Longboat Energy PLC

("Longboat Energy", the "Company" or "Longboat")

 

Audited Full Year Results to 31 December 2023 and Proposed Board Changes

 

London, 11 April 2024 - Longboat Energy, the full cycle emerging E&P business, announces its results for the 12 months ended 31 December 2023.

 

Highlights

 

Corporate Activity

 

·     Transformational transaction in Norway to form joint venture with JAPEX (July 2023):

o  Japan Petroleum Exploration Co., Ltd (JAPEX) acquired a 49.9% interest in the Company's Norwegian subsidiary to create a new joint venture company Longboat JAPEX Norge AS ("Longboat JAPEX")

o  JAPEX made a total equity investment of US$20 million in two tranches, US$16 million in 2023 and US$ 4million post the period end

o  In addition, JAPEX has provided a five-year, US$100 million Acquisition Finance Facility to finance acquisitions and associated development costs

 

·     Acquired SE Asian management team and assets (September 2023):

o  Longboat acquired Topaz Number One Limited, increasing its working interest in the Production Sharing Contract over Block 2A offshore Sarawak, Malaysia to 52.5% and simplifying the process to farm-down the high impact exploration block ahead of a drilling commitment  

o  Topaz team of James Menzies and Pierre Eliet joined the Company bringing extensive expertise and an established network in SE Asia

 

Operations Summary (including post-period events)

 

·     First production acquisition of the Statfjord satellites, by Longboat JAPEX, was completed (in January 2024):

o  Demonstrates the ability of the Longboat JAPEX joint venture to access and transact opportunities

o  By end-March 2024, initial production of c. 300 boepd net to Longboat JAPEX had doubled to c. 600, following the completion of drilling and gas-lift installation on three of the five new Statfjord Øst wells brought on stream since the acquisition

o  The remaining two  new wells require some minor work which is expected to be completed in the coming months

o  While the Statfjord satellites infill drilling project was successfully executed technically, there have been delays, in both the development programme and production ramp up, and cost overruns which together have had a significant negative impact on the joint venture's projected working capital.  After the period end, Longboat JAPEX drew down US$17 million on the Acquisition Finance Facility to fund the Statfjord satellites acquisition and provide additional working capital

 

·     Exploration well drilled in Norway on the Velocette prospect (Longboat JAPEX 20%) discovered subcommercial quantities of gas.

 

·     Kveikje Area:

o  In a prolific area North West of the Troll field, Longboat JAPEX has established a portfolio of assets including the Kveikje discovery and the Kjøttkake/Lotus licence(awarded in January 2023)

o  Kveikje, contains 3.5-6 million boe (2C-3C) net to Longboat JAPEX, the operator Equinor is maturing plans for a multi-field cluster development

o  Kjøttkake/Lotus has gross mean prospective resources of 27 mmboe with an upside of 44 mmboe and a chance of success is 56% (Company APA application) The well will be drilled using the semi-submersible Deepsea Yantai and is expected to spud in Q3 2024

o  In December, Longboat JAPEX announced a 2:1 farm down for a full carry on the dry hole costs of Kjøttkake/Lotus, reducing its interest in the well to 15%, which completed in 2024

 

·   The Company entered Malaysia in the Malaysian Bid Round 2022 by winning operatorship of a Production Sharing Agreement for Block 2A (Longboat 36.75% (subsequently increased to 52.5% following Topaz acquisition)):

o  Exploration block offshore Sarawak in deep water covering an area of more than 12,000 km2 with material exploration opportunities

o  Low initial cost obligation and with up to three years until a drill decision

 

 

Financial Summary

 

·     Cash balance of £3.7 million as at 31 December 2023 (31 December 2022: £12.1 million) with no consolidated exploration finance facility (EFF) borrowings due to the balances of Longboat JAPEX no longer forming part of the consolidated balance sheet

·     The continuing operations loss after taxation for the period, excluding other comprehensive income, was £9.3 million (2022: £2.6 million), with a profit on discontinued operations being £5.1 million (2022: loss of 12.9 million) resulting in a loss for the period of £4.2 million

 

Cost cutting

 

In light of and pending the successful execution of the Company's twin jurisdiction M&A and operational strategy, there is limited ability to make a material reduction in general and administrative expenditure in the immediate future.  However, the Company is mindful of the need to reduce costs to the extent possible, and  the Company is reviewing where savings can be made

 

Board Rotation

 

Brent Cheshire and Jorunn Saetre have confirmed their intention to stand down from the board as Non-Executive Directors and will not put themselves forward for re-election at the forthcoming Annual General Meeting.  Brent and Jorunn have been with the Company since its inception and have provided strong guidance and challenge at all times and will be very much missed. We thank them for all of their hard work over the period. The Company has no immediate plans to replace the Non-Executive Directors that are standing down

 

 

Outlook

 

·   The Company's strategy remains unchanged, to build Longboat into a full-cycle E&P company with Norway remaining the core area, with a focus on SE Asia

·     The Company is actively pursuing opportunities in Norway to deliver material production volumes, primarily on a bilateral basis but is also actively participating in sales proceeses. Longboat will make use of the Acquisition Financing Facility provided by JAPEX which puts Longboat JAPEX in a much stronger position in these processes

·     The Lotus exploration well, where Longboat has a 15% retained and fully carried interest, is expected to spud in Q3. The well will be targeting analogous injectite sands to the sand encountered in Kveikje.  

 

 

Helge Hammer, Chief Executive Officer of Longboat Energy, commented:

"In 2023, Longboat made a transformational transaction with JAPEX to create a new joint venture in Norway. The JV is now in prime position to pursue opportunities and deliver on our plans to grow production and reserves in high quality assets in Norway.

Longboat also made further inroads into the Southeast Asian region, increasing our working interest in Block2A in Malysia, and welcoming James Menzies and Pierre Eliet to the team - both of whom have extensive experience and established networks in the region.

Our strategy remains unchanged and in 2024, we seek to build cashflow generating E&P portfolios in both Norway and Southeast Asia with the full confidence that we will deliver considerable growth and create substantial shareholder value."

 

The information contained within this announcement is considered to be inside information prior to its release.

 

Footnotes:

Longboat Energy	via FTI
Helge Hammer, Chief Executive Officer
Jon Cooper, Chief Financial Officer Nick Ingrassia, Corporate Development Director
Stifel (Nomad and Joint Broker)	Tel: +44 20 7710 7600
Callum Stewart Jason Grossman Ashton Clanfield

Cavendish Capital Markets Limited (Joint Broker)                        Tel: +44 20 7397 8900

Neil McDonald                   

Pete Lynch           

Leif Powis            

 

FTI Consulting (PR adviser)	Tel: +44 20 3727 1000
Ben Brewerton Rosie Corbett Catrin Trudgill	[email protected]

 

Results

For the period to 31 December 2023, the Group's loss after taxation from continuing operations was £9.3 million.

Dividends

It is the Board's policy that the Company should seek to generate capital growth for its shareholders but may recommend distributions at some future date when the investment portfolio matures, and production revenues are established and when it becomes commercially prudent to do so.

Statement of going concern

The Directors have completed the going concern assessment, taking into account cash flow forecasts up to the end of 2025, sensitivities to those forecasts and stress tests to assess whether the Group is a going concern. The base case scenario includes the repayment of the Longboat JAPEX facility draw downs at the end of 2024 and makes assumptions around the final development costs and start up dates for the recently acquired Statfjord Satellites development wells, including initial start up of the development wells in April 2024 and the levels of business development activities and their chances of success.

 

Having undertaken careful enquiry, the Directors are of the view that the Company and Group will need to access additional funds during 2024 in order to fund on-going operations and pursue growth opportunities. This is in line with the Company's current activities of exploring, maturing its discoveries and seeking acquisitions.

 

The Group is forecast to have limited liquidity during H2 2024 under the base case and will require additional funding. It is anticipated that funding will be sourced through asset disposals, farm downs, the issue of new equity, dilution in the Company's joint venture or a combination of all these actions.

 

To the extent that growth opportunities will support debt, this will be considered where appropriate for example to support production acquisitions. The financial statements for the period to 31 December 2023 have been prepared assuming the Group will continue as a going concern. In support of this, the Directors believe the liquid nature of asset market combined with historical shareholder support, adequate funds can be accessed when required. However, the ability to access such funding detailed above is not guaranteed at the date of signing these financial statements. As a consequence, this funding requirement represents a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern. The financial statements do not include any adjustments that would result from the basis of preparation being inappropriate.

 

Outlook

Longboat now has two experienced M&A teams in place, one to pursue M&A opportunities for Norway and one focused on South East Asia. Combined with our in-house technical expertise, it puts the Company in a strong position to deliver growth.

 

In Norway, we are focused on delivering a transaction to add material production volumes to the relatively small initial production position we acquired in January 2024 in the Statfjord Satellites. We will make use of the Acquisition Financing Facility provided by JAPEX which will assist Longboat JAPEX's participation in NCS sales processes. 

 

In parallel with the M&A effort, work continues to progress the appraisal and development plans for the discoveries we have in our portfolio, particularly Kveikje, Oswig and Velocette, and to de-risk the exploration licences. The objective is to achieve maximum value from the assets either by developing them or by monetising the assets.

 

On Block 2A in Malaysia, we will finalise the evaluation of the giant Kertang gas prospect before running a process to farm down and make the final drilling decision. We have already been approached by a number of large E&P players who are interested in this exciting exploration prospect. Following the acquisition of privately held Topaz Number One Limited and the addition of James Menzies and Pierre Eliet to the Longboat organisation, as announced 13 September, the Company now has a Business Development Team for SE Asia with a proven track record, depth of knowledge and excellent relationships across the region.

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2023

	Notes	2023		2022
GROUP		£		£
Other income	6	641,275		-
Administrative expenses		(4,292,670)		(2,660,798)
Operating loss	6	(3,651,395)		(2,660,798)
Share of loss from equity accounted joint venture	15	(2,803,202)		-
Impairment of equity accounted joint venture	15	(2,639,976)		-
Finance costs	8	(51)		(112)
Net foreign exchange (loss)/gain		(364,366)		26,063
Investment income	5	155,397		42,374
Loss before taxation from continuing operations		(9,303,593)		(2,592,473)
Income tax	9	-		-
Loss for the year from continuing operations		(9,303,593)		(2,592,473)
Profit/(loss) for the period from discontinued operations, net of tax	10	5,116,559		(12,880,134)
Loss for the period		(4,187,034)		(15,472,607)
Other comprehensive income / (expense)
Currency translation income from joint venture		349,929		-
Currency translation income on disposal of subsidiary		285,230		-
Currency translation expense on subsidiaries		(885,598)		(19,754)
Total items that may be reclassified to profit or loss		(250,439)		(19,754)
Total other comprehensive loss for the year		(250,439)		(19,754)
Total comprehensive loss for the year		(4,437,473)		(15,492,361)
Loss per share	11	Pence		pence
Basic and diluted - continuing		(16.42)		(4.57)
Basic - discontinued		9.03		(22.73)
Diluted - discontinued		8.51		(22.73)