REG - Petro Matad Ltd - Final results for year ended 31 December 2023
19/06/2024 07:00
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RNS Number : 9446S Petro Matad Limited 19 June 2024
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IN THE PUBLIC DOMAIN.
19 June 2024
Petro Matad Limited
("Petro Matad" or the "Company")
Final results for year ended 31 December 2023
Petro Matad Limited ("Petro Matad" or "the Company"), the AIM quoted Mongolian
oil company, announces its audited final results for the year ended 31
December 2023. All monetary values are expressed in United States dollars
unless otherwise stated.
2023 Operational Highlights
· The Company continued to push the Mongolian government and
authorities to register Block XX Exploitation Area as State Special Purpose
land and secured Cabinet approval for the certification in July. Continued
bureaucratic delays in the government's regulatory processes to complete the
certification led the Company to seek local level approvals in parallel.
· The Company raised $6.6 million to finance exploration drilling in
Block V and its renewable energy joint venture focused on projects in
Mongolia.
· The Velociraptor-1 wildcat well was drilled in Block V in mid-2023.
Although the well was plugged and abandoned as a dry hole, it penetrated good
quality reservoirs and source rocks and provides an excellent data point to
high-grade other exploration areas in Mongolia. The operation also
demonstrated that very low-cost exploration drilling can be done in-country
with truck mounted equipment and a very small environmental footprint.
· Close cooperation and community support in Block V demonstrated that
the Company's community outreach is fit for purpose.
· Petro Matad was chosen as the preferred contractor for the two new
Production Sharing Contracts for which it had applied in the Mongolian
Exploration Licensing round.
· The company formed the Sunsteppe joint venture with an experienced
developer to pursue opportunities in the Mongolian renewable energy sector.
Mid-2024 update
· Local land access approvals are now in hand allowing operations to go
ahead on Block XX in 2024 whilst the State Special Purpose Certification
process is completed in parallel.
· Preparations are being finalised for completion of the Heron 1 well
and the contractor has indicated that it should be ready to mobilise in July.
· Progress is being made on the exclusive green energy development
projects that the Sunsteppe joint venture has high-graded at Choir (50MW
Battery Storage) and at the major Oyu Tolgoi mine (24MW renewable energy
supply for green hydrogen production).
2023 Financial Highlights
· As of 31 December 2023, the Group's cash position was $4.5 million
(inclusive of Financial Assets) (31 December 2022: $5.1 million).
· The Group's net loss after tax for the twelve months ended 31
December 2023 was $5.93 million (31 December 2022: loss $2.95 million).
· As announced on 2 February 2023, the Company raised gross proceeds of
US$6.6 million from a Capital Raise comprising of the issue of 215,121,952 new
Ordinary Shares at a price of 2.5p per share.
Mike Buck, CEO of Petro Matad, said:
"2023 proved to be a frustrating year on Block XX, where the significant step
of Cabinet approval of State Special Purpose Certification for the area did
not translate into a rapid renewal of Petro Matad's licence to operate. Whilst
that certification is still to be finalised and is having to wait until after
the imminent Mongolian parliamentary elections, the fact that we were recently
able to secure locally approved land use agreements for the areas in which our
next operations are planned, ends a very long wait. We share our shareholders'
relief and excitement that the completion operations on Heron 1 will go ahead
with contractors planned to mobilise in July to prepare the well for
production. Negotiations with PetroChina for oil transport, processing, export
and sale are ongoing with the support of the industry regulator.
Our shareholders' patience and support are much appreciated as is the
dedication and motivation of our staff. The Company will be focussing maximum
effort on moving the Heron development forward through the second half of 2024
and I look forward to updating you further."
About Petro Matad
Petro Matad is the parent company of a group focused on oil exploration, as
well as future development and production in Mongolia. Currently, Petro Matad
holds 100% working interest and the operatorship of two Production Sharing
Contracts with the government of Mongolia. Block XX has an area of 214 square
kilometres in the far eastern part of the country, and Block V has an area of
7,937 square kilometres in the central part of the country.
Petro Matad Limited is incorporated in the Isle of Man under company number
1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle
of Man, IM1 1EQ.
For more information, please contact:
Petro Matad Limited
Mike Buck, CEO +976 7014 1099 / +976 7575 1099
Shore Capital (Nominated Adviser and Joint Broker)
Toby Gibbs +44 (0) 20 7408 4090
Rachel Goldstein
Zeus Capital Limited (Joint Broker)
Simon Johnson +44 (0) 20 7614 5900
Louisa Waddell
FTI Consulting (Communications Advisory Firm)
Ben Brewerton +44 (0) 20 3727 1000
Christopher Laing
Annual Report and Accounts
The Company's statutory annual report and accounts will be dispatched
electronically to shareholders shortly and will be posted to shareholders who
have elected to receive hard copies of the Annual Report. Additional copies of
the Annual Report may be requested directly from the Company and an electronic
copy will be available on the Company's website www.petromatadgroup.com
(https://url.avanan.click/v2/___http:/www.petromatadgroup.com___.YXAxZTpzaG9yZWNhcDphOm86NjI0NDc4NjA4NmE1YWRlMzFkZmRlN2ZjMWNkZTRjN2Q6NjplMjIxOjI1N2UxNjFkMWMxOTI2MGQxMGM1YTE0ZDYyMTE1MDExZGJiNTVlYmY3NzY2OTlkMmM2YjgwNDE5MmJjYzRkYmE6cDpU)
.
Annual General Meeting ("AGM")
A notice of the Company's AGM will be distributed in due course and made
available on the Company's website www.petromatadgroup.com
(https://url.avanan.click/v2/___http:/www.petromatadgroup.com___.YXAxZTpzaG9yZWNhcDphOm86NjI0NDc4NjA4NmE1YWRlMzFkZmRlN2ZjMWNkZTRjN2Q6NjplMjIxOjI1N2UxNjFkMWMxOTI2MGQxMGM1YTE0ZDYyMTE1MDExZGJiNTVlYmY3NzY2OTlkMmM2YjgwNDE5MmJjYzRkYmE6cDpU)
.
Directors' Statement 2023
Summary
During 2023 the Company continued with its procurement and planning activities
for the development of the Heron discovery in Block XX in eastern Mongolia.
Unfortunately, the land access issue remained unresolved during the year which
continued to prevent the completion of the Heron-1 well into a production
well, installation of the surface infrastructure and first oil. With Petro
Matad's land access applications being blocked by refusal at District (Soum)
and Provincial (Aimag) levels, the Company sought State Special Purpose
certification of Block XX from the Mongolian cabinet to give the Company full
rights to access the entirety of the Block XX Exploitation Area for the
duration of the Exploitation Licence. This certification process had not been
used before for an oil project and this contributed to the bureaucracy moving
slowly. However, through continuous lobbying and effort from the Company,
Cabinet approval of State Special Purpose designation was secured in July
2023. Whilst this was a major achievement, unfortunately, under legislation
introduced in 2017, several further steps were required to be executed by
central and provincial authorities and the process continued to be obstructed
by the Dornod Province Governor due to a government created partial overlap of
the Block XX Special Purpose Area with an Aimag declared protected area.
Recognising the difficulties that the regulations were presenting, in
parallel, the Company pursued District level land approvals of the three areas
within the Exploitation Licence area where its initial development operations
are planned. 2023 ended without the Company securing land access but this was
remedied at the end of May 2024 when the Company secured District level
approvals. The land permits for these areas are valid for 5 years and allow
work to go ahead whilst the State Special Purpose Certification process is
completed. Discussions with PetroChina Daqing Tamsag (PetroChina), the
operator of the producing fields adjacent to Block XX, continued through 2023
covering production operations support, access to oil processing and export
facilities for the initial phase of the Heron development.
On the Company's central Mongolian exploration acreage, Block V, the
Velociraptor-1 wildcat exploration well was drilled during the second quarter
of 2023 but did not encounter any hydrocarbons and was plugged and abandoned.
Major Drilling drilled the well to the planned total depth of 1500m and the
operation was completed on budget without any environmental or safety
incidents occurring. The lack of hydrocarbon indications was disappointing but
some very thick and good quality sandstone reservoirs were encountered as
predicted by the pre-drill geological model. Good quality source rocks were
also penetrated and the well provides important data for future exploration
efforts in the region where exploration activity has been very limited to
date. The well cost was less than $2 million which is an exceptionally low
cost operation considering in particular the remoteness of the location. This
operation proved that very low cost exploration drilling can be executed in
Mongolia when targets are at depths shallower than 2000m. The Production
Sharing Contract (PSC) for Block V is due to expire at the end of July 2024
and the Company's efforts are now focused on completing environmental
restoration and compiling all necessary documents for the acreage to be handed
back to the State.
The Company submitted applications for two blocks offered in Mongolia's
Exploration Licensing round and was selected as the preferred contractor for
both areas. The government's approval process for the award of new exploration
licences continued through the year.
A Renewable Energy joint venture partnership was set up by Petro Matad and an
experienced Mongolian renewables developer, Wolfson LLC, in early 2023.
Sunsteppe Renewable Energy (SRE) was very active through the year and has
identified several attractive opportunities in battery storage and green
energy generation. Two projects were high-graded and SRE secured exclusivity.
The permitting and detailed design of both projects is progressing with pace
with the potential for revenue generation in 2025. Numerous other initiatives
are being generated by the renewables team.
Block XX Exploitation Area - Land access
The land access dispute that prevented the Company's access to the Heron
development location continued throughout 2023. This ongoing situation came
about due to conflicts in the Mongolian Land Law and local disquiet in Dornod
Aimag in which Block XX is located. This Aimag is home to 95% of Mongolia's
current oil production and the local communities in the area feel that they
have suffered all the impacts of oil exploitation activities since these
started up in the late 1990s with little or no benefit to the local community.
The Mongolian government's process to certify Petro Matad's Block XX
Exploitation Licence area as Special Purpose land progressed very slowly.
During the first quarter of 2023, the relevant ministries prepared the
relevant documentation to present to Cabinet to secure approval to certify the
Block XX Exploitation Area as a State Special Purpose Area. At the Cabinet
meeting on 5 July, the certification of the Block XX Exploitation Area,
including the Heron oil discovery, as a State Special Purpose Area was
approved and Cabinet instructed officials to conclude the follow up
formalities required under the 2017 Regulations on the management of special
purpose areas. The Central Land Agency completed registration of the area and
issued and signed the key Tripartite Agreement as did the Ministry of Mining
and Heavy Industry (MMHI) leaving only the Governor of Dornod Aimag to sign.
However, the Governor of Dornod Aimag insisted that compensation payments to
the 10 herder families impacted by the certification of the area had to be
completed before he would sign. Following a series of meetings, all the
herders agreed to be compensated. Under the legislation, compensation payments
should be made from the State budget but recognizing that this could be a very
slow process, industry regulator the Mineral Resources and Petroleum Authority
of Mongolia (MRPAM) and the Company investigated ways to expedite these
payments.
While the above issue was being addressed, the Company with the support of
MRPAM, discussed with local authorities the potential to secure Soum level
land usage permits for three areas within the Exploitation Licence where 2024
operational activities were planned. Whilst the land access issue remained
unresolved at year end 2023, the Matad Soum Citizens' Representatives
Committee approved the Company's land access request in early 2024. The Soum
Governor issued his decree and executed land use agreements valid for 5 years
in May 2024. As part of the local level approval, with the support of the Land
Agency and MRPAM, Petro Matad paid compensation to the herders whose
registered pastures will be impacted by the Block XX Exploitation Area.
2023 Review
HSSE
The Health, Safety, Security, and Environmental Management System (HSSE MS) of
the Company is designed to adhere to best practices set by the International
Association of Oil and Gas Producers (IOGP)
According to Mongolian national and international best practices, all reported
HSSE incidents are thoroughly investigated, documented, and classified in
accordance with IOGP guidelines. Moreover, the lessons learned from these
incidents are openly shared through the management review process. We are
pleased to report that Petro Matad, together with its sub-contractors, adhered
to all Mongolian laws and national standards throughout the 2023 operations.
Importantly, there were no environmental incidents, lost time incidents, or
recordable incidents during the year.
The Company is fully committed to environmental protection and consistently
strives to implement all necessary measures to fully comply with national and
international best practices, with ISO 14001 serving as the benchmark.
The technical and biological restoration of the Velociraptor-1 wildcat
exploration wellsite including the drilling mud sump was carried out by a
specialized restoration contractor. The provincial handover committee
conducted a formal inspection of the wellsite and signed off that the work had
been completed in full compliance with the relevant regulations. Before
starting construction of our VR-1 well lease in Block V in 2023, we had
relocated and replanted 44 Zag trees in the lease area to another location to
ensure their survival. We also worked with local authorities to plant over 670
Zag seedlings on the lease area during the biological restoration with the
hope that the area will eventually develop into a Zag forest.
With the necessary approvals, the Company was also able to complete the
restoration of the Heron-1 drilling location in preparation for the
mobilization of well completion equipment and the installation of the beam
pump, tanks and generator.
Social impact
In 2023, Petro Matad successfully implemented projects in Block V within the
framework of corporate social responsibility, based upon requests from the
local communities in the Guchin-Us and Baruunbayan-Ulaan Soums. The
exploration well location and the well supplying the operation with water were
located in these districts. Projects such as furnishings for a secondary
school, water wells for herders, provision of traditional gers for use in
ceremonies and other events, greenhouses, and livestock restocking for low
income families were successfully implemented and highly appreciated by local
communities. Following the Velociraptor-1 well operations, the Company
received letters of gratitude from Guchin-Us and Baruunbayan-Ulaan Soums for
the successful implementation of local projects and the safe and
environmentally friendly completion of operations.
In December 2023, the Company hosted the Matad District Citizens'
Representatives Committee on a visit to the South Gobi where mining and other
development projects are providing tangible benefits to the local communities
in which they operate. The trip was very successful and at a meeting to
conclude the trip in Petro Matad's Ulaanbaatar headquarters the Committee
thanked the Company, declared their support for the Company's development
activities in Matad and agreed the terms of the Cooperation Agreement which
governs community aid expenditure during oil exploitation activities.
Operations
Block XX: The Company continues to ensure that operational contracts and
environment permits are in place to get the Heron-1 well onstream. Beam pump
unit and related equipment, downhole completion and power generation equipment
and power control systems are ready to be mobilised from storage and installed
at Heron-1. Production tanks, sourced from PetroChina, will be relocated to
the production site where installation fabrication and electrical work will
commence once the well is completed. The Company and MRPAM have continued
engagement with PetroChina, the operator of the Block XIX exploitation area
and facilities located immediately north of Block XX, for co-operation with
production operations and contracts to process crude oil at their facilities,
crude export and sales at least during the initial phase of the Heron
development. All crude oil will be supplied to the Mongol Refinery via
pipeline, once the refinery is commissioned. Whilst these facilities continue
to be constructed, trucking of Mongolia's oil production to China for refining
will continue. The construction of the refinery and pipelines progressed in
2023.
The Company was in discussion with DQE Drilling (DQE), the main provider of
drilling services in Mongolia for a multi-well development drilling and
completion programme and signed a Memorandum of Understanding (MOU) in 2023.
The terms included some deferral of costs to allow a portion of the drilling
expenditure to be settled from future production revenue. However, MRPAM
insisted that current regulations do not cater for multi-year contracting and
accordingly the Company has concluded a Tender inviting all potential
contractors to bid on drilling on Block XX. DQE was the lowest bidder and has
been chosen to do the work. Final contract negotiations are underway and the
Company will seek to incorporate the terms of the previous MOU within the
framework of the current regulations.
Block V: The Velociraptor-1 wildcat exploration well located in the Taats
Basin of Block V located in central Mongolia was drilled in June/July 2023 and
reached a total depth (TD) of 1500m as planned, having encountered more than
350 metres of good quality reservoir sections. Unfortunately, the evaluation
of cuttings and wireline logs did not identify any hydrocarbons and the well
was plugged and abandoned. The well encountered geological markers close to
prognosis at all levels. The primary objective Late Jurassic/Early Cretaceous
Undur Formation was encountered at 1170m and had good quality reservoir sands
interbedded with shales over a c.200m interval. In the secondary objective
Early Cretaceous Shinehudag Formation, three thick sand units were drilled
with average porosity of around 18%. The well was drilled by Major Drilling
and operations were carried out on time and within budget with the full
support and cooperation of the local community. Post-well studies concluded
that excellent source rocks were encountered in the well, similar to those
encountered in the nearby Snow Leopard-1 well drilled in 2018. The wells
proved the presence of both excellent quality source rocks and good quality
reservoir units in the Taats Basin and provide excellent data points for the
evaluation of similar basins in this part of the country.
The Block V PSC is due to expire at the end of July 2024 and the Company's
efforts will now focus on completing and obtaining all required permits and
agreements from local authorities and MRPAM for the acreage to be handed back
to the State without issue. The Company has fulfilled all of its obligations
under the PSC.
2023 Exploration Licencing Round
The Company submitted applications for two blocks offered in the MRPAM
promoted Exploration licensing round. Working Groups, comprising experts from
MRPAM and MMHI were established and the Company successfully completed
negotiations on the terms of the PSC and work programmes for each block. The
Company's has focused on blocks in Mongolia that contain extensions of basins
proven productive for oil across the international border in China. The
government's approval process for the award of new exploration licences
continued through 2023 and MRPAM expects awards once the new government is
formed after the mid-2024 parliamentary elections.
Renewable Energy Opportunities in Mongolia
The Company's renewable energy vehicle, Sunsteppe Renewable Energy (SRE), made
very good progress in 2023. In consultation with the Ministry of Energy, the
need for a 50MW/150MWh battery energy storage facility in central Mongolia was
defined. SRE's team completed the required feasibility studies and the grid
connection study for the project was approved by the National Dispatching
Centre. All required documentation was submitted to and accepted by the
Technology Committee of the Ministry of Energy which subsequently approved the
project. The application for the License to construct is now being prepared.
SRE expects that this project can be brought onstream and be generating
revenue e in 2025.
A second project involving a utility scale wind farm to supply renewable
energy to generate green hydrogen for use at the major Oyu Tolgoi mine
operation in the South Gobi is also progressing with a forecast timescale
similar to SRE's battery storage project. The project is designed to
demonstrate the viability of green hydrogen as a fuel for use in the mining
industry in Mongolia and SRE is very excited to be involved. This initiative
has the strong support of the Mongolian Government and a memorandum of
understanding has been signed with the Ministry of Energy. A Japanese
government grant has also been secured to support the project with another
grant to be applied for later in 2024.
SRE and Petro Matad will determine, as these two projects proceed towards
construction ready status, how best to fund them. Debt funding for similar
projects is already established in Mongolia, leaving open the possibility that
SRE can aspire to stay involved in the construction phase and establish itself
as a key renewable power producer in the country. The potential for renewable
energy in Mongolia is huge with solar and wind power set to make up an
increasing part of the country's energy mix in the coming decades. This has
been embraced by lawmakers, with Mongolia ratifying international conventions
including the Paris Agreement. SRE has made good progress so far and has
identified several other projects for consideration.
Community Relations
The Company takes its responsibilities in community engagement and community
relations very seriously. In advance of any work programme activity being
undertaken, the Company ensures that it obtains the necessary approvals from
MRPAM and all other relevant authorities. Company staff participate in joint
meetings with the regulator and the local communities to present and discuss
planned activities. In addition to meeting local government officials, the
socialisation programmes will typically include town hall meetings where
questions from local residents are answered. Company representatives will also
meet with nomadic herders who may be in proximity to planned operations to
ensure all parties are listened to. Representatives from the Relations team
are stationed at site during all operational activities.
A focused programme of community projects is undertaken in areas where
operations are conducted, and this is done in cooperation with local
government. The Company views engagement with local communities as key to
conducting safe and successful operations that will in turn benefit the local
area.
Conclusions
Throughout 2023 the Company vigorously pursued solutions to the Block XX land
access issue working closely with MRPAM, MMHI and local communities. The
securing of local land approvals in 2024 will now enable the Company to carry
out its intended work programme for the year. Preparations to complete Heron-1
and achieve first oil are well advanced. The Velociraptor-1 well operations
were completed within budget, without any HSSE incident and with excellent
co-operation with the local community which is a significant achievement for
the Company's Mongolian staff especially considering the remoteness of the
location. The low cost operation demonstrates that extremely cost effective
exploration can be conducted in Mongolia. The Block V PSC expires end July
2024 and the acreage will be handed back to the state. The Company is
optimistic that its successful applications for two new areas will see the
blocks awarded in late 2024 or early 2025. The progress made in the renewable
energy sector is very encouraging and could provide a significant growth
opportunity for the Company.
Acknowledgements
The Company is very appreciative of the support and collaboration shown by
MRPAM and MMHI through the long struggle to secure land access. Petro Matad is
confident that the Special Purpose certification of Block XX will finally be
resolved and is very happy to have secured local land access approvals to
allow work to continue in parallel.
The Directors would like to reiterate their appreciation to the staff of Petro
Matad who have continued to work with enthusiasm, diligence, and dedication.
Shareholders continued support is also highly appreciated. The Board looks
forward to an exciting operational period in 2024.
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2023
Consolidated
31 Dec 2023 31 Dec 2022
Note $'000 $'000
Continuing operations
Revenue
Interest income 4(a) 216 201
Other income 4(a) 135 -
351 201
Expenditure
Consultancy fees (136) (129)
Depreciation and amortisation (190) (149)
Employee benefits expense 4(b) (2,076) (1,687)
Exploration and evaluation expenditure 4(c) (2,212) (137)
Other expenses 4(d) (1,663) (1,048)
(Loss)/Profit from continuing operations before income tax (5,926) (2,949)
Income tax expense 5 - -
(Loss)/Profit from continuing operations after income tax (5,926) (2,949)
Net (loss)/profit for the year (5,926) (2,949)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations, net of income tax of 26 (149)
$Nil (2022: $Nil)
Other comprehensive (loss)/income for the year, net of income tax 26 (149)
Total comprehensive (loss)/income for the year (5,900) (3,098)
(Loss)/Profit attributable to owners of the parent (5,926) (2,949)
Total comprehensive (loss)/income attributable to owners of the parent (5,900) (3,098)
(Loss)/Earnings per share (cents per share)
Basic (loss)/earnings per share 6 (0.5) (0.3)
6 (0.5) (0.3)
Diluted (loss)/earnings per share
The above Consolidated Statement of Profit or Loss and Other Comprehensive
Income should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
As at 31 December 2023
Consolidated
31 Dec 2023 31 Dec 2022
Note $'000 $'000
ASSETS
Current Assets
Cash and cash equivalents 7 503 1,476
Trade and other receivables 8 438 2,607
Prepayments 9 159 138
Financial assets 10 3,529 1,017
Inventory 11 215 215
Total Current Assets 4,844 5,453
Non-Current Assets
Exploration and evaluation assets 12 15,275 15,275
Investment in SunSteppe Power LLC 946 -
Property, plant and equipment 13 239 261
Right-of-Use asset 13 99 92
Total Non-Current Assets 16,559 15,628
TOTAL ASSETS 21,403 21,081
LIABILITIES
Current Liabilities
Trade and other payables 14 348 456
Total Current Liabilities 348 456
TOTAL LIABILITIES 348 456
NET ASSETS 21,055 20,625
EQUITY
Equity attributable to owners of the parent
Issued capital 15 160,176 154,057
Reserves 16 243 8
Accumulated losses (139,364) (133,440)
TOTAL EQUITY 21,055 20,625
The above Consolidated Statement of Financial Position should be read in
conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
Consolidated
31 Dec 2023 31 Dec 2022
Note $'000 $'000
Cash flows from operating activities
Payments to suppliers and employees (3,590) (2,860)
Interest received 102 130
Other income - -
Net cash flows (used in)/provided by operating activities 7 (3,488) (2,730)
Cash flows from investing activities
Purchase of property, plant and equipment (28) (212)
Proceeds from sale of financial assets (2,512) 3,527
Investment in SunSteppe Power LLC (946)
Proceeds from the sale of property, plant and equipment - -
Net cash flows used in investing activities (3,486) 3,315
Cash flows from financing activities
Proceeds from issue of shares 6,523 -
Capital raising cost (404) -
Payments of lease liability principal (144) (122)
Net cash flows from financing activities 5,975 (122)
Net (decrease)/increase in cash and cash equivalents (999) 463
Cash and cash equivalents at beginning of the year 1,476 1,162
Net foreign exchange differences 26 (149)
Cash and cash equivalents at the end of the year 7 503 1,476
The above Consolidated Statement of Cash Flows should be read in conjunction
with the accompanying notes.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Consolidated
Attributable to equity holders of the parent
Issued Accumulated Losses Other Total
Capital Reserves
Note 16
Note $'000 $'000 $'000 $'000
As at 1 January 2022 154,057 (130,524) 182 23,715
Net loss for the year - (2,949) - (2,949)
Other comprehensive income - - (149) (149)
Total comprehensive gain/(loss) for the year - (2,949) (149) (3,098)
Issue of share capital 15 - - - -
Cost of capital raising 15 - - - -
Share-based payments 15 & 16 - - 8 8
Exercise of Conditional Share Awards 15, 16 & 17 - - - -
Expiry of Options 16 & 17 - 33 (33) -
As at 31 December 2022 154,057 (133,440) 8 20,625
Net loss for the year - (5,926) - (5,926)
Other comprehensive income - - 26 26
Total comprehensive gain/(loss) for the year - (5,926) 26 (5,900)
Issue of share capital 15 6,523 - - 6,523
Cost of capital raising 15 (404) - - (404)
Share-based payments 15 & 16 - - 211 211
Exercise of Conditional Share Awards 15, 16 & 17 - - - -
Expiry of Options 16 & 17 - 2 (2) -
As at 31 December 2023 160,176 (139,364) 243 21,055
The above Consolidated Statement of Changes in Equity should be read in
conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2023
1 Corporate information
The financial report of Petro Matad Limited (Company) for the year ended 31
December 2023 was authorised for issue in accordance with a resolution of the
Directors dated 18 June 2024 which was approved on 19 June 2024.
This financial report presents the consolidated results and financial position
of Petro Matad Limited and its subsidiaries.
Petro Matad Limited (Company) incorporated in the Isle of Man on 30 August
2007 has five wholly owned subsidiaries, which are: Capcorp Mongolia LLC and
Petro Matad LLC (both incorporated in Mongolia), Central Asian Petroleum
Corporation Limited (Capcorp) and Petromatad Invest Limited (both incorporated
in the Cayman Islands), and Petro Matad Energy Limited (incorporated in Isle
of Man). Petro Matad Limited owns 50% of Sunsteppe Renewable Energy Pte. Ltd.
(formerly known as Petro Matad Singapore Pte. Ltd.), which is incorporated in
Singapore, which is owned jointly together with Sunsteppe Energy LLC to pursue
renewables energy projects. The Company and its subsidiaries are collectively
referred to as the "Group". The Group's principal activity in the course of
the financial year consisted of oil exploration and development and investment
in renewable projects in Mongolia.
Petrovis Matad Inc. (Petrovis) is a major shareholder of the Company, holding
approximately 19.92% of the shareholding at the year end of 2023.
2 Summary of significant accounting policies
(a) Basis of preparation
This financial report complies with International Financial Reporting
Standards (IFRS) as adopted by the European Union.
This financial report has been prepared on a historical cost basis, except
where otherwise stated. Historical cost is generally based on the fair values
of the consideration given in exchange for goods and services. Fair value is
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique.
In addition, for financial reporting purposes, fair value measurements are
categorised into Level 1, 2 or 3 based on the degree to which the inputs to
the fair value measurements are observable and the significance of the inputs
to the fair value measurement in its entirety, which are described as follows:
· Level 1 inputs are quoted prices (unadjusted) in active markets
for identical assets or liabilities that the entity can access at the
measurement date;
· Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability, either
directly or indirectly; and
· Level 3 inputs are unobservable inputs for the asset or
liability.
For the purpose of preparing the consolidated financial statements, the
Company is a for-profit entity.
(b) Statement of compliance
This general-purpose financial report has been prepared in accordance with the
requirements of all applicable IFRS as adopted by the European Union and
related Interpretations and other authoritative pronouncements.
(c) Going concern
The financial statements have been prepared on a going concern basis, which
contemplates the continuity of normal business activity and the realisation of
assets and the settlement of liabilities in the ordinary course of business.
The Group generated a loss of $5.93 million for year 2023 (2022 Loss: $2.95
million) and experienced net cash outflows from operating activities of $3.49
million (2022 Outflow: $2.73 million). In addition, as outlined in Note 18(b)
the Group is required to meet minimum exploration commitments on its Block XX
Production Sharing Contract (PSC) of approximately $6.4 million. The Company
previously reached an agreement with the Mineral Resources and Petroleum
Authority of Mongolia (MRPAM) that this underspent minimum exploration
commitment can be transferred to and spent on exploration and appraisal
activities during the exploitation period, which has commenced as the
application for a 25-year Exploitation Licence (EL) for Block XX was approved
in July 2021. The Company raised an additional $6.6 million funds in February
2023, which has provided sufficient working capital to continue operations
including the drilling of an exploration well in Block V and investing in
renewable energy projects. The Company had planned to commence production
operations in 2023 with the completion and production of the Heron-1 discovery
well. However, issues not within the Company's control resulted in being
unable to access Block XX to undertake planned operations. The relevant
government bodies have since designated Block XX as special purpose land. The
final steps before total access is granted are the remaining steps under
Regulation 287 which directs the procedures to formalize a land as special
purpose land. The Company expects these steps to be completed in the near
future. The delay in obtaining land access, while unfortunate, has not
jeopardised the Company's going concern status. Accordingly, the Company
believes that the current cash balance is sufficient to continue operations
until at least July 2025. Production operations are expected to commence in
the second half of 2024. This production will provide the Company with a
revenue source and ensure that the Company remains a going concern. It is also
important to note that the Company can access loans up to $1.5 million from
Petrovis under an existing loan agreement.
Cumulative expenditures to end 2023 in Block V exceed financial commitments by
$5.0 million. The Block V PSC exploration term expires in July 2024, at which
point the Block will be relinquished with no outstanding commitments
remaining.
The Directors have prepared a cash flow forecast which indicates that the
Group will have sufficient cash to meet their working capital requirements for
the twelve-month period from the date of signing the financial report.
(d) Application of new and revised Accounting Standards
Accounting Standards that are mandatorily effective for the current reporting
year
The Group has adopted all of the new and revised Standards and Interpretations
issued by the Australian Accounting Standards Board (AASB) that are relevant
to its operations and effective for an accounting period that begins on or
after 1 January 2020.
The Directors have determined that there is no material impact of the new and
revised Standards and Interpretations on the Group and, therefore, no material
change is necessary to Group accounting policies.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Group has not
applied the new and revised Australian Accounting Standards, Interpretations
and amendments that have been issued but are not yet effective. Based on a
preliminary review of the standards, interpretations and amendments, the
Directors do not anticipate a material change to the Group's accounting
policies, however further analysis will be performed when the relevant
standards are effective.
(e) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company and its subsidiaries.
Control is achieved when the Company:
· has power over the investee;
· is exposed, or has rights, to variable returns from its
involvement with the investee; and
· has the ability to use its power to affect its returns.
The Company reassesses whether it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control listed above.
The financial statements of the subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases.
The financial statements of subsidiaries are prepared for the same reporting
period as the parent company, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies
that may exist.
A change in the ownership interest of a subsidiary that does not result in a
loss of control is accounted for as an equity transaction.
All intercompany balances and transactions, including unrealised profits
arising from intra-group transactions, have been eliminated in full.
Unrealised losses are eliminated unless costs cannot be recovered.
(f) Foreign currency translation
Functional and presentation currency
Both the functional and presentation currency of Petro Matad Limited is United
States Dollars (USD). The Cayman Islands and Singaporean subsidiaries'
functional currency is USD. The Mongolian subsidiaries' functional currency is
Mongolian Tugrugs (MNT) which is then translated to the presentation currency,
USD.
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional
currency by applying the exchange rates ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate as at the date of the initial
transaction. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was
determined.
Exchange differences are recognised in profit or loss in the period in which
they arise except for:
· Exchange differences on transactions entered into to hedge
certain foreign currency risks; and
· Exchange differences on monetary items receivable from or
payable to a foreign operation for which settlement is neither planned nor
likely to occur (therefore forming part of the net investment in the foreign
operation), which are recognised initially in other comprehensive income and
reclassified from equity to profit or loss on disposal or partial disposal on
the net investment.
Translation of subsidiaries' functional currency to presentation currency
The results of the Mongolian subsidiaries are translated into USD
(presentation currency) as at the date of each transaction. Assets and
liabilities are translated at exchange rates prevailing at the reporting date.
Exchange differences resulting from the translation are recognised in other
comprehensive income and accumulated in the foreign currency translation
reserve in equity.
On consolidation, exchange differences arising from the translation of the net
investment in Mongolian subsidiaries are recognised in other comprehensive
income and accumulated in the foreign currency translation reserve. If a
Mongolian subsidiary was sold, the proportionate share of exchange difference
would be transferred out of equity and recognised in profit and loss.
(g) Cash and cash equivalents
Cash and short-term deposits in the statement of financial position comprise
cash at bank and in hand and short-term deposits with an original maturity of
three months or less.
For the purposes of the statement of cash flows, cash and cash equivalents
consist of cash and cash equivalents as defined above, net of outstanding bank
overdrafts.
(h) Trade and other receivables
Trade receivables, which generally have 30-60 day terms, are recognised
initially at fair value and subsequently measured at amortised cost using the
effective interest method, less an allowance for impairment.
Collectability of trade receivables is reviewed on an ongoing basis. An
impairment provision is recognised when there is objective evidence that the
Group will not be able to collect the receivable. Objective evidence of
impairment includes financial difficulties of the debtor, default payments or
debts more than 60 days overdue. The amount of the impairment loss is the
amount by which the receivable carrying value exceeds the present value of the
estimated future cash flows, discounted at the original effective interest
rate.
(i) Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation
and any impairment in value.
Depreciation is calculated on a straight-line basis over the estimated useful
life of the asset and is currently estimated to be an average of 6 years.
The assets' residual values, useful lives and amortisation methods are
reviewed, and adjusted if appropriate, at each financial year end.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when
no further future economic benefits are expected from its use or disposal.
(j) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity
becomes a party to the contractual provisions to the instruments. For
financial assets, this is equivalent to the date that the Company commits
itself to either purchase or sell of the asset (i.e. trade date accounting is
adopted).
Financial instruments are initially measured at fair value plus transaction
costs, except where the instruments is classified at 'Fair value through
profit or loss' in which case transaction costs are expensed to profit or loss
immediately. Financial instruments are classified and measured as set out
below.
Classification and subsequent measurement
Financial instruments are subsequently measured at either fair value,
amortised cost using the effective interest rate method or cost. Fair value
represents the price that would be received to sell an asset or paid to
transfer a liability in orderly transaction between market participants at the
measurement date. Where available, quoted prices in an active market are used
to determine fair value. In other circumstances, valuation techniques are
adopted.
Amortised cost is calculated as (i) the amount at which the financial asset or
financial liability is measured at initial recognition; (ii) less principal
repayments; (iii) plus or minus the cumulative amortization of the difference,
if any, between the amount initially recognised and the maturity amount
calculated using the effective interest method; and (iv) less any reduction
for impairment.
The effective interest method is used to allocate interest income or interest
expense over the relevant period and is equivalent to the rate that exactly
discounts estimated future cash payments or receipts (including fees,
transaction costs and other premiums or discounts) through the expected life
(or when this cannot be reliably predicted, the contractual term) of the
financial instrument to the net carry amount of the financial asset or
financial liability. Revisions to expected future net cash flows will
necessitate an adjustment to the carrying value with a consequential
recognition of an income or expense in profit or loss. The Group does not
designate any interest in subsidiaries, associates or joint venture entities
as being subject to the requirements of accounting standards specifically
applicable to financial statements.
(i) Financial assets at fair value through profit and
loss or through other comprehensive Income
Financial assets are classified at 'Fair value through profit or loss' or
'Fair value through other comprehensive Income' when they are either held for
trading for purposes of short term profit taking, derivatives not held for
hedging purposes, or when they are designated as such to avoid an accounting
mismatch or to enable performance evaluation where a group of financial assets
is managed by key management personnel on a fair value basis in accordance
with a documented risk management or investment strategy. Such assets are
subsequently measured at fair value with changes in carrying value being
included in profit or loss if electing to choose 'fair value through profit or
loss' or other comprehensive income if electing 'Fair value through other
comprehensive income'.
(ii) Financial Liabilities
The Group's financial liabilities include trade and other payables, loan and
borrowings, provisions for cash bonus and other liabilities which include
deferred cash consideration and deferred equity consideration for acquisition
of subsidiaries & associates.
All financial liabilities are recognised initially at fair value and, in the
case of loans and borrowings, and payables, net of directly attributable
transaction costs.
Fair value
Fair value is determined based on current bid prices for all quoted
investments. Valuation techniques are applied to determine the fair value for
all unlisted securities, including recent arm's length transactions, reference
to similar instruments and option pricing models.
Derecognition
Financial assets are derecognised where the contractual rights to receipts of
cash flows expire or the asset is transferred to another party whereby the
entity no longer has any significant continuing involvement in the risk and
benefits associated with the asset. Financial liabilities are recognised where
the related obligations are either discharged, cancelled or expire. The
difference between the carrying value of the financial liability extinguished
or transferred to another party and the fair value of consideration paid,
including the transfer of non-cash assets or liabilities assumed, is
recognised in profit or loss.
(k) Inventory
Inventories are stated at the lower of cost and net realisable value. Costs of
inventories are determined on a first-in-first-out basis. Net realisable value
represents the estimated selling price for inventories less all estimated
costs of completion and costs necessary to make the sale.
(l) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred by the Group is expensed
separately for each area of interest. The Group's policy is to expense all
exploration and evaluation costs funded out of its own resources.
(m) Exploration and evaluation assets
Exploration and evaluation assets arising out of business combinations are
capitalised as part of deferred exploration and evaluation assets. Subsequent
to acquisition, exploration expenditure is expensed in accordance with the
Group's accounting policy.
(n) Impairment of tangible and intangible assets other than goodwill
At each reporting date, the Group assesses whether there is any indication
that tangible and intangible asset may be impaired. Where an indicator of
impairment exists, the Group makes a formal estimate of recoverable amount for
each asset or cash generating unit to determine the extent of the impairment
loss (if any). Where the carrying amount of an asset (or cash-generating unit)
exceeds its recoverable amount the asset is considered impaired and is written
down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value
in use. It is determined for an individual asset, unless the asset's value in
use cannot be estimated to be close to its fair value less costs to sell and
it does not generate cash inflows that are largely independent of those from
other assets or groups of assets, in which case, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the assets (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which case the
reversal of impairment loss is treated as a revaluation increase.
Impairment review for deferred exploration and evaluation assets are carried
out on a project-by-project basis, where each project representing a single
cash generating unit. An impairment review is undertaken when indicators of
impairment arise, typically when one of the following circumstances apply:
· Unexpected geological occurrences that render the
resource uneconomic;
· Title to asset is compromised;
· Variations in prices that render the project
uneconomic; or
· Variations in the currency of operation.
(o) Trade and other payables
Trade and other payables are initially recognised at fair value. After initial
recognition, trade and other payables are carried at amortised cost and due to
their short-term nature are not discounted. They represent liabilities for
goods and services provided to the Group prior to the end of the financial
year that are unpaid and arise when the Group becomes obliged to make future
payments in respect of the purchase of these goods and services. The amounts
are unsecured and are usually paid within 30 days of recognition.
(p) Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, and it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the end of the reporting period,
taking into account the risks and uncertainties surrounding the obligation. If
the effect of the time-value of money is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate,
the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of
time is recognised as a finance cost.
(q) Leases
The Group as lessee
At inception of a contract, the Group assesses if the contract contains or is
a lease. If there is a lease present, a right-of-use asset and a corresponding
lease liability are recognised by the Group where the Group is a lessee.
However, all contracts that are classified as short-term leases (ie a lease
with a remaining lease term of 12 months or less) and leases of low-value
assets are recognised as an operating expense on a straight-line basis over
the term of the lease.
Initially the lease liability is measured at the present value of the lease
payments still to be paid at the commencement date. The lease payments are
discounted at the interest rate implicit in the lease. If this rate cannot be
readily determined, the Group uses the incremental borrowing rate.
Lease payments included in the measurement of the lease liability are as
follows:
· fixed lease payments less any lease incentives;
· variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date;
· the amount expected to be payable by the lessee under residual
value guarantees;
· the exercise price of purchase options, if the lessee is
reasonably certain to exercise the options;
· lease payments under extension options, if the lessee is
reasonably certain to exercise the options; and
· payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, any lease payments made at or before the commencement date
and any initial direct costs. The subsequent measurement of the right-of-use
assets is at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the lease term or useful life of the
underlying asset, whichever is the shortest.
Where a lease transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group anticipates to exercise a purchase
option, the specific asset is depreciated over the useful life of the
underlying asset.
The Group as lessor
Upon entering into each contract as a lessor, the Group assesses if the lease
is a finance or operating lease.
A contract is classified as a finance lease when the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases not within this definition are classified as operating
leases.
Rental income received from operating leases is recognised on a straight-line
basis over the term of the specific lease.
Initial direct costs incurred in entering into an operating lease (for
example, legal cost, costs to set up equipment) are included in the carrying
amount of the leased asset and recognised as an expense on a straight-line
basis over the lease term.
Rental income due under finance leases are recognised as receivables at the
amount of the Group's net investment in the leases. When a contract is
determined to include lease and non-lease components, the Group applies IFRS
15 to allocate the consideration under the contract to each component.
(r) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a deduction,
net of tax, from the proceeds.
(s) Revenue
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured. The
following specific criteria must also be met before revenue is recognised:
Interest revenue
Revenue is recognised on an accrual basis using the effective interest method.
(t) Share-based payment transactions
The Group provides to certain key management personnel share-based payments,
whereby they render services in exchange for rights over shares
(equity-settled transactions).
The cost of these equity-settled transactions is measured by reference to the
fair value at the date at which they are granted. The fair value is determined
by use of the Black Scholes model.
In determining the fair value of the equity-settled transactions, vesting
conditions that are not market conditions are not taken into account.
The cost of equity-settled transactions is recognised as an expense on a
straight-line basis, together with a corresponding increase in equity, over
the period in which they vest.
The cumulative expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects:
· the extent to which the vesting period has expired; and
· the number of awards that, in the opinion of the Directors of
the Group, will ultimately vest.
This opinion is formed based on the best available information at the
reporting date. The impact of the revision of original estimates, if any, is
recognised in profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to equity reserves.
Where the terms of an equity-settled award are modified, as a minimum, an
expense is recognised as if the terms had not been modified. In addition, an
expense is recognised for any increase in the value of the transaction as a
result of the modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested
on the date of cancellation, and any expense not yet recognised for the award
is recognised immediately. However, if a new award is substituted for the
cancelled award and designated as a replacement award on the date that it is
granted, the cancelled and new award are treated as if they were a
modification of the original award, as described in the previous paragraph.
(u) Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable
or recoverable in respect of the taxable profit or tax loss for the year. It
is calculated using tax rates and tax laws that have been enacted or
substantively enacted by the reporting date. Current tax for current and prior
years is recognised as a liability (or asset) to the extent that it is unpaid
(or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive balance sheet liability
method in respect of temporary differences arising from differences between
the carrying amount of assets and liabilities and the corresponding tax base
of those items.
In principle, deferred tax liabilities are recognised for all taxable
temporary differences. Deferred tax assets are recognised to the extent that
it is probable that sufficient taxable amounts will be available against which
deductible temporary differences or unused tax losses and tax offsets can be
utilised. However, deferred tax assets and liabilities are not recognised if
the temporary differences giving rise to them arise from the initial
recognition of assets and liabilities (other than as a result of a business
combination) that affects neither taxable income nor accounting profit.
Furthermore, a deferred tax liability is not recognised in relation to taxable
temporary differences arising from goodwill.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the year(s) when the asset and liability giving rise to
them are realised or settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted by reporting date. The measurement of
deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the consolidated Group expects, at the
reporting date, to recover or settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities are offset when they relate to income
taxes levied by the same taxation authority and the Company intends to settle
its current tax assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax is recognised as an expense or income in the profit
or loss, except when it relates to items credited or debited directly to
equity/other comprehensive income, in which case the deferred tax is also
recognised directly in equity/other comprehensive income, or where it arises
from the initial accounting for a business combination, in which case it is
taken into account in the determination of goodwill.
(v) Earnings per share
Basic earnings per share is calculated as net profit attributable to owners of
the parent, adjusted to exclude any costs of servicing equity (other than
dividends), divided by the weighted average number of ordinary shares,
adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to owners
of the parent, adjusted for:
· Costs of servicing equity (other than dividends);
· The after-tax effect of dividends and interest associated with
dilutive potential ordinary shares that have been recognised as expenses; and
· Other non-discretionary changes in revenues or expenses during
the year that would result from the conversion of dilutive potential ordinary
shares, divided by the weighted average number of ordinary shares and dilutive
potential ordinary shares, adjusted for any bonus element.
(w) Significant accounting judgments, estimates and assumptions
In applying the Group's accounting policies, management continually evaluates
judgments, estimates and assumptions based on experience and other factors,
including expectations of future events that may have an impact on the Group.
All judgments, estimates and assumptions made are believed to be reasonable
based on the most current set of circumstances available to management. Actual
results may differ from the judgments, estimates and assumptions.
Any revisions to accounting estimates are recognised in the period in which
the estimate is revised if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both the
current and future periods.
The following are the most critical estimates and judgments made by management
in applying the accounting policies and have the most significant effect on
the amounts recognised in the financial statements.
Share-based payments
The Group measures the cost of equity-settled transactions with Directors and
employees at the fair value of the equity instruments at the date at which
they are granted. The fair value is determined using a Black Scholes model.
One of the inputs into the valuation model is volatility of the underlying
share price which is estimated on the historical share price.
Recovery of the exploration and evaluation assets
The ultimate recoupment of the exploration and evaluation assets is dependent
upon successful development and commercial exploitation or alternatively the
sale of the respective areas of interest at an amount at least equal to book
value. At the point that it is determined that any capitalised exploration
and evaluation expenditure is not recoverable, it is written off.
Going Concern
The Group assesses the going concern of the Group on a regular basis,
reviewing its cash flow requirements, commitments and status of PSC
requirements and funding arrangements. Refer to Note 2(c) for further details.
3 Operating segments
Operating segments have been identified on the basis of internal reports of
the Group that are regularly reviewed by the chief operating decision maker in
order to allocate resources to the segments and to assess their performance.
The chief operating decision maker has been identified as the Board of
Directors. On a regular basis, the Board receives financial information on a
consolidated basis similar to the financial statements presented in the
financial report, to manage and allocate their resources. Based on the
information provided to the Board of Directors, the Group has one operating
segment and geographical segment, being Mongolia; as such no separate
disclosure has been provided.
31 Dec 2023 31 Dec 2022
$'000 $'000
4 Revenues and expenses
(a) Revenue
Interest income 216 201
Other income:
Other income 135 -
351 201
(b) Employee benefits expense
Included in employee benefits expense are the following:
Wages and salaries 1,676 1,488
Bonuses 11 -
Non-Executive Directors' fees (including 142 161
Directors of affiliates)
Consultancy fees 36 30
Share-based payments 211 8
2,076 1,687
(c) Exploration and evaluation expenditure
Exploration and evaluation expenditure relates to the following PSCs:
Block XX 262 128
Block V 1,950 9
2,212 137
(d) Other expenses
Included in other expenses are the following:
Administration costs 1,027 511
PSC administration costs 335 285
Audit fees 72 71
Travel expenses 229 181
1,663 1,048
31 Dec 2023 31 Dec 2022
Note $'000 $'000
5 Income tax
Income tax recognised in the statement of profit or loss:
Tax expense/(benefit) comprises:
Current tax expense/(benefit) - -
Deferred tax expense/(benefit) relating to the - -
origination and reversal of temporary differences
Total tax expense/(benefit) reported in the statement of profit or loss - -
The prima facie income tax benefit on pre-tax accounting loss from continuing
operations reconciles to the income tax expense/(benefit) in the financial
statements as follows:
Net (loss)/profit for the year (5,926) (2,949)
Income tax benefit calculated at 10% (i) 593 295
Effect of different tax rates on entities in different jurisdictions (ii) (115) (92)
Change in unrecognised deferred tax assets (478) (203)
- -
(i) The tax rate used in the above reconciliation is the
corporate tax rate of 10% payable by Mongolian corporate entities on taxable
profits up to 6 billion MNT under Mongolian tax law.
(ii) Petromatad Invest Limited and Capcorp are exempt of
Mongolian corporate tax on profits derived from the sale of oil under their
PSCs once production commences and are subject to Cayman Islands income tax at
a rate of 0%. As a consequence, no provision for Mongolian corporate tax or
Cayman Islands current tax or deferred tax has been made in the Company's
accounts in relation to them.
Petro Matad Limited is subject to Isle of Man income tax at a rate of 0%. As a
consequence, no provision for Isle of Man current tax or deferred tax has been
made in the Company's accounts.
6 (Loss)/Earnings per share
The following reflects the loss and share data used in the total operations
basic and diluted (loss)/earnings per share computations:
31 Dec 2023 31 Dec 2022
cents per share cents per share
Basic (loss)/earnings per share (0.5) (0.3)
Diluted (loss)/earnings per share (0.5) (0.3)
$'000's $'000's
The loss and weighted average number of ordinary shares used in the
calculation of basic and diluted (loss)/earnings per share are as follows:
Net (loss)/profit attributable to owners of the parent (5,926) (2,949)
Weighted average number of ordinary shares for the purposes of diluted 1,090,898 898,812
(loss)/earnings per share (in thousands)
Weighted average number of ordinary shares for the purposes of basic 1,090,898 898,762
(loss)/earnings per share (in thousands)
31 Dec 2023 31 Dec 2022
$'000 $'000
7 Cash and cash equivalents
Cash at bank and in hand 503 1,476
503 1,476
Cash at bank and in hand earns interest at fixed and floating rates based on
prevailing bank rates, and the fair value of the above cash and cash
equivalents is $503,000 (2022: $1,476,000) due to the short-term nature of the
instruments.
Reconciliation from the net gain/(loss) after tax to the net cash flows from
operations:
Net (loss)/gain after tax (5,926) (2,949)
Adjustments for:
Depreciation and amortisation 190 149
Expired bond recorded as an account receivable - 2,501
Share based payments 211 8
Unrealised foreign exchange (gains)/ losses (3) 24
Changes in assets and liabilities
Decrease/(increase) in trade and other receivables 2,169 (2,586)
Decrease/(increase) in prepayments (21) 38
Decrease/(increase) in inventory - 6
Increase/(decrease) in trade and other payables (108) 79
Net cash flows used in operating activities (3,488) (2,730)
Non-cash investing and financing activities
There were no non-cash investing or financing activities undertaken in the
2023 financial year or prior year (2022: $0.00).
8 Trade and other receivables
Current
Other debtors 438 2,607
438 2,607
All amounts are recoverable and are not considered past due or impaired.
2022 account receivables include the receivable from TDB Capital for expired
bond for which the money was received on 4 January 2023.
9 Prepayments
Prepayments 159 138
159 138
10 Financial assets
Long Term Deposits 3,529 1,017
3,529 1,017
The Group holds term deposits with an average weighted interest rate of 6.74%.
The deposits have maturity dates greater than 3 months. None of these assets
had been past due or impaired at the end of the reporting period.
31 Dec 2023 31 Dec 2022
$'000 $'000
11 Inventory
Raw materials 215 215
215 215
Inventory are mainly consumables, including casing, mud and drilling materials
purchased for Block XX.
12 Exploration and evaluation assets
Exploration and evaluation assets 15,275 15,275
15,275 15,275
The exploration and evaluation asset arose following the initial acquisition
in February 2007 of 50% of Petromatad Invest Limited, together with
acquisition on 12 November 2007 of the remaining 50% not already held by the
Group, for a consideration of 23,340,000 ordinary shares credited as fully
paid up and with an estimated fair value of $0.50 per share, taking into
account assets and liabilities acquired on acquisition. This relates to the
exploration and evaluation of PSC Block XX.
The ultimate recoupment of exploration and evaluation expenditure is dependent
upon successful development and commercial exploitation or alternatively the
sale of the respective areas of interest at an amount at least equal to book
value.
Management have reviewed for impairment indicators on Block XX and no
impairment has been noted.
During 2020, the Company was focused on providing all necessary documentation
to the Mongolian regulator in an effort to obtain approval for its
Exploitation Licence application, which would then enable development of its
2019 Heron discovery in the northern area of Block XX. The Exploitation
Licence was approved on 5 July 2021, which allows the Company to be able to
appraise, develop and produce oil from the area for a 25-year term, extendable
by up to 10-years (two times 5-years)
13 Property, plant and equipment and Right-of-Use asset
Plant and equipment at cost 939 925
Accumulated depreciation and impairment (700) (664)
239 261
Right-of-Use asset 132 122
Accumulated depreciation - Right-of-Use asset (33) (30)
99 92
Reconciliation of carrying amounts at the beginning and end of the year:
Plant and equipment Right-of-Use asset Total
Total Total Total
$'000 $'000 $'000
As at 1 January 2022 (net of accumulated depreciation) 99 93 192
Additions 212 122 334
Disposals - - -
Foreign exchange (16) (8) (24)
Depreciation charge for the year (34) (115) (149)
As at 31 December 2022 (net of accumulated depreciation) 261 92 353
Additions 28 144 172
Foreign exchange 2 1 3
Depreciation charge for the year (52) (138) (190)
As at 31 December 2023 (net of accumulated depreciation) 239 99 338
The following useful lives are used in the calculation of depreciation:
Plant and equipment - 2 to 10 years
31 Dec 2023 31 Dec 2022
$'000 $'000
14 Trade and other payables (current)
Trade payables 348 456
348 456
Trade payables are non-interest bearing and are normally settled within 60 day
terms.
15 Issued capital
Ordinary Shares
1,113,883,601 shares issued and fully paid 160,176 154,057
(2022: 898,761,649)
160,176 154,057
Movements in ordinary shares on issue:
Number of Shares Issue $'000
Price $
As at 1 January 2022 898,761,649 154,057
No transactions during 2022 -
As at 31 December 2022 898,761,649 154,057
Placement shares through Shore Capital on 10 Feb 2023 (note (a)) 94,787,994 $0.030 2,866
Placement shares through Zeus on 10 February 2023 (note (b)) 67,000,626 $0.030 2,027
Direct subscription shares on 10 February 2023 (note (c)) 33,333,332 $0.031 1,025
Open Offer shares on 10 February 2023 (note (d)) 20,000,000 $0.030 605
Capital raising cost (404)
As at 31 December 2023 1,113,883,601 160,176
(a) On 10 February 2023, the Company concluded a placing by issuing
94,787,994 shares at a price of GBP0.025 per share arranged through its
nominated adviser, broker and joint book runner for the purposes of the
Placing, Shore Capital Stockbrokers.
(b) On 10 February 2023, the Company concluded a placing by issuing
67,000,626 shares at a price of GBP0.025 per share arranged through its broker
and joint book runner for the purposes of the Placing, Zeus Capital.
(c) On 10 February 2023, the Company issued 33,333,332 shares through
direct subscriptions at a price of GBP0.025 per share.
(d) On 10 February 2023, the Company issued 20,000,000 shares to
shareholders at a price of GBP0.025 per share through a retail offering on the
Bookbuild platform.
16 Reserves
A detailed breakdown of the reserves of the Group is as follows:
Equity benefits reserve Foreign currency translation Total
Merger reserve
$'000 $'000 $'000 $'000
As at 1 January 2022 831 570 (1,219) 182
Currency translation differences - - (149) (149)
Expiry of Options - (33) - (33)
Exercise of Awards - - - -
Share based payments - 8 - 8
As at 31 December 2022 831 545 (1,368) 8
Currency translation differences - - 26 26
Expiry of Options - (2) - (2)
Exercise of Awards - - - -
Share based payments - 211 - 211
As at 31 December 2023 831 754 (1,342) 243
Nature and purpose of reserves
Merger reserve
The merger reserve arose from the Company's acquisition of Capcorp on 12
November 2007. This transaction is outside the scope of IFRS 3 'Business
Combinations' and as such Directors have elected to use UK Accounting
Standards FRS 6 'Acquisitions and Mergers'. The difference, if any, between
the nominal value of the shares issued plus the fair value of any other
consideration, and the nominal value of the shares received in exchange are
recorded as a movement on other reserves in the consolidated financial
statements.
Equity benefits reserve
The equity benefits reserve is used to record the value of Options and
Conditional Share Awards provided to employees and Directors as part of their
remuneration, pursuant to the Group's Long-Term Equity Incentive Plan (Plan or
Group's Plan). Refer to Note 17 for further details of these plans.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange
differences arising from the translation of the financial statements of
foreign subsidiaries.
17 Share based payments
(a) Long Term Equity Incentive Plan (Plan or Group's Plan)
The Group provides long term incentives to employees (including Executive
Directors), Non-Executive Directors and consultants through the Group's Plan
based on the achievement of certain performance criteria. The Plan provides
for share awards in the form of Options and Conditional Share Awards. The
incentives are awarded at the discretion of the Board, or in the case of
Executive Directors, the Remuneration Committee of the Board, who determine
the level of award and appropriate vesting, service and performance conditions
taking into account market practice and the need to recruit and retain the
best people.
Options may be exercised, subject only to continuing service, during such
period as the Board may determine. Options have a term of 10 years.
Conditional Share Awards shall vest subject to continuing service and
appropriate and challenging service and performance conditions determined by
the Remuneration Committee relating to the overall performance of the Group.
Conditional Share Awards based on performance conditions will vest on
achievement of the following performance conditions:
· 25% vest on the first discovery of oil on a commercial scale,
determined by management as being 5 July 2021 upon the award of the
Exploitation License;
· 25% vest on the first production of oil on a commercial
scale, estimated by management as to be achieved prior to 31 December 2024;
and
· 50% vest on the Company achieving the sale of 1 million
barrels of oil, estimated by management as being by 31 December 2025.
Other Conditional Share Awards have service conditions tied to employment
continuity and are available for vesting in three equal annual instalments on
various dates.
(b) Option pricing model
The fair value of Options granted is estimated as at the date of grant using
the Black Scholes model, taking into account the terms and conditions upon
which the Options were granted.
No Options have been issued during 2022 and following table summarizes Options
granted during 2023, along with relevant details in relation to the grant.
29 May 2023
Options Granted 12,147,000
Share price at grant date $0.0593
Expected Volatility (%) 55
Risk-free interest rates (%) 4.5%
Exercise Price (in GBP) 0.0480
Estimate fair value of option $0.0407
Options granted above are exercisable as follows:
· 33% one year after grant date
· 33% two years after grant date
· 34% three years after grant date
(c) Movement in Share Options
The weighted average fair value for all Options in existence as at 31 December
2023 is 0.04 (2022: 0.05).
Granted during the year Forfeited during the year Closing balance as at 31 December 2022
Opening balance at 1 January 2022
Exercisable as at 31 December 2022
Exercised during the year
Grant of Options on 25 Apr 2012 100,000 - (100,000) - - -
Grant of Options on 16 Jul 2012 24,000 - (24,000) - - -
Grant of Options on 4 Dec 2012 6,000 - (6,000) - - -
Grant of options on 9 July 2013 50,000 - - - 50,000 50,000
180,000 - (130,000) - 50,000 50,000
Weighted Average Exercise Price (cents per option) 24.2 - 31.07 - 6.33 6.33
Granted during the year Lapsed during the year Closing balance as at 31 December 2023
Opening balance at 1 January 2023
Exercisable as at 31 December 2023
Exercised during the year
Grant of options on 9 July 2013 50,000 - (50,000) - - -
Grant of options on 29 May 2023 - 12,147,000 (759,000) - 11,388,000 -
50,000 12,147,000 (809,000) - 11,388,000 -
Weighted Average Exercise Price (cents per option) 6.33 5.93 5.56 - 5.93 -
(d) Share Options Contractual Life
The weighted average remaining contractual life of outstanding share Options
is 9.4 year (2022: 0.5 years).
(e) Conditional Share Awards pricing model
The fair value of Conditional Share Awards granted is estimated as at the date
of grant using the Black Scholes model, taking into account the terms and
conditions upon which the Awards were granted.
No awards were granted in 2022 and 2023.
(f) Movement in Conditional Share Awards
The weighted average fair value for all Awards in existence as at 31 December
2023 is 0.84 (2022: 0.84)
Consolidated Granted during the year Exerci-sed during the year Forfei-ted during the year Closing balance Exercisable as at 31 December 2022
Opening balance at 1 January 2022 as at 31 December 2022
Grant of Conditional Share Awards on 3 Jun 2008 123,750 - - - 123,750 -
Grant of Conditional Share Awards on 8 Apr 2009 60,000 - - - 60,000 -
Grant of Conditional Share Awards on 9 Jul 2010 214,500 - - - 214,500 -
Grant of Conditional Share Awards on 6 Apr 2011 18,000 - - - 18,000 -
Grant of Conditional Share Awards on 5 Jul 2011 135,000 - - - 135,000 -
Grant of Conditional Share Awards on 22 Nov 2011 37,500 - - - 37,500 -
Grant of Conditional Share Awards on 5 Dec 2011 21,450 - - - 21,450 -
Grant of Conditional Share Awards on 25 Apr 2012 75,000 - - - 75,000 -
Grant of Conditional Share Awards on 4 Dec 2012 2,250 - - - 2,250 -
Grant of Conditional Share Awards on 9 Jul 2013 90,000 - - - 90,000 -
777,450 - - - 777,450 -
Weighted Average Exercise Price (cents per award) 1.00 - - - 1.00 -
Consolidated Granted during the year Exercis-ed during the year Lapsed during the year Closing balance Exercisable as at 31 December 2023
Opening balance at 1 January 2023 as at 31 December 2023
Grant of Conditional Share Awards on 3 Jun 2008 123,750 - - - 123,750 -
Grant of Conditional Share Awards on 8 Apr 2009 60,000 - - - 60,000 -
Grant of Conditional Share Awards on 9 Jul 2010 214,500 - - - 214,500 -
Grant of Conditional Share Awards on 6 Apr 2011 18,000 - - - 18,000 -
Grant of Conditional Share Awards on 5 Jul 2011 135,000 - - - 135,000 -
Grant of Conditional Share Awards on 22 Nov 2011 37,500 - - - 37,500 -
Grant of Conditional Share Awards on 5 Dec 2011 21,450 - - - 21,450 -
Grant of Conditional Share Awards on 25 Apr 2012 75,000 - - - 75,000 -
Grant of Conditional Share Awards on 4 Dec 2012 2,250 - - - 2,250 -
Grant of Conditional Share Awards on 9 Jul 2013 90,000 - - - 90,000 -
777,450 - - - 777,450 -
Weighted Average Exercise Price (cents per award) 1.00 - - - 1.00 -
(g) Conditional Share Awards Contractual Life
The weighted average remaining contractual life of outstanding Conditional
Share Awards is 4.5 years (2022: 5.5 years).
(h) Summary of Share Based Payments
A reconciliation of all share-based payments made during the year is as
follows:
31 Dec 2023 31 Dec 2022
Note $'000 $'000
Vesting of Options and Awards 17 211 8
211 8
Lapsed Options 17 (2) (33)
(2) (33)
18 Commitments and contingencies
(a) Operating lease commitments
Operating leases relate to premises used by the Group in its operations,
generally with terms between 2 and 5 years. Some of the operating leases
contain options to extend for further periods and an adjustment to bring the
lease payments into line with market rates prevailing at that time. The leases
do not contain an option to purchase the leased property.
Operating Leases:
Within one year - -
After one year but not more than five years - -
Greater than five years - -
- -
(b) Exploration expenditure commitments
Petromatad Invest Limited and Capcorp have minimum spending obligations, under
the terms of their PSCs on Blocks V and XX with MRPAM.
The amounts set out below do not include general and administrative expenses.
Production Sharing Contract Fees:
Within one year 200 286
After one year but not more than five years 434 548
Greater than five years 1,433 1,518
2,067 2,352
Minimum Exploration Work Obligations:
Within one year
Greater than one year but no more than five years - -
Greater than five years 6,449 6,480
6,449 6,480
(c) Contingencies
On 5 August 2016, Shell through its Affiliate company announced it would be
withdrawing from Blocks IV and V in West/Central Mongolia. As part of the
negotiations leading to formal Mongolian Government approval of the
reassignment of interest from Shell's Affiliate to the Company's Affiliate,
Shell agreed to a payment of $5 million to be remitted to the Company's
Affiliate upon such government approval being received. A condition to the
payment by Shell is that the proceeds are required to be repaid to Shell by
the Company in the event a farmout is concluded in future prior to the
development of either Block IV or V. Block IV has since been relinquished by
the Company in its entirety and Block V will be relinquished in its entirety
in July 2024, at which point the conditional payment will no longer be
applicable. The $5 million payment was received on 1 February 2017.
19 Related party disclosures
The immediate parent and ultimate controlling party of the Group is Petro
Matad Limited.
The consolidated financial statements include the financial statements of
Petro Matad Limited and the subsidiaries listed in the following table:
Equity Interest
Country of 2023 2022
Incorporation % %
Central Asian Petroleum Corporation Limited Cayman Islands 100 100
Capcorp Mongolia LLC Mongolia 100 100
Petromatad Invest Limited Cayman Islands 100 100
Petro Matad LLC Mongolia 100 100
Sunsteppe Renewable Energy Pte. Ltd. Singapore 100 100
(formerly Petro Matad Singapore Pte. Ltd.)
Petro Matad Energy Limited Isle of Man 100 -
Sun Steppe Power LLC Mongolia 50 -
Subsidiary Details
Central Asian Petroleum Corporation Limited (Capcorp) was acquired on 12
November 2007. Petro Matad Limited holds 43,340,000 ordinary shares of $0.01
each.
Capcorp Mongolia LLC is 100% owned by Capcorp. Capcorp holds 1,000,000
ordinary shares of MNT150 each.
Petromatad Invest Limited was acquired on 12 November 2007. 25,000 shares of
$1 each held by Capcorp was transferred to Petro Matad Limited on 25 November
2019 resulting in Petro Matad Limited holding 50,000 shares of $1 each.
Petro Matad LLC is 100% owned by Petromatad Invest Limited. Petromatad Invest
Limited holds 15,000 ordinary shares of MNT10,000 each.
Petro Matad Singapore Pte. Ltd was 100% owned by Petro Matad Limited who held
50,000 ordinary shares of SG$1.On 20 February 2024, the Company transferred
50% of Petro Matad Singapore Pte. Ltd to Sunsteppe Energy LLC and is currently
holding 25,000 ordinary shares of SG$1. Petro Matad Singapore Pte. Ltd was
also renamed as Sunsteppe Renewable Energy Pte. Ltd.
Petro Matad Energy Limited is 100% owned by Petro Matad Limited. Petro Matad
Limited holds 50,000 Ordinary shares of $1 each.
On 13 April 2023, the Company formed Sun Steppe Power LLC, incorporated in
Mongolia, which is a 50% owned subsidiary of Petro Matad LLC and 50% owned by
Sunsteppe Energy LLC.
Balances and transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on consolidation and are
not disclosed in this note.
Petrovis Matad Inc. (Petrovis) is a major shareholder of the Company, holding
approximately 19.92% of the shareholding at year end of 2023.
20 Key management personnel
(a) Details of Directors
The names of the Company's Directors, having authority and responsibility for
planning, directing and controlling the activities of the Group, in office
during 2022 and 2023, are as below:
The Directors were in office until the date of this report and for this entire
period unless otherwise stated.
Directors
Enkhmaa Davaanyam
Non-Executive Chairperson
Timothy Paul Bushell
Non-Executive Director
Michael James Buck
Chief Executive Officer
Shinezaya Batbold
Non-Executive Director
(b) Compensation of Directors
Consolidated
31 Dec 2023 31 Dec 2022
$'000 $'000
Short-term employee benefits 672 685
Share based payment expense 15 3
687 688
(c) Other key management personnel transactions
There were no other key management personnel transactions during the year
(2022: Nil).
21 Financial risk management objectives and policies
The Group's principal financial instruments comprise cash and short-term
deposits classified as loans and receivables financial assets.
The main purpose of these financial instruments is to raise capital for the
Group's operations.
The Group also has various other financial instruments such as trade debtors
and trade creditors, which arise directly from its operations. It is, and has
been throughout the year under review, the Group's policy that no trading in
financial instruments shall be undertaken.
The main risks arising from the Group's financial instruments are interest
rate risk, foreign currency risk, credit risk and liquidity risk.
The Board is responsible for identification and control of financial risks.
The Board reviews and agrees policies for managing each of these risks as
summarised below.
Risk Exposures and Responses
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or
cash flow associated with the instrument will fluctuate due to changes in
market interest rate. Interest rate risk arises from fluctuations in interest
bearing financial assets and liabilities that the Group uses. Interest bearing
assets comprise cash and cash equivalents which are considered to be
short-term liquid assets. It is the Group's policy to settle trade payables
within the credit terms allowed and the Group does therefore not incur
interest on overdue balances.
The following table sets out the carrying amount of the financial instruments
that are exposed to interest rate risk:
31 Dec 2023 31 Dec 2022
Weighted Average Int. rate $'000 $'000
Financial Assets
Cash and cash equivalents 0.00% 503 1,476
*Other financial assets 6.74% 3,529 1,017
4,032 2,493
Trade and other receivables 0% 438 2,607
4,470 5,100
Financial Liabilities
Trade and other payables 0% 348 456
348 456
Net exposure 4,122 4,644
*Other financial assets are comprised of cash deposits placed in the banks for
terms exceeding 90 days.
Sensitivity Analysis
If the interest rate on cash balances at 31 December 2022 and 2023
weakened/strengthened by 1%, there would be no material impact on profit or
loss. There would be no effect on the equity reserves other than those
directly related to other comprehensive income movements.
Foreign currency risk
As a result of operations overseas, the Group's statement of financial
position can be affected by movements in various exchange rates.
The functional currency of Petro Matad Limited and presentational currency of
the Group is deemed to be USD because the future revenue from the sale of oil
will be denominated in USD and the costs of the Group are likewise
predominately in USD. Some transactions are however dominated in currencies
other than USD. These transactions comprise operating costs and capital
expenditure in the local currencies of the countries where the Group operates.
These currencies have a close relationship to the USD and management believes
that changes in the exchange rates will not have a significant effect on the
Group's financial statements.
The Group does not use forward currency contracts to eliminate the currency
exposures on any individual transactions.
The following significant exchange rates applied during the year:
Average rate Spot rate at the balance date
USD 2023 2022 2023 2022
Mongolian Tugrug (MNT) 1 3,465.85 3,139.80 3,410.69 3,444.60
Australian Dollar (AUD) 1 1.506204 1.450052 1.468020 1.472423
Great British Pound (GBP) 1 0.804479 0.811255 0.785462 0.829194
Sensitivity Analysis
A 5% strengthening/weakening of the MNT against USD at 31 December 2022 and
2023 would not have a material effect on profit and loss or on equity.
Price risk
The Group's exposure to price risk is minimal as the Group is currently not
revenue producing other than from interest income.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group is exposed to credit risk on its cash and cash
equivalents and other receivables as set out in Notes 7 and 8 which also
represent the maximum exposure to credit risk. The Group only deposits surplus
cash with well-established financial institutions of high quality credit
standing.
In addition, receivable balances are monitored on an ongoing basis with the
result that the Group's exposure to bad debts is not significant.
There are no significant concentrations of credit risk within the Group.
Maximum exposure to credit risk at reporting date:
31 Dec 2023 31 Dec 2022
Note $'000 $'000
Financial Assets
Trade and other receivables 8 438 2,607
Net exposure 438 2,607
Impairment Losses:
None of the Group's receivables are past due at 31 December 2023 (2022: Nil)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
The Group's approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Group's reputation.
The Group's objective is to ensure that sufficient funds are available to
allow it to continue its exploration and development activities.
The following table details the Group's expected maturity for its
non-derivative financial assets. The table has been drawn up based on the
undiscounted maturities of the financial assets including interest that will
be earned on those assets.
Weighted average interest rate 6-12 months 1-5 over 5 years Total
6 months or less years
$'000 $'000 $'000 $'000 $'000
Cash and cash equivalents 0.00% 503 - - - 503
Trade and other receivables - 438 - - - 438
Financial Assets 6.74% 3,529 - - - 3,529
As at 31 December 2023 4,470 - - - 4,470
Cash and cash equivalents 0.00% 1,476 - - - 1,476
Trade and other receivables - 2,607 - - - 2,607
Financial Assets 2.92% 1,017 - - - 1,017
As at 31 December 2022 5,100 - - - 5,100
The remaining contractual maturities of the Group's and parent entity's
financial liabilities are:
31 Dec 2023 31 Dec 2022
$'000 $'000
6 months or less 348 456
6-12 months - -
1-5 years - -
over 5 years - -
348 456
All of the Group's amounts payable and receivable are current.
Further, the Group has exploration expenditure commitments on its PSCs as
disclosed in Note 18(b).
Fair Value of Financial Assets and Liabilities
The fair value of cash and cash equivalents and non-interest bearing financial
assets and financial liabilities of the Group approximate their carrying value
due to their short term duration.
Fair Value Hierarchy as at 31 December 2023
Level 1 Level 2 Level 3 Total
Financial Assets
Trade and other receivables - 438 - 438
Total - 438 - 438
Financial Liabilities
Trade and other payables - 348 - 348
Total - 348 - 348
Fair Value Hierarchy as at 31 December 2022
Level 1 Level 2 Level 3 Total
Financial Assets
Trade and other receivables - 2,607 - 2,607
Total - 2,607 - 2,607
Financial Liabilities
Trade and other payables - 456 - 456
Total - 456 - 456
The fair values of the financial assets and financial liabilities included in
the level 2 category above have been determined in accordance with generally
accepted pricing models based on a discounted cash flow analysis, with the
most significant inputs being the discount rate that reflects the credit risk
of counterparties.
22 Capital management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital. The management of the Group
and the Group's capital is regularly reviewed by the Board. The capital
structure of the Group consists of cash and bank balances (Note 7) and equity
of the Group (comprising issued capital, reserves and retained earnings as
detailed in Notes 15 and 16). This is reviewed by the Board of Directors as
part of their regular Board meetings.
The Group monitors its capital requirements based on the funding required for
its exploration and development activities in Mongolia and operations of the
Company.
The Group is not subject to externally imposed capital requirements.
23 Events after the reporting date
On 20 February 2024, the Company transferred 50% of Petro Matad Singapore Pte.
Ltd to Sunsteppe Energy LLC. Petro Matad Singapore Pte. Ltd was also renamed
as Sunsteppe Renewable Energy Pte. Ltd. The Company is currently in process of
transferring Sun Steppe Power LLC to be a wholly owned subsidiary of Sunsteppe
Renewable Energy Pte. Ltd.
The Company has had its application for land access for 2024 operations
approved by the Matad District Citizen Representative Hural. A land use
agreement enabling access to land for 2024 planned operations is in process of
being finalized.
24 Auditors' remuneration
The auditor of Petro Matad Limited is Hall Chadwick (WA) Pty Ltd.
31 Dec 2023 31 Dec 2022
$'000 $'000
Amounts received or due and receivable by Hall Chadwick (WA) Pty Ltd:
- an audit or review of the financial report of the entity and any other 41 33
entity in the Group
- other services in relation to the entity and any other entity in the Group - -
41 33
Amounts received or due and receivable by Deloitte Onch Audit LLC for:
- an audit or review of the financial report of subsidiary entities 23 23
- other services in relation to the subsidiary entities - -
23 23
Amounts received or due and receivable by Deloitte Infinity Assurance LLP for:
- an audit or review of the financial report of subsidiary entities 8 15
- other services in relation to the subsidiary entities - -
8 15
72 71
25 Other Information
Registered Office:
Victory House
Douglas
Isle of Man
IM1 1EQ
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. END FR FPMFTMTJBBBIRecent news on Petro Matad
See all newsREG - Petro Matad Ltd - Result of Retail Offer
AnnouncementREG - Petro Matad Ltd - Issue of equity
AnnouncementREG - Petro Matad Ltd - Results of Capital Raise
AnnouncementREG - Petro Matad Ltd - Retail Offer
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Announcement