushuk Topset play, targeting the Nanushuk 4 and 5 sands. As can be seen in Figure 1, the location of Winx-1 has been identified using the Nanuq South 3D which covers the third party 2017 Horseshoe discovery plus a large swathe of the "Western Blocks". Similar amplitude response is observed at the Winx prospect to that seen at the successful Horseshoe well location, which is situated approximately 4 miles (6 kilometres) to the west.
http://www.rns-pdf.londonstockexchange.com/rns/3944R_1-2019-2-28.pdf
Figure 1: Winx-1 targeting multiple stacked prospects with strong amplitude support
Philippines (Block SC55)
DownUnder GeoSolutions commenced work following the award of the seismic data reprocessing and quantitative interpretation (QI) contract. This activity is part of the ongoing effort by the Block SC55 consortium to help further de-risk previously identified drill-ready targets, including the "Cinco" gas prospect which has a best estimate prospective resource of 1.6 trillion cubic feet ("tcf") recoverable gas, and identify new highly prospective leads whilst reducing overall uncertainty. By leveraging our extensive and robust data set we can ensure that the consortium is on the strongest technical footing as it moves forward in due course.
Corporate
Red Emperor Alaska Limited, a wholly owned subsidiary company, was incorporated on 11 July 2018 in the State of Alaska.
On 8 August 2018, the Company issued 16,000,000 unlisted options to management and certain corporate advisers exercisable at A$0.04 each on or before 31 December 2020.
On 22 November 2018, the Company issued a further 10,000,000 unlisted options to its Directors exercisable at A$0.04 each on or before 31 December 2020.
SIGNIFICANT EVENTS AFTER THE REPORTING DATE
Subsequent to the period end, the Company placed 100,000,000 new ordinary shares at an issue price of 2.8 pence (AUD0.05) per share to raise £2.8 million (approximately AUD5.0m) before expenses. The oversubscribed placing was made to both new and existing institutional and sophisticated investors, via the Company's UK Broker, Brandon Hill Capital, and its Australian Broker and Corporate Adviser, 708 Capital Pty Ltd and Max Capital. In addition, the Company agreed to issue, in aggregate, 6,000,000 unlisted options to its aforementioned brokers and corporate adviser, exercisable at a price of 2.8 pence (AUD0.05) per new ordinary share, on or before 15 January 2022.
During the month of January 2019, the company constructed an approximate 11-mile (18-kilometre) ice road on the Western Blocks to provide access to the Winx-1 drill location. The drill rig, Nordic Rig#3, was mobilised on 1 February 2019 (local Alaska time) from Deadhorse, Alaska arriving on location on 7 February 2019 (local Alaska time). After completion of rig-up activities and other preparatory work, the Winx-1 well was spudded on 15 February 2019 (local Alaska time).
There are no other significant events subsequent to the end of the reporting period to the date of this report.
Auditor's Independence Declaration
Section 307C of the Corporations Act 2001 requires the Company's auditors to provide the Directors of the Company with an Independence Declaration in relation to their review of the interim financial report. This Independence Declaration forms part of this Directors' report for the half-year ended 31 December 2018.
This report is signed in accordance with a resolution of the Board of Directors made pursuant to section 306(3) of the Corporations Act 2001.
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the half-year ended 31 December 2018
| 31 December 2018 $ | 31 December 2017 $ |
Continuing Operations |
|
|
Interest received | 52,602 | 68,746 |
Sale of subsidiary - Georgian Oil Pty Ltd | 26,976 | - |
|
|
|
Employee and director benefits expense | (245,049) | (123,131) |
Professional and consultants | (123,742) | (156,883) |
ASX and AIM and share registry fees | (70,996) | (30,923) |
Exploration expenditure written off | - | (31,373) |
Realised gain on investment | - | 10,445 |
Share based payment expense | (700,330) | - |
Unrealised Foreign exchange gain/(loss) | 26,585 | (22,866) |
Other expenses | (324,406) | (149,050) |
Loss before income tax | (1,358,360) | (435,035) |
|
|
|
Income tax expense | - | - |
Loss after Income Tax | (1,358,360) | (435,035) |
|
|
|
Other comprehensive loss |
|
|
Items that may be reclassified to profit or loss |
|
|
Foreign currency translation differences | 160,936 | 224 |
Other comprehensive income/(loss) for the period net of tax | 160,936 | 224 |
Total comprehensive loss for the period | (1,197,424) | (434,811) |
Loss per share for the period attributable to the members of Red Emperor Resources NL |
|
|
Basic loss per share (cents) | (0.32) | (0.10) |
Diluted loss per share (cents) | N/A | N/A |
Consolidated Statement of Financial Position
as at 31 December 2018
| 31 December 2018 $ | 30 June 2018 $ |
Current Assets |
|
|
Cash and cash equivalents | 4,446,161 | 10,344,621 |
Trade and other receivables | 1,521,623 | 17,883 |
Total Current Assets | 5,967,784 | 10,362,504 |
|
|
|
Non-Current Assets |
|
|
Deferred exploration and evaluation expenditure | 3,864,694 | - |
Financial assets at fair value through profit or loss | - | 400 |
Total Non-Current Assets | 3,864,694 | 400 |
Total Assets | 9,832,478 | 10,362,904 |
|
|
|
Current Liabilities |
|
|
Trade and other payables | 96,829 | 132,561 |
Total Current Liabilities | 96,829 | 132,561 |
Total Liabilities | 96,829 | 132,561 |
|
|
|
Net Assets | 9,735,649 | 10,230,343 |
|
|
|
Equity |
|
|
Issued capital | 57,329,505 | 57,329,505 |
Reserves | 4,960,494 | 4,096,828 |
Accumulated losses | (52,554,350) | (51,195,990) |
Total Equity | 9,735,649 | 10,230,343 |
|
|
|
Consolidated Statement of Changes in Equity
for the half-year ended 31 December 2018
| Issued capital $ | Accumulated losses $ | Foreign exchange translation reserve $ | Share based payments reserve $ | Total $ |
|
|
|
|
|
|
Balance at 1 July 2017 | 57,329,505 | (50,505,893) | (15,430) | 4,111,702 | 10,919,884 |
Total comprehensive loss for the period |
|
|
|
|
|
Loss for the period | - | (435,035) | - | - | (435,035) |
Other comprehensive income/(loss) | - | - | 224 | - | 224 |
Total comprehensive income/(loss) for the period | - | (435,035) | 224 | - | (434,811) |
Transactions with owners in their capacity as owners |
|
|
|
|
|
Balance at 31 December 2017 | 57,329,505 | (50,940,928) | (15,206) | 4,111,702 | 10,485,073 |
Consolidated Statement of Changes in Equity (continued)
| Issued capital $ | Accumulated losses $ | Foreign exchange translation reserve $ | Share based payments reserve $ | Total $ |
Balance at 1 July 2018 | 57,329,505 | (51,195,990) | (14,874) | 4,111,702 | 10,230,343 |
Total comprehensive loss for the year |
|
|
|
|
|
Loss for the year | - | (1,358,360) | - | - | (1,358,360) |
Other comprehensive income/(loss) | - | - | 160,936 | - | 160,936 |
Total comprehensive income/(loss) for the year | - | (1,358,360) | 160,936 | - | (1,197,424) |
Transactions with owners in their capacity as owners |
|
|
|
|
|
Proceeds from options issued during the period | - | - | - | 2,400 | 2,400 |
Share based payments | - | - | - | 700,330 | 700,330 |
Balance at 31 December 2018 | 57,329,505 | (52,554,350) | 146,062 | 4,814,432 | 9,735,649 |
Consolidated Statement of Cash Flows
for the half-year ended 31 December 2018
| 31 December 2018 $ | 31 December 2017 $ |
Cash flows from operating activities |
|
|
Payments to suppliers and employees | (796,261) | (486,509) |
Interest received | 52,602 | 68,746 |
Net cash used in operating activities | (743,659) | (417,763) |
|
|
|
Cash flows from investing activities |
|
|
Payments for exploration and evaluation | (3,890,334) | (13,059) |
Payment of performance bond | (1,454,779) | - |
Proceeds from sale of subsidiary - Georgian Oil Pty Ltd | 26,976 | - |
Proceeds from sale of equities | - | 10,445 |
Net cash used in investing activities | (5,318,137) | (2,614) |
|
|
|
Cash flows from financing activities |
|
|
Proceeds from issue of options | 2,400 | - |
Net cash provided by financing activities | 2,400 | - |
|
|
|
|
|
|
Net decrease in cash and cash equivalents | (6,059,396) | (420,377) |
Cash and cash equivalents at beginning of period | 10,344,621 | 10,921,315 |
Effects of exchange rate changes on cash and cash equivalents | 160,936 | (22,865) |
Cash and cash equivalents at the end of the period | 4,446,161 | 10,478,073 |
About Red Emperor Resources NL
Red Emperor Resources NL is an Australian natural resource exploration company listed on both the Australian Securities Exchange (ASX: RMP) and the AIM Market (AIM: RMP). Red Emperor has oil and gas interests on the Alaska North Slope and in South East Asia.
Alaska
Red Emperor has entered into Definitive Agreements with its consortium partners 88 Energy Limited and Otto Energy Limited that will see the Company participate in the drilling of a highly prospective Nanushuk oil trend exploration well on the Alaska North Slope in early 2019. The drill target is immediately adjacent to and a direct analogue of the third party Horseshoe-1/1A oil well drilled in 2017. Horseshoe is part of the billion-barrel plus Nanushuk oil play-fairway, one of the largest conventional oil fields discovered in the US in more than 30 years.
Technical work on the Western Blocks has identified a gross best estimate prospective resource volume of 400 MMbbls (126 MMbbls net to RMP), and a geological chance of success of 25%-35%. The estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
Philippines
Red Emperor also holds an equity interest of 37.5% of Block SC55, which is located in the southwest Palawan Basin. SC55 covers an area of 9,880km2 and was awarded to Otto Energy Investments Ltd (formerly NorAsian Energy Ltd) in 2005. It is a deep-water block in the middle of a proven regional oil and gas fairway that extends from the productive offshore Borneo region in the southwest to the offshore Philippine production assets northwest of Palawan.
Red Emperor participated in a USD25m exploration well (Hawkeye-1) within the block in 2015 and contributed in excess of AUD5m towards drilling costs. Over USD50m has been spent exploring SC55 to date and a number of drill-ready targets remain, including the "Cinco" gas prospect which has a best estimate prospective resource of 1.6 trillion cubic feet ("tcf") recoverable gas.
Prospective Resources Reporting Notes
The Company announced the prospective resources estimate for the Western Blocks in its announcement titled "Red Emperor to acquire interest in large oil prospect in prolific Alaska North Slope" made on 25 June 2018. The Company confirms that it is not aware of any new information or data that materially affects the information included in that announcement, and that all material assumptions and technical parameters underpinning the estimates in that announcement continue to apply and have not materially changed.
(i) The prospective resources information in this announcement is effective as at 30 April 2018. (ii) The prospective resources information in this announcement has been estimated and is classified in accordance with SPE PRMS (Society of Petroleum Engineers Petroleum Resources Management System). (iii) The prospective resources information in this announcement is reported according to the Company's economic interest in each of the resources and net of royalties. (iv) The prospective resources information in this announcement has been estimated and prepared using the deterministic method. (v) The prospective resources information in this announcement has been estimated using a 6:1 BOE conversion ratio for gas to oil; 6:1 conversion ratio is based on an energy equivalency conversion method and does not represent value equivalency. (vi) The prospective resources information in this announcement has been estimated on the basis that products are sold on the spot market with delivery at the sales point on the production facilities. (vii) Prospective resources are reported on a best estimate basis. (viii) For prospective resources, the estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration, appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons. (ix) In respect to the prospective resources referred to in this announcement, Red Emperor's working interest in the four leases (ADL#s 391718, 391719, 319720 and 391721), totalling 22,711 acres all of which are located on the North Slope, Alaska, USA will be 31.5% upon completion of the transaction. (x) The prospective resources have been estimated on the following basis: the best estimate prospective recoverable resource calculation was based on a consideration of offset well information and seismic expression; a combination of volumetric assessment and field analogues have been used to estimate the prospective resources; exploration drilling will be required to assess these resources. (xi) The chance of discovery is considered moderate as the prospective resources are near developed and undeveloped reserves and in a proven oil and gas producing province. There is a risk that exploration will not result in sufficient volumes of oil and/or gas for a commercial development. (xii) Prospective resources are un-risked and have not been adjusted for an associated chance of discovery and a chance of development.