28 April 2021

Mosman Oil and Gas Limited

 ("Mosman" or the "Company")

Half Year Results

Mosman Oil and Gas Limited (AIM: MSMN) the oil exploration, development and production company, announces its Half Year results to 31 December 2020.

Summary

·     With a clear focus on the higher margin operations, Mosman took the decision to sell the Welch project and shares in Norseman.

·      Proceeds applied to drilling, completing, and installing production facilities at Falcon and workovers at Stanley and Greater Stanley.

·       COVID-19 constraints and some production challenges resulted in lower production, which was also impacted by a volatile oil price further affecting revenue

·       Revenue of AUD380,000 and Gross Profit AUD56,828

·       Net loss of AUD0.7m impacted by production challenges and the volatile oil price in 2020

·       Gross Project Production 34,569 BOE¹

·       Net Production to Mosman 9,871 BOE¹

¹BOE/boe - barrels of oil equivalent

²Gross Project Production - means the production of BOE at a total project level (100% basis) before royalties (where Mosman is the Operator) and where Mosman is not the operator the total gross production for the project

³Net Production - Net to Mosman's Working interest after royalties

Post period events

·       Sold remaining shares in Norseman Silver Inc for AUD208,000

·       Completed the sales of the Welch asset for AUD546,611

·       Raised £1.5m to be used for Helium, Hydrogen and Hydrocarbon exploration on EP 145 in Central Australia

·       Acquired an additional 20% of the Greater Stanley (Duff lease), increasing Mosman's working interest in Duff to 40%.

John W Barr, Chairman of Mosman commented: "Whilst the first half of FY21 was extremely challenging with continued economic uncertainty, volatile oil price movements and production challenges, we remained resolute that we would weather the storm.  We have started Q3 with renewed vigour having completed the disposal of the Welch project to enable us to focus on drilling activity and are look forward to the opportunity our increased working interest in Greater Stanley in the US will bring.

"We are well funded to deliver our exploration and development plan and expect to benefit from the recovery in energy prices.  This coupled with the planned exploration at EP145 in Australia, where drilling results in nearby permits have demonstrated the commercial production of hydrocarbons reinforcing the potential for successful helium and hydrogen exploration, sets out an encouraging programme for the months ahead. 

"Once again, we thank our shareholders for their support whilst reassuring them of our continued confidence to achieve growth in both production and value for the business." 

Enquiries:

Operations Review

Strategy

Mosman's objective remains to identify opportunities which will provide operating cash flow and have further development upside, in conjunction with adding value to the Company's existing exploration permits. To that end the Company is effectively operating in two divisions with onshore oil and gas production with further potential growth in the USA, and exploration for oil, gas, helium and hydrogen in Central Australia.

Whilst the strategy remains intact, short term adjustments were necessary as a result of global events, oil price movements and the COVID19 pandemic that has affected the world. The Board took action to ensure the company survived, and we are pleased that it has not only survived but is well placed for the economic recovery.

With lower oil prices, the decision was made to focus on the higher margin USA operations in East Texas and to dispose of other projects where possible. This led to the sale of the Welch project and sale of the shares in other companies. Proceeds were subsequently applied to drilling, completing, and installing production facilities at Falcon and workovers at Stanley and Greater Stanley.

In Central Australia, the original plan was to progress exploration by conducting seismic acquisition. As a result of COVID19, approvals for on ground activity were delayed. An airborne gravity survey is now planned to obtain geophysical data over the whole permit, while approval is sought for the seismic acquisition. Those activities are now fully funded with an equity placing announced in March 2021.

Results

The unaudited results for the six months to 31 December 2020 reflect the seriousness of the economic uncertainty in the second half of 2020 coupled with production issues, particularly at Stanley, where a number of workovers have been completed. Revenue fell to $383,138 and Gross Profit decreased to $56,828. 

On top of the fall in production, oil prices ranged between US$39 in July 2020 to US$48 in December 2020. This has recently risen to over US$60. These prices were better than the first half of the 2020 calendar year, but did effect the gross revenue. Arkoma was again disappointing and the Company is still reviewing options for this non-core asset. Falcon Production began in December 2020, although sales and the recognition of revenue did not commence until January 2021.

Expenses increased slightly during the period due to the appointment of a second broker, increased amortisation costs and currency movements.

The pandemic has restricted travel by the Board since early 2020 and thus the Company has become increasingly dependent on consultants at operational levels. The Company is effectively operating in two Countries, and clear divisions of duties have been implemented.

Operationally a number of activities occurred with the drilling of Falcon-1, the drilling of Stanley-4, the sale of Welch, and various workovers. From a corporate perspective there was strong activity with a number of presentations, a capital raising, and the sale of shares in Canada.

The ability to raise funds on the capital markets was important with over $1.6 million spent on exploration, development, and acquisitions during the six months. The Company raised GBP0.9m gross before expenses in an equity placing during the period in October 2020 and, in a post balance sheet date event, it raised a further GBP1.5 million gross before expenses in March 2021.

Today, the Company is well funded with a cash balance of AUD3.5 million as at the end of March 2021 and has an aggressive exploration and development plan on its existing projects for the remainder of 2021 that are expected to benefit from the recovery in energy prices and the economy while continuing to evaluate new acquisition opportunities that fit its investment criteria.

Projects

Mosman has Working Interests in onshore producing projects located in the USA. These projects and Mosman's working interests before royalties as at 31 December 2020 are:

Producing Projects in USA

Mosman also has interests in two projects in Central Australia:

Production Summary for the six months ending 31 December 2020

Net Production attributable to Mosman for the six months was 9,871 boe.

Production Details

Further details are outlined below:

Net production means net to Mosman's working interest before royalties

*Falcon production commenced on 11 December 2020

**Welch project has now been sold

Subsequent Events

·     In January 2021, the Company announced the sale of the remaining shares it owned in Norseman Silver Inc for AUD208,000;

·    The sales of the Welch asset was completed in January 2021 and the amount of AUD546,611 shown as a receivable in the balance sheet of 31 December 2020 was received;

·      In February 2021, warrants totalling AUD128,000 were exercised;

·   In March 2021, the Company raised GBP1,500,000 to be used for Helium, Hydrogen and Hydrocarbon exploration on EP 145 in Central Australia;

·      In April 2021, the Company announced it had acquired an additional 20% of the Greater Stanley (Duff lease). This increased Mosman's working interest in Duff to 40%.

Other than the above, there were no significant events subsequent to the date of statement of financial position.

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income

For The Half Year Ended 31 December 2020

All amounts are in Australian Dollars

The accompanying notes form part of these consolidated financial statements.
 

Condensed Consolidated Statement of Financial Position

As at 31 December 2020

All amounts are in Australian Dollars

The accompanying notes form part of these consolidated financial statements.

Condensed Consolidated Statement of Changes in Equity

For the Half Year Ended 31 December 2020

All amounts are in Australian Dollars

These accompanying notes form part of these consolidated financial statements
 

Condensed Consolidated Statement of Cash Flows

For the Half Year Ended 31 December 2020

All amounts are in Australian Dollars

The accompanying notes from part of these consolidated financial statements

Condensed Notes to the Financial Statements

For the Half-Year Ended 31 December 2020

All amounts are Australian Dollars

1.   Summary of Significant Accounting Policies

   Statement of Compliance

The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS34 Interim Financial Reporting. The half-year report does not include notes of the type normally included in an annual financial report and should be read in conjunction with the most recent annual financial report.

Basis of preparation

The condensed consolidated financial statements have been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts presented in Australian dollars, unless otherwise noted.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the Group's 2020 annual financial report for the financial year ended 30 June 2020, except for the impact of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards (IFRS).

Going Concern
The condensed consolidated financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and the discharge of liabilities in the normal course of business.

The directors have considered the funding and operational status of the business in arriving at their assessment of going concern and believe that the going concern basis of preparation is appropriate, based upon the following:

·     Current cash and cash equivalents on hand and a further capital raise of GBP 1,500,000 in March 2021;

·    The ability to further vary cash flow depending upon the achievement of certain milestones within the business plan and;

·      The ability of the Company to obtain funding through various sources, including debt and equity.

Exploration and Evaluation Costs

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are carried forward in respect of an area for which the rights to tenure are current and that has not at reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or relating to, the area of interest are continuing.

Impairment of Exploration and Evaluation Assets

The ultimate recoupment of the value of exploration and evaluation assets is dependent on the successful development and commercial exploitation, or alternatively, sale, of the exploration and evaluation assets.

Impairment tests are carried out when there are indicators of impairment in order to identify whether the asset carrying values exceed their recoverable amounts. There is significant estimation and judgement in determining the inputs and assumptions used in determining the recoverable amounts.

1.   Summary of Significant Accounting Policies (Continued)

The key areas of judgement and estimation include:

·      Recent exploration and evaluation results and resource estimates;

·      Environmental issues that may impact on the underlying tenements; and

·      Fundamental economic factors that have an impact on the operations and carrying values of assets and liabilities.

Revenue Reporting

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group's activities as described below. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue from joint operations is recognised based on the Group's share of the sale by the joint operation.

Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument.

Oil and Gas assets

The cost of oil and gas producing assets and capitalised expenditure on oil and gas assets under development are accounted for separately and are stated at cost less accumulated amortisation and impairment losses. Costs include expenditure that is directly attributable to the acquisition or construction of the item as well as past exploration and evaluation costs.

When an oil and gas asset commences production, costs carried forward are amortised on a units of production basis over the life of the economically recoverable reserves. Changes in factors such as estimates of economically recoverable reserves that affect amortisation calculations do not give rise to prior financial period adjustments and are dealt with on a prospective basis.

Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance.

New standards and interpretations

The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Standards Board ('AASB') that are mandatory for the current reporting period.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

13.       Segment Information

The Group has identified its operating segments based on the internal reports that are reviewed and used by the board to make decisions about resources to be allocated to the segments and assess their performance. Operating segments are identified by the board based on the Oil and Gas projects in Australia the United States. Discrete financial information about each project is reported to the board on a regular basis.

The reportable segments are based on aggregated operating segments determined by the similarity of the economic characteristics, the nature of the activities and the regulatory environment in which those segments operate. The Group has two reportable segments based on the geographical areas of the mineral resource and exploration activities in Australia, the United States. Unallocated results, assets and liabilities represent corporate amounts that are not core to the reportable segments.

13.     Segment Information (continued)

15.                   Expenditure Commitments

(a)       Exploration

The Company has certain obligations to perform minimum exploration work on Oil and Gas tenements held.  These obligations may vary over time, depending on the Company's exploration programs and priorities.  At 31 December 2020, the Company has estimated the monetary value of the total exploration commitments for the next 12 months are as follows:

¹ An extension to the work program condition has been granted until 21 August 2021, when there will be a commitment for completion of 100km of 2D seismic surveys, seismic processing and interpretation and well planning. If the Company has not fulfilled the above obligations, a negotiation with the Northern Territory Department of Primary Industry and Resources may be commenced to extend the period for completion, or the permit relinquished. There can be no certainty that an extension may be granted.

(b)       Capital Commitments

The Company had no capital commitments at 31 December 2020 (2019 - $Nil).

16.       Subsequent Events

·      In January 2021, the Company announced the sale of the remaining shares it owned in Norseman Silver Inc for AUD208,000;

·      The sales of the Welch asset was completed in January 2021 and the amount of AUD546,611 previously shown as a receivable was received;

·      In February 2021 warrants totalling AUD128,000 were exercised by warrant holders;

·      In March 2021 the Company raised GBP1,500,000 to be used for Helium, Hydrogen and Hydrocarbon exploration on EP 145 in Central Australia;

·      In April 2021 the Company announced it had acquired an additional 20% of the Greater Stanley (Duff lease). This increases Mosman's working interest in Duff to 40%.

Other than the above, there were no significant events subsequent to the date of statement of financial position.

17.       Dividends

No dividends have been paid or proposed during the half year ended 31 December 2020.

Directors' Declaration

The Directors of the Consolidated Group declare that:

1.          The financial statements and notes, as set out on pages 5-20, are in accordance with the Australian Corporations Act 2001:

(a)       comply with Accounting Standards, which, as stated in Note 1 - Statement of Accounting Policies to the consolidated financial statements, constitutes compliance with International Financial Reporting Standards (IFRS); and

(b)       give a true and fair view of the consolidated financial position as at 31 December 2020 and of the performance for the year ended on that date of the Group.

2.      In the Directors' opinion there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors and is signed by authority for and on behalf of the Directors by:

John W Barr

Executive Chairman

Dated this 27 April 2021