Yahoo Finance Wentworth Resources Limited : 2017 Annual Financial Statements and MD&A
PRESS RELEASE
28 March 2018
Wentworth Resources Limited
("Wentworth" or the "Company")
2017 Annual Financial Statements and MD&A
Wentworth Resources Limited, the Oslo Stock Exchange (WRL.OL) and London Stock Exchange (WRL.L) listed independent, East Africa-focused oil & gas company, today announces its results for the calendar year 2017.
Operations
Tanzania (Mnazi Bay)
Increased average gross daily gas production of 49.1 MMscf/d (2016: 43.0 MMscf/d). Gross gas sales volumes increased by 14 percent in 2017.
Exit daily gas production rate of 73.4 MMscf/d
The Company received total cash payments of $18.57 million relating to gas sales and recovery of the long-term government receivable during 2017.
During the course of 2017, gas sales receivables from the main purchaser of gas increased from two to four months in arrears. Regular payments have been received since Q2 2017. The Company continues to proactively manage working capital, by matching settlement obligations with gas sales payment timing.
Mozambique (Tembo)
Completed an integrated technical evaluation of the Wentworth operated Rovuma Onshore Appraisal Block, post the Tembo-1 well (2014), including reprocessing existing 2-D seismic data.
Commenced well planning for a Tembo gas discovery appraisal, including optimising well design and costs, selecting a location, obtaining necessary environmental permits and initiating long lead time equipment procurement activities.
Launched a farm-out process to secure an industry partner to participate in the joint venture, in advance of planned drilling.
The Company has formally requested a one-year extension of the Appraisal License and continues to advance pre-drilling planning activities.
Corporate
Wentworth`s share of Tanzanian Proved + Probable (2P) reserves are US$159.6 million NPV (10%) after tax at 31 December 2017, as independently valued by RPS Canada.
Mnazi Bay gas fields net 2P reserves were 115.1 Bscf (19.2 Mmboe) at December 31, 2017.
Completed a private placement on 23 May 2017 issuing 16,953,496 new common shares for total gross proceeds of $5.53 million.
Improved principal payment timing on existing $20.0 million credit facility and secured new $2.5 million overdraft facility for working capital purposes.
Initiated relocation of executive management and head office from Calgary, Canada to London, UK.
Financial
Increased Mnazi Bay gas sales revenue to $13.44 million, up 14 percent from 2016, due to gas-fired Kinyerezi-1 and Ubungo-II power stations operating at near full capacity during the second half of 2017, Kinyerezi-2 gas-fired power station commencing commissioning during Q4 2017 and lower quantities of gas supplied by industry competitors.
Net loss of $0.71 million (2016: $5.09 million net loss).
Incurred exploration capital expenditures of $2.38 million to advance the appraisal of the Tembo Appraisal License and development capital expenditures of $1.06 million on field infrastructure (tie-in) improvements in the Mnazi Bay Concession in Tanzania.
Cash and cash equivalents on hand of $3.75 million (2016: $0.98 million) as at December 31, 2017.
Working capital of $15.48 million (2016: $4.96 million).
Ongoing focus on capital discipline with 15% reduction in G&A expenses to $4.61 million.
Reduced outstanding long-term loans by $5.35 million of principal repayments during 2017. Carrying value of long-term loans at year-end was $15.15 million.
In compliance with both reporting obligations as a public company, commencing in 2018, the Company will now release a Half Yearly Financial Report and an Annual Financial Report. The Company will no longer publish first quarter and third quarter financial statements and management discussion and analyses as these are no longer mandatory filing obligations.
Geoff Bury, Managing Director, commented:
"2017 was a very positive year for Wentworth where we benefited from an increase in production to an average of 62 MMscf/d in Q4 and reached an exit rate of 73 MMScf/d, resulting in continued strengthening of our Company. Wentworth enters 2018 in a strong and stable financial position enabling us to continue to grow the Company and to enhance shareholder value. With the relocation of the head office to London I will soon be stepping down as Managing Director, so I would like to take this opportunity to thank our shareholders for their support and thank Wentworth`s Board, management and staff for their hard work and dedication."
A conference call for investors, analysts and other interested parties will be held today at 08.00 MDT (Calgary) / 15.00 BST (London) / 16.00 CEST (Oslo).
Dial in numbers:
Please dial in 5-10 minutes prior to the start time and join the call by referencing "Wentworth Resources Annual 2017 Results".
Participant Dial in Numbers:
All locations: + 44 20 3936 2999
United Kingdom (Local): 020 3936 2999
United States (Local): +1 845 709 8568
Canada (Toll Free): +1 833 2942 546
Norway (Toll Free): 800 24 973
Participant code - 171600
-Ends-
Enquiries: | Lance Mierendorf | lance.mierendorf@wentworthresources.com |
Katherine Roe | katherine.roe@wentworthresources.com | |
Stifel Nicolaus Europe Limited | AIM Nominated Adviser and Broker (UK) | +44 (0) 20 7710 7600 |
GMP FirstEnergy | Broker (UK) | +44 (0) 20 7448 0200 |
Peel Hunt LLP | Broker (UK) | +44 (0) 20 7418 8900 |
FTI Consulting | Investor Relations Adviser (UK) | wentworth@fticonsulting.com |
Key extracts of the 2017 Management Discussion and Analysis are set out below and should be read in conjunction with the complete 2017 Management Discussion and Analysis which is available on the Company`s updated website at http://www.wentworthresources.com.
Operations Overview
Corporate
During Q4 2017, the Company initiated a restructuring process to better align its corporate and management governance model with its shareholders and African asset base, to increase management efficiencies and reduce certain operational and overhead costs.
As part of this process the Company is relocating its executive management team and head office from Calgary to London. Managing Director Geoff Bury is unable to relocate to London and will therefore be leaving the Company. In January 2018, the Company announced that Mr. Eskil Jersing has agreed to join Wentworth as Chief Executive Officer ("CEO"). Mr. Jersing will join the Company and Board of Directors in Q2 2018 following an orderly transition from his current role as CEO of Sterling Energy Plc. Mr. Bury has agreed to remain in his current role for a period of time to allow a smooth transition of responsibilities to Mr. Jersing.
Mrs. Katherine Roe has been promoted to Chief Financial Officer ("CFO") based in London effective April 1, 2018. Mrs. Roe has been Vice President Corporate Development & Investor Relations for the Company since 2014 and has over 15 years of senior corporate and capital markets experience. Mr. Lance Mierendorf is unable to relocate to London and will remain in the CFO role until March 31, 2018 and coordinate an efficient and orderly handover to Mrs. Roe.
In line with the head office relocation and given that the Company has few Canadian registered shareholders and very limited operational connections to Canada, the Board is planning to re-domicile the public Canadian legal entity listed on the Oslo Stock Exchange (WRL.OL) and the AIM market of the London Stock Exchange (WRL.OL) from Canada to the British Isles. Following implementation, this initiative is primarily expected to optimise and further build shareholder engagement, reduce costs and decrease corporate complexity. The Company will consult and update shareholders, when appropriate, as to the progress on the corporate redomicile process.
In compliance with both reporting obligations as a public company, commencing in 2018, the Company will now release a Half Yearly Financial Report and an Annual Financial Report. The Company will no longer publish first quarter and third quarter financial statements and management discussion and analyses as these are no longer mandatory filing obligations.
Mnazi Bay Concession, Tanzania
Production Operations
Mnazi Bay gas sold to Tanzania Petroleum Development Corporation ("TPDC") is primarily utilized by Tanzania Electricity Supply Company Limited ("TANESCO") as a fuel source to power its electrical generation plants serving the National Electricity Grid in Tanzania. During year 2017, Mnazi Bay gas was used to fuel three TANESCO-owned power stations located within the city of Dar es Salaam: Kinyerezi-I, Kinyerezi-II and Ubungo-II.
In December 2017, the first gas turbine (40MW) of the 240MW Kinyerezi-II power station, was commissioned, taking up to 7 MMscf/d of gas during the month. As at March 20, 2018, four of the six gas turbines at Kinyerezi-II had been commissioned. Demand for Mnazi Bay gas in order to power this facility is expected to reach 36 MMscf/d when all six gas turbines become operational. Commissioning of the 185 MW Kinyerezi-I Extension is expected to commence during Q4 2018 and, once fully operational in 2019, is expected to utilize an additional 35 MMscf/d of gas to generate electrical power.
During Q4 2017, the Mnazi Bay gas fields delivered 62.2 MMscf/d compared to 39.4 MMscf/d during Q4 2016. Both the Kinyerezi-I and Ubungo-II power stations operated at near full capacity during the second half of 2017. Additionally, the Kinyerezi-II power station started the commissioning process during December 2017, a few months earlier than anticipated. During Q2 2017, TPDC commenced delivery of Mnazi Bay gas to its first industrial customer, a newly constructed $100 million roofing tile factory, Goodwill Ceramics. During 2017, gas deliveries to Goodwill Ceramics ranged between 4 MMscf/d to 7 MMscf/d.
Full year 2017 production from the Mnazi Bay gas field in Tanzania averaged 49.1 MMscf/d, compared to 43.0 MMscf/d during 2016, which was at the high end of Management`s 2017 guidance of between 40 - 50 MMscf/d.
Production from Mnazi Bay peaked at over 80 MMscf/d (13,300 boepd) in February 2018 and averaged 72.5 MMscf/d during the first two months of 2018. Additional gas demand in the industrial sector is expected to be realized in H1 2018. TPDC concluded a commercial arrangement to supply gas to the Mtwara Dangote cement plant, the largest in Tanzania; for power generation and firing its clinker kilns used in the production of cement. A new gas pipeline connecting the temporary power generation unit to the TPDC owned 36-inch transnational pipeline is currently in the process of being installed. The installation of a 35MW power generation unit and associated power supply to the Dangote plant is expected to be commissioned during April 2018. Dangote also announced a plan to eliminate coal and convert the entire plant to gas, including the kiln furnaces, envisaging a permanent combined cycle power plant being built on the premises of the factory. Initial gas demand for temporary power generation is expected to be between 5 and 7 MMscf/d. The kilns are expected to be fired by natural gas commencing in Q3 2018 and will require an additional 8 and 10 MMscf/d of natural gas, increasing to between 20 MMscf/d and 25 MMscf/d in 2019. The temporary 35MW gas fired plant is planned to be replaced by the combined cycle plant using steam turbines in Q1 2019.
On a smaller scale, Mnazi Bay gas is also currently sold directly to TANESCO for electrical power generation at an 18MW power plant at Mtwara. The power station provides electricity to an isolated grid serving the region and includes the towns of Mtwara, Madimba, Lindi, Msassi and Newala. Gas quantities of between 2 and 2.5 MMscf/d are being supplied to the power plant through an 8-inch pipeline, owned by the Mnazi Bay joint venture.
Development capital works
During 2017, engineering works were undertaken on the expansion of the Mnazi Bay Joint Venture owned processing facilities at Msimbati. Primary processing of Mnazi Bay produced gas is required at Msimbati to remove free liquids before the gas enters a sub-marine pipeline that connects into the Madimba Gas Processing Facility. Expansion of the processing facilities, together with tying-in of all 5 producing wells, completes the necessary field infrastructure work to enable delivery of gas volumes in excess of 100 MMscf/d to the TPDC owned pipeline to Dar es Salaam. Commissioning of these facilities is expected in Q1 2018. With the completion of these works it is anticipated that there will not be a need for significant additional capital expenditure until the average daily demand from the Msimbati facility exceeds 100 MMscf/d.
Rovuma Onshore Block, Mozambique
Appraisal activities
An extension of the Rovuma Onshore Exploration Concession to conduct an appraisal of the Tembo-1 gas discovery was granted to Wentworth by the Government on June 15, 2016. On that same date, Wentworth was approved as the operator of the concession and now holds an 85 percent participation interest, with the Government holding the remaining 15 percent. Activities to date have included the reprocessing of existing 2D seismic data, re-evaluation of the Tembo-1 drilling results, 2D seismic survey program planning, obtaining environment permits and licenses, establishing both a field camp within the Concession and a field office in Maputo, Mozambique along with pre-drilling planning activities.
A 2D seismic acquisition program of approximately 500-700 kilometers was considered for the second half of 2017, with a tendering process completed in Q2 2017. Based on the reprocessing and re-interpretation of legacy seismic data, extensive analysis of the Tembo-1 drilling results and further subsurface studies, Wentworth has concluded that sufficient data and information exists, to support drilling an appraisal well confirming the commercial potential of Tembo, without the need to acquire new seismic and therefore this seismic acquisition program has been postponed. Wentworth`s technical team is focused on identifying a suitable drilling location for a Tembo appraisal well and associated well planning activities. The government of Mozambique is supportive of postponing the acquisition of new seismic until after an appraisal well is drilled.
A planned Tembo-2 appraisal well will appraise the discovery made at Tembo-1 Well in December 2014. The appraisal well is designed to reach a total depth of 3,200 metres and planned as a vertical well to the Lower Cretaceous. Wentworth has started a process to procure the drilling rig and long lead items for the well. Expressions of interest (EOI) have been prepared for supply of the drilling rig and casing and tubing. The Company has identified several rigs currently located within the region which are capable of drilling the well. EOIs were published in the local Mozambican press in during Q4 2017. These have subsequently been evaluated and a short list of preferred bidders has been selected and will be invited to tender.
Surveying of the well location and associated civil works have been delayed due to a deteriorating security situation in and around the Macimboa da Praia region, adjacent to the Company`s Concession area. Clashes between police and extremists which began in early October have continued into 2018, preventing safe access to the area for Wentworth staff and contractors. Wentworth is monitoring the security situation closely and is in close liaison with the Mozambican Authorities, the Canadian High Commission, and other companies operating in the region and local security and risk management companies.
Farm-out and license extension
In July 2017, a formal farm-out process was initiated in order to secure one or more industry partners for third party validation and help de-risk the appraisal drilling of the Tembo discovery. The farm-out exercise is ongoing, and Wentworth anticipates securing an industry partner prior to commencing drilling operations, pending successful extension discussions with the Government of Mozambique.
Subsequent to year-end, as a result of the lack of a safe above-ground operating environment within the Concession area, certain pre-drill operations such as surveying, road construction, and well site preparation have been delayed until after the rainy season and improvements in the security situation for Wentworth personnel operating in the field. As a result, the Company has formally requested the Government grant an extension of the Appraisal License and is currently awaiting a response.
Financial Overview
Revenue
Gas sales to TPDC
The Company recorded 2017 net sales to TPDC of 4,063,124 MMBtu, an increase of 14% from 2016. A more stable level of gas demand from gas fired electrical power facilities was experienced in 2017 as many of the start-up, commissioning, repairs to power plants and problems with Government owned electrical power transmission and distribution infrastructure experienced during 2016 were resolved.
The gas sales price was $3.04/MMBtu (2016: $3.01/MMBtu) for revenue of $12.35 million (2016: $10.68 million) for the year-ended December 31, 2017.
Gas sales to TANESCO
Gas sales to an 18 MW gas-fired power plant in Mtwara, Tanzania, during 2017 were 199,868 MMBtu (2016: 200,259 MMBtu) while the gas price remained fixed and unchanged at $5.36/MMBtu. The Mtwara power plant generally operates below capacity and consumes on average between 2.0 and 2.5 MMscf/d. Total revenue earned during 2017 was $1.09 million (2016: $1.07 million).
Production and operating expense
Production costs within the Mnazi Bay Concession comprise the Company`s share of field operating costs, Operator`s administration and Operator`s overhead required to manage production operations. Management expects that, on a per Mscf basis, production costs will generally reduce as gas volumes increase, due to most operating costs being fixed in nature. For 2017, production averaged 49.1 MMscf/d in 2017 compared to 43.0 MMscf/d during 2016. Production and operating expenses were $3.48 million (2016: $3.37 million). For 2017, operating expenses were $0.84 per Mcf compared to $0.92 per Mcf for the same period in 2016.
General and administrative ("G&A") expense
During 2017, G&A expenses were $4.61 million compared to $5.40 million, a reduction of 15%. Cost saving initiatives and capitalization of costs for Mozambique operations, following the Company becoming the operator in Q3 2016, have contributed to a reduction in ongoing expenses. A continued focus on optimizing G&A will be undertaken in 2018, through corporate structure simplification and re-domicile activities. The table below shows the breakdown of G&A expenses:
Year ended December 31, | ||
(Figures in $000`s) | 2017 | 2016 |
Employee salaries and benefits | 2,026 | 2,392 |
Contractors and consultants | 510 | 705 |
Travel and accommodation | 329 | 515 |
Professional, legal and advisory | 713 | 582 |
Office and administration | 529 | 684 |
Corporate and public company costs | 507 | 519 |
4,614 | 5,397 | |
The Company maintains offices in Calgary, Canada, Dar es Salaam, Tanzania and Maputo, Mozambique and is listed on the public stock exchanges in both Oslo, Norway (Oslo Stock Exchange) and London, UK (AIM). Many G&A expenditures are fixed in nature and include such items as corporate and public company costs (exchange listing, transfer agent and directors` fees), legal fees supporting the compliance with corporate and public obligations (Canada, UK and Norway) and professional advisory (external audit, resources engineering and Nomad for our AIM listing). The Company has undertaken to relocate its head office and executive team from Calgary, Canada to London, UK to streamline operations and reduce costs.
The redomicile process commenced during 2017 with $0.19 million (2016: $nil) of professional, legal and advisory having been incurred. Additional one-time costs associated with the redomicile process are expected to be incurred during 2018.
In June 2016, following the appointment as Operator of the Rovuma Onshore Block in Mozambique, the Company established an operational presence in Mozambique; directly attributable costs relating to all operational activities within the Rovuma Onshore Block are being capitalized. Directly attributable costs during 2017 totaling $0.97 million (2016: $1.08 million) were capitalized.
Share based compensation
For 2017, $0.22 million was recognised compared to $0.59 million during the same period in year 2016.
During 2017, no options were granted, exercised or forfeited (during 2016: 1,350,000 options were forfeited, and no options were granted or exercised). A total of 10,600,000 stock options were outstanding at December 31, 2017 with 9,333,338 vested and exercisable with an average exercise price per share of NOK 4.33 ($0.53).
Depreciation and depletion
Depreciation and depletion of gas producing assets for 2017 totalled $4.09 million (2016:- $3.86 million) or $0.98/Mscf (2016: $0.99/Mscf). At December 31, 2017, the net book value of natural gas property, plant and equipment was $90.34 million (December 31, 2016: $93.37 million).
Finance income and costs
Finance income and costs that are settled in cash are interest income, interest expense and realized foreign exchange gain/ (loss) on current transactions. All other finance income and costs are non-cash in nature.
For 2017, interest expense was $1.66 million (2016: $2.19 million). During 2017, non-cash accretion of the TPDC receivable of $2.08 million (2016: $4.17 million) was recorded in finance income. The Company revised the accounting estimates used to determine the expected amounts and timing of future revenue streams to determine collection of the TPDC receivable resulting from revised gas demand estimates for future periods obtained from industry sources. This resulted in $0.87 million being charged to finance costs during the year (2016: $2.57 million).
Non-cash accretion of the Tanzanian Government receivable (Umoja/power) of $0.31 million (2016: $0.47 million) was recorded in finance income during 2017. Similar to the determination of the TPDC receivable, the Company revised the accounting estimates resulting in an amount of $0.83 million being charged to finance cost (2016: $0.05 million finance income).
Deferred tax expense/recovery
At December 31, 2017, the deferred tax asset of $30.75 million reflects the estimated future tax benefit of accumulated tax losses within the Tanzanian operations. The commencement of commercial production and sales of gas under the long-term Gas Sales Agreement ("GSA") allowed for the recognition of deferred tax asset on the accumulated tax losses estimated to be utilized in the future. A non-cash deferred tax expense of $0.39 million (2016: expense of $3.20 million) has been recorded in 2017.
Receivables from gas delivered to TANESCO
The Company`s ongoing exposure to receivables from TANESCO is associated with gas sales from the Mnazi Bay Concession to the 18 MW gas-fired power plant, located in Mtwara, Tanzania. At December 31, 2017, the Mnazi Bay joint venture partners were owed seven months of gas sales, with $1.14 million owed to Wentworth. Subsequent to year-end, TANESCO has paid two months of invoices relating to the outstanding balance at December 31, 2017 totaling $0.33 million (inclusive of the Company`s share of the TPDC receivable amount relating to this gas sale).
Receivables from gas delivered to TPDC
An amount of $12.01 million is owed to Wentworth at December 31, 2017, of which approximately 4 months were past due. Subsequent to year-end, TPDC has paid $4.12 million net to Wentworth (inclusive of the Company`s share of the TPDC receivable amount relating to this gas sale) for the November and December 2017 gas sales invoices. At December 31, 2016, two months` worth of invoices were outstanding. TPDC`s ability to settle gas sales invoices to the Mnazi Bay joint venture in a timely manner is directly impacted by the timeliness of TPDC receiving payment for gas it sales to the TANESCO owned electrical power generation plants. Recently, TANESCO has been inconsistent with paying TPDC in a timely manner for the gas that TANESCO purchases. This has a direct impact on the free cash flows of the Mnazi Bay joint venture partners. Wentworth and Maurel et Prom, the operator of the Mnazi Bay Concession, continue to engage with both TPDC and TANESCO to find ways to improve the timeliness of the settlement of its obligations.
Long-term receivable - TPDC
In terms of the Joint Operating Agreement entered into between TPDC, Wentworth and Maurel et Prom, entered into in 2006, TPDC is a 20 percent participating interest partner in the Mnazi Bay Concession. The Company has a receivable from TPDC, for their (TPDC`s) share of past development and operating costs that were paid by the Company prior to June 30, 2009. In addition, the Company has been paying its proportionate share of TPDC`s share of development and operating costs incurred subsequent to June 30, 2009, the value of which has been added to the TPDC receivable balance. The Company will recover this receivable from an agreed percentage of TPDC`s share of current and future revenue from the Mnazi Bay Concession. The undiscounted face value of the TPDC receivable at December 31, 2017 is $17.33 million (December 31, 2016: $27.15 million). The TPDC receivable has been discounted to $15.55 million (December 31, 2016: $24.84 million). With the passage of time and as gas sales are realized, the carried amount of the TPDC receivable is accreted up to the face value with a corresponding credit to finance income.
Based on the Company`s internal estimates of potential gas sales volumes, the $17.33 million receivable as at December 31, 2017 is expected to be fully recovered by the end of 2018. The recovery of the TPDC receivable is expected to provide a significant source of cash flow to the Company during 2018. As gas sales are realized, the current portion of the long-term receivable is transferred to accounts receivable and settled at the time cash payments are received from purchasers of Mnazi Bay gas.
At December 31, 2017, the current portion of the TPDC receivable is $15.55 million compared to $12.28 million at December 31, 2016. During 2017, $11.63 million was recovered from TPDC`s share of gas sales. The receivable is updated at each reporting period and is calculated taking into consideration the estimated timing and amounts of future gas sales.
Long-term receivable - Tanzanian Government (Umoja/power)
The Company has an agreement with the Government of Tanzania (TANESCO, TPDC and the Ministry of Energy and Mines ("MEM")) to be reimbursed, at cost, for past project development costs associated with transmission and distribution ("T&D") expenditures. An audit of the Mtwara Energy Project ("MEP") development expenditures was completed in November 2012 and costs of approximately $8.12 million were verified to be reimbursable. After deducting costs associated with the Tariff Equalization Fund and VAT input credits associated with the MEP totaling $1.61 million, the amount agreed to be reimbursed was $6.51 million. The receivable is considered long-term in nature and has been discounted to reflect the anticipated timing of collection. The undiscounted face value of the Tanzanian Government receivable (Umoja/power) at December 31, 2017 is $6.51 million (December 31, 2016: $6.51 million) while the discounted value, taking into consideration the anticipated time of collection, is $4.96 million (December 31, 2016: $5.48 million). Management continues to work with the Government of Tanzania on agreeing a mechanism to settle the outstanding balance and anticipates recovering the amounts from the Government`s share of revenue generated from the Mnazi Bay Concession. Timing of reaching an agreement on the reimbursement procedure is indeterminable. The Government initiated a second audit of the costs to verify the balance owing, the results of which are expected to be communicated to the Company during 2018.
Capital expenditures
During 2017, capital activities were focused on field infrastructure and development capital activities within the Mnazi Bay gas field location and Tembo appraisal activities in Mozambique.
(Figures in $000`s) | Year ended December 31, | |
2017 | 2016 | |
Exploration and evaluation assets | ||
Mozambique | ||
Seismic reprocessing and interpretation | 696 | 109 |
Drilling preparation and planning | 525 | - |
Exploration drilling | - | 951 |
Operator and indirect overhead | 1,162 | 1,310 |
2,383 | 2,370 | |
Tanzania | ||
Seismic acquisition, processing |
|
|
| ||
Tanzania | ||
Field infrastructure | 549 | 2,019 |
Asset retirement obligation | - | (388) |
Other field development capital | 508 | 404 |
1,057 | 2,035 | |
Canada and United Kingdom | ||
IT and office assets | 4 | 27 |
3,444 | 4,459 | |
External debt facilities
Medium term $20 million credit facility
The principal balance outstanding on the $20.0 million credit facility at December 31, 2017 was $13.32 million. During 2017, principal payments of $3.35 million were made.
During the second quarter of 2017, the Company executed amendments to the credit facility agreement which include the restructuring of principal loan payments and the addition of the following new provisions:
the interest rate changed six-month LIBOR rate plus 750 basis points subject to a minimum (floor) of 8.5% p.a. and no maximum (ceiling);
the addition of a Debt Service Coverage Ratio and Loan Life Coverage Ratio as financial covenants;
a requirement to maintain a minimum cash balance;
a cash flow waterfall procedure to ensure certain cash proceeds from gas sales are used in settling obligations in priority; and
in the event the Company decides to accelerate principal payments using funds not generated internally, a prepayment fee of 25 percent of interest forgone is required.
The Company and the lender are in ongoing discussions on agreeing the details and processes relating to implementing and monitoring the new provisions.
Principal repayments on the credit facility are set out in the following table.
Principal repayment date | Repayment amount |
April 30, 2018 | 1,665 |
July 30, 2018 | 1,665 |
October 30, 2018 | 1,665 |
January 30, 2019 | 1,666 |
April 30, 2019 | 1,665 |
July 30, 2019 | 1,666 |
October 30, 2019 | 1,665 |
January 30, 2020 | 1,664 |
13,321 |
Medium term $6 million credit facility
At December 31, 2017, the principal amount outstanding on this facility was $2.0 million. During 2017, principal payments of $2.0 million were made.
All provisions of the $6.0 million credit facility remain unchanged from the original loan agreement executed in December 2014. Interest is paid on a semi-annual basis, in arrears, on the principal repayment date. The 2018 principal repayment dates are as follows:
Principal repayment date | Repayment amount |
June 8, 2018 | 1,000 |
December 8, 2018 | 1,000 |
2,000 |
Overdraft $2.5 million credit facility
During 2017, the Company secured $2.5 million overdraft credit facility with a TIB Corporate Bank ("TIB Corp"). The overdraft facility has an interest rate of the lender`s base lending rate minus 1% per annum to be paid monthly. At December 31, 2017, the lender`s base lending rate was 9%. The full amount of the overdraft credit facility was drawn during the fourth quarter of 2017.
Security provided to the lender includes a debenture over the fixed and floating assets of the Company`s Tanzanian assets and a deed of assignment equivalent to approximately 20% of the revenue/cash flow from sales of natural gas from the Tanzanian assets. During the second half of 2017, the Company drew on the full amount of the facility and used the funds for short-term working capital purposes.
The one-year term of the overdraft credit facility expires on April 6, 2018. The Company has requested a one-year extension of the credit facility and has provided all information requested by the lender to support the renewal application. The lender has expressed its intention to renew the overdraft credit facility for an additional one year commencing April 6, 2018 and the Company is waiting for completion of the review and approval process.
Shares, share capital and dividends
On May 23, 2017, the Company completed a private placement and issued 16,953,496 new common shares, for cash consideration of $0.326 (GBP0.25 or NOK2.73) per share for total gross proceeds of $5.53 million (GBP4.2 million or NOK46.3 million).
Following the private placement offering the Company had 186,488,465 common shares issued and outstanding. All outstanding shares at December 31, 2017 are of the same class and with equal voting and dividend rights. The Company`s ordinary shares are listed on the Oslo Stock Exchange (WRL.OL) and denominated in Norwegian Kroner. The Company`s shares are also traded on the Alternative Investment Market of the London Stock Exchange (WRL.OL) and denominated in British Pounds.
As the Company is in the early stage of its production and revenue generating operations, it does not have a formal dividend policy. No dividends have ever been declared or paid by the Company. There are no restrictions on dividend distributions. At the Annual General Meeting in 2017, the Board of Directors did not propose dividends to be paid for the year-ended December 31, 2017. Proposals for dividend distribution in future years will be subject to assessment of business performance, operating environment, and growth opportunities in determining the appropriate level in any specific year.
Related party transactions
There were no related party transactions during 2017.
Financial Condition and Liquidity
At December 31, 2017, Wentworth had cash and cash equivalents of $3.75 million and trade and other receivables, prepayments and deposits, and a current portion of the long-term receivable from TPDC of $29.06 million. At current gas sales volumes, the Company is collecting substantial amounts of this long-term receivable from TPDC. Outstanding receivables for gas sales sold to TPDC and TANESCO total $13.15 million at December 31, 2017. A total of $4.45 million of the outstanding gas sales receivables has been settled subsequent to December 31, 2017.
During May of 2017, the Company raised gross proceeds of $5.53 million through the issuance of 10% of the Company`s share capital. These additional funds provide the Company with required funding for working capital and the ongoing Mozambique appraisal activities.
Current liabilities include outstanding cash calls issued by the Operator of the Mnazi Bay Concession for 2017 operating costs of $3.55 million. Subsequent to year-end, the Company has settled $2.35 and expects to settle the remainder during Q1 2018.
Current liabilities also include the principal repayment obligations on external credit facilities and the anticipated settlement of other liabilities also due within the next 12 months. During Q1 2017, the Company reached agreement with its main corporate lender to enhance short-term liquidity by deferring payment of the January 28, 2017 principal payment of $3.33 million to Q2/Q3 2017, deferring the July 28, 2017 and January 28, 2018 principal payments and extending the term of the credit facility by one year. Principal payments totaling $6.99 million are scheduled to be made within the next 12 months.
The Company is working closely with the Operator of the Mnazi Bay Concession and external lenders to match settlement of obligations with the receipt of cash from gas purchasers for settlement of gas sales invoices. To date, the cooperation amongst all parties has allowed the company to effectively manage working capital. Existing gas sales receivables at December 31, 2017 of $13.15 million exceed the immediate obligations to the Operator of the Mnazi Bay Concession and to external lenders, allowing for certain flexibility in the precise timing of settling obligations.
During 2018, the Company expects to have no significant capital commitments relating to exploration and development activities in Tanzania. Anticipated development capital spending is limited to approximately $0.8 million for general field development maintenance activities. In Mozambique, spending on appraisal activities is expected to be limited to completing the necessary work to support drilling of an appraisal well, costs associated with securing a farm-in partner and administrative and support costs for managing operations under the Rovuma Onshore Block in country.
Outlook
Realized gas sales during Q4 2017 were the highest quarterly sales volumes in the Company`s history and the Company expects gas demand to continue to grow in the coming months with the ongoing commissioning and start-up of the Kinyerezi-II power station and imminent commencement of delivery of gas to the Dangote cement plant in southern Tanzania. Wentworth is well positioned to meet this growing demand with sufficient gas reserves and in place infrastructure allowing for immediate delivery of up to approximately 100 MMscf/d (16,660 boepd). The Company expects gross gas sales from the Mnazi Bay asset to average between 65 and 75 MMscf/d throughout 2018 and anticipates nominal capital spending in Tanzania during this period.
The Company continues to carry significant receivables from TPDC and TANESCO but regular monthly payments have been made during the past several months into 2018. With each monthly cash settlement, the Company continues to strengthen its balance sheet by deleveraging of its credit facilities and settling accumulated working capital obligations.
With the support of the Government of Mozambique, the Company plans to secure an industry partner to participate in appraisal drilling of the Tembo discovery on the Rovuma Onshore Block. The Company expects a positive response from the Government on the Company`s request to obtain an extension of the appraisal license beyond the June 16, 2018 expiry date.
With a new London based executive management team expected to be in place in the near future, the Company will examine various strategic alternatives to grow the Company, reduce overheads and drive value throughout the Company and through to shareholders.
About Wentworth Resources
Wentworth Resources is a publicly traded (OSE:WRL, AIM:WRL), independent oil & gas company with: natural gas production; exploration and appraisal opportunities; and large-scale gas monetisation initiatives, all in the Rovuma Delta Basin of coastal southern Tanzania and northern Mozambique.
Inside Information
The information contained within this announcement is deemed by Wentworth to constitute inside information as stipulated under the Market Abuse Regulation (EU) no. 596/2014 ("MAR"). On the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
Cautionary note regarding forward-looking statements
This press release may contain certain forward-looking information. The words "expect", "anticipate", believe", "estimate", "may", "will", "should", "intend", "forecast", "plan", and similar expressions are used to identify forward looking information.
The forward-looking statements contained in this press release are based on management`s beliefs, estimates and opinions on the date the statements are made in light of management`s experience, current conditions and expected future development in the areas in which Wentworth is currently active and other factors management believes are appropriate in the circumstances. Wentworth undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless required by applicable law.
Readers are cautioned not to place undue reliance on forward-looking information. By their nature, forward-looking statements are subject to numerous assumptions, risks and uncertainties that contribute to the possibility that the predicted outcome will not occur, including some of which are beyond Wentworth`s control. These assumptions and risks include, but are not limited to: the risks associated with the oil and gas industry in general such as operational risks in exploration, development and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the imprecision of resource and reserve estimates, assumptions regarding the timing and costs relating to production and development as well as the availability and price of labour and equipment, volatility of and assumptions regarding commodity prices and exchange rates, marketing and transportation risks, environmental risks, competition, the ability to access sufficient capital from internal and external sources and changes in applicable law. Additionally, there are economic, political, social and other risks inherent in carrying on business in Tanzania and Mozambique. There can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements. See Wentworth`s Management`s Discussion and Analysis for the year ended December 31, 2017, available on Wentworth`s website, for further description of the risks and uncertainties associated with Wentworth`s business.
Notice
Neither the Oslo Stock Exchange nor the AIM Market of the London Stock Exchange has reviewed this press release and neither accepts responsibility for the adequacy or accuracy of this press release.
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
Annual 2017 MDA
2017 Report on Corporate Governance
Annual 2017 Financial Statements
180328 Press Release
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Wentworth Resources Limited via GlobeNewswire
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