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    CRWN   SE0004210854

CROWN ENERGY AB

(CRWN)
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Crown Energy : Interim ReportJan-Sep 2021

11/19/2021 | 09:14am EST

INTERIM REPORT JANUARY-SEPTEMBER2021

THIRD QUARTER - JULY-SEPTEMBER 2021

  • Revenue amounted to SEK 4,626 thousand (6,993).
  • Operating loss amounted to SEK -6,787 thousand (-1,283).
  • Net financial items amounted to SEK -8,095 thousand (6,679).
  • Unrealised changes in property values amounted to SEK -28,802 thousand (-8,854).
  • Result before tax amounted to SEK -43,684 thousand (-3,458), and result after tax amounted to SEK -38,832 thousand (-4,731), corresponding to SEK -0.08(-0.01) per share.

NINE MONTH PERIOD - JANUARY-SEPTEMBER 2021

  • Revenue amounted to SEK 15,188 thousand (24,171).
  • Operating loss amounted to SEK -18,558 thousand (-7,109).
  • Net financial items amounted to SEK -6,953 thousand (55,940).
  • Unrealised changes in property values amounted to SEK -46,132 thousand (-17,569).
  • Profit before tax amounted to SEK -71,643 thousand (31,262), and profit after tax amounted to SEK -64,244 thousand (20,303), corresponding to SEK -0.13 (0.04) per share.

KEY EVENTS DURING THE REPORTING PERIOD JANUARY- SEPTEMBER 2021

  • Michail Shatkus started as the Company's CFO on 1 January.
  • On 13 April, Crown Energy announced that payments had been received that exceed one-third of the contracted sale price for the C-View Smart Business Park in Luanda, Angola.
  • On 15 April, the Company announced that it is relinquishing its entire five per cent working interest in the Block P licence in Equatorial Guinea.
  • On 19 April, the Company announced that a memorandum of understanding had been signed with Wildcat Petroleum Plc, an oil company listed on the London Stock Exchange (LSE: WCAT).
  • On 20 April, the Company announced that its partner Africa Energy Corp had received official approval to conclude its two farm-out agreements for Block 2B in South Africa.
  • On 7 June, the Company announced that Andreas Forssell had informed Board of Directors that he wishes to leave his role as CEO.
  • On 15 September Yoav Ben Eli was nominated as new CEO of Crown and this appointment was formalized on 22 October.

EVENTS AFTER THE REPORTING PERIOD

  • On 20 October Company announced that it had entered into an Agreement for the disposal of the majority of its oil and gas assets.
  • On 27 October Company confirmed receipt of the first USD 75 million down payment towards the disposal with an additional consideration of USD 105 million payable over the next five years, with a total consideration, subject to the terms of an earn out agreement, of up to USD 450 million. The effect of the payment will first appear in Year-End report.
  • On 15 November the CEO announced his new vision for Crown Energy and its business going forward.
  • On 15 November an EGM was called to be held on 17 December.

CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Group

JUL-

JAN-

JAN-

FULL

JUL-SEP

SEP

SEP

SEP

YEAR

All amounts in SEK thousands

2021

2020

2021

2020

2020

Operating income

4,626

6,590

15,192

24,171

29,985

Operating expenses

-11,413

-7,873

-33,750

-31,280

-46,068

Operating profit/loss

-6,787

-1,283

-18,558

-7,109

-16,083

Net financial items

-8,095

6,679

-6,953

55,940

60,524

Net profit/loss for the period.

after tax

-38,832

-4,731

-64,244

20,303

45,046

Earnings per share

-0,08

-0,01

-0,13

0,04

0.09

Equity per share

1,17

1.25

1,17

1,25

1.17

Change in cash and cash

equivalents

21,934

12,538

22,866

- 7,099

-54

Q3

CEO statement

DEAR SHAREHOLDERS AND INVESTORS,

I am very excited to be speaking to you as the new CEO of Crown Energy. As you know I have served on the Board of the Company for the last five years. We are going into the final quarter of this year having completed a very significant and company changing transaction which took a significant time to negotiate, ending in a great result for Crown Energy and our shareholders. We now have in October an added free cash balance of USD 75 million and will be receiving a secure income of USD 105 million over the next five years, with the strong possibility of receiving considerable further milestone payments in earn-out consideration into the Company and we have no debt.

FUTURE VISION AND STRATEGY

I intend to steer and grow Crown Energy in a new, socially responsible direction and at the same time achieve a graduated but firm exit from the oil and gas industry.

The scientific consensus is that the world needs to achieve net-zero greenhouse gases emissions by mid-century to avoid the impacts of climate change. This leaves us with no other choice but to consider reducing our dependency on energy originating from fossil fuels. It's time to take a firm step towards a change. Recent industry shifts have made clear that companies must adopt stringent ESG measures if they want to adopt to the changing economic eco-system and have access to capital for growth.

We must reduce our carbon emissions to an acceptable near net zero while continuing to meet our energy needs. Evolving a solid strategy to do so is the real challenge. A strategy that focuses on the sustainable growth in the new world, on leading industries, technology in action, enhancing old businesses and transforming them to be more ESG compliant, while out-preforming with excellence for the benefit of our shareholders, to include for example:

  1. Environment - The CO2 capturing world, Real-estate investments in energetically efficient projects.
  2. Social - Improving healthcare technologies, Tele-medicine (the future of medical care) projects and investments, Medical-Tech projects.

In the coming months and years, it is my intention, together with our experienced Board of Directors, to drive the company to a new direction and to completely exit the oil and gas world, in a firm and responsible manner. At the same time, I intend to present the Board with new investment opportunities, as we are confident that the climate change challenges encompass many opportunities from the eco-systems described above, eco-systems we already dominate, like the real-estate, and others, for their analysis and approval, and I am sure that we can take our Company to a new era, investing wisely and responsibly, out-preforming financial projections and at the same time caring for "mother-nature".

We shall maintain a constant and open dialog, as a Company policy, with the market and shareholders, with respect to the various investments and achievements reached and strive to be the best in what we do.

ASSET DEVELOPMENT AND MANAGEMENT

I am pleased to report that we are now seeing an improving economic situation in Angola, which should bode well for 2022. The Angolan kwanza has also started to strengthen against the US dollar which will be positive for us.

During the first three quarters 2021, net sales revenue, decreased by 38 percent compared to the same period last year. On the positive side is that property costs for the reporting period decreased by 17 percent and amounted to SEK -8,236 thousand (-9,665). The period's operating result is SEK -18,558 thousand (-7,190).

The buyer of the C-View property, the Angolan Ministry of Finance, has continued to pay our subsidiary in Angola. The second instalment of a total of six payments was received in full earlier this year and after those additional payments have continued to be made. Up to September 30 this year, a total of 50 percent of the agreed purchase price has been paid.

2 Crown Energy Interim report- January-September 2021

Q3

ENERGY

The oil price has recently gone over the USD 80 per barrel mark. Despite increases in oil price, industry activity remains unsettled due to the COVID-19 pandemic, mainly resulting in overall delays to project developments. On Block 2 B in South Africa, our Operator, Azinam, and the joint venture completed a seabed survey of the well location, and the Operator is currently conducting negotiations with various rig contractors for the drilling of the Gazania-1 well. Crown Energy holds a 10 per cent interest and in accordance with an earlier farm-out agreement, the other licence partners will bear all costs associated with the next drilling within the licence area, including additional well testing.

On our other Energy assets, as previously reported on 20th October, we have successfully entered into an agreement with a buyer who has the right to acquire Crown Energy's upstream oil and gas assets, including Iraq and Madagascar, for a total consideration of up to USD 450 million before the deduction of transaction costs.

For Madagascar, the current licensing period expired in November 2019. Crown Energy has previously applied for an additional extension and is continuing to discuss this with the authorities.

EXTRAORDINARY GENERAL MEETING

We have called an EGM for Friday December 17th to approve the proposed changes to Crown Energy's Objects of Association to move us into this new commercial direction, I am also inviting our investors to join me in a Questions and Answers event, where I will be able to describe my new Vision in more detail and answer questions.

Lastly, I would like to thank Andreas Forssell for all his service to the Company over the last ten years and wish him the best in his new commercial ventures.

Yoav Ben Eli

CEO, Crown Energy

3 Crown Energy Interim report- January-September 2021

Q3

Crown Energy's position regarding COVID-19

During the first months of 2020, the world was hit by the worldwide virus COVID-19. Since March 11, 2020, the epidemic has been classified by the WHO as a pandemic, which has entailed extensive restrictions and shutdowns of communities and businesses worldwide. The pandemic has had major effects on the global world economy. Among other things, a lot of business have suffered, and oil prices and stock exchange levels around the world have fluctuated a lot. The effects are difficult to foresee at present and conditions change daily. Crown Energy is monitoring the course of events surrounding the spread of the virus and is following the recommendations of the authorities. The situation is unpredictable, especially with new variants of the virus appearing, and Crown Energy cannot currently quantify any effects that the virus has or could have on the Group's operations. Crown Energy does however not believe that the pandemic had any effect on the Group's profit during the first nine months of 2021. Below is a summary of the Group's two business areas until this Interim report is released and how the outbreak of COVID-19 has affected and may affect them.

Asset Development and Management

The business area currently only operates in Angola and according to official information there have only been limited reported cases of COVID-19. The government in Angola has imposed strict restrictions in the country in order to reduce and contain the possible spread of the COVID-19 virus. As a result of travel restrictions, and a general downturn in the global economy, there is a risk that international companies will have scaled down their operations temporarily or even longer term in Angola. Angola is a country that is highly dependent on international companies and subject to the effects of the COVID-19 outbreak on these companies, the Group's property operations could also be affected going forward. For example, the risk continues that when short-term leases expire, some current tenants may hesitate to extend them. Such a situation can affect both the Group's income and the valuation of property assets in the short and long term. Property operations are very important to the Group as that is what currently generates cash flow. If business slows as a result of the effects of COVID-19, it could possibly affect the Group's ability to raise financing.

Crown Energy has, despite the restrictions in Angola, managed to find applicable solutions to maintain full service to tenants while complying with Angolan health and safety regulations whilst at the same time continuing to provide its clients with a full suite of support and management services. Client feedback shows that satisfaction with our services remains high. There has been no disruption or interruption to our local business activities and rental and service revenues continue to be received as normal. In 2021 so far, we have not noticed any effects in the leasing due to COVID- 19, but in times like these, we review our cost structure ongoing basis.

Energy

South Africa has introduced some major lockdowns as a result of COVID-19 although these are no longer in significant force. The Group so far has not been affected and the Operator, Azinam, is continuing a tendering process to engage a rig to drill the well. A site survey has now been successfully carried out over the well location.. There have been no activities really on the Madagascar license, whereby we see no direct effects here. There have been no physical on site activities on our Iraqi project, however the discussions with potential buyes/partners were delayed because of pandemic Crown Energy has not taken any specific measures so far but will continuously review the underlying financial calculations that form the basis for the valuation of each exploration asset.

4 Crown Energy Interim report- January-September 2021

Q3

14

Properties

20 thousand

Leasable area, sqm

Asset Development and Management business area

THE PROPERTY MARKET AND CURRENCY IN ANGOLA

Angola's real estate market is strongly linked to the oil and gas sector. The decline during 2020, has had the effect that tenants within the office segment tend to look for office size optimisation and cost reductions, which in turn has led to some renegotians and relocations to smaller spaces. Companies are aiming more to reduce long-term commitments. This means that the landlord must offer flexible contracts; shorter duration or adjustable for immediate needs. Alternative concepts to a traditional leasing system, such as business centers, are starting to emerge in the market. In 2021 demand from the oil industry is starting to be marginally higher than 2020. This will boost the rental market and have a positive effect in the sales market, whether for the users own use or for placement on the investment market (Source: Reseach, Property Market Report 2021 Angola, Abacus).

The Angolan kwanza has been stable over the reporting period, unlike the trend from past years. The weakening of the kwanza over the past years has had consequences on the reported revenue in Swedish SEK. The graph below shows the development of revenue since the third quarter of 2019.

Annual inflation in Angola rose. From lying around 16.9 percent in December 2019, it rose to about

26.6 percent in September this year. (Source: Banco Nacional de Angola). This is the highest rate of inflation since May 2018, and it can not be ruled out that Angola will be considered a hyperinflation economy again, and that IAS 29 Financial Reporting in Hyperinflationary Economies should be applied to the financial accounts in the future.

SUMMARY OF PROPERTY-RELATED KEY RATIOS

For definitions of key ratios please see pages 20-21.

ALL AMOUNTS IN SEK THOUSANDS

2021-09-30

2021-06-30

Revenue backlog, SEK thousand

14,442

15,167

Rent backlog, SEK thousand

10,927

12,138

Contracted annual rental and service revenues, SEK thousand

20,644

18,341

Contracted annual rental revenues, SEK thousand

14,273

12,517

Area occupancy rate (excl. C-View) %

53%

52%

Economic occupancy rate (excl. C-View), %

38%

29%

WAULT rent and service, months

9.2

11.6

Market value of portfolio (excl. C-View), SEK thousand

143,545

167,972

Market value C-View, SEK thousand

291,291

261,545

5 Crown Energy Interim report- January-September 2021

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Crown Energy AB published this content on 19 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 November 2021 14:13:09 UTC.


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Financials
Sales 2020 29,8 M 3,17 M 3,17 M
Net income 2020 45,0 M 4,81 M 4,81 M
Net cash 2020 39,1 M 4,17 M 4,17 M
P/E ratio 2020 11,8x
Yield 2020 -
Capitalization 964 M 103 M 103 M
EV / Sales 2019 12,4x
EV / Sales 2020 16,5x
Nbr of Employees 17
Free-Float -
Income Statement Evolution
Managers and Directors
Yoav Ben-Eli Chief Executive Officer & Independent Director
Pierre-Emmanuel Weil Chairman
Alan Simonian Director & Chief Operations Officer
Jean Benhaim Independent Director
Andreas Forssell Deputy Chief Executive Officer