24 September 2015

 

Sound Oil plc

("Sound Oil" or the "Company")

 

2015 Interim Results

 

Sound Oil, the Mediterranean focused upstream gas company, announces its unaudited interim results for the six months ended 30 June 2015.

 

Highlights

 

·     Entered a farm-in agreement  to acquire a 55% net working interest and operatorship of the Tendrara licence, onshore Morocco

 

·     Award of the Casa Tonetto production concession (which includes the Nervesa Discovery) following period end and the signature of a gas sales agreement with Shell Energy Italia. Commercial production expected to commence by the end of 2015

 

·     Environmental Impact Assessment ("EIA")  approval for Badile exploration well

 

·     Continued production from Rapagnano covering the majority of the Company's Italian cost base

 

·     Unaudited cash balances of £17.5 million (approximately €24.8 million) as at 30 June 2015

 

 

 

For further information please contact:

 

Vigo Communications - PR Adviser Patrick d'Ancona Chris McMahon Alexandra Roper	Tel: 44 (0)20 7016 9573
Sound Oil James Parsons, Chief Executive Officer	j.parsons@soundoil.co.uk
Smith & Williamson - Nominated Adviser Azhic Basirov David Jones Ben Jeynes	Tel: 44 (0)20 7131 4000
Cantor Fitzgerald Europe - Broker Sarah Wharry David Porter	Tel: 44 (0)20 7894 8896

 

Chairman's Statement

 

I am pleased to report that the first half of 2015 has, once again, been a busy period for the Company.

 

Despite recent turbulence in the sector, Sound Oil is positioned with a well-balanced and recently broadened portfolio across Italy and Morocco, with existing production, a strong balance sheet, a supportive cornerstone investor and a bold growth agenda.

 

One of the key highlights of the period under review was our acquisition, subject to completion, of an operated position and up to 55% working interest in the Tendrara licence, onshore Morocco ("Tendrara"). Morocco is a stable, growing, gas-hungry country with strong gas prices and competitive fiscal terms.

 

Tendrara benefits from a compelling risk / reward balance with both a large scale gas discovery and multiple Tcf exploration potential.

 

The Company also once again demonstrated progress across its Italian portfolio, including securing the EIA approval at the transformational Badile licence and continuing to deliver strong, cost covering, production at Rapagnano.

 

Despite a disappointing second well on the Nervesa discovery over the summer, the Company is positioned for commercial production from the first well, underpinned by strong gas prices which remain resilient to the recent oil price decline, by the end of the year. The Company is also finalising preparations for our first well in Morocco.

 

Our Executive team, under the leadership of James Parsons our Chief Executive Officer, are executing a clearly defined and ambitious Mediterranean gas strategy. To better reflect our increasing gas focus, the Company's name will be changed to Sound Energy plc with effect from 1 October 2015.

 

I would like to take this opportunity to thank all our shareholders for their continued support.

 

Simon Davies

23 September 2015

 

 

Condensed Interim Consolidated Income Statement

For the six months ended 30 June 2015

 

 

	Notes	Six months ended 30 June 2015 Unaudited £'000s	Six months ended 30 June 2014 Unaudited £'000s	Year ended 31 Dec 2014 Audited £'000s
Revenue Operating costs Impairment of producing assets Exploration costs		478 (291) - (1)	490 (267) - (83)	983 (658) (723) (74)
Gross profit/(loss) Administrative expenses		186 (1,490)	140 (1,378)	(472) (2,773)
Group operating loss from continuing operations		(1,304)	(1,238)	(3,245)
Finance revenue Foreign exchange gain/(loss) External interest costs		12 (2,000) (602)	1 (330) (480)	7 (661) (1,022)
Loss for period before taxation		(3,894)	(2,047)	(4,921)
Tax expense		-	-	-
Loss for period after taxation		(3,894)	(2,049)	(4,921)
Other comprehensive (loss)/income Foreign currency translation (loss)/income		(100)	(51)	127
Total comprehensive loss for the period		(3,994)	(2,098)	(4,794)
Loss for the period attributable to: Equity holders of the parent		(3,994)	(2,098)	(4,794)
Loss per share and diluted for the period attributable to the equity holders of the parent (pence)	4	(0.91)	(0.70)	(1.40)

 

 

Condensed Interim Consolidated Balance Sheet

At 30 June 2015

 

	Notes	Six months ended 30 June 2015 Unaudited £'000s	Six months ended 30 June 2014 Unaudited £'000s	Year ended 31 Dec 2014 Audited £'000s
Non-current assets		12,403	1,585	13,200
Property, plant and equipment	6
Intangible assets	8	13,859	19,967	8,888
Land and buildings	7	1,294	-	1,433
		27,556	21,552	23,521
Current assets		2,434	1,807	2,173
Other receivables
Prepayments		94	140	157
Cash and short term deposits		17,489	677	12,608
		20,017	2,624	14,938
Total assets		47,573	24,176	38,459
Current Liabilities		3,626	934	2,194
Trade and other payables
Loans repayable in under one year		-	161	131
		3,626	1,095	2,325
Non-current liabilities		1,959	2,130	2,099
Deferred tax liabilities
Loans due in over one year		13,538	4,851	13,437
Provisions		1,082	1,176	1,164
		16,579	8,157	16,700
Total liabilities		20,205	9,252	19,025
Net Assets		27,369	14,924	19,434
Capital and Reserves		83,086	64,625	71,298
Equity share capital
Warrant Reserve		369	-	369
Foreign currency reserve		1,288	1,210	1,388
Accumulated deficit		(57,374)	(50,911)	(53,621)
Total Equity		27,369	14,924	19,434

 

 

Condensed Interim Consolidated Statement Of Changes in Equity

For the six months ended 30 June 2015

 

	Share capital £'000s	Share premium £'000s	Accumulated Deficit £'000s	Warrant Reserve £'000s	Foreign currency reserves £'000s	Total equity £'000s
At 1 January 2015	4,153	67,145	(53,621)	369	1,388	19,434
Total Loss for the period	-	-	(3,894)	-	-	(3,894)
Other comprehensive income	-	-	-	-	(100)	(100)
Total income and expense for the period	-	-	(3,894)	-	(100)	(3,994)
Issue of share capital	675	12,034	-	-	-	12,709
Transaction costs	-	(921)	-	-	-	(921)
Share based payments	-	-	141	-	-	141
At 30 June 2015 (unaudited)	4,828	78,258	(57,374)	369	1,288	27,369

 

	Share capital £'000s	Share premium £'000s	Accumulated Deficit £'000s	Warrant Reserve £'000s	Foreign currency reserves £'000s	Total equity £'000s
At 1 January 2014	2,876	60,209	(49,029)	-	1,261	15,317
Total Loss for the period            -	-	-	(4,921)	-	-	(4,921)
Other comprehensive income	-	-	-	-	127	127
Total comprehensive income/(loss)	-	-	(4,921)	-	127	(4,794)
Issue of share capital	1,277	7,442	-	-	-	8,719
Transaction costs	-	(506)	-	-	-	(506)
Fair value of warrants	-	-	-	369	-	369
Share based payments	-	-	329	-	-	329
At 31 December 2014	4,153	67,145	(53,621)	369	1,388	19,434

 

	Share capital £'000s	Share premium £'000s	Accumulated Deficit £'000s	Foreign currency reserves £'000s	Total equity £'000s
At 1 January 2014	2,876	60,209	(49,029)	1,261	15,514
Total Loss for the period	-	-	(2,047)	-	(2,047)
Other comprehensive income	-	-	-	(51)	(51)
Total comprehensive income/(loss)	-	-	(2,047)	(51)	(2,098)
Issue of share capital	402	1,317	-	-	1,719
Transaction costs	-	(179)	-	-	(179)
Share based payments	-	-	165	-	165
At 30 June 2014 (unaudited)	3,278	61,347	(50,911)	1,210	14,924

 

 

Condensed Interim Consolidated Cash Flow

For the six months ended 30 June 2015

 

	Six months ended 30 June 2015 Unaudited £'000s	Six months ended 30 June 2014 Unaudited £'000s	Year ended 31 Dec 2014 Audited £'000s
Cash flow from operating activities	(1,593)	(1,134)	(3,327)
Cash flow from operations
Interest received	12	1	7
Net cash flow from operating activities	(1,581)	(1,133)	(3,320)
Cash flow from investing activities	(292)	(3)	(2,258)
Capital expenditure and disposals
Exploration and development expenditure	(3,156)	(2,151)	(1,089)
Net cash flow from investing activities	(3,448)	(2,154)	(3,347)
CSTI Funding contract	(115)	-	(242)
Net proceeds from debt	-	2,250	11,398
Net Proceeds from equity issue	11,163	1,138	8,213
Interest payments	(382)	(45)	(280)
Net cash flow from financing activities	10,666	3,343	19,089
Net increase/(decrease) in cash and cash equivalents	5,637	56	12.420
Net foreign exchange difference	(756)	78	(355)
Cash and cash equivalents at the beginning of the period	12,608	543	543
Cash and cash equivalents at the end of the period	17,489	677	12,608

 

 

Notes to cash flow

 

	Six months ended 30 June 2015 Unaudited £'000s	Six months ended 30 June 2014 Unaudited £'000s	Year ended 31 Dec 2014 Audited £'000s
Cash flow from operations reconciliation Loss before tax Finance revenue Payroll bonuses paid in shares Exploration expenditure written off and impairment of assets Increase/(decrease) in accruals and short term payables Depreciation Share based payments charge Decrease in long term provisions Finance costs and exchange differences Decrease/(increase) in short term receivables	(3,894) (12) - -   (329)   98 141 - 2,602 (199)	(2,047) (1) 48 83   (466)   121 165 (61) 480 544	(4,921) (7) 60 797   (603)   225 329 (62) 1,022 (167)
Cash flow from operations	(1,593)	(1,134)	(3,327)

 

 

Notes to the Condensed Interim Consolidated

Financial Statements

 

1.  Basis of preparation

 

The condensed interim consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2006. The comparative financial information is based on the statutory accounts for the year ended 31 December 2014. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

 

The condensed interim financial information is unaudited and has been prepared on the basis of the accounting policies set out in the Group's 2014 statutory accounts in accordance with IAS 34 Interim Financial Reporting.

 

The seasonality or cyclicality of operations does not impact on the interim financial statements.

 

2.  Segment information

 

The Group categorises its operations into two business segments based on exploration & appraisal and development & production. The Group's exploration & appraisal activities are carried out in Italy under various licences and permits. The Group's reportable segments are based on internal reports about components of the Group which are regularly reviewed and used by the Board of Directors, being the Chief Operating Decision Maker ("CODM"), for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance. In 2013, the Group recognised its first revenue from the Rapagnano licence. All sales and operating costs relate to production from that licence. Details regarding each of the operations of each reportable segment is included in the following tables:

 

Segment results for the period ended 30 June 2015

 

	Corporate £'000s	Development &Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Sales and other operating revenues	-	478	-	478
Operating costs	-	(291)	-	(291)
Exploration costs	-	-	(1)	(1)
Administration expenses	(1,490)	-	-	(1,490)
Operating loss segment result	(1,490)	187	(1)	(1,304)
Interest receivable	12	-	-	12
Finance costs	(2,602)	-	-	(2,602)
Loss for the period before taxation	(4,080)	187	(1)	(3,894)

 

The segments assets and liabilities at 30 June 2015 are as follows:

 

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Capital expenditure	67	12,336	15,153	27,556
Other assets	20,017	-	-	20,017
Total liabilities	(1,959)	(6,669)	(11,577)	(20,205)

 

 

Segment results for the period ended 30 June 2014

 

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Sales and other operating revenues	-	490	-	490
Operating costs	-	(267)	-	(267)
Exploration costs	-	-	(83)	(83)
Administration expenses	(1,378)	-	-	(1,378)
Operating loss segment result	(1,378)	223	(83)	(1,238)
Interest receivable	1	-	-	1
Finance costs	(810)	-	-	(810)
Loss for the period before taxation	(2,167)	223	(83)	(2,047)

 

The segments assets and liabilities at 30 June 2014 were as follows:

 

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Capital expenditure	70	1,515	19,967	21,552
Other assets	2,625	-	-	2,625
Total liabilities	(9,253)	-	-	(9,253)

 

Segment results for the year ended 31 December 2014

 

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Sales and other operating revenues	-	983	-	983
Operating costs	-	(658)	-	(658)
Exploration costs	-	-	(74)	(74)
Impairment of producing assets	-	(723)	-	(723)
Administration expenses	(2,773)	-	-	(2,773)
Operating loss segment result	(2,773)	(398)	(74)	(3,245)
Interest receivable	7	-	-	7
Finance costs	(1,552)	(131)	-	(1,683)
Loss for the period before taxation	(4,318)	(529)	(74)	(4,921)

 

The segments assets and liabilities at 31 December 2014 were as follows:

 

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Capital expenditure	-	13,112	10,409	23,521
Other assets	14,938	-	-	14,938
Total liabilities	(2,099)	(1,557)	(15,369)	(19,025)

 

 

3.  Share based payments

 

No new options were awarded to the Executive Team during the first half of 2015. The charge of £141,000 recognises the amortisation of share options awarded in prior years.

 

4.  Related party transactions

 

There were no sales or purchases to or from related parties. In 2014, the Company finalised a loan arrangement from the Company's Chairman, Simon Davies. The loan carries an annual coupon of 10% and an amount of £1m was drawn in 2014.

 

No guarantees were provided or received for any related party receivables or payables and there were no further other transactions with related parties, directors' loans and other directors' interests.

 

5.  Profit/(loss) per share

 

The calculation of basic profit/(loss) per Ordinary Share is based on the profit/(loss) after tax and on the weighted average number of Ordinary Shares in issue during the period. Basic profit/(loss) per share is calculated as follows:

 

	Loss after tax from continuing operations			Weighted average shares in issue			Loss per share (basic) from continuing operations
	June 2015 £'000s	June 2014 £'000s	December 2014 £'000s	June 2015 million	June 2014 million	December 2014 million	June 2015 pence	June 2014 pence	December 2014 pence
Basic	(3,894)	(2,047)	(4,921)	430	291	360	(0.91)	(0.70)	(1.40)

 

6.  Property, plant and equipment

 

	Six months ended 30 June 2015 Unaudited £'000s	Six months ended 30 June 2014 Unaudited £'000s	Year ended 31 Dec 2014 Audited £'000s
Development and production assets	15,566	2,947	2,947
Cost
At start of period
Exchange adjustments	(1,229)	(40)	(548)
Additions	511	269	1,612
Transfers	-	-	11,555
At end of period	14,848	3,176	15,566
Depreciation	2,454	1,559	1,559
At start of period
Transfers	-	-	-
Charge for period	58 -	102	183
Impairment of assets		-	712
At end of period	2,512	1,661	2,454
Net book amount	12,336	1,515	13,112
Fixtures, fittings and office equipment	273	231	231
Cost
At start of period
Exchange adjustments	-	(2)	(4)
Additions	-	3	46
At end of period	273	232	273
Depreciation	185	143	143
At start of period
Charge for period	21	19	42
At end of period	206	162	185
Net book amount	67	70	88
Total net book amount	12,403	1,585	13,200

 

7.  Land and Buildings

 

	Six months ended 30 June 2015 Unaudited £'000s	Six months ended 30 June 2014 Unaudited £'000s	Year ended 31 Dec 2014 Audited £'000s
Cost	1,443	-	-
At start of period	-
Additions	-	-	1,433
Exchange adjustments	(149)	-	-
At end of period	1,294	-	1,433
Depreciation	-	-	-
At start of period
Additions	-	-	-
At end of period	-	-	-
Net book amount	1,294	-	1,433

 

8.  Intangibles

 

	Six months ended 30 June 2015 Unaudited £'000s	Six months ended 30 June 2014 Unaudited £'000s	Year ended 31 Dec 2014 Audited £'000s
Cost	13,948	24,560	24,560
At start of period
Additions	5,497	863	1,089
Transfers	-	-	(11,555)
Exchange adjustments	(454)	(396)	(146)
At end of period	18,991	25,027	13,948
Impairment and Depreciation	-	-	-
At start of period	5,060	5,060	5,060
Exchange adjustments	-	-	-
Charge for period	72	-	-
At end of period	5,132	5,060	5,060
Net book amount	13,859	19,967	8,888

 

 

9.  Share Issues

 

On 22 January 2015, Sound Oil announced that it had issued 3,906,250 ordinary shares to Greenberry S.A. relating to the introductory fee payable for the reserve based lending facility announced on 13 November 2014.

 

On 20 May 2015, Sound Oil announced that it had issued 48,000,000 ordinary shares as part of the first tranche of the equity placing announced on 28 April 2015.

 

At the same time the Company also issued 48,000,000 warrants valid for five years from 22 May 2015 with an exercise price of 24 pence per ordinary share.

 

On 24 June 2015, the Company announced the result of its Open Offer first announced on 18 May 2015. The Company issued 15,599,752 new ordinary shares and 15,599,752 warrants with identical terms to those announced on 20 May 2015, consequently, at 30 June 2015, the Company had 482,806,817 ordinary shares in issue.

 

10.  Notes to the Cash Flow Statement

Additions to exploration and development assets during the period and unpaid at the period end were £1,760,000.

 

During the period fees of £625,000 relating to the reserve based lending facility completed in November 2014 were settled in exchange for 3,906,250 new ordinary shares.

 

11.  Post Balance Sheet events

 

On 3 July 2015, the Company confirmed the completion of the placing first announced on 28 April 2015.

 

Following receipt of subscriptions and £2.88m of cash, the Company issued 15,157,895 new ordinary shares and 15,157,895 warrants at a price of 24p for a period of five years from 22 May 2015.