16 September 2022

Coro Energy Plc

("Coro" or the "Company" and together with its subsidiaries the "Group")

Half Year Report

Coro Energy Plc, the Southeast Asian energy company with a natural gas and clean energy portfolio, announces its unaudited interim results for the six-month period ended 30 June 2022.

Highlights

Operational

Oil & Gas

·        Production from the Company's Italian gas portfolio (the "Italian Portfolio"), against the backdrop of recent structural increases in European gas prices, during the first half of 2022 was 2,425,342 scm generating revenue of US $2.639m (EUR 2.556m).

·        The operator of the Duyung PSC continues to make steady progress commercially de-risking the Mako gas field and preparing for Final Investment Decision ("FID").

Renewables

·        Entry into a 25-year Power Purchase Agreement ("PPA") with Phong Phu, a listed Vietnamese high volume manufacturer of textiles. The 3MW solar rooftop pilot project is expected to achieve maiden revenues before the end of 2022 with long term net cash flows of approximately US $0.3m per annum.

·        Coro has two development stage renewables projects in the Philippines, a 100MW solar project and a 100MW wind project. The Company is currently focused on securing land access alongside regulatory permits and approvals, securing offtake arrangements and data gathering at the proposed sites.

Corporate

·        Successful restructuring of the Company's EUR 22.5m Eurobond, now maturing April 2024.

·        Coro has a strong funding position from a combination of its cash position of approximately US $1.6m (as at 30 June 2022), supported by the free cash flow from its Italian Portfolio and the Vietnam solar pilot, which is expected to be operational later this year.

Post Balance Sheet Events

·        Revised Duyung Plan of Development ("PoD") approved by partners.

·        Duyung has compelling project economics and resources demonstrated by the recent Operator commissioned competent person's report ("CPR"):

o   51% IRR

o   NPV10 net to Coro of US $87m (US $577m gross) in the Best Case (2C) scenario

o   42 Bcf net entitlement 2C resources to Coro during the PSC life

o   Plateau production of 120 MMscf/d for six years in the Best Case (2C) scenario

o   CPR capital expenditure requirement to first gas estimated at US $251m gross (US $38m net to Coro). Coro expects to secure a Reserve Based Lending facility for a large portion of the capital.

·        Duyung operator has indicated that termed Gas Sales Agreements ("GSA"), for gas sold into Singapore, are under discussion with SKK Migas with a view to finalising sales arrangements in the near future.

·        Entered into an option agreement with an existing operator in Italy to purchase the Company's Italian Portfolio for up to EUR 7.5m (the "Option Agreement").

·        Successful completion of installation of the Vietnam rooftop solar pilot project and the commencement of commissioning.

·        Leonardo Salvadori, was appointed Managing Director - Oil & Gas and Michael Carrington, previously Coro's Chief Operating Officer, was appointed as Managing Director - Renewables.

 For further information please contact:

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

The information contained in this announcement has been reviewed by Leonardo Salvadori, Coro's Managing Director - Oil & Gas, a qualified geologist and geophysicist and member of the Italian Society of Petroleum Engineers. The volumes included in this announcement are in accordance with SPE standards. Bcf means billion standard cubic feet of gas; MMscf/d means million standard cubic feet of gas per day; bbl means barrels; and Mscf means thousand standard cubic feet of gas.

STATEMENT FROM THE CHAIRMAN

Coro is a micro-cap company with gas production, gas reserves and a growing clean energy portfolio.  Underpinned by its strong Italian production and four institutional lenders, Coro's shareholders are uniquely exposed to a leveraged play on the gas price alongside a growing Southeast Asian renewables portfolio. 

The strengthening of commodity prices in the first half of 2022 has presented a significant opportunity to Coro with the re-valuation of the Italian Portfolio alongside a significant uplift in the core net asset value of the flagship Duyung PSC.

Coro has looked to quickly capitalise on these recent developments by seeking to dispose of its, now re-valued, Italian Portfolio and, together with the Operator, commercially de-risking the Duyung PSC. Recent progress on the Duyung PSC includes an updated PoD and an Operator CPR which include compelling economics and confirm the Director's view of the upside Coro shareholders are exposed to.  We look forward to the signature of the long-awaited GSA at Duyung which we believe will be a key inflexion point for the Company and its partners.

My view remains that recent structural increases in global gas markets very much now favour Coro and the Mako gas field.

Oil & Gas

Italy

Following structural increases in global gas prices, the Company relaunched its Italian Portfolio earlier in the year. The Italian Portfolio has since delivered significant free cash flows for the Group. During the first six months of the year gas was produced from three fields: Sillaro, Casa Tiberi and Rapagnano. Production was 2,425,342 scm (H1 2021: 1,228,597 scm) and revenue was US $2,639,000 (EUR 2,556,000) (H1 2021: US $263,000 [EUR 219,046]). Operating costs and depreciation and amortisation expense during the first half of the year totalled US $1,345,000 (H1 2021: US $454,000) resulting in a gross profit of US $1,294,000 (H1 2021: gross loss of US $191,000). The H1 2022 increase in gross profit reflects both an increase in production and an increase in gas prices and the resulting revenue more than offset the increase in operating costs and depreciation and amortisation expenses.    

Duyung

The Mako gas field is one of the largest gas discoveries (437 Bcf gross, full field) 2C (contingent recoverable resources) in the West Natuna Basin and, the Directors believe, the largest confirmed undeveloped resource in the area.

The Operator of the Duyung PSC is WNEL, a 100%-owned subsidiary of Conrad Asia Energy Ltd, and has continued to technically mature the development of the Mako gas field alongside negotiations of GSA(s), both in preparation for FID. Significant progress has been made post the period as detailed below.

Renewables

Vietnam

On 11 April 2022, Coro announced the entry into a 25-year PPA for its rooftop solar project in Vietnam. 

The PPA was entered into by Coro Renewables Vietnam (85% owned by Coro and 15% owned by Coro's local partner Vinh Phuc Energy JSC) and will see Phong Phu, a listed Vietnamese high volume manufacturer of textiles, purchase 3MW of electricity annually.

Electricity will be supplied under the PPA at 7.3 US cents (equivalent) per kWh with a 1% annual escalator. The PPA is expected to generate aggregate revenues of between US $9m and US $11m over the 25-year duration.

On 30 August 2022, Coro announced the successful completion of installation of the Vietnam rooftop solar pilot project and the commencement of commissioning.

The 3-megawatt pilot project consists of over 4,500 solar panels and other ancillary components which have been installed across four factory roofs, and covers a total area of 16,120 square metres. The pilot project has been delivered on budget and on schedule and is now into a commissioning phase expected to be completed before the end of September 2022.

The pilot project will, on commissioning, provide proof of concept for Coro's portfolio of rooftop Solar opportunities and represents the Company's first installed and operated renewable energy project.

Coro continues to evaluate further solar projects in Vietnam.

Philippines

Coro has two development stage renewables projects in the Philippines, a 100MW solar project and a 100MW wind project which, allowing for permitting timelines and land access, could achieve ready-to-build status by the end of the year or the first half of 2023. In addition to the wind data gathering exercise, which has commenced with Lidar equipment onsite, further data gathering is proposed using a Met Mast. Coro is currently focused on securing land access alongside regulatory permits and approvals. Coro continues to evaluate further solar projects in the Philippines.

Corporate

On 11 April 2022, Coro announced the successful restructuring of the Company's EUR 22.5m Eurobond, now maturing in April 2024.

Coro has a strong funding position from a combination of its cash position of approximately US $1.6m (as at 30 June 2022), supported by the free cash flow from its Italian Portfolio and the Vietnam solar pilot, which is expected to be operational later this year.

Post Reporting Period

Duyung

As announced on 9 September 2022, the partners in the Duyung PSC approved an updated PoD and have approved and secured alignment with SKKMIGAS on the PoD. The PoD now been submitted to the Indonesian Ministry of Energy and Mineral Resources for approval. Coro holds a 15% interest in the Duyung PSC.

Coro also announced that an Operator commissioned CPR had been prepared by GaffneyCline Associates ("GCA") for the Mako development.

Based on the CPR there are compelling project economics:

o     51% IRR

o     NPV10 net to Coro of US$ 87M (US$ 577M gross) in the Best Case (2C) scenario

o     42 Bcf net entitlement 2C resources to Coro during the PSC life

o     Plateau production of 120 MMscf/d for six years in the Best Case (2C) scenario

o     CPR capital expenditure requirement to first gas estimated at US$251M gross (US$38M net to Coro). Coro expects to secure a Reserve Based Lending facility for a large portion of the capital.

The CPR is closely aligned with the PoD and is premised on a two-phased development with six wells in phase 1 and a further two wells in phase 2 after 5 years of production. The wells will be tied back to a leased production platform at the field, with sales gas transported via the West Natuna Transportation System pipeline to Singapore for sales to the Singapore market. The development plan includes first gas in 2025, with a 120 MMscf/d production plateau and a gross recoverable 2C contingent resource of 413 Bcf gas total and 281 Bcf net entitlement attributable to the Duyung PSC JV partners (42 Bcf net to Coro) during the PSC life.

As reported in the CPR (dated 26 August 2022) and specified in the PoD revision, upside exists to increase the plateau rate to 150 MMscf/d, should reservoir deliverability be sufficient. GCA has confirmed Mako contingent resources that are broadly in agreement with the PoD as set out in the table below:

           Duyung PSC - Contingent Resources, GCA Operator CPR

* the CPR estimates that 88% of the Mako field is within the PSC boundary

** after deduction of the 23% contractor take

The CPR, and the updated PoD, assumes first gas in 2025 and calculates the last economic production years prior to the current Duyung PSC expiry date for Low, Best and High cases of 2033, 2036 and 2036 respectively, which extend to 2039 and 2054 for the Best and High respectively, if the Duyung PSC is extended.

The CPR utilises a gas price of US$9.97/Mscf in 2025 which is calculated on a Brent linked price formula with a Brent slope of 12% and a Brent price deck of US$80/bbl in 2025, escalating 2% per annum from 2027 thereafter. Different gas prices may eventually be agreed with the gas buyers and the regulator when the GSAs are eventually signed. The CPR estimates that the post-tax NPV10 resulting from the Best Case Contingent Resources within the Duyung PSC acreage and within the life of the Duyung PSC (363 Bcf) is some US $577m (US $87m net to Coro) representing a 51% IRR.

Under the PoD and CPR, first gas from the Mako gas project is planned to be evacuated via the West Natuna Transportation System. The development will utilise a conductor support frame for one dry wellhead and gas import-export support, bridged-linked to a leased bridge linked mobile offshore production unit. The CPR Phase 1 capital expenditure is estimated to be US $251m and total capital expenditure will be US $303m. These estimates will be updated as a consequence of envisaged Front End Engineering and Design ("FEED") studies. Coro expects to secure a Reserve Based Lending facility for a large portion of the capital.

The Operator has indicated that termed Gas Sales Agreements, for gas sold into Singapore, are under discussion with SKK Migas with a view to finalising sales arrangements in the near future.

Italy

Coro announced that it has entered into an Option Agreement with an existing operator in Italy (the "Optionholder") to purchase the Company's Italian Portfolio for up to EUR 7.5m.

The Optionholder has the right to acquire 100% of the issued share capital of Coro Europe Limited, the Company's wholly owned subsidiary which in turn holds 100% of the issued share capital of Apennine Energy S.p.A, the Group entity holding the Company's interests in the Italian Portfolio. The Optionholder paid to the Group EUR 0.3 million in respect of the award of the Option (the "Option Payment"). 

Total receipts from a disposal pursuant to the Option of up to EUR 7.5m, of which EUR 6.0m would be paid in cash at or prior to completion, and further contingent payments of up to an aggregate of EUR 1.5m through a 10% net profit interest ("NPI") in the Italian Portfolio over the three years from the date of completion of any disposal of the Italian Portfolio under the Option Agreement. 

The Company retains full ownership and cash flows from the Italian Portfolio prior to the completion of the disposal.

The disposal of the Italian Portfolio under the Option would be subject to Coro shareholder approval pursuant to Rule 15 of the AIM Rules for Companies.

The proposed divestment is fully in line with the Company's strategic objectives, enabling Coro to focus exclusively on growing its oil, gas and clean energy portfolio in Southeast Asia where demand for energy and the opportunity for material expansion remain very strong.

The proposed divestment provides an immediate cash payment and the ability to retain cash flows from the Italian Portfolio in the near term prior to any disposal, whilst also securing a fixed priced exit. The combination of the Option cash consideration, the retained NPI and the cash flows delivered by the Italian Portfolio under Coro's continued ownership in the current gas price environment, would be expected by the Board to represent approximately EUR 10m.

James Parsons

Executive Chairman

FINANCIAL REVIEW

Results for the Period

Further to the relaunch of the Italian Portfolio and the requirements of IFRS 5 it was determined that at 30 June 2022 the assets were not held for sale. Therefore, for the half year, Italy has been reported as a continuing operation and the comparative numbers for 2021 restated as if the Italian Portfolio was not held for sale.

The Group made a loss after tax from continuing operations of US $3.0m (restated H1 2021: US $3.2m).

The increase in gross profit of US $1.1m from the Italian operation was offset by an increase in general and administrative costs of US $0.2m offset by an increase in finance costs of US $1.1m primarily due to a reduced unrealised foreign exchange gain on the Group's Eurobond compared to 2021.

Within G&A expenses, and as shown in more detail in note 4 below, the cost increase was primarily due to employee related costs with the other categories broadly offsetting each other.

Going Concern

The interim financial statements have been prepared under the going concern assumption, which presumes that the Group will be able to meet its obligations as they fall due for the foreseeable future.

The Group ended the period with cash of US $1.6m. The Group balance sheet records net current liabilities of US $2.8m due to the classification of the Group's Eurobond from current liabilities to non-current liabilities. The bonds are scheduled to mature on 12 April 2024.

Ewen Ainsworth

Chief Financial Officer

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended 30 June 2022

The above condensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.