2017 Interim Financial Results

Released : 25.08.2017

RNS Number : 0608P
Argos Resources Ltd
25 August 2017
 

 

25 August 2017

 

ARGOS RESOURCES LIMITED

("Argos" or "the Company")

 

2017 Interim Financial Results

 

Argos Resources Limited (AIM: ARG.L), the Falkland Islands based company focused on the North Falkland Basin, is pleased to announce its interim financial results for the six months ended 30 June 2017.

 

Highlights

·     $81 thousand profit for the period (H1 2016: Loss of $4 thousand);

·     $0.68 million cash reserves at 30 June 2017 (YE 2016: $0.70 million);

·     Participation Agreement between the Company, Noble and Edison ensures continued funding.

 

For further information:

 

Argos Resources Limited (+500 22685)                           Cenkos Securities plc (Nomad & Broker)

www.argosresources.com                                                   Derrick Lee (+44 131 220 9100)

Ian Thomson, Chairman                                                        Neil McDonald (+44 131 220 6939)

John Hogan, Managing Director



Chairman's Statement

 

The Company continues to hold a 5% Overriding Royalty Interest in Licence PL001, where Noble Energy is the Operator, in the North Falkland Basin. The Licence is adjacent to Licences PL032 and PL004 containing the large Sea Lion oil field and the Zebedee and Isobel-Elaine discoveries.

 

The fall in oil prices since 2014 has led to a world-wide slowdown in oil industry activity, but has also led to a general reduction in both operating and development costs as Operators focus on cost reductions to restore profitability. This lowering cost trend should have a positive effect on new exploration and development opportunities in the North Falkland Basin as development breakeven costs are progressively reduced.

 

We believe that Licence PL001 is well-positioned in a proven oil basin and contains a large inventory of attractive prospects.

 

Under the terms of a Participation Agreement between the Company, Noble and Licence partner Edison, the Company continues to receive quarterly cash payments from Noble and Edison totalling £300,000 per annum, which are sufficient to meet the Company's ongoing costs.

 

Financial overview

The Group profit for the six months to 30 June 2017 was $81 thousand (2016: loss of $4 thousand) giving an undiluted profit per share of 0.04 cents (2016: loss of 0.002 cents per share).

 

Administrative expenses were $0.14 million compared to $0.26 million for the same period in 2016.

 

Net assets of $29.4 million reflect an increase of $81 thousand since December 2016 as a result of the profit for the period.

 

Financial outlook

Cash proceeds being received under the Participation Agreement continue to fully fund the Group overhead.

 

 

 

                Ian Thomson OBE

                Chairman

Consolidated statement of comprehensive income

Period ended 30 June 2017

                                                                                                                                          






Note



6 months
ended
30 June
2017
unaudited
$'000


6 months
ended
30 June
2016
unaudited
$'000

Year
ended
31 December
2016
audited
$'000



 


 

Other income


185

308

505

Administrative expenses 


(142)

(265)

(427)

Finance income


1

1

1

Foreign exchange gains/(losses)


37

(48)

(95)



 


 

Profit/(loss) before tax


81

(4)

(16)

 


 

 

 

Profit/(loss) from operations attributable to owners of the parent


81

(4)

(16)



 


 

Total comprehensive income for the period


 


 

attributable to owners of the parent 


81

(4)

(16)



 

 

 



 

 

 



 

 

 

Earnings/(loss) per share (cents):


 

 

 

Basic and diluted

2

0.04

(0.002)

(0.007)

 



 

Consolidated statement of financial position

As at 30 June 2017

                                                                                                                                          




Note


As at

30 June
2017
unaudited
$'000

As at
30 June
2016
unaudited
$'000

As at
31 December
2016
audited
$'000

Assets


 



Non-current assets


 



Capitalised exploration expenditure

 

28,749

28,921

28,749

Plant and equipment

 

-

1

-

 

 

 

 

 

 

 

28,749

28,922

28,749

Current assets


 


 

Other receivables


12

13

15

Cash and cash equivalents


678

532

701

 


 


 

Total current assets


690

545

716



 


 

Total assets


29,439

29,467

29,465



 

 

 

Liabilities


 

 

 

Total and current liabilities


 

 

 

Other payables


(41)

(138)

(148)



 

 

 

Total net assets


29,398

29,329

29,317



 


 



 


 

Capital and reserves attributable to


 


 

equity holders of the company


 


 



 


 

Share capital


6,669

6,669

6,669

Share premium


30,071

30,071

30,071

Retained losses


(7,342)

(7,411)

(7,423)



 


 

Total shareholders' equity


29,398

29,329

29,317

 



 

Consolidated statement of cash flows

Period ended 30 June 2017

                                                                                                                                          


6 months
ended
30 June
2017
unaudited

$'000

6 months
ended
30 June
2016
unaudited
$'000

Year
ended
31 December
2016
audited
$'000

Cash flows from operating activities

 


 

Profit/(loss) for period

81

(4)

(16)

Adjustments for:

 


 

Finance income

(1)

(1)

(1)

Foreign exchange

(39)

-

92

Depreciation

1

2

3


 


 

Net cash inflow/(outflow) from operating activities

 


 

before changes in working capital

42

(3)

78


 


 

Decrease in other receivables

3

39

37

(Decrease)/increase in other payables

(108)

91

54


 


 

Net cash (outflow)/inflow

from operating activities

(63)

127

169


 


 

Investing activities

 


 

Interest received

1

1

1

Proceeds on sale of assets

-

-

172


 


 

Net cash inflow

from investment activities

1

1

173


 


 

Financing activities

 


 


 


 

Net cash inflow from financing activities

-

-

-


 


 

Net (decrease)/increase in cash and cash equivalents

(62)

128

342

Cash and cash equivalents at beginning of period

701

451

451

Exchange gains/(losses) on cash and cash equivalents

39

(47)

(92)


 


 

Cash and cash equivalents at end of period

678

532

701



 

Consolidated statement of changes in equity - unaudited

Period ended 30 June 2017

 




Share
capital
$'000


Share premium
$'000

Retained
earnings/
(deficit)
$'000


Total
equity
$'000

At 1 January 2016


6,669

30,071

(7,407)

29,333

Total comprehensive income for period to 30 June 2016


-

 

-

(4)

(4)







At 30 June 2016


6,669

30,071

(7,411)

29,329



 

 

 

 

Total comprehensive income for period to 31 December 2016


-

 

-

(12)

(12)



 

 

 

 

At 31 December 2016


6,669

30,071

(7,423)

29,317



 

 

 

 

Total comprehensive income for period to 30 June 2017


-

 

-

81

81



 

 

 

 

At 30 June 2017


6,669

30,071

(7,342)

29,398

 



 

Notes to the interim report - unaudited

Period ended 30 June 2017

 

1      Accounting policies

 

General information

Argos Resources Limited is a limited liability company incorporated and domiciled in the Falkland Islands under registration number 10605.  The address of its registered office is Argos House, H Jones Road, Stanley, Falkland Islands.

 

This consolidated interim report was approved for issue by the directors on 25 August 2017.

 

Basis of preparation

The financial information included within this interim report has not been reviewed nor audited and is based on the consolidated financial statements of Argos Resources Limited and its subsidiary Argos Exploration Limited ("the Group").  The consolidated financial statements are prepared in compliance with the recognition and measurement requirements of International Financial Reporting Standards as adopted by the European Union (IFRSs) and interpretations of those standards as issued by the International Accounting Standards Board (IASB).  They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2016 annual report.  These accounts have been prepared in accordance with the accounting policies that are expected to be applied in the report and accounts of Argos Resources Limited for the year ending 31 December 2017.

 

The comparative financial information for the year ended 31 December 2016 has been derived from the full statutory financial statements for that period which were prepared in compliance with IFRSs.  The Independent Auditors' Report on the annual report and financial statements for 2016 was unqualified and did not draw attention to any matters by way of emphasis.

 

The IASB has issued various new and revised standards, amendments and interpretations to existing standards that are not effective for the financial year ending 31 December 2017 and have not been adopted early.  The directors do not expect these standards and interpretations to have material impact on the financial statements.

 

Going concern

There is a risk that Noble and Edison withdraw from the Participation Agreement. In such circumstances the licence would revert back to Argos, subject to government approval, but funding would need to be found to cover overheads. Given that Noble and Edison have committed to the Participation Agreement, and have secured a three year licence extension to November 2019, their withdrawal is considered unlikely.

 

The directors consider that the Group is therefore fully funded for the foreseeable future and that the Group's available financial resources are adequate to provide working capital for at least 12 months from the date on which the financial statements were signed.  The financial statements have therefore been prepared on a going concern basis.



 

Notes to the interim report - unaudited

Period ended 30 June 2017

 

1      Accounting policies (continued)

 

Significant accounting judgements, estimates and assumptions

The Group makes certain estimates and assumptions regarding the future in relation to intangible assets and impairment of these assets.  Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  In the future, actual experience may differ from these estimates and assumptions.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed as follows:

 

Overriding royalty interest (ORRI)

The Group's principle asset is an ORRI which entitles the Group to 5% of gross revenues from all hydrocarbon discoveries developed within Licence PL001, situated in the North Falkland Basin.

 

The Group considers that the ORRI is similar in economic terms to holding a direct interest in the underlying licence as there is only a right to receive benefit from the ORRI on production and many of the risks faced by the Group are the same as those faced by the owner of the licence.  These risks are seen as:

 

Existence risk - whether oil is found in commercially extractable quantities;

Production risk - whether the operator is able to get any discovery to commercial production;

Timing risk - commencement and quantity as determined by the operator;

Price risk - determined by future commodity supply and demand.

 

The Group believes therefore that the most appropriate method of accounting for the retained ORRI is to classify it as an intangible asset in accordance with IAS 38.

 

The ORRI intangible is carried at cost less accumulated amortisation and any impairment provision.

 

Income receivable under the Participation Agreement

The quarterly income receivable under the participation agreement has been credited to the income statement on the basis that the purpose is to cover overhead.

 

Impairment

The ORRI is assessed for indicators of impairment at each period end under IAS 36. If such an indication is identified, the recoverable amount of the asset is estimated in order to determine the extent of any impairment. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated cash flows are discounted to their present value using a pre-tax discount rate. If the recoverable amount of the asset is estimated to be less than its carrying value, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is also recognised in the income statement.



 

Notes to the interim report - unaudited

Period ended 30 June 2017

 

1      Accounting policies (continued)

 

Should an impairment loss subsequently reverse, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment been recognised. A reversal of an impairment loss is also recognised in the income statement.

 

On production the income generated by the ORRI will be recognised as revenue in the income statement and the intangible asset will be amortised on a systematic basis.

 

2      Profit/(loss) per share


6 months
ended
30 June
2017
unaudited
Number

6 months
ended
30 June
2016
unaudited
Number

Year
ended
31 December
2016
audited
Number

 

Shares in issue brought forward  (2 pence shares)

 

219,713,205

 

219,713,205

 

219,713,205


 

 

 

Shares in issue carried forward  (2 pence shares)

 

219,713,205

 

219,713,205

 

219,713,205


 

 

 

Options not exercised

9,080,818

9,080,818

9,080,818


 

 

 

Weighted average number of ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares

 

 

 

228,794,023

 

 

 

228,794,023

 

 

 

228,794,023


 

 

 


6 months
ended
30 June
2017
unaudited

6 months
ended
30 June
2016
unaudited

Year
ended
31 December
2016
audited


 

 

 

Profit/(loss) for the period ($'000)

81

(4)

(16)


 

 

 

Earnings/(loss) per ordinary share (cents)

 

 

 

Basic

0.04

(0.002)

(0.007)

Diluted

0.04

(0.002)

(0.007)

 

Basic earnings/loss per share has been computed by dividing the earnings/loss by the weighted average number of shares in issue during the period.  Diluted earnings/loss per share is calculated by dividing the earnings/loss by the weighted average number of shares, plus the weighted average number of dilutive securities in issue during the period but not converted.

Notes to the interim report - unaudited

Period ended 30 June 2017

 

3       Events after the reporting date

 

There were no reportable events occurring after the balance sheet date.


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