Baron Oil Plc (LON:BOIL), the AIM-quoted oil and gas exploration company focused on assets in SE Asia and the UK, has announced its unaudited interim results for the six months ended 30 June 2022.
Key Points
| · | Considerable technical advances made on Chuditch, offshore Timor-Leste. Our geoscience team are interpreting the improved subsurface image resulting from the TGS 3D reprocessing project and integrating it into a revised evaluation. |
| · | Likewise, in UK Licence P2478, the 3D seismic reprocessing project and geochemical studies have been received and re-interpretation commenced on schedule in July. The revised evaluation of the prospectivity of the licence, including the Dunrobin prospect, is anticipated to be delivered during Q4 2022. |
| · | Relinquishment of legacy Block XXI allows for an orderly withdrawal from Peru. |
| · | A Placing and Subscription in April 2022 raised approximately £1.65m gross (net £1.5m), primarily to progress the Chuditch and P2478 projects towards their key milestones. |
| · | At the end of the half year period, the free cash position stood at £2,365,000 (30 June 2021: £1,650,000). |
Commenting on the results, John Wakefield, Non-executive Chairman, said:
“We believe that Baron is in a strong position to deliver value to shareholders as our two major projects move through key evaluation points at the same time as the oil & gas sector tailwinds of energy security, structural imbalances in LNG, and historically high gas prices are firmly with us. Our strategy remains that of seeking and working up high potential impact exploration and appraisal opportunities at significant equity in proven hydrocarbon basins.”
FINANCIALS
The net result for the period was a loss before taxation of £419,000 (30 June 2021: net loss of £117,000; year ended 31 December 2021: net loss of £1,127,000), representing a loss of 0.003p per share (30 June 2021: 0.002p; year to 31 December 2021: 0.012p). It should be noted that the interim and year end results for 2021 included a one-off non-cash gain on the deemed disposal of an associated undertaking amounting to £302,000.
Exploration and evaluation expenditure written off and included in the Income Statement amounts to £120,000, consisting of Peru-related costs up to the date of the relinquishment of the Block XXI licence, surface rental in Timor-Leste, and technical consultancy. An impairment provision in respect of a Peru tax receivable was reduced by £44,000, this being attributable to adjustments arising from the relinquishment of the licence.
Administration expenses for the period amounted to £497,000, compared to £424,000 in the same period in 2021, and £1,321,000 for the whole of 2021 The increase over the previous six month period is entirely due to the full inclusion of expenses arising in Timor-Leste (first consolidated in April 2021), and the relative reduction on the 2021 full year figures is attributable to lower director and staff salary costs, and the inclusion of share-based payments of £286,000 in 2021, not repeated in 2022.
During the six months to 30 June 2022, the US Dollar strengthened against the Pound Sterling considerably, with an opening rate of $1.35 and a closing rate of $1.21. This has given rise to a substantial gain on holdings of US Dollar assets of £161,000 (30 June 2021: loss of £36,000; 31 December 2021: gain of £22,000).
At the end of the period, free cash reserves of the Group had increased to £2,365,000 from a level at the preceding year end of £1,650,000. The proceeds of a Placing and Subscription of new ordinary shares in the year amounting to £1,508,000 net of costs bolstered the Company’s cash reserves. The Group’s investment in intangible assets in the UK and Timor-Leste amounted to £383,000 in the period, together with £410,000 of operating cash outflow.
PROJECTS
SE Asia: Timor-Leste, offshore TL-SO-19-16 PSC (“Chuditch”) – Baron 75%; Timor Gap 25%
Significant technical progress has been made since the beginning of the year on the evaluation of the Chuditch-1 discovery and offset analogous prospectivity. Our geoscience team is fully engaged in the interpretation of the significantly improved subsurface image resulting from the TGS 3D reprocessing project and its integration with petroleum systems, reservoir and other technical studies. Once the geoscience evaluation is completed we will be updating our development and gas export option studies, including the layout and costs of infield facilities, pipeline and standalone options for gas export, and the treatment and storage of carbon dioxide.
We are engaging with multiple potential farm-in partners by hosting a continuously updated dataroom. Farm-in candidates include not only ‘traditional’ exploration and production industry players, but also companies seeking security of gas supply as well as infrastructure providers.
In June, as part of our ongoing showcasing of Chuditch, Baron’s wholly owned subsidiary SundaGas Banda Unipessoal Lda. (“SundaGas“), the operator of the Chuditch PSC, presented at the 4th Timor-Leste Energy & Mining Summit in Dili and the South-East Asia Petroleum Exploration Society (SEAPEX) Asia-Pacific conference in London. This will be followed in September with further presentations at the Business and Exploration Opportunities Show (BEOS) in London, and at the RIU Good Oil & Gas Energy Conference in Perth, Western Australia, which is Australia’s pre-eminent oil and gas investment forum for junior and emerging oil and gas explorers and producers.
Our office in Dili, the capital of Timor-Leste, became fully staffed and operational during the first half of 2022, thereby reinforcing our already strong and constructive relationships with in-country authorities, partners and industry peers.
United Kingdom Offshore Licence P2478 – Corallian 36%; Upland Resources 32%; Baron 32%
The 3D seismic reprocessing and geochemical studies covering the Dunrobin and other prospects within Licence P2478 in the Inner Moray Firth have been delivered with a significant uplift in data quality believed to have been achieved. The interpretation of the revised data began on schedule in July 2022. An updated prospectivity evaluation is anticipated to be available during Q4 2022, which will provide sufficient time for the Joint Venture partners to consider options, potentially including engaging with prospective drilling and funding partners, ahead of the July 2023 ‘drill or drop’ licence decision.
We have been encouraged by the UK Government’s stance on energy security which has the potential to revive the business and regulatory hydrocarbon exploration environment in the UK North Sea. In addition, the proposed “windfall” tax (the Energy Profits Levy) may lead to producing oil and gas companies re-engaging in exploration drilling. Both aspects may have a positive impact on the chances of the potentially large Dunrobin prospect with its shallow target depths being tested.
Peru
Baron announced in April 2022 the relinquishment of its legacy Peru Licence Block XXI, and in June 2022 the release and successful return of its US$160,000 Bank Guarantee. Through its fully owned subsidiary Peru, Gold Oil Peru SAC, the Company continues to work with Perupetro SA (the Peruvian national oil & gas agency and licensing authority) to establish and file an Abandonment Plan. Ongoing cash expenditure is minimal, and we do not anticipate any material write-offs or impairment as we complete our exit from Peru.
Shareholder Webinar
Based on the success of our first live investor presentation in late January 2022, we anticipate holding a second similar Chuditch focused event during the early part of Q4 2022.
January’s Chuditch presentation, which is available on the Baron website, included an updated technical overview; description of the overall commercial context; options for potential future gas export strategies via pipeline to LNG facilities, or standalone solutions such as a Floating Liquefied Natural Gas (FLNG) facility; preliminary concepts for the handling of carbon dioxide and CCS (carbon capture and storage); and a preliminary design for a Chuditch appraisal well.
Glossary
| LNG | Liquefied Natural Gas |
| PSC | Production Sharing Contract |
| TGS | TGS-NOPEC Geophysical Company |
