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17 June 2020
Chariot Oil & Gas Limited
("Chariot", the "Company" or the "Group")
2019 Final Results
Chariot Oil & Gas Limited (AIM: CHAR), the Atlantic margins focused oil and gas company, today announces its audited final results for the year ended 31 December 2019.
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2019 and Post Period Highlights
Corporate strategy updated to fit with evolving market dynamics:
������ Risk appetite of investors and the industry has evolved.
������ Exploration in frontier regions has fallen out of favour.
������ Need for nearby / adjacent discoveries to unlock basin potential.
������ Importance of ESG has increased with societal preference for low carbon energy feeding through to investor sentiment; upstream energy projects now need to demonstrate Environmental, Social and Governance ("ESG") credentials.
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Lixus - A material, high value gas project with a route to free cash flow:
������ Lixus Offshore Licence, Morocco, containing the Anchois Discovery awarded to Chariot as operator with 75% interest, Q2 2019.
������ Anchois Discovery, Anchois Satellites and Additional Prospects offer potential for a low risk near-term development opportunity and material, strategic entry into a fast growing Moroccan energy market and access to the Spanish and Portuguese gas markets.
������ Strong ESG credentials of project support Moroccan energy transition and appeal to a broad range of partners in an evolving market.
������ Anchois Field Development targets a production of 53 mmscf/d, which at US$8/mcf would deliver revenue of c.US$150 million per year, paying back development capex in 2-3 years.
������ Attractive commercial and fiscal terms, with a 10-year Moroccan tax holiday from the start of production.
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Scale of the Gas Development Opportunity:
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������ Independent Estimates by Netherland Sewell & Associates Inc. ("NSAI"), completed in 2019, suggests in excess of >2.2 Tcf (370 mboe) in 2C contingent and 2U prospective resources:
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-���� Anchois-1 well gas discovery 307 Bcf with 2C contingent resource forms core of fast-track development case with deeper sand containing 116 Bcf 2U prospective resources making a combined 423 Bcf remaining recoverable resource.
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-���� Anchois Satellites offer material tie-back opportunities with 588 Bcf 2U prospective resources. One of these, Anchois North, confirmed as the low risk priority satellite with 308 Bcf of 2U prospective resources and probability of geologic success of 43%
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-���� Additional Prospects on-block offering exploration upside in excess of 1.2 Tcf 2U prospective resources
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������ Improved imaging on reprocessed 3D seismic data has further de-risked the existing Anchois and Anchois satellite prospective resource gas volumes.
������ Chariot is also evaluating new leads identified during technical review, with companies participating in the partnering process. These leads have the potential to add further prospects to the portfolio when technically matured.
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Monetising the Anchois Gas Discovery:
������ Development Feasibility Study completed. Results confirm technically feasible with the potential for either a single phase or a staged development to commercially optimise access to different parts of the gas market.
������ Subsea-to-shore development, two wells tied back to a subsea manifold, from which a flowline and control umbilical connect to an onshore Central Processing Facility ("CPF"). All current, off-the-shelf technology. Numerous examples of this development scheme being implemented.
������ Drilling Environmental Impact Assessment ("EIA") completed and approvals received.
������ Progressing pre-Front End Engineering Design ("FEED") work programme to optimise and reduce uncertainty in project cost, volumes and price to deliver potential partners and unlock debt financing.
������ A highly experienced technical, operational, financial and commercial team with proven, recent operating capability.
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Developing a low CO2 Moroccan gas business
������ Moroccan Gas Market and Anchois Field Monetisation Assessment completed.
������ Morocco has a fast-growing energy market with strong gas prices that underpins a commercially attractive project.
������ Proximity to power generation and Maghreb-Europe Gas pipeline ("GME") which connects Morocco with Spain and Portugal offer numerous commercial options to monetise asset.
������ In discussion with a broad spectrum of potential farm-in partners, multi-lateral lending agencies, debt finance providers, reserved based lenders, midstream service providers and downstream off-takers.
������ Company has held initial discussions with l'Office National de l'Electricit� et de l'Eau Potable�("ONEE"), the Moroccan state electricity provider, and the key players in the Spanish gas market.
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Clear and focussed risk and capital management strategies:
������ Cash balance of US$9.6 million at 31 December 2019 with no remaining work commitments.
������ Annual cash overhead c.US$4.5 million, with a material decrease to c.US$2.5 million expected following an extensive cost-reduction programme - whilst retaining key skills and operational capability.
������ No debt, strong record of capital discipline.�
������ Position of strength to respond to current market uncertainty related to COVID-19 and commodity price weakness.
������ Firmly focused on monetising Lixus licence - asset fits what potential partners are looking for - discovered resources with ESG credentials.
������ Board further strengthened with the appointment of Andrew Hockey (Q2 2019) as Independent Non-Executive Director. Andrew has extensive experience in the development and production of gas assets.
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Exploration portfolio:
With the strategic focus on Lixus, the Company will only proceed with exploration if nearby adjacent drilling de-risks the basin sufficiently to generate partnering.
������ In Namibia, three third-party wells, including one in the block adjacent to Chariot's Central Blocks, due to be drilled. With no remaining commitments, marketing of the remaining exploration prospects ranging from 284 - 469mmbbls of gross mean prospective resources will be contingent on results of this third-party activity in the basin.
������ Post year-end Azinam gave notice of its intention to withdraw from the Central Blocks. Chariot remains committed to continuing to hold and progress the licence.
������ In Brazil, commitment wells in neighbouring blocks are being monitored, progression of these projects is needed to trigger further partnering activity. Chariot holds no remaining commitments on the acreage.
������ In Morocco, the Company is reviewing Mohammedia and Kenitra and will make a judgement based on prospectivity and the current market environment.
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2020 Strategic Focus:
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������ Seek project endorsement, asset validation and de-risking through partnering.
������ Complete a Pre-FEED analysis to define the Anchois Field development as a catalyst to unlock debt finance:
o Progress concept testing, selection and definition.
o Well engineering for production wells, reservoir model engineering and design of production test for first development well.
o Secure Heads of Agreement on Gas Sales Agreements with potential off-takers.
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Larry Bottomley, Chief Executive Officer of Chariot, commented:
"Whilst the early part of 2019 marked a shift in the balance of our portfolio, with the addition of the Lixus licence, the latter half of 2019 and the start of 2020 has seen the Company re-prioritise its strategy, accelerating efforts towards monetising a major gas development project in Morocco.� The asset has the potential to deliver near term cashflows and delivers a more suitable fuel source for global economies looking to transition to less carbon intensive energy sources. This re-focus has coincided with the impact of COVID-19 on the economic and operational environment. Chariot was able to respond quickly and implemented an extensive cost-reduction programme to restructure the organisation, ensuring the retention of key skills and the operating capability to deliver on Lixus, whilst enabling the business to preserve cash.
The Anchois Field development has strong ESG credentials and, when developed, will provide Morocco with a reliable domestic gas source.� Gas from Anchois has the potential to form a fundamental part of the energy mix, aiding the country's transition from imported oil and coal in its energy consumption, with any excess gas exported via the GME to Spain. The studies undertaken have highlighted the technical feasibility and economic viability of a development and the gas market analysis confirms the potential to deliver gas into Morocco and/or Spain at a price that delivers strong returns on the capital invested. Reliable and plentiful supply of energy from a domestic source can enhance conditions for economic growth, particularly in such a fast-growing economy where energy demand is predicted to double between 2015 and 2030. A successful project delivery and development of a sustainable Moroccan gas business will act as a catalyst for jobs in Morocco and the overall wealth of the Kingdom. We look forward to continuing our already strong relationships with our partners at Office National des Hydrocarbures et des Mines�("ONHYM") and the Moroccan Ministry of Energy and building on our new connections with ONEE and Moroccan industry."�
This announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
| For further information please contact: � Chariot Oil & Gas Limited Larry Bottomley, CEO � | � � +44 (0)20 7318 0450 | ||
| finnCap (Nominated Adviser and Broker) Christopher Raggett, Hannah Boros (Corporate Finance), Andrew Burdis (ECM) � | +44 (0)20 7220 0500 | ||
| Celicourt Communications (Financial PR) Jimmy Lea | +44 (0)208 434 2754 | ||
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| � | � | � | � |
NOTES TO EDITORS
ABOUT CHARIOT
Chariot Oil & Gas Limited is an independent oil and gas company focused on the Atlantic margins. It holds exploration licences covering two blocks in Namibia, three blocks in Morocco and four blocks in the Barreirinhas Basin offshore Brazil.
The ordinary shares of Chariot Oil & Gas Limited are admitted to trading on the AIM Market of the London Stock Exchange under the symbol 'CHAR'.
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Chariot Oil & Gas Limited
Chairman's Statement
Responding to changing industry dynamics
The Chariot team is made up of highly experienced, technically and operationally excellent people who are all striving to deliver the goal of transformational value for stakeholders. To date, the Company has employed its resources to execute a strategy of high impact exploration drilling that in the success case had the potential to deliver transformational value. Having completed the 2018 drilling campaign a period of review took place and it became clear that industry appetite for the class of risk the Company was operating in had evolved. It was with this evolution in mind that Chariot sought to broaden its risk profile and, through hard work, commercial acumen and opportunistic drive, successfully brought in a licence containing a 307 Bcf gas discovery that would appeal to a wider range of energy industry partners and investors and be better placed to monetise a resource that is closer to near-term cashflow. The Lixus licence therefore makes two fundamental changes to the Company; it lowers the risk profile with the Anchois discovery and low-risk tie-back prospects and it changes the timing of the expected cashflows bringing them forward to the near-term.
The work the team has carried out so far indicates the discovery has all the attributes of a gas resource with strategic importance and material exploration upside. It also represents a compelling investment case to gain entry into a fast growing Moroccan energy market or into the significantly larger gas market in Spain and Portugal with both offering attractive gas pricing, commercial and fiscal terms. Furthermore, the project compares favourably to current imported fossil fuel-based energy sources. Hence we believe the licence has the potential to aid Moroccan energy transition.
Applying the strategy: Broadening the risk profile
Whilst the Lixus licence marks a step change in project characteristics for the Company it is still very much a product of the existing strategy the Company was founded on. We are bringing to market the Anchois Discovery by applying all the different elements of our strategy against a lower risk gas asset with strong ESG credentials that is close to a proven gas market, giving a direct route to monetisation.
We have again managed to access large acreage in a new and emerging basin, taking an operated position with high equity. In so doing we are able to take control of the project and keep a tight focus on costs but also keep equity available to bring in industry partners at the appropriate time and at commercially attractive levels. This new acreage has broadened the risk profile of the Company and we are finding that the style of project has opened up the range of potential partners we can invite into the data room.
The licence itself under the previous operator had undergone a full exploration campaign with seismic and well data which Chariot has had the benefit of picking up and reworking with application of its modern, state of the art risk reduction technologies. A key part of risk management is the validation that comes from peer group review and the endorsement and risk-sharing of partnering. Just as we were able to lever our strong early mover position to a near zero cost well in Rabat Deep, Morocco, we hope to repeat this partnering success to deliver a commercially favourable outcome to the Company from our high equity in Lixus, which we hope will act as a catalyst to further debt financing. We therefore intend to create value by delivering and monetising the Anchois Gas discovery.
Maximising the value of the exploration potential in the Lixus licence
The Anchois Gas Discovery is garnering significant interest in its base case development scenario from potential farminees who have been through the data room and engaged with us at various industry events. By applying the same strategy demonstrated on previous exploration licences we have deployed our unique, differentiated in-house technical capabilities throughout a campaign of reprocessing and interpretation of legacy 3D seismic data on the block which has substantially enhanced the scale and potential value of the opportunity. Leveraging the team's Atlantic Margins expertise has yielded a conveyor belt of substantial leads and prospects within the licence area, which have been validated externally by successive Independent Estimates throughout the year. Whilst tie-ing back these incremental, high-value exploration opportunities to the primary Anchois development clearly demonstrates the enormous running room and upside in the licence, we are mindful and cognisant of the need to focus on the core monetisation stage of the Anchois Discovery. Only once this has been delivered will we look to undertake material exploration activity on the block in a context in which downside risk is managed both by the selection of priority targets with high chance of geologic success and by achieving partnering prior to drilling.
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Guiding principal of Capital Discipline
Fundamental to the beliefs of the Company is to apply strong capital discipline to all aspects of our work. Throughout a very challenging business environment Chariot has retained its strong balance sheet and ensured sufficient cash to cover work programme commitments through the current project phase of Lixus. A key part of our strategy is to operate projects using our in-house team which enables us to maintain a firm grip on costs whilst expediting delivery.
We will undertake to only proceed with exploration if nearby adjacent drilling de-risks the basin sufficiently to generate partnering. As such, we are monitoring closely the forthcoming activity in Namibia and Brazil where third party commitment wells have the potential to reignite interest in our acreage.
We have always sought to achieve a balance of risk, cost and reward in our portfolio whilst still maintaining focus on capital discipline. In order to ensure the greatest chance of success for monetisation of discovered resources in Lixus, and in light of the evolution in strategy, the Company is currently reviewing its licences in Mohammedia and Kenitra in Morocco. Having fulfilled our seismic work commitments across these licences and conducted partnering processes for drill-ready prospects, we note that the industry's change of appetite for these higher risk targets has not yet led to successful partnering.
Our Relationships and Values
The 2018 drilling campaign across Morocco and Namibia was conducted with no compromise on safety or environmental protection and, whilst ultimately unsuccessful in delivering hydrocarbons, the skills and capabilities demonstrated have led the Company to its current project. To understand why the Lixus licence containing the 307 Bcf Anchois gas discovery was awarded to Chariot we must point to the twin strengths of the Company exhibited in this campaign; firstly in levered partnering on Rabat Deep where we took an early stage exploration licence and attracted high calibre industry partners in Woodside and Eni to join us in sharing the risk of what was a wildcat exploration well, simultaneously retaining exposure to the upside whilst protecting the Company from cost exposure; and secondly, in Prospect S we safely and efficiently operated a deepwater well at industry benchmark low cost in a manner which showcased our values of fair, open and honest work with our partners across the value chain, communicating closely with Energy Ministry, Government, local empowerment partners, contractors and suppliers.
Seeing what we could do in a such a short timeframe, having spud Prospect S within 6 months of raising finance and knowing that we go out and execute on our stated work strategy makes us an ideal candidate to operate Lixus and bring to market a dormant gas discovery that can contribute materially to Morocco's energy mix. We would like to thank the Ministry for their co-operation in securing the Lixus Offshore Licence in Morocco and look forward to continuing to work in partnership with the Office National des Hydrocarbures et des Mines ("ONHYM").
We seek to achieve excellence through our values of collaborative teamwork, a collegiate approach, peer review and regular technical reviews with the in-house team. Throughout the organisation we seek a culture of continuous improvement and in pursuit of this objective we have strengthened our technical review capability with the appointment of Andrew Hockey to the Board in June 2019. We welcome Andrew, whose technical insight and current experience in developing gas assets has further strengthened the decision making and strategic planning process.
Outlook
Elephant scale exploration activity in frontier regions has, aside from a few notable exceptions, fallen out of favour with the market and industry appetite is now clearly focused on the environmental and social impact of energy projects and their governance.
I believe that Chariot has evolved to fit with changing market dynamics and the risk appetite of investors by refocusing its corporate strategy on monetising the near term potential of the Lixus licence and maximising value for investors by developing a Moroccan gas business. In addition, the recent restructuring to reduce ongoing costs, coupled with the fact we have no debt and no remaining work programme commitments, puts Chariot in a good position to respond to the current market uncertainty related to COVID-19 and commodity price weakness.
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George Canjar
Chairman
16 June 2020
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Chariot Oil & Gas Limited
Chief Executive Officer's Review
The addition of the Lixus Licence, offshore Morocco, in the first half of 2019 has brought discovered gas resources to the portfolio for the first time and transformed the strategic focus of the Company. This asset is located along the Moroccan Atlantic industrial corridor and lies close to the Maghreb-Europe Gas pipeline ("GME") which connects Morocco with the gas markets of Spain and Portugal. Chariot is now the operator of a major low risk appraisal and development opportunity which has the potential to have a material impact on the energy mix of Morocco by opening an untapped source of indigenous gas that can reduce reliance on imported fossil fuels, with the potential for any excess gas to be exported to the Iberian peninsula. This project can be delivered at a low cost and with strong ESG credentials, supporting a Moroccan energy transition and/or low-carbon energy in Spain.�
The Lixus asset contains the Anchois Gas Discovery with 423 Bcf of remaining recoverable resource, which alongside its Satellite and Additional Prospects comprises in excess of 2.2 Tcf (370mboe) in 2C contingent and 2U prospective resources as independently evaluated by Netherland Sewell & Associates Inc. ("NSAI").
Monetising the Anchois Discovery to return transformational shareholder value
Historically the Company has focused, with partnering, on discovery of hydrocarbons in underexplored frontier regions and higher risk, giant scale plays. As a response to evolving market dynamics the corporate strategy has been broadened to position Chariot to unlock value in the Lixus Licence, offshore Morocco. The risk appetite of investors and the industry has gone through a realignment and exploration in frontier regions, which have until recently made up the core of our portfolio and yielded successful partnering, has fallen out of favour. Following the post-2014 oil price collapse and reorganisation of the sector focus has redirected away from international exploration and as such the pool of potential investors and partners for higher risk oil exploration has diminished. Lixus represents a much lower risk development opportunity with a clear line of sight to cashflow which we believe is more appealing to a wider target market of potential investors and partners.
At the same time as this refinement in risk appetite of investors, the importance of ESG and energy transition has increased in importance when it comes to project finance. We believe the project has strong ESG credentials as the production of natural gas will help Morocco transition from reliance on coal and oil for its energy supply. The Company therefore intends to continue applying the elements of its strategy of access, risk management and delivery but this time exposing stakeholders to transformational value by the monetisation of a material existing gas asset that also holds exceptional upside potential.�
Experienced and Strong Operational Team
To date, Chariot has built a reputation as a technically capable, safe and efficient operator, with the ability to execute successful exploration programmes with a strong focus on capital discipline. The 2018 drilling campaign demonstrated these qualities through both the attraction of high calibre industry partners in Morocco and the delivery of a deepwater well in Namibia as operator at a new benchmark low cost in the industry. The strong relationship we have built with our Moroccan partner ONHYM through successive operated exploration licences since 2012, coupled with our recent demonstration of project execution capability in Namibia meant that when we approached the Ministry in Morocco to take Lixus on as operator we were met with a positive response.
Origination of the Opportunity and Rapid Progression of Subsurface Description
The Anchois-1 well was drilled in 2009 in 388m water depth some 40km from the coast and encountered an estimated net gas pay of 55m in two sands with very high quality 25-28% porosity reservoirs. An independent estimate of this discovery by NSAI on this well and the legacy 3D seismic data estimates a 2C contingent resource of 307 Bcf. A deeper target not penetrated by the well has 2U prospective resources estimated by NSAI of 116 Bcf, with the Anchois discovery combined containing a remaining recoverable resource of 423 Bcf.�
The well results indicate sales quality gas with commercial flow rates which make for a relatively simple development solution. The well itself was suspended as a potential producer - an Anchois Field development could potentially look to re-enter this well and commission for first gas.
Since the award in the first half of 2019, three independent estimates have been completed from interpretation of the legacy seismic data over the Anchois Discovery, the Anchois Satellite Prospects and the Additional Prospects. The Satellite prospects that ring the Anchois discovery all have the potential to be tied back to Anchois at low cost. They are viewed as low risk prospects characterised by similar seismic attributes and are in the same reservoir system as Anchois, with the Satellites independently estimated by NSAI to hold 588 Bcf. The high-graded Anchois North, is a 308 Bcf low risk opportunity with probability of geologic success at 43% and is therefore a potential second drilling candidate which, if successful, would add to the production profile beyond the initial 10 year time frame anticipated in a core Anchois development scenario, thus demonstrating a lucrative follow-on upside.
The legacy 3D seismic data has been reprocessing to Pre-Stack Depth migration with a significant uplift in data quality. These data are currently being interpreted and will be incorporated in Chariot's plans for the region.
Engineering and Gas Marketing
The Development Feasibility Study conducted in mid-2019 demonstrated the viability of the project and made it clear that a compelling opportunity exists to grow a Moroccan gas business with the prospect of near-term cashflow from a high value gas development in a stable, growing economy with fast growing energy demand and attractive gas prices and fiscal terms.
The Anchois Field reservoirs have a productive capacity which is potentially sufficient to fully supply individual power stations, with any surplus gas being contracted to domestic industrial users or export off-takers. The fast track base case development option we are focusing on is a low cost subsea-to-shore model with two subsea wells tied into a subsea manifold, from which a 40km flowline and umbilical connect to an onshore Central Processing Facility ("CPF"). This would deliver a plateau production rate of 53 mmscf/d, representing 60% of the 2C resource potential of the A and B sands only, delivering approximately US$150million per year in revenue under a US$8/mcf gas price assumption. This concept allows for future wells to be tied-in to the core infrastructure in phases and open capacity to ramp-up production in response to progressive demand and favourable project economics. Preliminary feasibility study costs range from -30% to +50% of the base case, based on the American Association of Cost Engineers ("AACE") International Class 4 feasibility study standards� and we will be working to reduce uncertainty in this range as Pre-FEED studies proceed.�
The Gas Market Analysis and the Anchois Field Monetisation Assessment conducted by a third-party consultancy highlighted the strong fundamentals that underpin this market. Moroccan energy demand has doubled since the year 2000 and is forecast to double again between 2015 and 2030. Power generation is principally from imported coal, fuel oil and gas and the majority of growth in recent times has come from renewables and imported gas from Algeria. There is therefore a potential for power generation from indigenous gas, as a transition from fuel oil and coal, to mitigate the carbon footprint of the country's energy consumption and improve its ESG credentials. This project would serve the need to both diversify and focus on security of supply by accessing a low-cost, strategically important domestic energy base whilst minimising environmental impact. Importantly, prices of c.US$8/mcf are expected to the power sector, an assessment also supported by a recently announced peer group gas sales agreement. Sales to industrial users would be expected to be smaller volume, higher margin in nature at around US$11/mcf offering material upside. In addition to targeting power generation, gas-to-power projects and industrial users, the Maghreb-Eurpoe Gas pipeline ("GME") is within 30 kilometers of landfall of the Lixus licence which makes the export of gas into the Iberian Peninsula, a potentially lucrative market, feasible. Initial discussions have been held with ONEE, the Moroccan state electricity company and the key players in the Spanish gas market with a view to future gas-offtake arrangements.
Finance and Partnering
We have been very pleased and encouraged by the response we have received from both potential upstream partners and a wide range of potential strategic alliances across the energy value chain. As operator with 75% of the licence, the data room has been host not just to E&P companies, but also, in line with the rebalancing of risk this project has opened the door to financing with midstream players, engineering service companies, downstream power generators and third party off-takers. As with previous farm-out campaigns, we will seek partnering prior to first development drilling as both a key de-risking strategy for validation of the asset and as a crucial source of funding. The licence has exceptional commercial contract terms, internationally attractive gas prices and fiscal conditions, with tax breaks in the first 10 years of production that augment an already strong base case cash flow profile, all of which we believe will be appealing to potential farm-in partners.
In addition, discussions have been held with multi-lateral lending agencies, reserves-based lenders and other debt finance providers which have framed the project planning to enable bespoke work to meet criteria for unlocking funding. Two engineering group consortia have also expressed their interest in the project, either by taking an equity position or through future sales tariff. The team is pushing forward with a Pre-FEED project to reduce uncertainty and narrow the range on project costs to AACE Class 3 level with an expected accuracy range from -20% to +30% of the base case, mature development concept plans, build reservoir models, design the well production test and seek to secure heads of terms on gas sales agreements with potential off-takers, all of which move the Anchois gas discovery along its path to attracting partners, unlocking debt financing, first gas production and monetisation.
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Active Exploration Portfolio Management
We note that a number of companies have near-term plans to drill nearby Chariot's Central Blocks in Namibia and, in one case, adjacent acreage. Any discovery would have the potential to unlock the basin and improve the chances of re-marketing the remaining giant scale exploration prospects on our block. There are no remaining work commitments, with the Prospect S well in 2018 having fulfilled drilling requirements on the licence. Chariot remains committed to continuing to hold and progress the licence.
In Brazil, we await a play opening commitment well to be drilled by a third-party in the neighbouring deepwater block, following which a partnering process will be re-initiated for a partner to join in drilling Prospect 1, estimated to contain 911 mmbls of prospected resources in stacked targets.
We have always sought to achieve of balance of risk, cost and reward in our portfolio whilst still maintaining focus on capital discipline. To ensure the greatest chance of success for monetisation of discovered resources in Lixus, and in light of the evolution in strategy, the Company is currently reviewing Mohammedia and Kenitra in Morocco. Having fulfilled our seismic work commitments across these licences and conducted partnering processes to progress drill ready prospects, we note that the industry's change in appetite for these higher risk targets has not yet led to successful partnering.
Outlook
�In 2020, all our efforts are geared towards defining the Anchois Field development plan whilst simultaneously progressing partnering discussions. Execution of the strategy has the potential to deliver an initial phase 1 development of the Anchois discovery, putting in place a core infrastructure that will not only deliver first gas, near-term cashflow on a standalone basis and a sustainable Moroccan gas business, but also allows the Company to leverage its position to add incremental value-accretive growth from the Anchois satellite prospects and wider exploration targets on the block in the years to come.
Chariot has built a reputation for operational excellence and attracting high calibre industry partners to its projects and the team is fully focused on applying its skillset to capture value in the Lixus opportunity. The investment case is clear. All the elements are in place to make a major impact on the Moroccan energy market with a phased development of Anchois and the wider Lixus portfolio, monetising a high value resource and delivering transformational value for stakeholders.
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Larry Bottomley
Chief Executive Officer
16 June 2020
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Chariot Oil & Gas Limited
Chief Financial Officer's Review
Funding and Liquidity as at 31 December 2019
The Group entered 2020 with a debt free balance sheet, cash of US$9.6 million as at 31 December 2019 (31 December 2018: US$19.8 million) and no material remaining work programme commitments. Having demonstrated capital discipline throughout our drilling operations and the award of a new licence in Morocco with minimal commitments our continued focus on costs has been further illustrated by the recent extensive cost reduction programme which has reduced our annual cash overhead to c.US$2.5 million.
During 2019, the Group continued to� develop its portfolio and business by investing c.US$10 million into its exploration portfolio and administration activities (31 December 2018: c.US$12 million) primarily in the new Lixus licence in Morocco.
As at 31 December 2019, US$0.7 million of the Group's cash balances were held as security against licence work commitments. The decrease from US$0.8 million at 31 December 2018 was due to the release of Moroccan bank guarantees.
Financial Performance - Year Ended 31 December 2019
The Group's loss after tax for the year to 31 December 2019 was US$4.1 million, which is US$11.0 million lower than the US$15.1 million loss incurred for the year ended 31 December 2018. The vast majority of this decrease in the annual loss is due to an impairment charge of US$10.9 million in 2018 against previously capitalised drilling costs in the Namibian Central Blocks. This equates to a loss per share of US$(0.01) compared to a loss per share of US$(0.04) in 2018.
The share based payments charge of US$0.7 million for the year ended 31 December 2019 in relation to employee and Directors deferred share awards was broadly consistent with US$0.9 million in the previous year.
Other administrative expenses of US$3.4 million for the year ended 31 December 2019 is in line with the prior year (31 December 2018: US$3.4 million).
The finance income and expense net US$Nil (31 December 2018: US$Nil) comprises interest on cash, foreign exchange movements on non-US$ cash and finance expense on the office lease liability.
Interest income of US$0.2 million for the year ended 31 December 2019 is slightly lower than the prior year due to a decrease in cash held on deposit (31 December 2018: US$0.4 million).
The foreign exchange loss on non-US$ cash of US$0.1 million for the year ended 31 December 2019 has reduced due to the reduction in Sterling requirements which were needed to meet well commitments in 2018 (31 December 2018: US$0.4 million loss). The effect of unwinding of the discount on the lease liability from adoption of IFRS 16 Leases has led to a finance expense charge of US$0.1 million in the current year (31 December 2018:US$Nil).
The tax expense of less than US$0.1 million in the year to 31 December 2019 (31 December 2018: less than US$0.1 million) relates to Brazilian taxation levied on interest income.
Exploration and Appraisal Assets as at 31 December 2019
During the year to 31 December 2019, the carrying value of the Group's exploration and appraisal assets increased by US$4.1 million to US$78.3 million from US$74.2 million as at 31 December 2018. This US$4.1 million increase was principally due to investment into the Lixus licence in Morocco as the project moves forward. US$3.0 million was incurred mainly on interpretation and reprocessing of legacy Lixus 2D & 3D seismic data, development feasibility and gas market studies, drilling environmental impact assessment in preparation toward a first development well and project subsurface description for funding. In Namibia, US$0.6 million and in Brazil, US$0.5 million were incurred on ongoing interpretation and licence costs.
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Other Assets and Liabilities as at 31 December 2019
The Group's inventory balance of US$0.5 million as at 31 December 2019 is unchanged from the US$0.5 million at 31 December 2018.
As at 31 December 2019, the Group's net balance of current trade and other receivables and current trade and other payables shows a net current liability position of US$1.8 million (31 December 2018: US$4.7 million) with the decrease primarily due to settlement of outstanding payables for the drilling in Namibia, offset by tax recoveries in both Brazil and Namibia.
Upon adoption of IFRS 16 Leases with effect from 1 January 2019, rental commitments paid on the UK office which were previously charged on a straight-line basis to the income statement over the term of the lease, with the total commitment disclosed in the notes, have now been brought onto the balance sheet. As a result, the Group has recognized at 31 December 2019 a depreciating right-of use asset of US$1.0 million and a corresponding lease liability based on discounted cashflows of US$1.2 million, with the annual cash impact to the business unaffected by these accounting adjustments.
Outlook
With US$9.6 million of cash at 31 December 2019, no debt and no material work programme commitments, the Group has a stable platform from which to focus on funding the Lixus opportunity. Delivery of the immediate project actions has the potential to attract partners and act as a trigger to debt financing. Our current engagement with an expanded set of potential funding providers is encouraging and we look forward to updating the market as and when progress is made.��
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Julian Maurice-Williams
Chief Financial Officer
16 June 2020���
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Chariot Oil & Gas Limited
Exploration Manager's Review of Operations
Morocco: Appraisal & Development - Lixus Offshore (75% Chariot (Operator), 25% ONHYM (carried interest))
Overview
In 2019 we broadened the risk profile of the Company's portfolio by securing the Lixus Offshore licence in Morocco. This licence area contains the legacy Anchois gas discovery (made by Repsol in 2009) which contains 307 Bcf of 2C Contingent Resources as independently assessed by NSAI and represents a high value gas appraisal and development project which we believe offers an early route to monetisation. The Anchois discovery was made in high quality reservoirs and with a favourable gas composition which together facilitate a development solution underpinned by conventional technology with delivery into a growing gas market with strong established prices. Importantly the gas bearing reservoirs are directly imaged on seismic data, and the resulting calibration of this data helps to describe a significant and low risk portfolio of analogous exploration prospects.
It was the analysis of the results of the Rabat Deep 1 (RSD-1) well drilled in 2018 which initially led us to the identification of the Lixus Offshore area as a potential new venture. It was a process of analysis to understand the presence of oleananes in the oils recovered from the Mid-Jurassic carbonate reservoirs in the well, implying a Cretaceous or younger source rock, which challenged our understanding of the regional petroleum systems. The team analysed all the thermogenic hydrocarbon indications in the region, initially for the benefit of the existing drill ready exploration targets in the adjacent Mohammedia and Kenitra licences. Whilst reviewing the results of the Anchois-1 thermogenic gas discovery to the north the team recognised the potential for a commercial development of the Anchois discovery in a lower cost environment supported by a maturing local gas market, along with substantial remaining exploration potential in the same play.
Once the opportunity was recognised, as a nimble, independent upstream Company, we were able to move quickly to secure the acreage. We believe that our track record in operating exploration ventures in Morocco, in conducting exploration work programmes and attracting external investment were important in securing the support of our local partner ONHYM. This support helped us to secure the acreage under excellent terms and in a timely fashion, whilst quickly compiling a comprehensive database of geological and geophysical data which permitted a rapid evaluation of the potential of the area upon licence award.
Favourable Subsurface Conditions
The Anchois Discovery was made in Tertiary-aged turbidite reservoirs, which are similar to those demonstrated to be highly productive in analogous environments, such as the Nile Delta, offshore Egypt.� The reservoir sands were deposited in a deepwater setting in mini-basins which developed above the pre-Rifaine nappe (or Olistostrome) which formed during the Alpine orogeny as Africa and Europe collided in this region approximately 5 million years ago. Gas was discovered in two sands, Gas Sands A and B, which both recorded gas columns of approximately 50m and 22m and 33m of net gas pay respectively. They both exhibit excellent petrophysical properties with porosity averages ranging from 26% to 28% and reservoir sampling in Gas Sand B demonstrating the potential for multi-Darcy permeability.� We would therefore expect very high productivity wells in any development. Reservoir sampling via MDT also yielded gas composition data from the B Sand accumulation, confirming� high quality dry gas, with 97% (Mol %) of Methane (C1) and without problematic impurities such as CO2 or H2S. Gas Sand A and Gas Sand B have distinctive seismic signatures with bright high amplitudes and far-offset (AVO) seismic anomalies associated to the gas bearing sands and there is therefore high confidence in the lateral extent of those sands away from the proven well location. Based upon the evaluation of the legacy Pre-Stack Time Migration ("PSTM") 3D seismic data, NSAI performed an Independent Estimate of the Contingent Resources associated to the Anchois discovery, resulting in an estimate of 156 Bcf of 1C (or Proven) resources, 307 of 2C (or Probable) resources and 433 Bcf of 3C (or Possible) resources.
Together, the high-quality reservoirs, high-quality gas and the ability to directly map the extent of the gas sands on the legacy seismic data, reduce the uncertainty on the resource volumes and subsurface risks for a development project, also allowing the use of standard equipment for a relatively simple development solution.
In addition to the description of the gas discovered in the well, Chariot's team also identified an undrilled seismic anomaly, called Gas Sand C, with similar distinctive seismic attributes that would offer low risk exploration upside to the east of the discovery well and at the same elevation to where thin gas bearing sands were identified in the well. Again, NSAI performed an independent estimation on the resource potential of this reservoir, resulting in a Best Estimate (2U) of 116 Bcf of Prospective Resources, which could be targeted in combination with a first appraisal or development well on the Anchois Field.
Leveraging the insights from the evaluation of the Anchois discovery, the team was able to quickly identify further prospects surrounding the Anchois discovery, as they both share the same reservoir systems and possess very similar seismic attributes. Of these 'Satellite Prospects', Anchois North was high-graded based upon its prospective resource potential, estimated by NSAI to contain 308 Bcf of 2U prospective resources and its high probability of geologic success of 43%. Together with the four other Satellite Prospects, Anchois and its satellites are an amplitude and AVO supported discovery and prospect inventory with remaining recoverable resources in combination in excess of 1 Tcf, as independently estimated by NSAI, demonstrating a potentially high-value, low risk and material resource base for growth in the medium term.
In addition to the satellites, five further exploration prospects (Turbot, Tombe, Maquereau North, Maquereau Central and Maquereau South) have been identified and independently estimated by NSAI within the Miocene play, with a total remaining recoverable resource in excess of 1.2 Tcf 2U prospective resources.� These prospects offer the potential to be additional production centres beyond the Anchois area for the longer term, in the case of successful exploration drilling. Beyond the potential captured in the independently estimated portfolio, which totals 2.2 Tcf of mid-case 2C & 2U resources, the exploration team continues to work on the identification and description of additional targets within the proven Miocene gas play and the maturation of additional exploration play systems which together have the potential to deliver additional prospects and significant resource upgrades to the portfolio once technically matured. Other play systems include both a shallower gas play within the younger Pliocene reservoir systems and also a high-risk high-reward oil play in the Mesozoic reservoirs of the sub-nappe section.
This exploration work will be enhanced through the results of a Pre-Stack Depth Migration ("PSDM") reprocessing campaign on the legacy 3D seismic data. This will materially improve the seismic image and depth accuracy over Lixus through the application of technologies which were not available at the time of the original processing. Initial screening of the early products from this reprocessing campaign indicates that the 1C resource assigned to the Anchois discovery is expected to increase while the 2C resource is unlikely to materially change. An improvement in the 1C resource base expands the various development and funding options available for the project and allows the possibility for a commercially attractive fast-track development. Such a development has the potential to underpin the project whilst allowing for production growth as reservoir performance is confirmed and the gas market demand expands to include a variety of potential offtakers. This improved seismic image is also expected to impact on the description of the additional exploration prospectivity in the licence by reducing both risk and uncertainty, and the improvements in imaging at depth will be critical to unlocking the potential of the sub-nappe oil play.
To ensure Chariot can capture the value created through the reprocessing campaign, the Company will re-assess the Anchois development options and incorporate the findings into the upstream partnering process.
A Proven Development Concept
Chariot sought third party validation of its subsea to shore concept and the independent Development Feasibility Study conducted in mid-2019 served to both validate the team's concept and to provide indicative CAPEX and OPEX costs which together demonstrated the eminent viability of the project. High-quality reservoirs and favourable gas composition allow the application of a conventional development scheme using standard technology that has been employed in many places around the world, including examples in Africa. Based upon the resource potential, subsurface uncertainty and initial gas market, the favoured concept is a fast track development with two subsea production wells tied into a subsea manifold. From which a 40km flowline and reciprocal umbilical and flowline for glycol or other hydrate inhibitor, would connect to an onshore Central Processing Facility ("CPF"). The expectation is that this would deliver a plateau production rate of 53 mmscf/d, representing 60% of the 2C resource potential of the A&B sands only based upon a 10 years plateau duration. This would deliver approximately US$150million per year in revenue under a US$8/mcf gas price assumption. This concept provides a robust initial cashflow and allows for future wells to be tied-in to this core infrastructure in phases, to ramp-up production in response to progressive demand growth and to provide even more favourable project economics. Preliminary feasibility study costs range from -30% to +50% of the base case, based on the American Association of Cost Engineers ("AACE") International Class 4 feasibility study standards, and more-accurate cost estimates are expected as part of a Pre-FEED study, which is expected to complete by mid-2020.�
Moroccan Gas Market and Anchois Field Monetisation Assessment
Primary energy demand in Morocco has doubled since the year 2000 and is forecast to double again from 2015 to 2030. In terms of power generation, imported fossil fuels dominate, with Morocco relying on imports for 96% of its needs. Since the construction of the Maghreb-Europe Pipeline ("GME") in 2004, Morocco has been importing gas from Algeria for power generation.� Together the Ain Beni Mathar and Tahaddart Power stations have consumed around 100 mmscfd since 2012. The Moroccan government has been working on policies designed to improve security of supply, access to energy at a low cost, and to minimize the environmental impact of its energy mix. As part of this process, gas has been a major factor in its vision, including the possibility of imported LNG and the construction of further power infrastructure, for example a new 1,200MW CCGT power plant has been contemplated at Dhar Doum, which would be favourably located in close proximity to the landfall location of an Anchois Field gas pipeline.
Clearly indigenous Moroccan gas, such as that from an Anchois Field development, has the ability to fuel these existing and planned CCGT power stations (thus displacing the need to import gas from Algeria), reduce the volumes required from LNG projects which require material investment, switch expensive and underutilised fuel oil power stations to gas and to reduce import coal. Over and above power projects, there is a proven fast-growing industrial demand for gas with prices already established in the region of US$10-11/mcf. Once a material gas resource, such as Anchois, is connected to an industrial region such as that of Morocco's Atlantic coast, it is anticipated that industrial gas consumption will grow significantly, through a variety of possible delivery networks such as piped gas and Compressed Natural Gas ("CNG"); which will allow industrial customers to switch from other more expensive fuels such as fuel oil and Liquefied Petroleum Gas ("LPG").
Furthermore, with a connection to the GME pipeline, for which ownership transitions to Morocco in 2021, surplus gas from the Anchois Field development could potentially be exported to the Iberian Peninsula, highlighting the project's flexibility in commercial options.
Lixus boasts excellent contract terms in what is widely known internationally to be a favourable fiscal environment. There is a 10-year tax holiday on production revenues and a low 3.5% royalty on gas produced offshore at the water depth of the Anchois discovery, with ONHYM paying their 25% share of the development. The 10-year tax holiday is an important incentive to encourage the kickstarting of a domestic offshore gas supply and we note this coincides with the production window our project is targeting to meet the expected doubling of energy demand. We are encouraged by the excellent responses received so far in data room. For larger E&P companies the running room in the asset is garnering attention as an attractive entry into an emerging economy with fast growing energy demand.
Forward Plan 2020/21:
������ Seek partners and funding for a first appraisal/development well, which is to be suspended as a potential future producer
������ 3D seismic PSDM reprocessing and interpretation to further refine the understanding of the Anchois discovery and identification of further exploration opportunities within both the shallow low-risk gas play and also to develop potentially giant sub-nappe oil prospectivity
������ Develop the gas market, testing development concepts, conducting drilling preparatory work, developing strategic alliances to progress funding solutions
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Exploration Portfolio:
With a strategic focus on Lixus and having fulfilled its minimum work programmes across the portfolio, the Company will continue to monitor results of adjacent activity and will largely continue with investments in in-house technical work on the rest of its exploration portfolio.� If nearby drilling success de-risks the basin, then the company will be ready to rapidly define a forward work programme to benefit from that activity. Active third-party drilling campaigns are anticipated over the next 12-24 months in Brazil and Namibia, as described below.
Brief description of:
Namibia
Following the drilling of the Prospect S exploration well in 2018, which fulfilled the work commitments in the current licence period, post-well evaluation studies have been completed. We continue to monitor activity on offset acreage in Namibia and we await results from nearby drilling which may help to derisk the remaining prospectivity in our Namibian exploration portfolio. The industry anticipates that between 2 and 4 wells will be drilled over the coming 12 to 24 months.
Brazil
Chariot has fulfilled the current period commitments on its acreage in the Barreirinhas basin and continues to mature exploration studies and host data rooms whilst awaiting for results from offset drilling in the basin. Neighbouring blocks contain multiple commitments wells, both those bid in the 13th bid round of the ANP in 2013, and other legacy well commitment from previous licence rounds (Petrobras has announced plans to drill the Guajuru prospect in Q4 2020 as part of its environmental licensing application). In an underexplored deepwater basin, the results from these wells will be important in revealing the exploration potential of the basin and derisking our acreage ahead of drilling decisions.
Mohammedia / Kenitra
In light of the evolution in strategy and the current business environment, the Company is reviewing its licences in Mohammedia and Kenitra in Morocco.
Duncan Wallace
Exploration Manager
16 June 2020
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Chariot Oil & Gas Limited
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Consolidated Statement of Comprehensive Income for the Year Ended 31 December 2019
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| � � � | � | � Year ended 31 December 2019 | � Year ended 31 December 2018 |
| � | Notes | US$000 | US$000 |
| � | � | � | � |
| Share based payments | 20 | (651) | (904) |
| Impairment of exploration asset | 11 | - | (10,876) |
| Other administrative expenses | � | (3,395) | (3,359) |
| � | � | � | � |
| Total operating expenses | � | (4,046) | (15,139) |
| Loss from operations | 4 | (4,046) | (15,139) |
| Finance income | 6 | 190 | 371 |
| Finance expense | 6 | (183) | (356) |
| Loss for the year before taxation | � | (4,039) | (15,124) |
| � | � | � | � |
| Tax expense | 8 | (11) | (12) |
| Loss for the year and total comprehensive loss for the year attributable to equity owners of the parent | � | (4,050) | (15,136) |
| � | � | � | � |
| � | � | � | � |
| Loss per Ordinary share attributable to the equity holders of the parent - basic and diluted | 9 | US$(0.01) | US$(0.04) |
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All amounts relate to continuing activities.
The notes form part of these financial statements.
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Chariot Oil & Gas Limited
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Consolidated Statement of Changes in Equity for the Year Ended 31 December 2019
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| � | � � Share capital | � � Share premium | � � Contributed equity | Share based payment reserve | � Foreign exchange reserve | � � Retained deficit | Total attributable to equity holders of the parent | |
| � | US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | US$000 | |
| � | � | � | � | � | � | � | � | |
| As at 1 January 2018 | 4,881 | 340,743 | 796 | 4,472 | (1,241) | (261,988) | 87,663 | |
| � Loss and Total comprehensive loss for the year | - | - | - | - | - | (15,136) | (15,136) | |
| Issue of capital | 1,355 | 16,258 | - | - | - | - | 17,613 | |
| Issue costs | - | (1,085) | - | - | - | - | (1,085) | |
| Share based payments | - | - | - | 904 | - | - | 904 | |
| Transfer of reserves due to issue of share awards | 28 | 420 | - | (448) | - | - | - | |
| � | � | � | � | � | � | � | � | |
| As at 31 December 2018 | 6,264 | 356,336 | 796 | 4,928 | (1,241) | (277,124) | 89,959 | |
| � Loss and total comprehensive loss for the year | - | - | - | - | - | (4,050) | (4,050) | |
| Share based payments | - | - | - | 651 | - | - | 651 | |
| Transfer of reserves due to issue of share awards | 4 | 167 | - | (171) | - | - | - | |
| � | � | � | � | � | � | � | � | |
| As at 31 December 2019 | 6,268 | 356,503 | 796 | 5,408 | (1,241) | (281,174) | 86,560 | |
| � | � | � | � | � | � | � | � | � |
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The following describes the nature and purpose of each reserve within owners' equity.
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Share capital������������������������������� Amount subscribed for share capital at nominal value.
Share premium���������������������������� Amount subscribed for share capital in excess of nominal value.
Contributed equity����������������������� Amount representing equity contributed by the shareholders.
Share based payments reserve���� Amount representing the cumulative charge recognised under IFRS2 in respect of share option, LTIP and RSU schemes.
Foreign exchange reserve ����������� Foreign exchange differences arising on translating into the reporting
�������������������������������������������������������������������������������������������������������������������������������� currency.
Retained deficit��������������������������� Cumulative net gains and losses recognised in the financial statements.
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The notes form part of these financial statements.
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Chariot Oil & Gas Limited
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Consolidated Statement of Financial Position as at 31 December 2019
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| � | � | 31 December 2019 | 31 December 2018 |
| � | Notes | US$000 | US$000 |
| � Non-current assets | � | � | � |
| Exploration and appraisal costs | 10 | 78,264 | 74,236 |
| Property, plant and equipment | 11 | 94 | 100 |
| Right of use asset | 15 | 983 | - |
| Total non-current assets | � | 79,341 | 74,336 |
| � | � | � | � |
| Current assets | � | � | � |
| Trade and other receivables | 12 | 781 | 2,306 |
| Inventory | 13 | 524 | 524 |
| Cash and cash equivalents | 14 | 9,635 | 19,822 |
| Total current assets | � | 10,940 | 22,652 |
| Total assets | � | 90,281 | 96,988 |
| � | � | � | � |
| Current liabilities | � | � | � |
| Trade and other payables | 16 | 2,535 | 7,029 |
| Lease liability: office lease | 15 | 366 | - |
| Total current liabilities | � | 2,901 | 7,029 |
| � Non-current liabilities | � | � | � |
| Lease liability: office lease | 15 | 820 | - |
| Total non-current liabilities | � | 820 | - |
| Total liabilities | � | 3,721 | 7,029 |
| � | � | � | � |
| Net assets | � | 86,560 | 89,959 |
| � | � | � | � |
| Capital and reserves attributable to equity holders of the parent | � | � | � |
| Share capital | 17 | 6,268 | 6,264 |
| Share premium | � | 356,503 | 356,336 |
| Contributed equity | � | 796 | 796 |
| Share based payment reserve | � | 5,408 | 4,928 |
| Foreign exchange reserve | � | (1,241) | (1,241) |
| Retained deficit | � | (281,174) | �(277,124) |
| Total equity | � | 86,560 | 89,959 |
| � | � | � | � |
The notes form part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 16 June 2020.
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George Canjar
Chairman
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�Chariot Oil & Gas Limited
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Consolidated Cash Flow Statement for the Year Ended 31 December 2019
| � | � | � Year ended 31 December 2019 | � Year ended 31 December 2018 |
| � | � | US$000 | US$000 |
| � Operating activities | � | � | � |
| Loss for the year before taxation | � | (4,039) | (15,124) |
| Adjustments for: | � | � | � |
| Finance income | � | (190) | (371) |
| Finance expense | � | 183 | 356 |
| Depreciation | � | 401 | 56 |
| Share based payments | � | 651 | 904 |
| Impairment of exploration asset | � | - | 10,876 |
| Net cash outflow from operating activities before changes in working capital | � | (2,994) | (3,303) |
| � | � | � | � |
| Decrease / (increase) in trade and other receivables | � | 1,036 | (560) |
| Increase / (decrease) in trade and other payables | � | 930 | (775) |
| Increase in inventories | � | - | (44) |
| Cash outflow from operating activities | � | (1,028) | (4,682) |
| � | � | � | � |
| Tax payment | � | (11) | (12) |
| Net cash outflow from operating activities | � | (1,039) | (4,694) |
| � | � | � | � |
| Investing activities | � | � | � |
| Finance income | � | 217 | 357 |
| Payments in respect of property, plant and equipment | � | (67) | (23) |
| Payments in respect of exploration assets | � | (8,828) | (7,223) |
| Net cash outflow used in investing activities | � | (8,678) | (6,889) |
| � Financing activities | � | � | � |
| Issue of ordinary share capital | � | - | 17,613 |
| Issue costs | � | - | (1,085) |
| Payments of lease liabilities | � | (287) | - |
| Finance expense on lease | � | (97) | - |
| Net cash (outflow) / inflow from financing activities | � | (384) | 16,528 |
| � | � | � | � |
| Net (decrease) / increase in cash and cash equivalents in the year | � | (10,101) | 4,945 |
| � | � | � | � |
| Cash and cash equivalents at start of the year | � | 19,822 | 15,233 |
| � | � | � | � |
| Effect of foreign exchange rate changes on cash and cash equivalent | � | (86) | (356) |
| � | � | � | � |
| Cash and cash equivalents at end of the year | � | 9,635 | 19,822 |
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The notes form part of these financial statements.
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Chariot Oil & Gas Limited
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Notes forming part of the financial statements for the year ended 31 December 2019
1����� General information
Chariot Oil & Gas Limited is a company incorporated in Guernsey with registration number 47532. The address of the registered office is Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 1WW. The nature of the Company's operations and its principal activities are set out in the Report of the Directors and in the Exploration Manager's Review of Operations.
2����� Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations, as issued by the International Accounting Standards Board (IASB), as adopted by the European Union.
In accordance with the provisions of section 244 of the Companies (Guernsey) Law, 2008, the Group has chosen to only report the Group's consolidated position, hence separate Company only financial statements are not presented.
The financial statements are prepared under the historical cost accounting convention on a going concern basis.
Going concern
As at 31 December 2019, the Group had cash of US$9.6 million, no debt and no licence commitments.
In response to the current market uncertainty related to COVID-19 and commodity price weakness post year end a restructuring, to reduce annual running costs, has been undertaken.
The Company key corporate strategy is to focus on monetising the near term potential of the Lixus licence via partnering and maximising value for investors by developing a Moroccan gas business and the Board have the reasonable expectation of generating future value and cash from this strategy.
The Directors are of the opinion that the Group has adequate financial resources to enable it to undertake its planned programme of exploration and appraisal activities for a period of at least 12 months and additionally, the Board have considered downside scenarios including the event where there is delay to the expected generation of cash under which the Board has further opportunities within its control to further manage its cost base if needed so as to continue as a going concern - and this effectively acted as a reverse stress test.
New Accounting Standards
The following new standards and amendments to standards are mandatory for the first time for the Group for the financial year beginning 1 January 2019. Whilst the implementation of these standards and amendments to standards may have given rise to changes in the Group's accounting policies, the effect of the changes has not been material.
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| Standard | Effective year commencing on or after |
| Annual Improvements to IFRSs - (2015-2017 Cycle) | 1 January 2019 |
| IAS 28: Long-term Interests in Associates and Joint Ventures | 1 January 2019 |
| IFRS 16: Leases | 1 January 2019 |
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Certain new standards and amendments to standards have been published that are mandatory for the Group's accounting periods beginning after 1 January 2020 or later years to which the Group has decided not to adopt early when early adoption is available. The implementation of these standards and amendments is expected to have no material effect on the Group's accounting policies. These are:
| Standard | Effective year commencing on or after |
| IFRS 3: Definition of a Business (Amendments to IFRS 3) | 1 January 2020 |
| IAS1, IAS8: Definition of Material (amendments to IAS1 and IAS 8) | 1 January 2020 |
| Amendments to References to the Conceptual Framework in IFRS Standards | 1 January 2020 |
| IFRS 17: Insurance Contracts | 1 January 2021* |
* Not yet endorsed by the EU.
IFRS 16 - Leases
The Group has adopted IFRS 16 Leases effective 1 January 2019. On adoption, the Group recognised
a lease liability and corresponding right-of-use asset in relation to the UK office that had previously been classified as an operating lease under the principles of IAS 17 Leases. The group has applied the modified retrospective adoption method under IFRS 16 and therefore has only recognised leases on the balance sheet as at 1 January 2019 with no requirement for restatement of comparatives for the 2018 financial year.
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The lease liability has been initially measured at the present value of the remaining lease payments and discounted using an incremental borrowing rate at 1 January 2019. The associated right-of-use asset has been measured at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments relating to the lease recognised on the balance sheet as at 31 December 2019.
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Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
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This affected the following items in the consolidated balance sheet on 1 January 2019:
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� right-of-use assets - increase by US$1.3 million (31 December 2019: US$1.0 million)
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� lease liabilities - increase by US$1.5 million (31 December 2019: US$1.2 million)
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The Group has elected not to recognize right-of-use assets and liabilities for leases where the total lease term is less than or equal to 12 months, or for leases of low-value assets. Low-value assets comprise IT equipment and small items of office furniture. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss.�
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Further details on the lease liability can be found in note 15.
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Exploration and appraisal costs
All expenditure relating to the acquisition, exploration and appraisal of oil and gas interests, including an appropriate share of directly attributable overheads, is capitalised within cost pools.
The Board regularly reviews the carrying values of each cost pool and writes down capitalised expenditure to levels it considers to be recoverable. Cost pools are determined on the basis of geographic principles. The Group currently has three cost pools being Central Blocks in Namibia, Morocco and Brazil. In addition where exploration wells have been drilled, consideration of the drilling results is made for the purposes of impairment of the specific well costs. If the results sufficiently enhance the understanding of the reservoir and its characteristics it may be carried forward when there is an intention to continue exploration and drill further wells on that target.
Where farm-in transactions occur which include elements of cash consideration for, amongst other things, the reimbursement of past costs, this cash consideration is credited to the relevant accounts within the cost pools where the farm-in assets were located. Any amounts of farm-in cash consideration in excess of the value of the historic costs in the cost pools is treated as a credit to the Consolidated Statement of Comprehensive Income.
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Inventories
The Group's share of any material and equipment inventories is accounted for at the lower of cost and net realisable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
Taxation
Income tax expense represents the sum of the current tax and deferred tax charge for the year.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases, and is accounted for using the balance sheet liability method.� Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that have been enacted or substantively enacted and are expected to apply in the year when the liability is settled or the asset realised. Deferred tax is charged or credited to the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.�
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Foreign currencies
Transactions in foreign currencies are translated into US Dollars at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into US Dollars at the closing rates at the reporting date and the exchange differences are included in the Consolidated Statement of Comprehensive Income. The functional and presentational currency of the parent and all Group companies is the US Dollar.
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Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost or fair value on acquisition less depreciation and impairment. Depreciation is provided on a straight line basis at rates calculated to write off the cost less the estimated residual value of each asset over its expected useful economic life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful life.
Property, plant and equipment are depreciated using the straight line method over their estimated useful lives over a range of 3 - 5 years.
The carrying value of property, plant and equipment is assessed annually and any impairment charge is charged to the Consolidated Statement of Comprehensive Income.
Share based payments
Where equity settled share awards are awarded to employees or Directors, the fair value of the awards at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of awards that eventually vest. Market vesting conditions are factored into the fair value of the awards granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of awards are modified before they vest, the increase in the fair value of the awards, measured immediately before and after the modification, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period.
Where shares already in existence have been given to employees by shareholders, the fair value of the shares transferred is charged to the Consolidated Statement of Comprehensive Income and recognised in reserves as Contributed Equity.
Basis of consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if it has power over the investee and it is exposed to variable returns from the investee and it has the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between the Group companies are therefore eliminated in full.
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Trade and other receivables
Trade and other receivables are stated initially at fair value and subsequently at amortised cost.
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Financial instruments
The Group's financial assets consist of a bank current account or short-term deposits at variable interest rates and other receivables. Any interest earned is accrued and classified as finance income.
The Group's financial liabilities consist of trade and other payables. The trade and other payables are stated initially at fair value and subsequently at amortised cost.�
Joint operations
Joint operations are those in which the Group has certain contractual agreements with other participants to engage in joint activities that do not create an entity carrying on a trade or business on its own. The Group includes its share of assets, liabilities and cash flows in joint arrangements, measured in accordance with the terms of each arrangement, which is usually pro rata to the Group's interest in the joint operations. The Group conducts its exploration, development and production activities jointly with other companies in this way.
Critical accounting estimates and judgements
The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may deviate from these estimates and assumptions. If these estimates and assumptions are significantly over or under stated, this could cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The areas where this could impact the Group are:
a)�� Areas of judgement
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i.��� Recoverability of exploration and appraisal costs
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Expenditure is capitalised as an intangible asset by reference to appropriate cost pools and is assessed for impairment when circumstances suggest that the carrying amount may exceed its recoverable value.
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ii.��� Treatment of farm-in transactions
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All farm-in transactions are reflected in these financial statements in line with the accounting policy on Exploration and Appraisal Costs. Farm-in transactions are recognised in the financial statements if they are legally complete during the year under review or, if all key commercial terms are agreed and legal completion is only subject to administrative approvals which are obtained within the post balance sheet period or are expected to be obtained within a reasonable timeframe thereafter.
iii.�� Covid-19
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Post year end the Covid-19 pandemic has caused severe and unexpected disruption both to the economy and to working practices. In order to mitigate against this risk the Group announced on 9 April 2020 that its corporate strategy was to focus on monetising the near term potential of the Lixus licence and maximising value for investors by developing a Moroccan gas business. In addition a restructuring, to reduce annual running costs, has been undertaken to deliver this strategy, with a continued focus on capital discipline.
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3����� Segmental analysis
The Group has two reportable segments being exploration and appraisal and corporate costs. The operating results of each of these segments are regularly reviewed by the Board of Directors in order to make decisions about the allocation of resources and assess their performance.
31 December 2019
| � | Exploration and Appraisal | Corporate | Total |
| � | US$000 | US$000 | US$000 |
| Share based payment | - | (651) | (651) |
| Administrative expenses | (365) | (3,030) | (3,395) |
| Finance income | - | 190 | 190 |
| Finance expense | - | (183) | (183) |
| Tax expense | - | (11) | (11) |
| Loss after taxation | (365) | (3,685) | (4,050) |
| Additions to non-current assets | 4,028 | 67 | 4,095 |
| Total assets | 78,788 | 11,493 | 90,281 |
| Total liabilities | (1,113) | (2,608) | (3,721) |
| Net assets | 77,675 | 8,885 | 86,560 |
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31 December 2018
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| � | Exploration and Appraisal | Corporate | Total |
| � | US$000 | US$000 | US$000 |
| Share based payment | - | (904) | (904) |
| Administrative expenses | (416) | (2,943) | (3,359) |
| Impairment of exploration asset | (10,876) | - | (10,876) |
| Finance income | - | 371 | ��������� 371 |
| Finance expense | - | (356) | (356) |
| Tax expense | - | (12) | (12) |
| Loss after taxation | (11,292) | (3,844) | (15,136) |
| Additions to non-current assets | 12,342 | 23 | 12,365 |
| Total assets | 75,224 | 21,764 | �������� 96,988 |
| Total liabilities | (6,501) | (528) | (7,029) |
| Net assets | 68,723 | ������������ 21,236 | 89,959 |
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4��������� Loss from operations
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| � | 31 December�������������������� 2019 | 31 December�������������������� 2018 |
| � | US$000 | US$000 |
| Loss from operations is stated after charging: � | � | � |
| Impairment of exploration asset | - | 10,876 |
| Depreciation of property, plant and equipment | 73 | 56 |
| Depreciation of Right of Use asset | 328 | - |
| Share based payments - Long Term Incentive Scheme | 614 | 847 |
| Share based payments - Restricted Share Unit Scheme | 37 | 57 |
| � | � | � |
| Auditors' remuneration: | � | � |
| Fees payable to the Company's Auditors for the audit of the Company's annual accounts | 56 | 62 |
| Audit of the Company's subsidiaries pursuant to legislation | 14 | 14 |
| Fees payable to the Company's Auditors for the review of the Company's interim accounts | 10 | 10 |
| Total payable | 80 | 86 |
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5 ���� Employment costs
| Employees | 31 December 2019 | 31 December 2018 |
| � | US$000 | US$000 |
| Wages and salaries | 3,016 | 2,213 |
| Pension costs | 128 | 98 |
| Share based payments | 321 | 514 |
| Sub-total | 3,465 | 2,825 |
| Capitalised to exploration costs | (2,410) | (1,624) |
| Total | 1,055 | 1,201 |
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| Key management personnel | 31 December 2019 | 31 December 2018 |
| � | US$000 | US$000 |
| Wages, salaries and fees | 753 | 611 |
| Social security costs | 75 | 63 |
| Share based payments | 330 | 390 |
| Sub-total | 1,158 | 1,064 |
| Capitalised to exploration costs | (403) | (194) |
| Total | 755 | 870 |
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The Directors are the key management personnel of the Group. Details of the Directors' emoluments and interest in shares are shown in the Directors' Remuneration Report.
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6����� Finance income and expense
| Finance income | 31 December 2019 | 31 December 2018 |
| � | US$000 | US$000 |
| Bank interest receivable | 190 | 371 |
| Total | 190 | 371 |
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| Finance expense | 31 December 2019 | 31 December 2018 |
| � | US$000 | US$000 |
| Foreign exchange loss | 86 | 356 |
| Finance expense on lease | 97 | - |
| Total | 183 | 356 |
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7����� Investments
The Company's wholly owned subsidiary undertakings at 31 December 2019 and 31 December 2018, excluding dormant entities, were:
| Subsidiary undertaking | Principal activity | Country of incorporation |
| Chariot Oil & Gas Investments (Namibia) Limited | Holding company | Guernsey |
| Chariot Oil & Gas Investments (Mauritania) Limited | Oil and gas exploration | Guernsey |
| Chariot Oil & Gas Investments (Morocco) Limited | Oil and gas exploration | Guernsey |
| Chariot Oil and Gas Statistics Limited | Service company | UK |
| Enigma Oil & Gas Exploration (Proprietary) Limited1 | Oil and gas exploration | Namibia |
| Chariot Oil & Gas Investments (Brazil) Limited | Holding company | Guernsey |
| Chariot Brasil Petroleo e Gas Ltda | Oil and gas exploration | Brazil |
| Chariot Oil & Gas Finance (Brazil) Limited1 | Service company | Guernsey |
| Chariot Oil & Gas Holdings (Morocco) Limited2 | Oil and gas exploration | UK |
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��������������� 1Indirect shareholding of the Company.���������������������������������������������������������������������������������������������������������������������������������������������������������������������
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����� 2On 29 January 2019 the Company incorporated a new wholly owned subsidiary Chariot Oil & Gas Holdings (Morocco) Limited in the UK.
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8����� Taxation
The Company is tax resident in the UK, however no tax charge arises due to taxable losses for the year (31 December 2018: US$Nil).
No taxation charge arises in Namibia, Morocco or the UK subsidiaries as they have recorded taxable losses for the year (31 December 2018: US$Nil).
In Brazil, there were taxable profits due to interest received on cash balances resulting in a tax charge payable of US$11,000 (31 December 2018: US$12,000). There was no deferred tax charge or credit in either period presented.
������� Factors affecting the tax charge for the current year
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK applied to losses for the year are as follows:
| � | 31 December 2019 | 31 December 2018 |
| � | US$000 | US$000 |
| Tax reconciliation | � | � |
| Loss on ordinary activities for the year before tax | (4,039) | (15,124) |
| Loss on ordinary activities at the standard rate of corporation tax in the UK of 19% (31 December 2018: 19%) | (767) | (2,874) |
| Non-deductible expenses | 200 | 2,249 |
| Difference in tax rates in other jurisdictions | 26 | 71 |
| Deferred tax effect not recognised | 552 | 566 |
| Total taxation charge | 11 | 12 |
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The Company had tax losses carried forward on which no deferred tax asset is recognised. Deferred tax not recognised in respect of losses carried forward total US$7.1 million (31 December 2018: US$6.5 million). Deferred tax assets were not recognised as there is uncertainty regarding the timing of future profits against which these assets could be utilised.
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9����� Loss per share
The calculation of basic loss per Ordinary share is based on a loss of US$4,050,000 (31 December 2018: loss of US$15,136,000) and on 367,405,011 Ordinary shares (31 December 2018: 343,201,438) being the weighted average number of Ordinary shares in issue during the year. Potentially dilutive share awards are detailed in note 20, however these do not have any dilutive impact as the Group reported a loss for the year, consequently a separate diluted loss per share has not been presented.
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10��� Exploration and appraisal costs
| � | 31 December 2019 | 31 December 2018 |
| � | US$000 | US$000 |
| Net book value brought forward | 74,236 | 72,770 |
| Additions | 4,028 | 12,342 |
| Impairment | - | (10,876) |
| Net book value carried forward | 78,264 | 74,236 |
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As at 31 December 2019 the net book values of the three cost pools are Central Blocks offshore Namibia US$51.1 million (31 December 2018: US$50.5 million), Morocco US$11.5 million (31 December 2018: US$8.5 million) and Brazil US$15.7 million (31 December 2018: US$15.2 million).
The impairment charge in 2018 is in respect of drilling the Prospect S well in the Central Blocks offshore Namibia. The Group continues to see value in the remaining prospects within the Central Blocks with recoverable amount assessed to be in excess of carrying value.
11��� Property, plant and equipment
| � | Fixtures, fittings and equipment | Fixtures, fittings and equipment |
| � | � 31 December 2019 | � 31 December 2018 |
| � | US$000 | US$000 |
| � | � | � |
| Cost | � | � |
| Brought forward | 1,781 | 1,758 |
| Additions | 67 | 23 |
| Disposals | (500) | - |
| Carried forward | 1,348 | 1,781 |
| � | � | � |
| Depreciation | � | � |
| Brought forward | 1,681 | 1,625 |
| Charge | 73 | 56 |
| Eliminated on disposals | (500) | - |
| Carried forward | 1,254 | 1,681 |
| � | � | � |
| Net book value brought forward | 100 | 133 |
| Net book value carried forward | 94 | 100 |
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12��� Trade and other receivables
| � | 31 December 2019 | 31 December 2018 |
| � | US$000 | US$000 |
| Other receivables and prepayments | 781 | 2,306 |
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The fair value of trade and other receivables is equal to their book value.
13��� Inventory
| � | 31 December 2019 | 31 December 2018 |
| � | US$000 | US$000 |
| Wellheads and casing | 524 | 524 |
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14��� Cash and cash equivalents
| � | 31 December 2019 | 31 December 2018 |
| Analysis by currency | US$000 | US$000 |
| US Dollar | 9,114 | 19,325 |
| Brazilian Real | 52 | 2 |
| Sterling | 342 | 489 |
| Namibian dollar | 127 | 6 |
| � | 9,635 | 19,822 |
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As at 31 December 2019 and 31 December 2018 the US Dollar and Sterling cash is held in UK and Guernsey bank accounts. All other cash balances are held in the relevant country of operation.
As at 31 December 2019, the cash balance of US$9.6 million (31 December 2018: US$19.8 million) contains the following cash deposits that are secured against bank guarantees given in respect of exploration work to be carried out:
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| � | 31 December 2019 | 31 December 2018 |
| � | US$000 | US$000 |
| Moroccan licences | 650 | 800 |
| � | 650 | 800 |
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The funds are freely transferrable but alternative collateral would need to be put in place to replace the cash security.
15 �� Leases
The lease relates to the UK office.
Right-of-use asset:
| � | 31 December 2019 | 1 January 2019 |
| � | US$000 | US$000 |
| Brought forward | 1,311 | - |
| Initial recognition | - | 1,311 |
| Depreciation | (328) | - |
| Carried forward | 983 | 1,311 |
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Lease liability:
| � | 31 December 2019 | 1 January 2019 |
| � | US$000 | US$000 |
| Current | 366 | 327 |
| Non-current | 820 | 1,146 |
| Total lease liability | 1,186 | 1,473 |
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The maturity analysis of the lease liability at 31 December 2019 is as follows:
| � | 31 December 2019 | 1 January 2019 |
| � | US$000 | US$000 |
| Maturity analysis - contractual undiscounted cash flows | � | � |
| Less than one year | 439 | 424 |
| Between one and two years | 439 | 424 |
| Between two and three years | 437 | 424 |
| Between three and four years | - | 422 |
| Total undiscounted lease liabilities | 1,315 | 1,694 |
| Effect of interest | (129) | (221) |
| Total lease liability | 1,186 | 1,473 |
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16��� Trade and other payables
| � | 31 December 2019 | 31 December 2018 |
| � | US$000 | US$000 |
| Trade payables | 1,235 | 6,379 |
| Accruals | 1,300 | 650 |
| � | 2,535 | 7,029 |
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The fair value of trade and other payables is equal to their book value.
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17��� Share capital
| � | Allotted, called up and fully paid | |||
| � | 31 December 2019 | 31 December 2019 | 31 December 2018 | 31 December 2018 |
| � | Number | US$000 | Number | US$000 |
| Ordinary shares of 1p each1 | 367,532,909 | 6,268 | 367,259,909 | 6,264 |
1.���� The authorised and initially allotted and issued share capital on admission (19 May 2008) has been translated at the historic rate of US$GBP of 1.995. The shares issued since admission have been translated at the date of issue, or, in the case of share awards, the date of grant and not subsequently retranslated.
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������� Details of the Ordinary shares issued are in the table below:
| Date | Description | Price US$ | No of shares |
| 31 December 2017 | Opening Balance | � | 268,873,197 |
| 28 March 2018 | Issue of shares at �0.13 in Placing and Open Offer | 0.18 | 96,494,701 |
| 8 June 2018 | Issue of share award | 0.12 | 27,500 |
| 8 June 2018 | Issue of share award | 0.20 | 13,750 |
| 8 June 2018 | Issue of share award | 0.11 | 11,140 |
| 8 June 2018 | Issue of share award | 0.11 | 139,042 |
| 8 June 2018 | Issue of share award | 0.20 | 8,334 |
| 8 June 2018 | Issue of share award | 0.11 | 44,021 |
| 2 July 2018 | Issue of share award | 0.33 | 300,000 |
| 2 July 2018 | Issue of share award | 0.14 | 212,500 |
| 2 July 2018 | Issue of share award | 0.12 | 218,751 |
| 2 July 2018 | Issue of share award | 0.11 | 244,935 |
| 4 September 2018 | Issue of share award | 0.33 | 400,000 |
| 4 September 2018 | Issue of share award | 0.13 | 140,816 |
| 28 September 2018 | Issue of share award | 3.06 | 14,000 |
| 28 September 2018 | Issue of share award | 0.50 | 86,000 |
| 28 September 2018 | Issue of share award | 0.10 | 31,222 |
| � | � | � | � |
| 31 December 2018 | � | � | 367,259,909 |
| � | � | � | � |
| 20 June 2019 | Issue of share award | 1.35 | 40,000 |
| 20 June 2019 | Issue of share award | 0.50 | 233,000 |
| � | � | � | � |
| 31 December 2019 | � | � | 367,532,909 |
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18��� Related party transactions
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-��� Key management personnel comprises the Directors and details of their remuneration are set out in note 5 and the Directors' Remuneration Report.
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-��� There were no related party transactions during the current year or year ended 31 December 2018.
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19��� Financial instruments
The Board of Directors determine, as required, the degree to which it is appropriate to use financial instruments or other hedging contracts or techniques to mitigate risk. Throughout the year ending 31 December 2019, no trading in financial instruments was undertaken (31 December 2018: US$Nil). There is no material difference between the book value and fair value of the Group cash balances, short term receivables and payables.
������� Market risk
Market risk arises from the Group's use of interest bearing and foreign currency financial instruments. It is the risk that future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) and foreign exchange rates (currency risk). Throughout the year, the Group has held surplus funds on deposit, principally with its main relationship bank Barclays, on fixed short term deposits. The credit ratings of the main relationship bank the Group holds cash with do not fall below A or equivalent. The Group does not undertake any form of speculation on long term interest rates or currency movements, therefore it manages market risk by maintaining a short term investment horizon and placing funds on deposit to optimise short term yields where possible but, moreover, to ensure that it always has sufficient cash resources to meet payables and other working capital requirements when necessary. As such, market risk is not viewed as a significant risk to the Group. The Directors have not disclosed the impact of interest rate sensitivity analysis on the Group's financial assets and liabilities at the year-end as the risk is not deemed to be material.������������������������������������������������������������������������������������������������������������������������������������
This transactional risk is managed by the Group holding the majority of its funds in US Dollars to recognise that US Dollars is the trading currency of the industry, with an appropriate balance maintained in Brazilian Real, Sterling and Namibian Dollars to meet other non-US Dollar industry costs and on-going corporate and overhead commitments.
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At the year end, the Group had cash balances of US$9.6 million (31 December 2018: US$19.8 million) as detailed in note 15.
Other than the non-US Dollar cash balances described in note 14, no other material financial instrument is denominated in a currency other than US Dollars. A 10% adverse movement in exchange rates would lead to a foreign exchange loss of US$50,000 and a 10% favourable movement in exchange rates would lead to a corresponding gain; the effect on net assets would be the same as the effect on profits (31 December 2018: US$50,000).
������� Capital
In managing its capital, the Group's primary objective is to maintain a sufficient funding base to enable it to meet its working capital and strategic investment needs. The Group currently holds sufficient capital to meet its on-going needs for at least the next 12 months. ��������������������������������������������������������������������������������������
������� Liquidity risk
The Group's practice is to regularly review cash needs and to place excess funds on fixed term deposits. This process enables the Group to optimise the yield on its cash resources whilst ensuring that it always has sufficient liquidity to meet payables and other working capital requirements when these become due.
The Group has sufficient funds to continue operations for the forthcoming year and has no perceived liquidity risk.
Credit risk
The Group's policy is to perform appropriate due diligence on any party with whom it intends to enter into a contractual arrangement. Where this involves credit risk, the Group will put in place measures that it has assessed as prudent to mitigate the risk of default by the other party. This could consist of instruments such as bank guarantees and parent company guarantees.
At the year-end the Group acts as Operator in one non-carried joint venture relationship on one of the Group's licences and therefore from time to time is owed money from its joint venture partners. The joint venture partner which has a 20% interest in the Central Blocks in Namibia is an entity which is part owned by one of the world's largest seismic and geoscience companies.
As such, the Group has not put in place any particular credit risk measures in this instance as the Directors view the risk of default on any payments due from the joint venture partner as being very low.
20��� Share based payments
������� Share Option Scheme
During the year, the Company operated the Chariot Oil & Gas Share Option Scheme ("Share Option Scheme"). The Company recognised total expenses of US$Nil (31 December 2018: US$Nil) related to equity settled share-based payment transactions under the plan.
The options expire if they remain unexercised after the exercise period has lapsed.� For options valued using the Black-Scholes model, there are no market performance conditions or other vesting conditions attributed to the options.�
������� The following table sets out details of all outstanding options granted under the Share Option Scheme:
| � | 31 December 2019 | 31 December 2018 |
| � | Number of Options | Number of Options |
| Outstanding at beginning of the year | 3,000,000 | 3,000,000 |
| Outstanding at the end of the year | 3,000,000 | 3,000,000 |
| Exercisable at the end of the year | 3,000,000 | 3,000,000 |
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The range of the exercise price of share options exercisable at the year-end falls between US$0.36 (27p) - US$1.65 (125p) (31 December 2018: US$0.34 (27p) - US$1.59 (125p)).
The estimated fair values of options which fall under IFRS 2 and the inputs used in the Black-Scholes model to calculate those fair values are as follows:
| Date of grant | Estimated fair value | Share price | Exercise price | Expected volatility | Expected life | Risk free rate | Expected dividend |
| 1 September 2011 | �0.87 | �1.29 | �1.25 | 80% | 5 years | 4.3% | 0% |
| 22 April 2013 | �0.11 | �0.186 | �0.273 | 80% | 5 years | 1.5% | 0% |
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Expected volatility was determined by calculating the annualised standard deviation of the daily changes in the share price.
������� Long Term Incentive Scheme ("LTIP")
The plan provides for the awarding of shares to employees and Directors for nil consideration. The award will lapse if an employee or Director leaves employment.
Shares granted when an individual is an employee will vest in equal instalments over a three year period from the grant date and shares granted when an individual is a Director or otherwise specified will vest three years from the end of the year or period that the award relates.
The Group recognised a charge under the plan for the year to 31 December 2019 of US$614,000 (31 December 2018: US$847,000).
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The following table sets out details of all outstanding share awards under the LTIP:
| � | 31 December 2019 | 31 December 2018 |
| � | Number of awards | Number of awards |
| Outstanding at beginning of the year | 22,433,201 | 21,980,015 |
| Granted during the year | 2,840,444 | 2,563,946 |
| Shares issued for no consideration during the year | (273,000) | (1,892,011) |
| Lapsed during the year | - | (218,749) |
| Outstanding at the end of the year | 25,000,645 | 22,433,201 |
| Exercisable at the end of the year | 14,494,547 | 8,778,432 |
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������� Non-Executive Directors' Restricted Share Unit Scheme ("RSU")
The plan provides for the awarding of shares to Non-Executive Directors for nil consideration. An award can be Standalone or Matching.
Standalone share awards are one-off awards to Non-Executive Directors which will vest in equal instalments over a three year period and will lapse if not exercised within a fixed period on stepping down from the Board.
Matching share awards will be granted equal to the number of existing Chariot shares purchased by the Non-Executive Director in each calendar year capped at the value of their gross annual fees for that year. The shares will vest in equal instalments over a three year period and will lapse if not exercised prior to stepping down from the Board or if the original purchased shares are sold prior to the vesting of the relevant Matching award. Any potential Matching awards not granted in a calendar year shall be forfeited and shall not roll over to subsequent years.
The Group recognised a charge under the plan for the year to 31 December 2019 of US$37,000 (31 December 2018: US$57,000).
The following table sets out details of all outstanding share awards under the RSU:
| � | 31 December 2019 | 31 December 2018 |
| � | Number of awards | Number of awards |
| Outstanding at beginning of the year | 2,191,852 | 2,191,852 |
| Granted during the year | 648,023 | - |
| Outstanding at the end of the year | 2,839,875 | 2,191,852 |
| Exercisable at the end of the year | 1,981,193 | 1,540,886 |
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21 Contingent liabilities
From 30 December 2011 the Namibian tax authorities introduced a withholding tax of 25% on all services provided by non-Namibian entities which are received and paid for by Namibian residents. From 30 December 2015 the withholding tax was reduced to 10%. As at 31 December 2019, based upon independent legal and tax opinions, the Group has no withholding tax liability (31 December 2018: US$Nil). Any subsequent exposure to Namibian withholding tax will be determined by how the relevant legislation evolves in the future and�the contracting strategy of the Group.
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22 Events after the balance sheet date
The Directors consider these events to be a non-adjusting post balance sheet events.
a)�� Azinam Notice of Withdrawal
Post year end Azinam Limited, who have a 20% equity interest in the Central Blocks licence offshore Namibia (currently Chariot 65% (Operator), Azinam 20%, NAMCOR 10% and Ignitus 5%), served a notice of its intention to withdraw from this licence. This withdrawal process is currently underway. All the commitments on this licence have been met and this withdrawal has no material impact on the group operations.
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b)�� Strategic Update and Response to Market Conditions
On 9 April 2020, the Company provided an update on its strategic direction and response to the current market uncertainty related to COVID-19 and commodity price weakness. The Company announced that its corporate strategy was to focus on monetising the near term potential of the Lixus licence and maximising value for investors by developing a Moroccan gas business. In addition a restructuring, to reduce annual running costs, has been undertaken to deliver this strategy, with a continued focus on capital discipline.
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