TIDMPELE
RNS Number : 7823O
Petrolatina Energy PLC
22 September 2011
22 September 2011
PetroLatina Energy Plc
("PetroLatina" or the "Company")
Interim Results for the six months ended 30 June 2011
PetroLatina (AIM: PELE), the independent oil and gas
exploration, development and production company focused on Latin
America, announces its unaudited interim results for the six months
ended 30 June 2011.
Financial Highlights:
-- Revenues increased by 51% to US$14.5 million (2010: US$9.6
million)
-- Gross profit increased significantly to US$10.6 million*
(2010: US$6.5 million*)
-- EBITDA generation of US$3.6 million* (2010: US$2.2
million*)
-- Basic and diluted EPS of US$(0.033) (2010: US$(0.043))
*Excluding DD&A of US$5.03m (2010: US$3.81m) and Impairment
charges of US$Nil (2010: US$1.71m).
Operational Highlights:
-- Average gross production rate, for all fields in which the
Group holds an interest, for the period increased by approximately
32% to 2,249 barrels of oil per day ("bopd") (2010: 1,699 bopd)
-- Average net production rate attributable to the Group
increased by approximately 28% to 975 bopd (2010: 760 bopd)
-- Total gross production for all fields in which the Group
holds an interest increased by approximately 32% to 407,093 barrels
("bbls") (2010: 307,556 bbls)
-- La Paloma block
o Well results to date and recent 3D seismic reprocessing
studies were used to re-map the structure which, together with the
results of recent simulation projects, has helped define the
locations for two new development wells: Colon-4 and Colon-5.
-- Querubin
o Querubin-1 well remains under a long term test and is
producing at an average rate of 139 bopd.
-- Tisquirama licence
o In spite of increasing Santa Lucia's gross production rate by
12.8% to 404 bopd (2010: 358 bopd), the net production rate reduced
slightly by approximately 2% to 50 bopd (2010: 51 bopd) reflecting
a price premium adjustment.
-- Midas block
o Stabilised production on the Chuira-1 well, which remains
under a long-term test, at 32 bopd gross. Seismic reprocessing is
currently being undertaken in Calgary by Arcis Corporation, and the
results will help define future well locations. 78 square
kilometres of 3D seismic has been acquired in relation to the Midas
Centro 3D-2011 campaign and initial processing has begun to define
a new exploratory prospect.
-- Serafin
o Serafin-1 gas well is producing at an average rate of 4.3
million cubic feet of gas per day ("mmscf/d"), and remains under a
6 month long term test.
-- Rio Zulia-Ayacucho ("RZA") pipeline's average throughput for
the period increased by approximately 2.5% to 3,063 bopd (2010:
2,989 bopd).
Corporate Highlights:
-- Conversion in full during the period of Tranches 1 and 2 of
the loan notes held by Tribeca Oil and Gas Financing Inc.
("TOGF").
Post Period End Highlights:
Operational
-- Farm-out agreement entered into with Shell Exploration and
Production Colombia GmbH ("Shell E&P Colombia"), an affiliate
of the Royal Dutch Shell group of companies, in respect of the
Company's VMM-28 exploration block. The agreement remains subject
to the approval of the Agencia Nacional de Hidrocarburos
("ANH").
o Under the agreement, Shell E&P Colombia will obtain an 85%
participating interest in the block. PetroLatina's Colombian
operating subsidiary will retain a 15% legal interest with an
option to participate in the block on expiry of an agreed
exclusivity period and reimbursement of its share of Shell E&P
Colombia's total sunk costs to the date of exercise of the option.
Upon the potential future exercise of the option, PetroLatina shall
pay, its share of the ongoing costs, expenses and liabilities
associated with the block.
o PetroLatina will receive a total fee of US$15 million in cash,
US$3 million was received on execution of the agreement and the
balance of US$12 million is due on receipt of the requisite
regulatory approval.
o Shell E&P Colombia will become operator of the contract
and be granted exclusive operating rights for a period of 6 years
or, if earlier, until Declaration of Commerciality (the
"Exclusivity Period").
o Shell E&P Colombia will pay for 100% of the costs,
expenses and liabilities associated with the work obligations for
the VMM-28 block during the Exclusivity Period.
Ongoing Work Programme
-- At Midas
o Exploration activities involving the initial processing of
78km(2) of 3D seismic data and the definition of a location for the
drilling of one exploratory well.
o Development activities involving high technology geophysical
studies: the reprocessing of 3D seismic data and the seismic
attributes relating to Midas Norte, and Midas Sur, to define
drilling locations for the Chuira-2 and Zoe-2 development
wells.
-- At La Paloma
o Exploration activities comprising the drilling of one
exploratory well.
o Development activitiescomprising the drilling of the Colon-4
and Colon-5 development wells.
-- At Putumayo
o Exploration activities involving completing the acquisition of
an initial 104.8km of 2D seismic data followed by an additional
48km of 2D seismic data and the drilling of one exploratory
well.
-- At Tisquirama Association Contract - Tisquirama B
o Conducting simulation studies on the Los Angeles field and the
drilling of one exploratory well (Tronos-1).
-- At Tisquirama Association Contract - Tisquirama A
o Conducting simulation studies on the Santa Lucia field.
Luc Gerard, Executive Chairman of PetroLatina, commented:
"The Group has continued to improve its underlying financial
performance during the first half of 2011.
The recent farm-out to Shell of the VMM-28 block, subject to ANH
approval, together with various ongoing initiatives by the Group to
efficiently allocate the cash flow generated from production to
areas of the Group's portfolio that will provide the fastest
anticipated returns, is expected to provide further positive
progress on both production and reserves for the remainder of this
year."
Enquiries:
PetroLatina Energy Plc
Juan Carlos Rodriguez, Chief Executive Officer Tel: +57 (1) 627 95
10
Pawan Sharma, Executive Vice President - Tel: +44 (0)20 7766
Corporate Affairs & CFO 0075
Strand Hanson Limited
Simon Raggett / Matthew Chandler Tel: +44 (0)20 7409
3494
Financial Dynamics
Ben Brewerton / Susan Quigley Tel: +44 (0)20 7831
3113
A copy of PetroLatina's interim financial statements is
available from the Company's registered office at 2nd Floor, Suite
2.3, Stanmore House, 29-30 St. James's Street, London SW1A 1HB,
registered company number 05173588 and is also available for
download from the Company's website at
www.petrolatinaenergy.com.
___
PetroLatina Energy Plc
Chairman's Statement
For the period ended 30 June 2011
The Group has continued to make progress during the first half
of 2011, achieving a further improvement in its underlying
financial performance. This was primarily a reflection of the
results of our exploration programme which has again served to
increase average production rates.
Post period end, in July 2011, we negotiated a farm-out
agreement with Shell E&P Colombia for it to become our
operating partner in respect of the VMM-28 contract, which we were
awarded in ANH's 2010 Open Ronda. Shell E&P Colombia's deep and
complex drilling capability and experience in conventional and
non-conventional reservoirs will be invaluable, and the farm-out
agreement provides us with exposure to exploration activity on the
VMM-28 block, including the technology and expertise of Shell
E&P Colombia, whilst enabling us to focus our resources on the
development of the other promising assets in our Colombian
portfolio, including the Putumayo-4 E&P block.
Following receipt of ANH approval in due course, the funds
received pursuant to the agreement with Shell E&P Colombia will
assist with the financing of our ongoing work programme.
Expenditure continues to be carefully targeted on the faster payout
development opportunities existing in our current portfolio. The
Group has continued with its initiatives to efficiently allocate
the cash flow generated from production to areas of the Group's
portfolio that will provide the fastest anticipated returns and I
look forward to reporting further progress on both production and
reserves for the remainder of this year.
Luc Gerard
Executive Chairman
22 September 2011
___
PetroLatina Energy Plc
Operational & Financial Review
For the period ended 30 June 2011
Overview
During the 6 month period under review, the Group has continued
to perform relatively well. Revenues increased by 51% to US$14.5
million (2010: US$9.6 million), and we generated an underlying
EBITDA of US$3.6 million (2010: US$2.2 million) excluding DD&A
of US$5.03m (2010: US$3.81m) and Impairment charges of US$Nil
(2010: US$1.71m).
Review of Operations
PetroLatina has continued to pursue its aggressive drilling
campaign aimed at increasing production in its existing fields and
making new discoveries in prospects on its exploration blocks, as
summarised below:
La Paloma Exploration and Production Agreement
Total gross production from the La Paloma field in which the
Group holds an interest for the six month period increased to
88,992 bbls (2010: 86,336 bbls).
Two new well locations were defined for Colon-4 and Colon-5
based on seismic attributes studies and new seismic interpretation,
which are anticipated to be spudded at the end of 2011.
Tisquirama Licence
Total gross production from the Santa Lucia field in which the
Group holds an interest for the six month period increased by
approximately 12.8% to 73,207 bbls (2010: 64,872 bbls).
Los Angeles Field
Total gross production from the Los Angeles and Querubin wells
for the six month period increased to 152,960 bbls (2010: 144,610
bbls).
Midas Exploration and Production Agreement
The Chuira-1 well is still producing on natural flow at a stable
gross rate of 32 bopd. No additional workovers have been carried
out on this well. Additional seismic attribute studies are being
conducted by Arcis Corporation in order to complement the detailed
fracture study over the 3D seismic volume in order to define
potential future development and deeper exploratory wells in this
area. In addition, a surface geological study over the La Luna
formation (Limestone) was completed providing important results on
rock properties, organic matter content, fracture patterns and
stratigraphical information in respect of the Chuira reservoir.
These studies provide a clearer picture for incremental production
through future drilling in the area.
Production from the Zoe-1 well has been unstable with increasing
water cut. The Company therefore currently intends leaving this
well on production until the water cut reaches 100%, at which point
the well will then be plugged and abandoned. The Zoe-1 well was
fully impaired in our previously reported financial results for
2009 and 2010.
Exploration activity on the block continues with the initial
processing of the recently completed 78 square kilometres of new 3D
seismic. Utilising this seismic a new exploratory prospect should
be defined in the central part of the block for possible drilling
in the first quarter of 2012.
Lebrija Licence
A review of the existing reservoir and information on the well
is ongoing in order to re-evaluate the future potential of the Dona
Maria field, with a well work proposal expected to be released in
December 2011. The field currently has two producing wells.
Putumayo-4 Exploration and Production Agreement
PetroLatina holds a 50% interest in this block, alongside La
Cortez Energy Inc., and is the operator. 1,300km of historic 2D
seismic from different vintages has now been reprocessed, and a new
2D seismic survey, totalling approximately 150km, is planned to be
put out for tender shortly, with a view to commencing seismic
acquisition in November 2011.
RZA Pipeline
During the first half of 2011, average throughput of 3,063 bopd
(2010: 2,989 bopd) was achieved from the Tibu and Rio Zulia fields,
which represents an increase of approximately 2.5%. Further
development of the Tibu field by Ecopetrol S.A. could lead to a
significant increase in the flow of oil and consequently the Group
continues to anticipate that utilisation of the Group's RZA
pipeline will increase in due course.
Serafin Gas Well
Initial commercial gas sales commenced at a stable rate of 5.5
mmscf/d in March 2011 and an average production rate of 4.3 mmscf/d
was achieved in the period to 30 June 2011. The Serafin-1 well
remains on production under a 6 month long term test, with the gas
sales providing valuable additional revenues to the Group to
support the development of its other producing fields.
The Board believes that there is a high probability of further
gas deposits on the licence area and the Company is currently
conducting studies using its existing 3D seismic coverage to
identify further drillable prospects.
Outlook
During the remainder of 2011 and 2012, we will continue to
implement our strategy and its associated intensive capital
investment programme, and expect to drill 2 exploratory wells and a
further 3 development wells on the La Paloma field.
With the expected proceeds from the farm-out of our VMM-28 block
and future anticipated revenues from the ongoing work programme,
which should transform more of our oil reserves into producing
assets, the Group is well placed to be able to fund part of its
planned ongoing work programme. The Group does have certain
development commitments and repayment obligations in respect of its
credit facility with MBL which are due to commence in the fourth
quarter of 2011. The repayment obligations will be satisfied from
future cashflows, however the development commitments will require
additional funds to be raised prior to the first quarter of 2012,
or earlier if these works are accelerated and commenced prior to
the fourth quarter of 2011 and funds from the recent farm-out of
our VMM-28 block are delayed beyond the fourth quarter. The
Directors remain confident that the Group's current and future
exploration and near term production potential, which includes
future anticipated revenues from the Colon, Querubin-1 and Serafin
wells, together with the historic proven ability to raise
additional funds when required, will enable the Group to fully
finance its future working capital requirements beyond the period
of 12 months of the date of this report.
Our objective remains to grow PetroLatina into one of the major,
technologically advanced players in Colombia's oil and gas
industry. We will endeavour to deliver further sustained increases
in production and reserves and create long term value for all of
the Group's stakeholders.
Juan Carlos Rodriguez
Chief Executive Officer
22 September 2011
___
PetroLatina Energy Plc
Independent review report to PetroLatina Energy Plc
For the period ended 30 June 2011
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2011 which comprises the Consolidated
Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Statement of Cashflows, the
Consolidated Statement of Changes in Equity and the related
explanatory notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with the International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2011 is not prepared, in all material respects, in accordance
with the rules of the London Stock Exchange for companies trading
securities on AIM.
Emphasis of matter - Going concern
In forming our conclusion, which is not modified, we have
considered the adequacy of the disclosures made in note 1 of the
interim financial statements for the six months ended 30 June 2011
concerning the Group's ability to continue as a going concern.
Further funds will be required to finance the Group's entire
planned work programme and development commitments.
The Group has development commitments and repayment obligations
in respect of the credit facility with Macquarie Bank Limited which
are due to commence in the fourth quarter of 2011. The Group
expects the repayment obligations will be satisfied from future
cash flows, however the development commitments will require
additional funds to be raised prior to the first quarter of 2012,
or earlier if these works are accelerated and commenced earlier.
The Directors remain confident that the Group will be able to raise
additional funds to enable it to fully finance its future working
capital requirements beyond the period of 12 months of the date of
this report. However, there can be no guarantee that the required
funds will be raised within the necessary timeframe.
These conditions indicate the existence of a material
uncertainty which may cast significant doubt about the Group's
ability to continue as a going concern. The interim financial
information does not include the adjustments that would result if
the Group was unable to continue as a going concern.
BDO LLP
Chartered Accountants and Registered
Auditors
London
Untied Kingdom
22 September 2011
BDO LLP is a limited liability partnership
registered in England and Wales
(with registered number OC305127).
PetroLatina Energy Plc
Unaudited notes forming part of the unaudited consolidated
interim financial statements
for the period ended 30 June 2011
Six months Six months Twelve months
Note ended ended ended
31 December
30 June 2011 30 June 2010 2010
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Revenue 14,492 9,545 20,171
Impairment of Oil & Gas
assets - (1,709) (19,804)
DD&A (5,034) (3,809) (8,355)
Other cost of sales (3,898) (3,057) (9,392)
------------------------- ----- ------------- ------------- --------------
Total Cost of sales (8,932) (8,575) (37,551)
________ ________ ________
Gross profit/ (loss) 5,560 970 (17,380)
General and
administrative costs (3,303) (4,307) (7,646)
Other expenses 3 (3,705) - -
________ ________ ________
Loss from operations (1,448) (3,337) (25,026)
Finance income 1,924 4,573 3,332
Finance expense (3,577) (3,453) (7,030)
________ ________ ________
Loss before tax (3,101) (2,217) (28,724)
Taxation (304) 171 1,158
________ ________ ________
(Loss) and total
comprehensive (loss)
for the period
attributable to equity
shareholders of the
parent (3,405) (2,046) (27,566)
________ ________ ________
(Loss) per share
attributable to the
equity holders of the
parent during the
period:
- Basic and diluted
(US$) 4 (0.033) (0.043) (0.43)
________ ________ ________
Notes As at As at As at
31 December
30 June 2011 30 June 2010 2010
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
ASSETS
Non-current assets
Property, plant and
equipment 64,622 65,774 67,257
Intangible assets 8,549 26,124 8,495
Deferred tax asset - - 988
________ ________ ________
73,171 91,898 76,740
Current assets
Inventories 156 117 367
Trade and other
receivables 6,125 6,605 2,130
Withholding taxes 1,971 - 1,435
Cash and cash equivalents 3,830 1,086 8,042
Term deposits 5,124 1,625 1,970
________ ________ ________
17,206 9,433 13,944
________ ________ ________
Total Assets 90,377 101,331 90,684
________ ________ ________
LIABILITIES
Non-current liabilities
Provisions 3,204 2,581 3,125
Loans & borrowings 5,6 16,873 25,043 24,937
Convertible loan 5,7 - 10,417 -
Long term payables 2,300 - -
Derivative liability 7 2,159 - -
Deferred tax liability 4,303 5,740 5,506
________ ________ ________
28,839 43,781 33,568
Current liabilities
Trade and other payables 10,512 25,083 8,385
Taxation 518 50 285
Derivative liability 7 1,216 2,166 6,812
Borrowings 5,6 8,343 426 11,364
________ ________ ________
20,589 27,725 26,846
Total Liabilities 49,428 71,506 60,414
________ ________ ________
Total Net assets 40,949 29,825 30,270
________ ________ ________
Notes As at As at As at
31 December
30 June 2011 30 June 2010 2010
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
EQUITY
Share capital 8 29,819 22,273 26,550
Share premium 107,483 77,409 98,372
Warrant and option
reserve 9,10 4,399 5,381 4,576
Retained deficit (100,752) (75,238) (99,228)
________ ________ ________
Total equity 40,949 29,825 30,270
________ ________ ________
The interim financial statements on pages 9 to 23 were approved
and authorised for issue by the Board of Directors on 21 September
2011 and were signed on its behalf by:
Juan Carlos Rodriguez
Chief Executive Officer
Twelve
Six months Six months months
ended ended ended
30 June 30 June 31 Dec
2011 2010 2010
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Cash flows from operating activities
(Loss) for the period (3,405) (2,046) (27,566)
Share-based payments 221 2,981 497
Depreciation of property, plant and
equipment 5,034 3,809 8,355
Impairment of intangible asset - 1,709 19,804
Finance income (1,924) (4,573) (3,332)
Finance expense 3,577 3,453 7,030
Equity tax 3,242 - -
Taxation 304 (171) (1,158)
________ ________ ________
Cash flows from operating activities
before
changes in working capital and
provisions 7,049 5,162 3,630
Decrease/(increase) in inventories 211 32 (218)
(Increase) in trade and other
receivables (4,531) (3,682) (407)
Increase/(decrease) in trade and other
payables 749 (2,351) 743
________ ________ ________
Cash flows from / (used in) operations 3,478 (839) 3,748
Income taxes paid (48) (50) (285)
________ ________ ________
Net cash flows from / (used in)
operating activities 3,430 (889) 3,463
Investing activities
Finance income 317 252 252
Purchase of property, plant and
equipment (786) (6,946) (8,420)
Payments for oil and gas exploration
and development (1,667) (11,749) (31,304)
Investment in fixed term deposits (3,154) 50 (295)
________ ________ ________
Cash flows used in investing activities (5,290) (18,393) (39,767)
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 Dec
2011 2010 2010
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Financing activities
Issue of ordinary share capital 82 - 25,000
Loan notes subscribed during the
period - - -
Short and Long Term Loans
subscribed during the period - 30,275 30,275
Repayment of loans during the
period (126) (11,458) (12,052)
Interest paid (1,420) (1,681) (2,109)
Derivative settlement (888) - -
________ ________ ________
Cash flows from financing
activities (2,352) 17,136 41,114
________ ________ ________
Increase/(decrease) in cash and
cash equivalents (4,212) (2,146) 4,810
Cash and cash equivalents at the
start of the period 8,042 3,232 3,232
________ ________ ________
Cash and cash equivalents at the
end of the period 3,830 1,086 8,042
________ ________ ________
Warrant
and
Share Share option Retained Total
capital premium reserve earnings equity
US$'000 US$'000 US$'000 US$'000 US$'000
Opening
balance - 1
January 2010
(audited) 22,212 76,800 2,400 (73,192) 28,220
Total
comprehensive
(loss) for
the period - - - (2,046) (2,046)
Issue of share
capital 61 609 - - 670
Share-based
payment - - 2,981 - 2,981
________ ________ _________ ________ ________
Balance as at
30 June 2010
(unaudited) 22,273 77,409 5,381 (75,238) 29,825
Total
comprehensive
(loss) for
the period - - - (25,520) (25,520)
Issue of share
capital 4,277 21,498 - - 25,775
Share-based
payment - (535) 725 - 190
Warrants
lapsed during
the period - - (1,530) 1,530 -
________ ________ _________ ________ ________
Balance as at
31 December
2010
(audited) 26,550 98,372 4,576 (99,228) 30,270
Total
comprehensive
(loss) for
the period - - - (3,405) (3,405)
Other
comprehensive
income - - - - -
Issue of share
capital on
conversion of
loan 3,224 8,991 - 1,551 13,766
Share-based
Payment - - 221 - 221
Warrants
lapsed during
the period - - (330) 330 -
Warrants
exercised
during the
period 45 120 (68) - 97
________ ________ _________ ________ ________
Balance as at
30 June 2011
(unaudited) 29,819 107,483 4,399 (100,752) 40,949
________ _________ _________ _________ _________
1 Accounting policies
Basis of preparation
The interim financial statements have been prepared using
policies based on International Financial Reporting Standards (IFRS
and IFRIC interpretations) issued by the International Accounting
Standards Board (IASB) as adopted for use in the EU. The interim
financial statements has been prepared using the accounting
policies applied for the year ended 31 December 2010 and which will
be applied in the Group's statutory financial statements for the
year ended 31 December 2011.
All amounts have been prepared in US dollars, this being the
Group's presentational currency.
Going Concern
The Group plans to continue its extensive drilling programme in
the next twelve months and beyond, which should transform more of
its oil reserves into producing reserves. Following a review of the
Group's financial position and its budgets and plans, the planned
programme for the next 12 months is part funded from resources at
the Group's disposal for a period of 12 months from the date of
this report. The Group does have certain development commitments
and repayment obligations in respect of the credit facility with
MBL which are due to commence in the fourth quarter of 2011. The
repayment obligations will be satisfied from future cashflows,
however the development commitments will require additional funds
to be raised prior to the first quarter of 2012, or earlier if
these works are accelerated and commenced prior to the fourth
quarter of 2011 and funds from the recent farm-out of the Group's
VMM-28 block to Shell E&P Colombia are delayed beyond the
fourth quarter. The Directors remain confident that the Group's
current and future exploration and near term production potential,
which includes future anticipated revenues from the Colon,
Querubin-1 and Serafin wells, together with the historic proven
ability to raise additional funds when required, will enable the
Group to fully finance its future working capital requirements
beyond the period of 12 months of the date of this report. However,
there can be no guarantee that the required funds will be raised
within the necessary timeframe. Consequently a material uncertainty
exists that may cast significant doubt on the Group's ability to
fund this cash shortfall and therefore be able to meet its
commitments and discharge its liabilities in thenormal course of
business for a period not less than 12 months from the date of this
report.
These interim financial statements do not include adjustments
that would result if the Group was unable to continue in
operation.
2 Financial reporting period
The interim financial statements for the period from 1 January
2011 to 30 June 2011 are unaudited. In the opinion of the
Directors, the interim financial statements for the period present
fairly the financial position and results from operations and cash
flows for the period and are in conformity with International
Financial Reporting Standards consistently applied. The financial
statements incorporate comparative figures for the interim period
from 1 January 2010 to 30 June 2010 and the audited financial year
ended 31 December 2010.
The financial information contained in this interim report does
not constitute statutory accounts as defined by section 435 of the
Companies Act 2006. The comparatives for the full year ended 31
December 2010 are not the Company's full statutory accounts for
that year. A copy of the statutory accounts for that year has been
delivered to the Registrar of Companies. The auditors' report on
those accounts was unqualified however it did include references to
matters to which the auditors drew attention by way of emphasis
without qualifyingtheir report and did not contain a statement
under section 498(2)-(3) of the Companies Act 2006.
3 Other Expenses
Other expenses reflect a one off equity tax levied in Colombia
during the period. This tax is payable over a period of 4 years,
however has been recognised in its entirety in the period.
4 Earnings per share
Basic earnings per share amounts are calculated by dividing
(loss) for the period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings per share amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares
outstanding during the year, plus the weighted average number of
shares that would be issued on the conversion of dilutive potential
ordinary shares into ordinary shares. The calculation of the
dilutive potential ordinary shares relating to employee and
director share option plans includes only those options with
exercise prices below the average share trading price for each
period.
Where the company is loss making, a diluted loss per share is
not presented because the effect on the loss per share would be
anti-dilutive. The calculation of the diluted EPS assumes all
criteria giving rise to the dilution of the EPS are achieved and
that all outstanding share options are exercised.
Six months Six months Twelve months
ended ended ended
30 June 2011 30 June 2010 31 Dec 2010
Unaudited Unaudited Audited
Net (loss) attributable to
equity holders used in basic
calculation (US$'000) (3,405) (2,046) (27,566)
__________ __________ __________
Basic weighted average number
of shares 104,084,620 47,862,149 64,362,830
(Loss) Per Share
- Basic (0.033) (0.043) (0.43)
- Diluted (0.033) (0.043) (0.43)
Dilutive potential ordinary
shares
Shares related to convertible
notes 8,092,308 31,253,924 8,000,000
Employee and Director share
option plans 1,513,332 1,696,346 1,282,625
Diluted weighted average number
of shares 113,690,260 80,812,419 73,645,455
5 Loans and borrowings
The book value and fair value of loans and borrowings are as
follows:
Book & Book & Book & Fair
Fair Value Fair Value Value
30 June 30 June 31 December
2011 2010 2010
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Non-current
Macquarie Bank Limited (Senior
secured debt facility) 15,188 22,061 22,194
Unsecured Tranche 1 and 2,
Tribeca Oil and Gas Financing
Inc ("TOGF") Convertible Loan
Note - 10,417 -
Banco Occidente 1,685 2,982 2,743
______ ______ ______
Total non-current 16,873 35,460 24,937
Current
Macquarie Bank Limited (Senior
secured debt facility) 7,500 - -
Banco Occidente 843 426 -
Unsecured Tranche 1 and 2,
Tribeca Oil and Gas Financing
Inc ("TOGF") Convertible Loan
Note - - 11,364
_______ _______ _______
Total loans and borrowings 25,216 35,886 36,301
_______ _______ _______
Principal terms and the debt repayment schedule of the Group's
loans and borrowings are as follows as at 30 June 2011.
Nominal Year to
Currency Rate Maturity
Unsecured Tranche 2, TOGF Convertible
Loan Note USD 12% 2011
Libor +
MBL USD 9% 2014
Unsecured Tranche 1, TOGF Convertible
Loan Note USD 12% 2011
Banco Occidente COP 18.5% 2014
6 Senior Secured Debt Facility
In accordance with the terms of the agreement, MBL has committed
to provide a loan facility of, in aggregate, up to US$75 million to
the Company in order to assist with financing the accelerated
development and enhancement of its highly promising oil and gas
assets in Colombia.
On 8 March 2010, the Company entered into a four year Senior
First Lien Secured Credit Facility (the "Senior Facility") of up
to, in aggregate, US$75 million with MBL to finance part of the
Company's planned ongoing drilling programme.
During negotiations of the credit facility, an initial
US$5,000,000 promissory note short term facility was agreed and
drawndown on 26 February 2010 carrying an interest rate of 18 per
cent. per annum which was secured over the assets and undertakings
of the Group on 26 February 2010.
The Company drew down the full US$25m under Tranche A and
allotted the associated warrants to MBL. The funds were used to
repay the aforementioned US$5m bridging loan extended to the
Company from MBL and to repay trade payables, with the remainder
used to part fund existing exploration and development operations.
The Senior Facility consists of the following drawn and undrawn
facilities and terms:
-- Tranche A: US$25 million. Under the terms of the agreement,
MBL has been allotted 8 million warrants exercisable at a price of
75.7p per share at any time over the 5 year period from drawdown of
Tranche A. These warrants were valued at US$2.7 million and will be
amortised on a straight line basis over a 5 year period together
with the loan facility fee.
-- Tranche B/C: to consist in aggregate of US$50m, to fund pre
agreed development work, potential future acquisitions and for
general working capital purposes. The tranches can be drawn down,
at MBL's sole discretion, at any time during the three year period
ended 8 March 2013. Under Tranche B (to be used for development
activities), MBL would be allotted up to 12 million new warrants
exercisable at a 20% premium to the prevailing previous 20 day
VWAP. If any funds are drawn down under Tranche C (to fund new
projects or commitments) in addition to the 12 million warrants
detailed above, MBL will be eligible for additional warrants.
-- An interest rate payable ranging between 3 month US LIBOR +
7.5% and 3 month US LIBOR + 9% dependent upon the NPV of the
Company's proved oil and gas reserves.
-- The Senior Facility has a four year term expiring on 7 March
2014. Repayment is on a quarterly linear amortisation basis
starting 30 months prior to the final maturity date.
-- The Group must accomplish certain covenants related to:
production levels; cumulative net revenue; current ratio (not lower
than 1:1); EBITDA covenant ratio (not lower than 2.5:1); Group Debt
EBITDA ratio (not higher than 3.5:1); Adjusted Present Value ratio
(not lower than 2:1) and an agreed G&A cap not higher than
US$375,000.
The exercise price of the 8 million warrants previously issued
was amended on 4 August 2010 and reduced to GBP0.50 (US$0.85) per
share in consideration of Macquarie investing US$5 million and
subscribing for new ordinary shares in the capital of the Company.
The incremental charge of US$0.5 million has been charged to share
premium as part of financing costs.
The warrants are exercisable in whole or in part at any time
within 4 years of their date of issue. These warrants remain
outstanding at the period end.
The amortisation of the costs of the loan issue taken to the
P&L during the period was US$0.4m (2010: US$Nil).
7 Convertible loans and derivative liability
TOGF Unsecured Convertible 30 June 30 June 31 December
Note - Tranche 1 and Tranche 2011 2010 2010
2 (US$'000) (US$'000) (US$'000)
Brought forward 11,364 9,105 10,417
Principal repayment (11,165) - -
Interest accrued 850 1,977 1,622
Interest paid (1,049) (665) (675)
______ ______ ______
Carried forward - 10,417 11,364
_______ _______ _______
Derivative liability - TOGF
Unsecured Convertible Note - 30 June 30 June 31 December
Tranche 1 and Tranche 2 2011 2010 2010
Brought forward 3,157 6,120 1,799
Fair Value movement
(gain)/loss (3,157) (4,321) 1,358
______ ______ ______
Carried forward - 1,799 3,157
_______ _______ _______
Derivative liability - Fuel Oil
"Fixed Price" swap and WTI "Cap and 30 June 30 June 31 December
Collar" swap 2011 2010 2010
Brought forward 3,655 - -
Fair Value movement (gain)/loss (280) - 3,655
______ ______ ______
Carried forward 3,375 - 3,655
_______ _______ _______
The fair value of the derivative financial transactions were
calculated using a Black-Scholes model for the derivative part of
the conversion option.
The fair value of the oil swap contracts has been based on an
estimate provided by the Company's bankers as at 30 June 2011.
8 Share capital
Details of the significant movements in share capital are set
out below:
Issue Number of
Price Ordinary
Description Date Shareholder US$ shares
Period ended
30 June 2011
Interest on 21 January
Loan Note 2011 TOGF 0.70 423,022
Interest on 21 January
Loan Note 2011 TOGF 0.66 571,083
Conversion of
Tranche 1 21 January
Loan Note 2011 TOGF 0.33 14,695,520
Exercise of 8/9 March
Warrants 2011 Various Various 450,645
Interest on
Loan Note 17 June 2011 TOGF 0.40 943,198
Conversion of
Tranche 2
Loan Note 17 June 2011 TOGF 0.40 15,605,520
_________
Total shares issued
during period ended
30 June 2011 32,688,988
_________
Year ended 31
December 2010
Interest on 27 January
Loan Note 2010 TOGF 1.08 350,911
Interest on 27 January
Loan Note 2010 TOGF 1.11 264,618
TOGI and
Placing of Rorick
US$8.5 Ventures
million 23 July 2010 Group Inc 0.57 14,871,972
Interest on
Loan Note 23 July 2010 TOGF 0.51 735,277
Interest on
Loan Note 23 July 2010 TOGF 0.56 514,426
TOGI and
Placing of Rorick
US$11.5 Ventures
million 30 July 2010 Group Inc 0.62 18,503,500
Part of US$5
million
placing 4 August 2010 Macquarie 0.62 6,840,850
Part of US$5
million
placing 4 August 2010 Macquarie 0.62 1,302,812
_________
Total shares issued
during year ended 31
December 2010 43,384,366
_________
The Ordinary Shares of US$0.10 each carry one vote per share.
They entitle the holder to share equally in a distribution of the
profits or assets of the Company by dividend with all other holders
of Ordinary Shares, in proportion to the holders' aggregate holding
of all Ordinary Shares.
9 Share based payments
Share options
At 31 December 2010, the Group had options over 2,270,000
ordinary shares of US$0.10 each outstanding. The options were
awarded during the year to certain directors and employees under
the terms of an existing unapproved share option plan. The options
vest over a two year period from the date of grant and once vested
are immediately exercisable, in whole or in part, up to the fifth
anniversary of the date of grant, at an exercise price of 44.5
pence per share. There were no changes to the number of share
options outstanding during the period ended 30 June 2011.
10 Warrants
Each warrant entitles the holder to purchase one Ordinary Share
at a price of between US$0.50 to US$5.05 (adjusted post
sub-division) per share on or before the expiry date, after which
time the warrants will be void and of no value. Each Warrant is
governed by the provisions of warrant instruments representing the
warrants, that have been adopted by the Company. The rights
conferred by the warrants are transferable in whole or in part
subject to and in accordance with the transfer provisions set out
in the Articles. The holders of warrants have no voting right,
pre-emptive right or other right attaching to Ordinary Shares.
During the period, 450,645 warrants were executed with 1,430,317
warrants expiring. At the end of the period, 8,092,308 warrants
remained outstanding.
11 Related party transactions
Latinamerican Drilling Company ("Latco"), a company formerly
controlled by Tribecapital Partners S.A. ("Tribeca"), the parent
company of an existing substantial shareholder in the Company,
Tribeca Oil and Gas Inc. ("TOGI"), and in which Juan Carlos
Rodriguez had a material interest, entered into an agreement to
provide rig services to the Company. During the period ended 30
June 2011 US$Nil (2010: US$4,702,964) was incurred for services
provided by Latco. At the period end, US$Nil (2010: US$5,991,061)
was due and outstanding to Latco. Latco was sold to an unrelated
third party during the period.
Transportes del Norte S.A. ("TDN"), a company controlled by Juan
Carlos Rodriguez, a director and substantial shareholder in
PetroLatina, provides transportation services to the Company.
During the period ended June 2011 US$776,533 (2010: US$865,402) was
incurred for services provided by TDN. At the period end, a total
of US$155,962 (2010: US$827,792) was due and outstanding to
TDN.
12 Events after reporting period
On 15 July 2011, the Group announced that it has entered into a
farm-out agreement with Shell E&P Colombia, effective 12 July
2011. Under the terms of the agreement, Shell E&P Colombia will
acquire an 85% participating interest in the Company's VMM-28
Exploration and Production contract (the "E&P Contract"),
subject to the approval of the ANH. The VMM-28 block is currently
wholly owned and operated by Petroleos del Norte S.A. ("PDN"),
PetroLatina's Colombian operating subsidiary.
PDN and the ANH signed the formal E&P Contract in March
2011, for the exploration, development and production of
hydrocarbons in the area known as the VMM-28 block. The block
covers an area of 54,552 hectares (approximately 136,390 acres) and
lies to the west of, and immediately adjacent to, the Company's
existing La Paloma block containing the Company's producing Colon
field. Preliminary analysis of the available historic 2D seismic
data suggests that the type of structure which has proven to be oil
productive on the La Paloma block may also potentially hold
commercial oil reserves on the VMM-28 block.
12 Events after reporting period (continued)
In accordance with the terms of the farm-out agreement, which
remains subject to regulatory approval from the ANH, Shell E&P
Colombia has agreed to pay a fee of US$15 million in cash to
PetroLatina, of which US$3 million was payable on execution of the
agreement and the balance of US$12 million is payable on receipt of
the requisite ANH approval. Shell E&P Colombia will be
appointed as operator of the contract and will take responsibility
for the work programme. In the event that ANH approval is not
forthcoming by 30 September 2011, Shell E&P Colombia has the
right to terminate the agreement and require any payments made by
it to PetroLatina to be repaid.
The VMM-28 E&P Contract comprises two 3 year exploration
periods ("Phase 1" and "Phase 2") followed by a 24 year production
phase. In accordance with the E&P Contract in place with the
ANH, work obligations for the VMM-28 block include the acquisition
of 2D seismic and one exploratory well during Phase 1 (the first 3
year exploration phase), and either two wells without
relinquishment of any acreage or one well with 50% relinquishment
during Phase 2 (the second 3 year exploration phase). Under the
terms of the farm-out agreement, PetroLatina has granted Shell
E&P Colombia a six year period of operational exclusivity.
During this Exclusivity Period, Shell E&P Colombia will pay for
100% of the costs, expenses and liabilities associated with the
work programme and shall be entitled to all rights in relation to
the block.
Shell E&P Colombia will make available to PetroLatina all
data acquired by it in relation to the contract area and ensure
that the licence area remains in good standing and will comply with
all applicable laws, regulations and orders of Colombia.
Under the agreement, Shell E&P Colombia will obtain an 85%
participating interest in the block. PDN will retain a 15% legal
interest with an option to participate in the block upon expiration
of the Exclusivity Period. Under the terms of the farm-out
agreement, PetroLatina shall pay its share of the costs, expenses
and liabilities associated with the block and shall pay Shell
E&P Colombia for its share of Shell E&P Colombia's total
sunk costs incurred to such date, out of PetroLatina's share of
production within the block. Operations on the VMM-28 block would
thereafter be governed by a joint operating agreement.
In the event that Shell E&P Colombia decides to withdraw
from the farm-out agreement, the Company has the option to request
that Shell E&P Colombia transfers its prevailing interest in
the block back to PetroLatina.
Following the receipt of ANH approval, the Company intends to
use the proceeds from the farm-out agreement to assist with the
part funding of its planned ongoing drilling programme and
development commitments in respect of the remainder of its
Colombian asset portfolio and for general working capital
purposes.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BLGDCGGDBGBD
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