? We continue to seek to progress Bina Bawi in the right 
                                                                way under the right conditions 
                                                              ? 2021 activity broadly in line, although some delays on 
  ? Deliver 2021 work programme on time and on budget           obtaining approvals may mean some activity happens a 
                                                                little later than planned 
  ? Continue to focus on growing our income streams and       ? c.USD100 million of investment in growth in 2021 
    cash generation, bringing greater resilience and            demonstrates our commitment to improving on these 
    diversity to the business and supporting our                objectives and building a diverse, resilient reserves 
    sustainable and progressive dividend programme              base with longevity

Financial results for the year

Income statement 


(all figures USD million)                    H1 2021 H1 2020 FY 2020 
Production (bopd, working interest)        32,760  32,100  31,980 
Profit oil                                 57.6    24.0    55.4 
Cost oil                                   43.3    47.6    84.9 
Override royalty                           50.6    16.8    19.4 
Revenue                                    151.5   88.4    159.7 
Production costs                           (21.7)  (16.8)  (32.7) 
G&A (excl. depreciation and amortisation)  (6.7)   (6.5)   (12.4) 
EBITDAX                                    123.1   65.1    114.6 
Depreciation and amortisation              (81.8)  (82.6)  (153.7) 
Impairment                                 -       (321.2) (323.2) 
Exploration expense                        -       (1.3)   (2.2) 
Net finance expense                        (15.7)  (14.7)  (52.2) 
Income tax expense                         -       -       (0.2) 
Profit / (Loss)                            25.6    (354.7) (416.9)

Working interest production of 32,760 bopd increased (H1 2020: 32,100 bopd), with revenue rising from USD88 million to USD152 million, principally caused by the higher Brent oil price and resumed override from January onwards.

Production costs of USD22 million increased from the prior year (H1 2020: USD17 million), with cost per barrel USD3.7/bbl in H1 2021 (H1 2020: USD2.9/bbl). Both increases have been caused by the addition of Sarta, which commenced production in December 2020. We expect that the overall operating cost per barrel at the Sarta field will reduce to around USD5/bbl once production has increased to around the facility capacity - the Sarta plant is currently operating at less than 50%. This compares favourably to revenue per barrel of USD38/bbl.

General and administration costs were USD7 million (H1 2020: USD7 million), of which corporate cash costs were USD6 million (H1 2020: USD5 million).

The increase in revenue resulted in a similar increase to EBITDAX, which was USD123 million (H1 2020: USD65 million). EBITDAX is presented in order for the users of the financial statements to understand the cash profitability of the Company, which excludes the impact of costs attributable to exploration activity, which tend to be one-off in nature, and the non-cash costs relating to depreciation, amortisation and impairments.

Depreciation of USD59 million (H1 2020: USD52 million) and Tawke intangibles amortisation of USD23 million (H1 2020: USD31 million) were broadly in line with last period in total.

Bond interest expense of USD13 million (H1 2020: USD15 million) decreased due to lower debt and lower coupon rate.

In relation to taxation, under the terms of the KRI production sharing contracts, corporate income tax due is paid on behalf of the Company by the KRG from the KRG's own share of revenues, resulting in no corporate income tax payment required or expected to be made by the Company. Tax presented in the income statement was related to taxation of the service companies (H1 2021: nil, H1 2020: nil).

Capital expenditure

Capital expenditure is the aggregation of spend on production assets (USD19 million) and pre-production assets (USD39 million) and is reported to provide investors with an understanding of the quantum and nature of capital investment. Capital expenditure for the period was USD58 million, predominantly focused on production assets and the Sarta PSC (USD15 million) and Qara Dagh (USD21 million): 


(all figures USD million)                H1 2021 H1 2020 FY 2020 
Cost recovered production capex         19.3   35.7     56.5 
Pre-production capex - oil              15.3   11.5     30.0 
Pre-production capex - gas              1.3    5.9      10.0 
Other exploration and appraisal capex   22.3   5.4      13.2 
Capital expenditure                     58.2   58.5     109.7

Cash flow, cash, net cash and debt

Gross proceeds received totalled USD123 million (H1 2020: USD110 million), of which USD29 million (H1 2020: USD23 million) was received for the override royalty and USD14 million for receivable recovery. 


(all figures USD million)               H1 2021 H1 2020 FY 2020 
Brent average oil price               USD65/bbl USD40/bbl USD42/bbl 
EBITDAX                               123.1   65.1    114.6 
Working capital                       (32.0)  20.4    14.8 
Operating cash flow                   91.1    85.5    129.4 
Producing asset cost recovered capex  (21.1)  (38.1)  (60.2) 
Development capex                     (16.0)  (11.6)  (25.3) 
Exploration and appraisal capex       (16.8)  (13.7)  (24.2) 
Restricted cash                       -       (0.1)   3.0 
Interest and other                    (15.0)  (15.5)  (27.1) 
Free cash flow                        22.2    6.5     (4.4)

Free cash flow is presented in order to show the reader the free cash generated for equity. Free cash flow was USD22 million (H1 2020: USD7 million), with an overall decrease in cash of USD88 million in the year (H1 2020: USD35 million decrease) after payment of the FY2020 final dividend and USD81 million settlement of the remaining 2022 bond debt, which was called in December 2020. 


(all figures USD million)         H1 2021 H1 2020 FY 2020 
Free cash flow                  22.2    6.5     (4.4) 
Dividend paid (incl. expenses)  (29.0)  (41.3)  (55.3) 
Purchase of own shares          (0.3)   (0.7)   (3.4) 
Bond refinancing                (81.0)  -       28.9 
Other                           -       0.1     (2.0) 
Net change in cash              (88.1)  (35.4)  (36.2) 
Opening cash                    354.5   390.7   390.7 
Closing cash                    266.4   355.3   354.5 
Debt reported under IFRS        (268.6) (298.1) (348.3) 
Net (debt) / cash               (2.2)   57.2    6.2

The 2025 bonds have two financial covenant maintenance tests: 


Financial covenant                        Test   H1 2021 
Equity ratio (Total equity/Total assets)  > 40%  63% 
Minimum liquidity                         > USD30m USD266 million

Net assets

Net assets at 30 June 2021 were USD929 million (31 December 2020: USD930 million) and consist primarily of oil and gas assets of USD1,073 million (31 December 2020: USD1,095 million), trade receivables of USD120 million (31 December 2020: USD94 million) and net debt of USD2 million (31 December 2020: USD6 million net cash).

Liquidity / cash counterparty risk management

The Company monitors its cash position, cash forecasts and liquidity on a regular basis. The Company holds surplus cash in treasury bills or on time deposits with a number of major financial institutions. Suitability of banks is assessed using a combination of sovereign risk, credit default swap pricing and credit rating.

Dividend

A final dividend distribution of USD29 million was made in June 2021 (June 2020: USD28 million).

The interim dividend is increasing to 6¢ per share (2020: 5¢ per share), a total distribution of USD17 million. Total dividends declared in 2021 amount to USD46 million (2020: USD41 million), representing 16¢ per share (2020: 15¢ per share). The payment timetable for the interim dividend is below:

The payment timetable for the interim dividend is below: ? Ex-dividend date: 11 November 2021 ? Record Date: 12 November 2021 ? Payment Date: 10 December 2021

Going concern

The Directors have assessed that the Company's forecast liquidity provides adequate headroom over forecast expenditure for the 12 months following the signing of the half-year condensed consolidated financial statements for the period ended 30 June 2021 and consequently that the Company is considered a going concern. In assessing going concern, the Directors have assessed that prolonged prevalence of COVID-19 may have a further negative impact on the oil price and in turn revenues, operational activity and receipt of amounts owed. The Company's low run rate costs, flexible capital programme, and strong cash position provide appropriate mitigation of the reduction of cash inflows that COVID-19 may cause for the going concern basis to remain appropriate.

Principal risks and uncertainties

(MORE TO FOLLOW) Dow Jones Newswires

August 03, 2021 02:00 ET (06:00 GMT)