WEN.L Regulatory News (WEN)

PRESS RELEASE 3 September 2020

WENTWORTH RESOURCES PLC("Wentworth" or the "Company")

Interim Results for the six months ended 30 June 2020

Wentworth Resources (AIM: WEN), the independent, Tanzania-focused natural gas production company, is pleased to announce its interim financial results for the six months ended 30 June 2020. All dollar values are expressed in US dollars unless stated otherwise.

HIGHLIGHTS

2020 Outlook

· The health and safety of our employees is our priority and robust precautionary measures remain in place to ensure the continued safety of our staff; there have been zero reported cases of COVID-19 at Mnazi Bay

· Mnazi Bay remains fully operational, with no adverse impact on supply from the pandemic

· Marginal decline in industrial demand due to weakened activity as a result of COVID-19 with 2020 production guidance slightly adjusted to 60-70 MMscf/day (gross)

· Tanzania's economy has remained resilient with recent data from the African Development Bank suggesting Tanzania's projected GDP growth in 2020 is set to be the highest in the East Africa region at 5.2%

· Production volumes are expected to be typically higher in H2 2020 than H1 2020 due to the end of the rainy season and the lifting of COVID-19 restrictions in Tanzania

· Mnazi Bay is well-positioned to supply increased gas volumes and support demand growth in H2 2020 and into 2021 with the capacity to supply volumes of 100 MMscf/day (gross)

Financial

· Interim dividend of $1.2 million declared, an increase of 20% from H1 2019 ($1.0 million), bringing the total dividend distribution declared in the last 12 months to $4.2 million

· Revenues of $8.3 million, underpinned by long-term fixed price contracts with the Government of the United Republic of Tanzania

· Adjusted EBITDAX of $4.1 million (H1 2019: $3.3 million)

· Debt free with $16.7 million cash on hand at 2 September 2020 

· Tanzania Petroleum Development Corporation ("TPDC") now fully current with payments

· Continued commitment from Tanzania Electric Supply Company ("TANESCO") to settle all remaining arrears with payments resuming in August

Operational

· Adjusted production guidance range of 60-70 MMscf/day (gross)

· 58.28 MMscf/day (H1 2019: 66.17 MMscf/day) for the period to 30 June 2020 following weakened demand due to COVID-19 related restrictions in March and April and an extended rainy season in January and June (normally March to late May)

· Industrial demand now recovering after the lifting of COVID-19 restrictions and natural gas-fired electricity generation displacing hydro-electric power due to the onset of the dry season. Proportion of supply to Tanzania's national grid provided by natural gas increased from 47% to currently 60%. Production averaged 68.48 MMscf/day for the period 1 July 2020 to 31 August 2020 and 71.77 MMscf/day for the period 1 August 2020 to 31 August 2020

· Low operational cost of production of $1.72/Mscf (2019: $1.88/Mscf)

· 2P Reserves of 95 Bscf, valued at $118.6 million (post-tax NPV10) as at 31 December 2019 as per published RPS Reserves Assessment Report

Sustainable Growth

· Wentworth remains focused on identifying sustainable and responsible growth opportunities that create value for Tanzania, Wentworth and all its stakeholders 

· With an energy access rate of only 37% according to the IEA, population growth set to double by 2050 and an economy shifting from an agricultural to an industrial base, there is a real need for transformational growth in Tanzania's domestic energy supply to deliver universal access by 2030

· Wentworth's robust gas-to-power production platform is well-positioned to service this future demand growth and we are committed to growing our platform responsibly to support demand growth in Tanzania and protect returns for shareholders

Dividend

A dividend is declared of GBP 0.48 pence per share (US$1.2 million), payable by the end of October 2020. A final dividend for the year ending 31 December 2020 will be determined by the Board with the full year results and is expected to be approximately $2.4 million in line with the Company's stated policy of 1/3 : 2/3 split between the interim and final dividend. Assuming a final dividend is declared, subject to shareholder approval, this would equate to a total distribution of $3.6 million which represents a full year dividend of 1.43 pence per share, a yield of approximately 8.2% at the current share price. Shareholders who hold their shares on the VPS Register on the Record Date shall receive the dividend in NOK. The exchange rate shall be determined on the UK Payment Date and the Company shall inform VPS Shareholders as soon as practicable thereafter of the NOK sum per share they will receive which shall be settled on the VPS Payment Date.

Interim Dividend Payment Timetable:

· Ex-dividend date: 10 September 2020

· Record Date: 11 September 2020

· UK Payment Date (for shareholders who hold shares on the UK Register): 9 October 2020

· VPS Payment Date (for shareholders who hold shares on the VPS Register): 23 October 2020

Interim Results Analyst Conference Call

The Company is holding a conference call for analysts at 9:30am BST today, Thursday 3 September 2020 and an updated presentation will be available at that time on the Company's website: wentplc.com.

To register for the call, please click on the following link:

https://secure.emincote.com/client/wentworth/wentworth005/vip_connect

To view the presentation during the call, please click on the following link:

https://secure.emincote.com/client/wentworth/wentworth005

Katherine Roe, CEO, commented:

"Despite a challenging macroeconomic environment due to the ongoing impacts of the COVID-19 pandemic, Wentworth has continued to demonstrate business resilience, robust financial and operational performance which has underpinned our decision to increase our interim dividend.

Having only launched our sustainable dividend policy in Q3 2019, we're delighted to have now declared three dividend payments within the last twelve months returning $4.2m in total to shareholders. This latest interim dividend also represents a 20% increase year-on-year from our inaugural dividend in September last year and demonstrates how our sustainable business model can withstand these global economic shocks.

Looking ahead to the second half of 2020, with Tanzania now returning gradually to business-as-usual and following unprecedentedly high levels of rainfall in the H1 2020, we expect to see an increase in demand for natural gas during the remaining part of this year.

Responsible and sustainable growth that creates value for all our stakeholders remains our priority. We are proud to be a Tanzanian business that is committed to playing a leading role in closing the country's energy access gap through low-carbon solutions as it seeks to deliver universal access by 2030. Through the provision of reliable, affordable and low-carbon power we have a significant opportunity to deliver transformational change for the people of Tanzania and to support the ongoing socio-economic development of the country." 

About Wentworth Resources

Wentworth Resources plc (AIM-listed: WEN) is a leading, domestic natural gas producer in Tanzania with a core producing asset at Mnazi Bay in the onshore Rovuma Basin in Southern Tanzania.

The power demand base in-country is growing and with an ambitious universal energy access target set by the Government for 2030, Wentworth has a vital role to play in increasing access by ensuring a reliable, affordable and growing supply of natural gas into the local market.

 In 2019, Wentworth launched its dividend policy and remains committed to responsible growth that maintains returns for shareholders.  

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

The condensed consolidated financial statements of Wentworth Resources plc, registered number 127571 were approved by the Board of Directors and authorised for issue on 2 September 2020.

Signed on behalf of the Board of Directors

Katherine Roe

Chief Executive Officer

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

1. Incorporation and basis of preparation

Wentworth Resources PLC ("Wentworth" or the "Company") is an East Africa-focused upstream oil and natural gas company. These unaudited condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries (collectively referred to as "Wentworth Group of Companies" or the "Group"). The Company is actively involved in oil and gas exploration, development and production operations. Wentworth is incorporated in Jersey and shares of the Company as at 30 June 2020 were listed on the AIM Market of the London Stock Exchange (ticker: WEN).

The Company's principal place of business is located at 4th Floor, St Paul's Gate, 22-24 New Street, Jersey JE1 4TR.

The Company maintains offices in Dar es Salaam, United Republic of Tanzania and London, United Kingdom.

2. Summary of significant accounting policies

Use of judgements and estimates

In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the 2019 annual report and financial statements.

Going concern

With the world currently struggling to come to terms with the unprecedented events of the Covid-19 pandemic and the risk presented to the continued health and well-being of our workforce alongside the disruption that preventative measures have had on the global supply chain in placing restrictions on the transportation of goods, services and personnel set to continue for some time to come, considerable time and resource have been allocated by Directors and senior management in ensuring that Wentworth is best placed to be able to continue to safely produce gas from Mnazi Bay alongside the Operator, Maurel et Prom. Given the essential nature of services provided and the forecasted impact of the virus in the country, the Group notes that an interruption of production and unavailability of key workforce is remote. The Directors however are mindful of the speed with which circumstances may change, both for the better or for the worse, and all modelling is based on information that we currently have available to us.

The Group has a long established and collaborative relationship with the Government of the United Republic of Tanzania, having operated in-country for many years, however the Directors do recognise that the Group is dependent upon the continued collection of gas sales invoices and ongoing operational support of the Government as its sole gas sales customer through its operating agencies TPDC and TANESCO.

The Directors have, therefore, judged that on a risk-weighted basis which takes into consideration both the probability of occurrence and an estimate of the financial impact, the continued timely settlement of gas-sales invoices by the Government of the United Republic of Tanzania continues to be the most significant risk currently faced by the Group. To this end, should no settlement of future gas sales invoices be received from the date of approval of these financial statements, we have assessed that the Group would be able to continue to operate for a period of up to 12-months without the need for a further injection of working capital.

Further to this, based on the application of reasonable and foreseeable sensitivities, which include potential changes in demand, capital spend, operating costs, the Directors believe that the Group is well placed to manage its financial exposures. The Directors have judged that owing to a combination of the stability of this relationship which has seen payment terms continue to improve during H1 2020 and its much improved financial position having fully repaid all of its fixed-term debt in January 2020, the Group has sufficient cash resources for its working capital needs, committed capital and operational expenditure programmes for at least the next 12-months based on the Directors' worst case scenario of no settlement of future gas sales as noted above.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and therefore continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Basis of presentation and statement of compliance

These unaudited condensed consolidated interim financial statements have been prepared by management in accordance with International Accounting Standard 34, "Interim Financial Reporting". The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

These unaudited condensed consolidated interim financial statements have been prepared following the same accounting policies as the annual audited consolidated financial statements for the year ended 31 December 2019 and should be read in conjunction with the annual audited consolidated financial statements and the notes thereto. These unaudited condensed consolidated interim financial statements were approved by the Board of Directors on 2 September 2020. The disclosures provided below are incremental to those included in the 2019 annual consolidated financial statements.

The information for the year ended 31 December 2019 included in the report was derived from the statutory accounts for that year which were prepared in accordance with International Financial Reporting Standards ('IFRSs') issued by the International Accounting Standards Board and interpretations issued by the International Financial Reporting Interpretations committee ('IFRIC') of the IASB as adopted by the EU up to 31 December 2019, a copy of which has been delivered to the Registrar of Companies. The auditor's opinion in relation to those accounts was unqualified, did not draw attention to any matters by way of emphasis and also did not contain a statement under section 498 (2) or 498 (3) if the Companies Act 2006.

Functional and presentation currency

These consolidated financial statements are presented in US dollars which is the functional currency the majority of the Group.

Basis of consolidation

These unaudited condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. Subsidiaries are entities that the Company controls. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and can affect those returns through its authority over the investee. The existence and effect of potential voting rights are considered when assessing whether a company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases.

The following legal entities are within the Wentworth Group of companies:

(1) The Wentworth Moçambique Petroleos, Limitada is in the process of voluntary liquidation after relinquishment of the Tembo Block Appraisal Licence. 

All inter-company transactions, balances and unrealized gains on transactions between the parent and subsidiary companies are eliminated on consolidation.

Changes in accounting policies

The following accounting standards, amendments and interpretations, which had no significant impact on these financial statements, became effective in the current reporting period on adoption by the EU through the European Financial Reporting Advisory Group ('EFRAG'):

IFRS 3 (amendments) 'Definition of a Business': The IASB effective date is 1 January 2020 and the amendment is yet to be endorsed by the EU. The amendment provides clearer application guidance to help companies distinguish between a business and a group of assets when applying IFRS 3 'Business Combinations'. The amendment also clarifies that applying the classification of a business would not be appropriate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. This amendment is not expected to have an impact on the Group's consolidated financial statements.

IAS 1 and IAS 8 (amendments) 'Definition of Material': The IASB effective date is 1 January 2020 and the amendment has been endorsed by the EU. The amendment revises the definition of material stating that 'information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity'. This amendment is not expected to have an impact on the Group's consolidated financial statements.

IFRS 9, IAS 39 and IFRS 7 (amendments) 'Interest Rate Benchmark Reform': The IASB effective date is 1 January 2020 and the amendment has been endorsed by the EU. The amendment requires that for interest rate hedges affected by Interbank Offered Rate ('IBOR') reform, the interest rate benchmark is not altered when considering whether a forecast transaction is highly probable, or whether there is an economic relationship between the hedged cash flow and the hedging instrument. This would apply for a limited period until there is no longer uncertainty relating to IBOR reform. This amendment is not expected to have an impact on the Group's consolidated financial statements.

Future accounting pronouncements

At the date of these financial statements the standards and interpretations listed below were issued but not yet effective. The adoption of these standards may result in future changes to existing accounting policies and disclosures. The Company is currently evaluating the impact that these standards will have on results of operations and financial position:

IFRS 17 'Insurance Contracts': The IASB effective date is 1 January 2021 and the standard is yet to be endorsed by the EU. IFRS 17 will replace IFRS 4 'Insurance Contracts' and applies to all types of insurance contracts as well as to certain guarantees and financial instruments with discretionary participation features. This standard is not expected to have an impact on the Group's consolidated financial statements.

3. Segment information

Net income/(loss) for the six months ended 30 June 2020

Net income/(loss) for the six months ended 30 June 2019

Selected balances at 30 June 2020

Capital additions for the six months ended 30 June 2019

Selected balances at 30 June 2019

Capital additions for the six months ended 30 June 2019

4. General and administrative costs

5. Finance income and finance costs

6. Trade and other receivables

The other receivable from TPDC represents income tax $73k (2019: $513k) paid by Wentworth Gas Limited, a wholly owned subsidiary of the Company. The income tax will be recovered from TPDC profit gas (security revenue) through future gas sales.

Subsequent to 30 June 2020, the Group has received total payments of $3.85 million from TPDC and $147k from TANESCO, significantly reducing the receivables balance at 2 September 2020.

Other receivables include $360k of VAT receivable and $437k of prepayments and accrued income.

Amounts receivable with respect to dissenting shareholder rights represent the agreed buy-back of shares from certain Norwegian shareholders on the 2018 corporate transition to UK and Oslo Børs delisting, further details of which are disclosed in notes 10 and 16.

7. Exploration and evaluation assets

Exploration costs comprise the acquisition and interpretation of 3D Seismic 225 Km² and 2D High Resolution Seismic 281 Km² at Mnazi Bay.

There have been no indicators of impairment during the period and as such no full impairment review has been undertaken.

8. Property, plant and equipment

There have been no indicators of impairment during the period and as such no full impairment review has been undertaken

9. Subsidiary undertakings

The principal subsidiary undertakings at 30 June 2020 are:

(1) The Wentworth Moçambique Petroleos, Limitada is in the process of liquidation after relinquishment of the Tembo Block Appraisal Licence. 

10. Trade and other payables

The payable to Mnazi Bay Operator represents the accrued Q2 2020 joint-venture cash-call for field costs between 1 April and 30 June 2020 totalling $791k of which $500k was paid to the Operator in advance and $291k was settled on its due date of 24 July 2020.

Following the completion of the corporate transition to UK and Oslo Børs delisting, three shareholders exercised certain Dissent Rights under Canadian law which may require the Company to buy back their equity holdings at fair value. The Company received Dissent Rights notices over a total of 2,329,326 shares with an anticipated fair value of $696,519 after adjusting for dividends that had been paid to those shareholders. $281,666 of the $696,519 has been agreed and will be settled. This amount has been provided for in full within these financial statements. The further $414,853 remains under dispute and subject to further negotiation and has therefore been classified as a contingent liability per note 14.

11. Overdraft credit facility

The Company has a rolling one-year, $2.5 million overdraft credit facility with a United Republic of Tanzania Government owned bank which is in the process of being renewed for a further 12 months to 5 April 2021 subject to the mutual agreement of the bank and the Company. The overdraft facility has an interest rate of the lender's base lending rate, minus 1% per annum to be paid monthly.

The credit facility, which was fully repaid on 9 July 2018, was not drawn-down at the period ended 30 June 2020.

Security provided to the lender includes a debenture over the fixed and floating assets of the Company's United Republic of Tanzania assets and a deed of assignment of 20% of the revenue and cash flow from sales of natural gas from the United Republic of Tanzania assets.

12. Long term loan

Credit facility from United Republic of Tanzania based banks

On 8 December 2014, Wentworth Gas Limited, a wholly owned subsidiary of the Company, entered into a $20.0 million loan to finance field infrastructure development within the Mnazi Bay Concession in the United Republic of Tanzania.

The term of the loan was initially forty-eight months in duration commencing on the first draw-down date with the loan bearing interest at six-month LIBOR rate plus 750 basis points, subject to a minimum (floor) of 8% p.a. and a maximum (ceiling) of 9.5% p.a. Security was in the form of a debenture creating first ranking charge over all the assets of WGL (assets of WGL include a 25.4% participation interest in the Mnazi Bay Concession), assignment over any TPDC long-term receivable and assignment of revenues generated from the Mnazi Bay Concession.

During 2017, the Company executed amendments to the credit facility agreement, which included the restructuring of principal loan repayments and added provisions. The new provisions contained a requirement for the Company to maintain two financial covenants, the Debt Service Coverage Ratio and Loan Life Coverage Ratio, both calculated semi-annually beginning on 30 June and 31 December. The interest rate was amended to the interest rate of six-month LIBOR rate plus 750 basis points subject to a minimum (floor) of 8.5% p.a. and no maximum (ceiling).

On 30 January 2020 the final principal repayment of $1,663k was made.

During the six months period ended 30 June 2020, the Company incurred interest expense on long-term loan, inclusive of accretion of financing costs, of $(12k) (2019: $209k). A total of $39k was settled in cash (2019: $387k).

13. Decommissioning and Abandonment provision

A reconciliation of the decommissioning obligations is provided below:

14. Contingent liabilities

Following the completion of the corporate transition to UK and Oslo Børs delisting, three shareholders exercised certain Dissent Rights under Canadian law which may require the Company to buy back their equity holdings at fair value. The Company received Dissent Rights notices over a total of 2,329,326 shares with an anticipated fair value of $696,519 after adjusting for dividends that had been paid to those shareholders. $281,666 of the $696,519 has been agreed and will be settled. This amount has been provided for in full within these financial statements. The further $414,853 remains under dispute and subject to further negotiation and has therefore been classified as a contingent liability.

15. Share-based payments

Movement in the total number of share options outstanding and their related weighted average exercise prices are summarized as follows:

The following table summarizes share options outstanding and exercisable at 30 June 2020:

1 The US Dollar to Norwegian Kroner exchange rate used for determining the exercise price at 30 June 2020 is 0.102621.

16. Share capital

17. Earnings per share

Basic and diluted EPS

18. Dividends

 The following dividends were declared and paid by the Company during the year.

On 24 April 2020, the Company declared a dividend of GBP 0.9 pence per share, being a total dividend distribution of $2.0 million. This second dividend with respect to the audited results to 31 December 2019 follows the Company's maiden interim dividend of $1.0 million, which was declared in September 2019, bringing a total distribution in respect of 2019 to $3.0 million, which delivers an annual yield of approximately 7.2%, based on the closing share price at 20 April 2020, in line with previous guidance.

The information contained within this announcement is deemed by Wentworth to constitute inside information as stipulated under the Market Abuse Regulation (EU) no. 596/2014 ("MAR"). On the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.