A flash blog today for all sorts of reasons but more on some companies if I speak to any of them. Will update on oil price post hurricane and inventory stats tomorrow but there is a short synopsis below.
Challenger Energy Group
Challenger Energy (AIM: CEG) provides the following update.
- Establishment of a £3.3 million convertible loan note funding facility, to:
- support business development, in particular continuing with accelerated technical work programs in Uruguay, for both the AREA OFF-1 block and the newly awarded AREA OFF-3 block; and
- progress business development opportunities in Trinidad.
- £0.55 million has initially been drawn, with future drawdown of the remainder at the Company’s option.
- 3-month extension for completion of sale of Cory Moruga asset in Trinidad and Tobago (presently awaiting regulatory approval). Relinquishment of the Weg Naar Zee PSC in Suriname, consistent with the Company’s strategy to focus on core assets.
- Intended purchase of approximately 60 million shares by the Company’s CEO, to increase the CEO’s aggregate shareholding to approximately 6% of the Company.
- Issue of approximately 315 million new shares to various service providers, in lieu of cash fees.
Eytan Uliel, Chief Executive Officer, said:
“In the last year, across the broader Challenger Energy business, we have completed value-enhancing technical work, improved production operations, high-graded our portfolio, secured new assets, and ensured a range of options are available to deliver additional funds into the business. Progress has been substantial, but the timing of when we need to spend and when we will see cash inflows is not always within management’s control. We have therefore now taken steps to ensure that we have flexible additional funding available, if and when needed, so that we can press on with accelerating new licences and high prospect business development opportunities in both Uruguay and Trinidad. In the current market we see benefit in having an established facility in place, even if we ultimately do not use it all.
Personally, I am excited with how Challenger Energy is now poised – a honed portfolio, a clear focus on those assets which are world-class and have the potential to deliver a major value uplift in the near term, and the financial flexibility to take disciplined portfolio decisions when opportunity presents. Day by day I believe we are creating intrinsic value which I strongly believe will ultimately be rewarded, and which is why I am increasing my personal holding in the Company at this time. I look forward to sharing news of continued progress with fellow shareholders over the coming months.”
More tomorrow from me on CEG, I am speaking to CEO Eytan Uliel overnight but this is a very smart funding to be expected by him. With excitement in Uruguay where they have two potentially huge Blocks and of course Trinidad where the opportunities are being developed.
Funding Facility – Summary
- The Company has established a £3.3 million unsecured convertible loan note funding facility (the “Facility”) with a UK based alternative asset management and investment firm (the “Investor”). £0.55 million of the Facility has initially been drawn to support the Company’s immediate work program
- The Facility will provide the Company the flexibility, as needed, to:
o provide funding, as necessary, to further develop the technical case underpinning the AREA OFF-1 farm-out – the formal farm-out process is progressing well, and the Company’s objective remains to secure a partner for AREA OFF-1 by the end of 2023, so as to enable 3D seismic acquisition to proceed in 2024;
o fund an initial work program performance bond and thereafter an accelerated technical work program for the AREA OFF-3 licence in Uruguay, similar to that initially undertaken on AREA OFF-1 in support of the AREA OFF-1 farm-out process;
o provide funding for progressing new licence opportunities in Trinidad and Tobago, if successfully awarded, and allow the Company to progress certain other high-potential business development initiatives in that country; and
o bridge working capital needs through to delivery of a number of cash generative options over the coming 6 months, including those that may result from a successful AREA OFF-1 farm-out process, and those anticipated from completion of the sale of the Company’s Cory Moruga asset in Trinidad.
- The Company considers that having the Facility in place (and subject to the Facility’s draw down conditions continuing to be met) will ensure that the Company has the ability to meet all of its capital requirements until at least 2H 2024, regardless of the amount and timing of any future potential inflows.
Funding Facility – Rationale
- In March 2022, in conjunction with completion of a comprehensive corporate restructuring, the Company raised approximately US$10m. Notwithstanding that the capital raising in March 2022 was “sized” for approximately 12 months of future operations, the Company has not required any additional external funding to-date (i.e., thus far, to end August 2023). This is as a result of extremely prudent management of capital over the past 18 months, a significant reduction in corporate overheads, and the sale of identified non-core assets.
- During the same period of time, the Company has made significant progress in respect of its core business operations, including in particular:
o Uruguay AREA OFF-1 – an accelerated and expanded technical work program, designed to maximise the value of the asset in any farm-out process, and which work program has been substantially completed, and with positive outcomes that significantly exceeded the Company’s initial expectations as set out in the Company’s announcements on 26 April 2023 and 31 May 2023.
o Uruguay AREA OFF-3 – a successful bid for the AREA OFF-3 licence, thereby establishing the Company as the 2nd largest acreage holder in Uruguay, with an expanded suite of high-quality prospects and commercial options.
o Trinidad – a bid for the Guayaguayare licence in Trinidad, the largest available onshore licence offering both near-term production and long-term exploration upside – in May 2023 the Company was nominated as the party with whom the Trinidad and Tobago Ministry of Mines and Energy Industries will seek to negotiate a long-term licence agreement, with this process ongoing.
- All of these activities are considerably in excess of that which was contemplated in March 2022, yet have been funded to-date from within the Company’s existing available capital resources. The Company wishes to maintain momentum on these various opportunities over the coming 12 months, but expected funding outflows and inflows are subject to uncertainty as to timing and quantum.
- Thus, in view of the Company’s forward business needs and general market conditions at this time, the Board considers it would be prudent to have additional capital available on an as-needed basis. The Facility has been established accordingly, with a small portion drawn initially, and future draw-downs at the Company’s election (subject to draw down conditions, as described further below, being met).
Funding Facility – Key Terms
- The Facility is arranged into an initial tranche of senior unsecured convertible loan notes of £550,000 and 10 subsequent tranches of £275,000 each, with the first tranche having been drawn (being the minimum required by the Investor in order to establish the Facility). The second tranche of the Facility is available for draw-down at the Company’s sole election 90 days after drawn down of the initial tranche, and each subsequent tranche is available for draw down at the Company’s sole election 45 days after draw down of the previous tranche (and subject to draw down conditions, described further below, continuing to be met from time to time).
- Loan notes, once drawn, are all repayable 36 months from the date of the first draw-down. Interest is fully pre-paid on draw-down, such that on draw-down 90% of the value of the notes is advanced in cash to the Company. The Company has the right to make early repayments, all or in part, at no penalty, subject to the Investor’s conversion rights as described below.
- Each tranche of the Facility is convertible into ordinary shares of the Company (“Ordinary Shares”) at the Investor’s election at any time prior to repayment, at the lesser of (i) 140% of the Company’s closing bid price on the trading day immediately prior to the date of draw-down of the relevant tranche, or (ii) 90% of the lowest closing bid price in the five trading days immediately preceding the date of conversion (the “Conversion Price”).
- The loan notes are redeemable in cash by the Company, all or in part, at any time after draw down, or in the event of a change of control of the Company, at 105% of par value. If the Company notifies the Investor of an intended redemption of any loan notes, the Investor shall have two trading days to elect to convert some or all of outstanding amounts or accept the early redemption. In the event of default, loan notes will be redeemable immediately at 120% of par value of outstanding loan notes.
- Drawn loan notes are convertible into Ordinary Shares at each tranche’s Conversion Price in whole or in part, subject to any conversion being for a minimum of £50,000.
- Subsequent drawdowns under the Facility are subject to draw down conditions continuing to be met, which are (i) the closing mid-price of the Company’s Ordinary Shares on each of the five trading days preceding draw-down date being at least £0.0005 (i.e.: at least 0.05 pence) per ordinary share, and (ii) the Company maintaining available share issuance authority headroom and disapplication of pre-emption rights to cover 150% of any draw down amount divided by the Conversion Price.
Director Intended Share Purchase
- The Company’s CEO, Mr Eytan Uliel, has advised the Company that following the release of this announcement, and subject to the Company not being in a closed period, he intends to purchase approximately 60 million Ordinary Shares. If purchased, this would increase his total shareholding in the Company to approximately 605 million Ordinary Shares, or approximately 6% of the Company. The Company will advise once a TR-1 is received from Mr Uliel in respect of any shares purchased.
Cory Moruga Sale Extension
- On 8 March 2023, the Company announced that it had entered into an agreement (“Agreement”) with Predator Oil and Gas Holdings Limited pertaining to the sale of the Cory Moruga asset in Trinidad. In that announcement, it was noted that completion of the transaction was conditional on consent of the Trinidadian Ministry of Energy and Energy Industries (“MEEI”) to a revised work programme for the Cory Moruga licence proposed by the Company, as well as agreement of MEEI to a revision of future fees for the Cory Moruga licence and a settlement / cancellation of past claimed dues pertaining to the Cory Moruga licence. The Agreement stipulated a long stop date of 31 August 2023 for securing the relevant consent and agreements from MEEI.
- Dialogue with MEEI continues, with the parties and MEEI having made progress on reaching acceptable terms, and the parties remain confident that appropriate consents and agreement will be forthcoming. However, completion of the transaction will not be possible by 31 August 2023. Accordingly, the parties have mutually agreed to extend the last date for completion of the intended transaction by 3 months, to 30 November 2023.
- As part of the Agreement, and as advised on 8 March 2023, the parties had also agreed to establish a collaboration in relation to CO2 EOR activities and projects in other areas in Trinidad, including but not limited to potential application of CO2 EOR techniques across the Company’s other fields. Pursuant to this collaboration agreement, and in parallel to the ongoing process to complete the sale of the Cory Moruga asset in Trinidad, the parties have progressed discussions seeking to re-establish partnering arrangements in relation to other assets, including in particular a potential joint-venture or acquisition of the Inniss-Trinity field – further announcements will be made as appropriate.
Weg Naar Zee PSC Relinquishment
- The Company has agreed with Staatsolie Hydrocarbon Institute, the Surinamese hydrocarbons industry regulator (“SHI”), to terminate the Suriname Weg Naar Zee Production Sharing Contract (“WNZ PSC”) between Columbus Energy Resources South America B.V., a wholly-owned subsidiary of the Company and Staatsolie Maatschappij Suriname N.V., the Surinamese state-owned oil & gas company (“Staatsolie”). The termination of the WNZ PSC is effective immediately.
- This portfolio optimisation and capital allocation decision reflects the fact that the WNZ project, which whilst not without long-term potential, is early-stage and will thus require both time and substantial investment to take forward, for an ultimate production potential that is relatively small. By contrast, the Company’s newly secured opportunities in both Uruguay and Trinidad are of much higher potential impact, in that they offer greater scale and opportunity for near-term value creation from deployment of the same capital that would otherwise be required for WNZ. The Company thanks Staatsolie for the opportunity and the cooperation over the past several years.
Service Provider Share Issuance
- A number of service providers that have provided services to the Company over the past 6 months, including in respect of technical work for the AREA OFF-1 licence in Uruguay (principally seismic reinterpretation and amplitude variation with offset analysis), have indicated a desire to receive a significant part of their fees, otherwise payable in cash, in the form of shares in the Company.
- The Company considers that the willingness of service providers to become shareholders in the Company demonstrates a high degree of confidence in the Company generally, and more specifically in the technical and commercial attributes of its AREA OFF-1 licence, and the merits of that asset to potential farm-in partners.
- Accordingly, the Company has agreed to the issue of 315,533,332 Ordinary Shares (“New Issue Shares”) in total to various service providers, in lieu of payment of cash fees. The New Issue Shares will be issued from the Company’s standing share issuance authority.
- On 7 March 2022, the Company advised of the terms and structure of the Company’s approved option plan, which provided for the potential issue of up to 1,080,000,000 options in four tranches of 270,000,000 each. At the time, the Company advised on an initial allocation of 240,000,000 options from each tranche of that approved option plan. Within this allocation, 40,000,000 options from each tranche were allocated to the Company’s former director and CFO, Mr. Tim Eastmond.
- Since that time, the options issued to the former director / CFO have been returned to the Company and cancelled, consequent on his resignation in July 2022. These options have now been re-issued to the non-executive directors of the Company. Apart from the re-issue of a prior director’s options to other directors, no new options have been allocated at this time. Accordingly, 35,000,000 options in each tranche of the Company’s approved option plan remain available for future issue as may be determined by the Board from time to time. The terms of the Company’s option plan remain unchanged from that advised in March 2022.
- Thus, the total number of options currently in issue remains unchanged from March 2022, but are now distributed as follows:
|Current Distribution||Previous Distribution|
|28,000,000 in each of Tranche A, B, C and D|
|25,000,000 in each of Tranche A, B, C and D|
|18,500,000 in each of Tranche A, B, C and D|
|18,500,000 in each of Tranche A, B, C and D|
Executive Director and CEO
|85,000,000 in each of Tranche A, B, C and D|
|Executives and Staff (1)||Unchanged|
|90,000,000 in each of Tranche A, B, C and D|
|240,000,000 in each of Tranche A, B, C and D|
960,000,000 in total
|240,000,000 in each of Tranche A, B, C and D|
960,000,000 in total
o Note 1: these are distributed to key members of the executive and operating staff base, to secure retention and incentivisation.
- The terms and conditions applicable to each tranche of options remain unchanged – refer to the Company’s announcement of 7 March 2022 for details. The exercise price for each of Tranche A, B, C and D under the option plan remains 0.1p, 0.15p, 0.225p, and 0.3p respectively – that is, in all case, a substantial premium to the current share price, such that the ability of option-holders to benefit will only be possible if there is a material upward rerating of the Company’s market value from current levels.
Admission and Total Voting Rights
- Application will be made for admission (“Admission”) of the New Issue Shares to trading on AIM, and it is expected that on Admission the New Issue Shares will rank pari passu with the Company’s existing ordinary shares.
- On Admission, the total issued share capital of the Company will consist of 9,935,732,811 Ordinary Shares. The Company does not hold any Ordinary Shares in treasury. Therefore, the total number of voting rights in the Company is 9,935,732,811 and this figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA’s Disclosure Guidance and Transparency Rules.
Predator Oil & Gas
Predator has announced an operations update.
The proposed rigless testing programme has been presented to the Office National des Hydrocarbures et des Mines (“ONHYM”).
MOU-1 will be the first well in the rigless testing programme to be performed by Energy Consulting Services (“ECS”) based in France and with a licence to use and operate the Sandjet perforating technology.
Ten individual horizons within the interval 1217 to 1300 metres TVD KB have been selected for perforating.
In the interval 769 to 912 metres TVD KB a further eight individual horizons have been selected for perforating.
Four additional data points between 1397 to 1400.5 and 967 to 991 metres and at 1035 metres TVD KB may be added to provide information that may be potentially useful for the finalisation of the MOU-3 rigless testing programme.
The MOU-1 well will establish Sandjet rigless testing procedures and will adjust the operating parameters to optimise the depth of penetration into the reservoirs of interest if and where required.
Testing individual sands in sequence from the bottom of the MOU-1 well upwards will evaluate the potential for co-mingling different sand intervals on production and help determine if there is a requirement to isolate any interval downhole based on any material water cut.
An alternative to a coiled tubing unit originally sourced out of Tunisia, which is required to run the Sandjet perforating tool, has been now been sourced in France by ECS. This will enable the testing programme to commence at the earliest possible opportunity in September. Shipping logistics from Tunisia, due to competition for vessel cargo space, created uncertainty regarding the exact scheduling of commencement of field operations.
The adjusted schedule for delivery of the Sandjet equipment is currently being put together by ECS and a further announcement will be made when this is finalised..
Future drilling opportunities
The updip appraisal of the Jurassic target encountered in MOU-4 is a key objective of the Company.
Three preliminary drilling locations are being selected for inclusion in a new Environmental Impact Assessment (“EIA”).
Well design and sourcing of long lead well inventory has commenced.
A field trip is being planned for the autumn to evaluate the reservoir potential of the entire interval of interest in Jurassic surface exposures to the south of the Guercif licence area.
Geochemical source rock quality and maturation studies, including evidence for migrated gas, for the Jurassic section penetrated in the MOU-4 well are expected to be completed in September.
Two other near-term drilling opportunities are also being assessed, one location covered by an existing EIA and the other to be added to the new EIA. Evaluation of the higher pressure shallow gas encountered in MOU-3 and a southwest extension of the MOU-3 structure would be the targets for future drilling.
On 8 March 2023, the Company announced that it had entered into an agreement (“Agreement”) with Challenger Energy Group Plc pertaining to the sale of the Cory Moruga asset in Trinidad. In that announcement, it was noted that completion of the transaction was conditional on consent of the Trinidadian Ministry of Energy and Energy Industries (“MEEI”) to a revised work programme for the Cory Moruga licence proposed by the Company, as well as agreement of MEEI to a revision of future fees for the Cory Moruga licence and a settlement / cancellation of past claimed dues pertaining to the Cory Moruga licence. The Agreement stipulated a long stop date of 31 August 2023 for securing the relevant consent and agreements from MEEI.
Dialogue with MEEI continues, with the parties having made progress on reaching acceptable terms, and the parties remain confident that appropriate consents and agreement will be forthcoming. However, completion of the transaction will not be possible by 31 August 2023. Accordingly, the parties have mutually agreed to extend the last date for completion of the intended transaction by 3 months, to 30 November 2023.
The Company sees the opportunity for a future drilling programme at Cory Moruga with the objective of confirming hydrocarbon resources and delivering a high productivity well in a primarily undeveloped field.
As part of the Agreement, and as advised on 8 March 2023, the parties had also agreed to establish a collaboration in relation to CO2 EOR activities and projects in other areas in Trinidad. In parallel to the ongoing process to complete the sale of the Cory Moruga asset in Trinidad, the parties have progressed discussions seeking to re-establish partnering arrangements in relation to other assets, in particular the Inniss-Trinity field – further announcements will be made as appropriate.
In the longer term, scaling up of potential CO2 EOR operations and the creation of cost-saving operational synergies are likely to be considered by the Company subject to updating of project economics. CO2 EOR operations would initially be conducted on an individual well basis to potentially provide a contribution to Company overheads and operating costs as a Cory Moruga drilling programme progresses, subject to regulatory consents.
On the 28 July 2023 the Company received an acknowledgement from the Department of the Environment, Climate and Communications (“DECC”) that a request made on behalf of the Company and its potential partner in the event of a future award of a Frontier Exploration Licence in respect of “Corrib South” was receiving attention.
Corrib South has mid and high case estimates for gross gas resources of 137.8 and 484.8 BCF respectively (PRD net interest 50%) with a 44% chance of geological success and a 50% chance of development (Tracs International Limited July 2023).
Paul Griffiths, Executive Chairman of Predator Oil & Gas Holdings Plc commented:
“The Sandjet rigless testing programme is on track and scheduled to be executed and completed in September.
In parallel with the testing programme agreements for the sale of gas and sourcing and scheduling for delivery of long lead items required for the CNG development and an Environmental Impact Assessment are being progressed.
Company strategy is to develop a revenue-generating business opportunity capable of being monetised under the right market conditions.
Opportunities for further drilling, in particular to evaluate the Jurassic structure partly penetrated by MOU-4, are being developed. The strategy has a clear objective to identify and pursue balanced risk-reward projects where early near-term shareholder value can be delivered through drilling success. Current market dynamics support drilling activity and very near-term value creation.
Subject to rigless testing results, an initial Compressed Natural Gas development can potentially be funded by a debt instrument linked to production thereby freeing up existing cash resources for more high impact drilling.
Trinidad offers a separate potential future drilling opportunity in an under-developed onshore field. The project is capable of adding primary hydrocarbon resources that can grow into a significant cash-generating business. There are few such opportunities remaining onshore in Trinidad.
Corrib South in Ireland remains an attractive commercial proposition for gas whilst also potentially contributing to the longevity and commerciality of the Corrib infrastructure through the energy transition. This could underpin potential use of the infrastructure beyond the Energy Transition for blended gas and hydrogen storage.
The Company remains active on three fronts and will continue to deliver shareholder value as and when the opportunity arises within its portfolio of projects.”
A modest update from Predator where they are preparing to perforate at MOU-1 and assessing a number of different horizon intervals in September. They are also looking at further drilling locations for further activity in Morocco.
In Trinidad the deal on Cory Moruga they are awaiting final approvals for the deal so the deadline for the final completion has been extended by three months until 30th November.
Eco (Atlantic) Oil & Gas
Eco has announced its results for the three months ended 30 June 2023.
Financials (as at 30 June 2023)
- The Company had cash and cash equivalents of US$2.4 million and no debt.
- Eco has cash and cash equivalents of US$4.7 million as at 30 August 2023.
- The Company had total assets of US$53.31 million, total liabilities of US$3.56 million and total equity of US$49.75 million.
- Post Period end, on 10 August 2023, the Company signed a Sale Purchase Agreement for its wholly owned subsidiary, Eco Guyana Oil and Gas (Barbados) Limited to acquire a 60% Operated Interest in Orinduik Block, offshore Guyana, through the acquisition of Tullow Guyana B.V., a wholly owned subsidiary of Tullow Oil Plc. in exchange for a combination of upfront cash and contingent consideration.
- Eco, via its wholly owned subsidiary Eco (Atlantic) Guyana Inc, currently holds a 15% working interest in the Orinduik Block. On completion of the Transaction, which is subject to certain market-standard conditions precedent, including customary Government and JV partner approvals, Eco, as operator and majority interest holder in the Orinduik Block, intends to drive the exploration process and focus on its strategy to attract new partners to join the license and proactively engage in drilling.
- Post period end, on 17 July 2023, the Company issued 1,200,000 shares to the Lunn Family Trust in place of the US$500,000 cash consideration due in respect of the acquisition of the 6.25% interest in Block3B/4B from the Lunn Family Trust as previously announced on 27 June 2022.
- On 11 July 2023, the Company signed a legally binding Letter of Intent with Africa Oil to farm out a 6.25% Participating Interest in Block 3B/4B, offshore South Africa for up to US$10.5 million in cash. On 14 August 2023, the parties signed the final Assignment and Transfer agreement. Additional US$2.5m cash consideration is expected to be received upon Government of SA approval of the transfer, with the initial consideration of US$2.5m already having been received.
- In March 2023, Africa Oil released a New Competent Person’s Resource Report confirming that the Block contains an estimated P50 Prospective Resources of approximately four billion barrels of oil equivalent (“BOE”), one Billion BOE net to Eco Atlantic prior to the sale of the aforementioned Participating Interest which is expected to complete shortly.
- The JV partners continue to progress plans to conduct a two-well campaign on the Block in conjunction with progressing the collaborative farm out process, up to 55% gross working interest, with various potential parties.
- On 15 November 2022, a Production Right Application to the Petroleum Agency of South Africa, for Block 2B, based on the existing oil discovery of AJ-1 and potential future operations was submitted by the JV Partners.
- Eco continues to believe that Block 2B contains considerable hydrocarbon resources and looks forward to providing further updates as the Company looks to deliver value from the licence for all stakeholders.
- Following the significant drilling success in the area, Eco continues to receive third party interest in its strategic acreage position offshore Namibia.
- The Company continues to assess farm out opportunities with its four licences in the region as it considers options for progressing exploration and commercial activity on its acreage.
Gil Holzman, President and Chief Executive Officer of Eco Atlantic, commented:
“Our Q1 results serve as an important opportunity to remind investors of the strategic work which is happening across all areas of the portfolio. Recently announced deals in both South Africa and Guyana are examples of the team’s efforts to position the portfolio to continue creating high-impact catalysts for investors. I am excited for the future and look forward to progressing our work programmes across our entire Atlantic Margin portfolio.
These figures are neither here nor there but for investors there has much been going on beneath the waterline. Eco’s boys and girls have been very busy, in Guyana where they have evicted Tullow and should get that programme revitalised.
They have also been wheeling and dealing in South Africa on Block 3B/4B which I am most excited about being in a smart post code and very much in demand.
Eco remains a solid member of the Bucket List and patient shareholders should be rewarded if the current level of hard work proves anything like the potential in the CPR’s. At these levels it looks more and more like a ten-bagger every day.
The Company’s unaudited financial results and Management’s Discussion and Analysis for the three months ended 30 June 2023 are available for download on the Company’s website at www.ecooilandgas.com and on Sedar at www.sedar.com.
The following are the Company’s Balance Sheet, Income Statements, Cash Flow Statement and selected notes from the annual Financial Statements. All amounts are in US Dollars, unless otherwise stated.
|June 30,||March 31,|
|Cash and cash equivalents||2,445,863||4,110,734|
|Amounts owing by license partners, net||–||477,578|
|Accounts receivable and prepaid expenses||1,530,734||1,529,451|
|Total Current Assets||4,015,675||6,153,364|
|Non- Current Assets|
|Investment in associate||8,446,043||8,612,267|
|Petroleum and natural gas licenses||40,852,020||40,852,020|
|Total Non-Current Assets||49,298,063||49,464,287|
|Accounts payable and accrued liabilities||3,371,460||4,416,789|
|Advances from and amounts owing to license partners, net||191,252||286,553|
|Total Current Liabilities||3,562,712||4,965,062|
|Restricted Share Units reserve||920,653||920,653|
|Foreign currency translation reserve||(1,754,385)||(1,458,709)|
|Total Liabilities and Equity||53,313,738||55,617,65|
|Three months ended|
|Operating costs, net||350,180||1,943,451|
|General and administrative costs||112,473||257,290|
|Foreign exchange loss (gain)||(40,050)||284,427|
|Total operating expenses||814,560||3,975,381|
|Fair value change in warrant liability||261,720||1,430,984|
|Share of losses of company accounted for at equity||(166,224)||(92,303)|
|Net loss for the period from continuing operations||(717,399)||(2,616,573)|
|Loss from discontinued operations, after-tax||–||(98,113)|
|Net loss for the period||(717,399)||(2,714,686)|
|Foreign currency translation adjustment||(295,676)||(111,630)|
Comprehensive loss for the period
|Basic and diluted net loss per share:|
|from continuing operations||(0.002)||(0.009)|
|from discontinued operations||(0.000)||(0.000)|
|Weighted average number of ordinary shares used in computing basic and diluted net loss per share||367,348,680||293,654,835|
Cash Flow Statement
|Three months ended|
|Cash flow from operating activities – continued operations|
|Net loss from continuing operations||$ (717,399)||$ (2,616,573)|
|Items not affecting cash:|
|Revaluation of warrant liability||(261,720)||(1,430,984)|
|Share of losses of companies accounted for at equity||166,224||92,303|
|Changes in non‑cash working capital:|
|Accounts payable and accrued liabilities||(1,045,329)||1,681,064|
|Accounts receivable and prepaid expenses||(1,283)||28,162|
|Reallocation to discontinued operations cashflows||–||(171,294)|
|Advance from and amounts owing to license partners||382,277||1,175,612|
|Cash flow from operating activities – continued operations||(1,369,195)||(266,265)|
|Cash flow from operating activities – discontinued operations||–||104,919|
|Cash flow from financing activities|
|Proceeds from private placements, net||–||35,587,837|
|Cash flow from financing activities||–||35,587,837|
|Increase (decrease) in cash and cash equivalents||(1,369,195)||35,426,491|
|Foreign exchange differences||(295,676)||(111,630)|
|Cash and cash equivalents, beginning of period||4,110,734||3,438,834|
|Cash and cash equivalents, end of period||$ 2,445,863||$ 38,753,695|
Notes to the Financial Statements
Basis of Preparation
The consolidated financial statements of the Company have been prepared on a historical cost basis with the exception of certain financial instruments that are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
Summary of Significant Accounting Policies
Critical accounting estimate.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively from the period in which the estimates are revised. The following are the key estimate and assumption uncertainties considered by management.
The Company is pleased to announce that it has entered into non-binding Heads of Terms with a large multinational operator to divest of all of its Egyptian assets. The Company expects to close the transaction by year-end.
The signed Heads of Terms represents an important milestone, towards crystallising value for shareholders and optimising the Company’s asset portfolio. The Disposal will position the Company for upcoming diversification into Morocco’s energy transition sector. Moving towards the energy transition narrative also gives access to a wider pool of capital, setting SDX on a new path of growth with the ultimate aim of delivering sustainable returns for shareholders.
It is envisaged that the Disposal, if completed, would constitute a fundamental change of business pursuant to AIM Rule 15 – the consideration, as currently calculated in the Heads of Terms, will significantly exceed the market cap Consideration Test threshold. The Disposal would therefore also require the consent of SDX shareholders being given in a general meeting. Upon signing a sale and purchase agreement, the Company will issue a further announcement and publish a circular containing details of the Disposal and convene a general meeting.
Completion of the Disposal will be subject to, among other conditions, the negotiation of final transaction documentation and obtaining Egyptian government approvals for the sale. The Heads of Terms are non-binding and, therefore there can be no certainty that the Disposal will complete.
The Company will make further announcements as appropriate.
Daniel Gould, Managing Director, commented:
“The planned sale of SDX’s Egyptian assets will be a significant milestone on the Company’s transition roadmap that we will soon be presenting to our shareholders. SDX, re-energised with new management, will focus on monetising exciting opportunities around its Moroccan assets and related energy transition sector-plays in order to reward and deliver capital growth to our shareholders in the near term.”
Well, well, well, Jay Bhattacherjee and his team has done what he said he would when he came in as interim Executive Chairman and has now signed HOT’s for the Egyptian assets at what must be a cracking price if it is ‘significantly’ in excess of the company’s £8m market cap.
It has certainly beaten any expectations I had for the assets after the announcement earlier in the summer when it was announced that there were many potential bidders in the room. Whilst these things always carry a degree of transactional risk it sounds like it is quite a long way down the road and it is my understanding the deal will be in US Dollars and not exposed to Egyptian currency risks so homework has been done by the Company.
Once closed I understand that Jay will pay down some debt and a few outstanding bills, maybe redeploy some in Morocco and of course patient and longstanding shareholders would like a small piece of the action as well. Jay always said that he wanted to create long term value for shareholders and this deal looks smart enough for that to have been the case, I’m very impressed.