吉星新能源(03395) - 2024 Q3 - 季度业绩

Unaudited Interim Results Announcement The company announced its unaudited interim financial results and business update for the periods ended September 30, 2024, reviewed by the Board and Audit and Risk Committee Announcement Details The company announced its unaudited interim financial results and business update for the periods ended September 30, 2024, reviewed by the Board and Audit and Risk Committee - The company released its unaudited condensed interim financial results and business update for the three and nine months ended September 30, 2024[1] - The announcement complies with Rule 13.09(2) of the HKEX Listing Rules and Part XIVA of the Securities and Futures Ordinance[1] - The Board and its Audit and Risk Committee have reviewed the interim results[1] Board of Directors The Board of Directors consists of two executive directors and three independent non-executive directors - The Board of Directors comprises two executive directors and three independent non-executive directors[2] - Mr. Liu Yongtan serves as Chairman and interim Chief Executive Officer[2] Condensed Interim Financial Statements This section presents the unaudited condensed interim financial statements, including statements of financial position, loss, changes in equity, and cash flows Notice Regarding Unaudited Financial Statements These condensed interim financial statements are unaudited, prepared by management, and approved by the Board, complying with regulatory requirements - The condensed interim financial statements are unaudited by an independent auditor[3] - The financial statements were prepared by company management and approved by the Board of Directors[3] Condensed Interim Statements of Financial Position Total assets and shareholders' equity decreased, while total liabilities increased, expanding the working capital deficit and shareholders' equity deficit Condensed Interim Statements of Financial Position Key Data (as of September 30) | Metric | 2024 (CAD) | 2023 (CAD) | | :--- | :--- | :--- | | Assets | | | | Total current assets | 587,686 | 2,070,970 | | Total assets | 30,811,539 | 35,507,629 | | Liabilities and Shareholders' Equity | | | | Total current liabilities | 21,193,938 | 15,190,661 | | Total liabilities | 41,611,089 | 41,007,614 | | Total shareholders' equity | (10,799,550) | (5,499,985) | - As of September 30, 2024, the company's working capital deficit was 20.6 million CAD, an increase from 13.1 million CAD as of December 31, 2023[4] Condensed Interim Statements of Loss and Other Comprehensive Loss Total net income significantly decreased, and operating and net losses substantially widened due to reduced sales and increased finance costs Condensed Interim Statements of Loss and Other Comprehensive Loss Key Data (as of September 30) | Metric | Three Months Ended 2024 (CAD) | Three Months Ended 2023 (CAD) | Nine Months Ended 2024 (CAD) | Nine Months Ended 2023 (CAD) | | :--- | :--- | :--- | :--- | :--- | | Total net income | 206,564 | 3,497,453 | 3,800,283 | 9,849,221 | | Total expenses | (3,639,526) | (5,507,824) | (12,776,404) | (15,380,888) | | Operating (loss) income | (3,432,962) | (2,010,371) | (8,976,121) | (5,531,667) | | Finance costs | (779,223) | (853,274) | (2,513,898) | (1,379,060) | | Income (loss) and comprehensive income (loss) | (4,212,185) | (2,862,687) | (11,490,019) | (6,924,838) | | (Loss) earnings per share (basic and diluted) | (0.01) | (0.01) | (0.02) | (0.02) | - For the three months ended September 30, 2024, total net income decreased by 94.1% year-over-year, and operating loss widened by 70.8% year-over-year[5] - For the nine months ended September 30, 2024, total net income decreased by 61.4% year-over-year, and operating loss widened by 62.3% year-over-year[5] Condensed Interim Statements of Changes in Equity Shareholders' equity deficit expanded to 10.8 million CAD due to a net loss of 11.49 million CAD, despite new share issuances and convertible debt Condensed Interim Statements of Changes in Equity Key Data (as of September 30) | Metric | September 30, 2024 (CAD) | January 1, 2024 (CAD) | | :--- | :--- | :--- | | Share capital | 222,430,877 | 220,212,755 | | Convertible debt | 2,238,636 | – | | Contributed surplus | 14,825,639 | 13,091,943 | | Accumulated deficit | (250,294,702) | (238,804,683) | | Total equity | (10,799,550) | (5,499,985) | - In the first nine months of 2024, the company issued shares for 2,540,956 CAD in cash and issued convertible debt of 2,190,350 CAD[7] - A net loss of 11,490,019 CAD for the period led to a further increase in accumulated deficit[7] Condensed Interim Statements of Cash Flows Operating cash flow turned negative, investing cash flow became positive due to asset sales, and financing cash flow increased, but overall cash and cash equivalents declined Condensed Interim Statements of Cash Flows Key Data (as of September 30) | Metric | Three Months Ended 2024 (CAD) | Three Months Ended 2023 (CAD) | Nine Months Ended 2024 (CAD) | Nine Months Ended 2023 (CAD) | | :--- | :--- | :--- | :--- | :--- | | Total cash from operating activities | (1,076,379) | 375,802 | (3,187,860) | 2,727,377 | | Net cash (used in) investing activities | (180,324) | (870,096) | 1,406,916 | (2,390,023) | | Net cash (used in) financing activities | 832,445 | 627,921 | 1,571,005 | (434,780) | | Increase (decrease) in cash and cash equivalents | (424,258) | 133,027 | (209,939) | (97,426) | | Cash and cash equivalents, end of period | 153,458 | 237,146 | 153,458 | 237,146 | - In the first nine months of 2024, net cash inflow from investing activities was 1,406,916 CAD, primarily due to the sale of exploration and evaluation assets for 1,900,000 CAD[8] - Net cash inflow from financing activities reached 1,571,005 CAD in the first nine months of 2024, mainly from the issuance of shares and convertible bonds[8] Notes to the Financial Statements This section details the company's information, going concern status, financial instruments, equity, revenue, related party transactions, risk management, and commitments Company Information and Basis of Preparation The company, incorporated in Alberta in 2005, engages in oil and gas exploration, with financial statements prepared in CAD under IAS 34 and HKEX Listing Rules - The company was incorporated in Alberta, Canada, in 2005, engaging in oil and gas exploration and development[9] - The company's shares are listed on The Stock Exchange of Hong Kong Limited under stock code '3395'[9] - Financial statements are prepared in CAD in accordance with International Accounting Standard 34 'Interim Financial Reporting' and comply with HKEX Listing Rules disclosure requirements[10] Going Concern Significant going concern uncertainties exist due to working capital deficits, operating losses, and market volatility, with continued operations dependent on positive cash flow or financing - As of September 30, 2024, the company had a working capital deficit of 20.6 million CAD and incurred operating losses of 3.2 million CAD and 1.1 million CAD for the three and nine months, respectively[11] - Wars in Ukraine and the Middle East, global warming, supply chain disruptions, and natural gas price volatility have significantly impacted the company's operating performance[11] - The company's ability to continue as a going concern depends on generating positive cash flow from operations, securing equity and/or debt financing, disposing of assets, or making other arrangements[11] Financial Assets and Liabilities Cash and cash equivalents decreased, accounts receivable declined, exploration assets reduced due to sales, while long-term debt and payables, including shareholder and CIMC loans, increased Cash and Cash Equivalents (as of September 30) | Metric | 2024 (CAD) | 2023 (CAD) | | :--- | :--- | :--- | | Deposits with banks and other financial institutions | 151,453 | 361,300 | | Cash on hand | 2,005 | 2,005 | | Total | 153,458 | 363,305 | Accounts Receivable (as of September 30) | Metric | 2024 (CAD) | 2023 (CAD) | | :--- | :--- | :--- | | Trade receivables | 58,410 | 829,041 | | Other | (1,763) | (3,078) | | Total | 56,647 | 825,963 | - In March 2024, the company sold five non-producing Basing assets for 1.9 million CAD, resulting in a decrease in exploration and evaluation assets and a reversal of 2023 impairment[19] Long-Term Debt (as of September 30) | Metric | 2024 (CAD) | 2023 (CAD) | | :--- | :--- | :--- | | Shareholder loan (net) | 10,332,639 | 11,370,713 | | Term debt/Subordinated debt | 3,389,586 | 3,885,912 | | Total | 13,588,317 | 15,082,539 | | Current | 12,988,689 | 3,529,806 | | Long-term | 599,628 | 11,552,733 | - On March 27, 2023, the company secured 3.5 million USD (4.7 million CAD) in new long-term debt from CIMC Leasing (USA) Inc. and an 8 million USD (10.8 million CAD) shareholder loan from JX, both at an annual interest rate of 9.25%[29][30] Equity and Convertible Instruments Issued ordinary shares increased, convertible bonds were issued and recognized as equity, and the share option scheme remains active, with some options excluded from EPS calculation Issued Ordinary Shares (as of September 30) | Metric | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Number of ordinary shares | 522,886,520 | 459,886,520 | | Amount (CAD) | 222,430,877 | 220,212,755 | - On July 24, 2024, the company entered into a 1.6 million USD convertible bond agreement with an annual interest rate of 12%, repayable in ordinary shares at maturity at an ascribed price of 0.20 HKD per share[41] - As of September 30, 2024, the company had 3,080,200 outstanding share options, with 2,280,000 at an exercise price of 0.52 HKD and 800,200 at 0.48 HKD[38][39] Revenue and Expenses Analysis Revenue significantly declined due to commodity price volatility and production shutdowns, while finance costs increased, leading to continued losses and no dividend recommendation Revenue Composition (as of September 30) | Metric | Three Months Ended 2024 (CAD) | Three Months Ended 2023 (CAD) | Nine Months Ended 2024 (CAD) | Nine Months Ended 2023 (CAD) | | :--- | :--- | :--- | :--- | :--- | | Total commodity production sales | 252,350 | 3,951,287 | 3,794,348 | 10,383,195 | | Total trading income (loss) | (1,815) | (372) | 1,441 | (22,060) | | Total other income | 4,705 | 5,318 | 14,809 | 18,415 | - The company's revenue primarily derives from the sale of natural gas, natural gas liquids, condensate, and crude oil under floating price contracts[42] Total Finance Costs (as of September 30) | Metric | Three Months Ended 2024 (CAD) | Three Months Ended 2023 (CAD) | Nine Months Ended 2024 (CAD) | Nine Months Ended 2023 (CAD) | | :--- | :--- | :--- | :--- | :--- | | Total finance costs | 779,223 | 853,274 | 2,513,898 | 1,379,060 | - For the nine months ended September 30, 2024, finance costs increased by 82% year-over-year, primarily due to the accretion of long-term payables and foreign exchange losses[47] - The Board does not recommend the payment of dividends for the three and nine months ended September 30, 2024, and 2023[51] Related Party Transactions and Remuneration Remuneration policy is performance-based, with key management and director compensation fluctuating, and shareholder loan repayments occurring - Total key management remuneration for the three and nine months of 2024 was 100,000 CAD and 70,000 CAD (including 380,000 CAD severance), respectively, compared to 220,000 CAD and 650,000 CAD for the same periods in 2023[53] - Total director remuneration for the three and nine months of 2024 was 80,000 CAD (compared to 60,000 CAD and 100,000 CAD for the same periods in 2023), including cash payments and accrued compensation under the shadow unit plan[54] - For the three and nine months ended September 30, 2024, the company repaid 110,000 CAD and 450,000 CAD of JX loans, respectively[55] Financial Instruments and Risk Management The company manages credit, liquidity, and market risks, including commodity price, interest rate, and foreign exchange, without using financial derivatives - The company faces credit risk, liquidity risk, and market risk, and has established risk management policies to identify, analyze, and control these risks[56] - As of September 30, 2024, the company's accounts receivable included 60,000 CAD due from crude oil and natural gas product purchasers, with no significant impairment allowance[57][58] Contractual Maturities of Financial Liabilities (as of September 30, 2024) | Metric | Carrying Amount (CAD) | Total (CAD) | 1 Year or Less (CAD) | 1-2 Years (CAD) | 3-5 Years (CAD) | Over 5 Years (CAD) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Accounts payable and accrued liabilities | 6,238,264 | 6,238,264 | 6,238,264 | – | – | – | | Long-term payables | 18,745,698 | 23,399,455 | – | – | 23,399,455 | – | | Shareholder loan | 10,332,639 | 10,509,626 | 9,747,626 | 762,000 | – | – | | Term debt | 3,255,678 | 3,389,586 | 3,389,586 | – | – | – | - As of September 30, 2024, the company had no financial derivative contracts and no floating-rate borrowings, thus interest rate changes have no significant impact on net loss[61][62] - The company manages foreign currency risk by monitoring exchange rates; a +/- 0.01 USD change in the USD to CAD exchange rate would decrease/increase foreign exchange gains by 80,000 CAD[63] Capital Structure (as of September 30) | Metric | 2024 (CAD) | 2023 (CAD) | | :--- | :--- | :--- | | Long-term debt | 599,628 | 11,552,733 | | Long-term related party payables | 18,006,427 | 12,343,492 | | Other liabilities | 109,075 | 118,868 | | Long-term lease liabilities | 26,144 | 251,069 | | Net working capital deficit | 20,606,252 | 13,119,691 | | Net debt | 39,347,525 | 37,385,853 | | Shareholders' equity | (10,799,550) | (5,499,985) | | Total capital | 28,547,975 | 31,885,868 | | Debt-to-equity ratio | 138% | 117% | - The company obtained Performance Security Guarantee (PSG) financing from Export Development Canada (EDC), which guarantees letters of credit as of September 30, 2024[65] Commitments The company has various commitments and contingencies, including 'take-or-pay' transportation agreements and the JX agreement Commitments (as of September 30, 2024) | Metric | Total (CAD) | Less than 1 Year (CAD) | 1-2 Years (CAD) | 3-5 Years (CAD) | Over 5 Years (CAD) | | :--- | :--- | :--- | :--- | :--- | :--- | | Transportation commitments | 6,925,254 | 3,197,057 | 3,728,197 | – | – | | JX agreement | 110,476,375 | 7,363,877 | 10,498,317 | 16,007,535 | 76,606,646 | | PSG facility | 733,000 | 733,000 | – | – | – | | Total | 118,134,629 | 11,293,934 | 14,226,514 | 16,007,535 | 76,606,646 | - The company entered into 'take-or-pay' firm service transportation agreements with a committed volume of 52.14 million cubic feet per day, valid until November 30, 2026[68] Management Discussion and Analysis This MD&A provides management's perspective on the company's operational and financial performance, liquidity, capital resources, governance, and non-IFRS measures Introduction and Outlook This MD&A reviews performance for the periods ended September 30, 2024, highlighting Basing area revenue, future drilling plans, recent financing, and debt repayment - This MD&A should be read in conjunction with the company's audited financial statements for the years ended December 31, 2023, and 2022[70] - Approximately 90% of the company's revenue is derived from the Basing area, with Western Canadian natural gas prices expected to remain around 2023 average levels[74] - On July 24, 2024, the company entered into a 1.6 million USD convertible bond agreement; in February and May 2024, the company issued 30 million and 33 million ordinary shares, respectively, through private placements, generating total proceeds of 1.28 million CAD and 1.26 million CAD[74][75] - On April 1, 2024, the company sold five undeveloped land sections in the Basing CGU for 1.9 million CAD[76] - On March 27, 2023, the company repaid outstanding subordinated debt using an 8 million USD shareholder loan from JX and a 3.5 million USD loan from CIMC Leasing (USA) Inc.[76] Selected Quarterly Information Total production is seasonally affected, with Q1 2024 low gas prices leading to decreased revenue, increased net loss, and well shutdowns, though a price recovery is anticipated Selected Quarterly Production and Financial Data | Metric | Q3 2024 | Q3 2023 | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | :--- | :--- | | Average daily total production (boe/day) | 30 | 1,902 | 1,461 | 1,789 | | Production revenue (thousand CAD) | 252 | 3,951 | 2,827 | 4,041 | | Net (loss) income (thousand CAD) | (4,212) | (2,863) | (3,430) | (2,096) | | Net working capital (thousand CAD) | (20,606) | (11,874) | (12,177) | (10,680) | - The company's revenue is strongest in the first and fourth quarters and weakest in the second and third quarters, reflecting the seasonal demand cycle for natural gas[79] - In April 2024, the company shut down natural gas wells due to uneconomic prices, partially restarted production in October 2024, and expects to resume full production by the end of 2024[79] - In Q2 2023, the company was forced to shut down Basing oil well production for approximately two weeks due to forest fires and received royalty credits from the Alberta government[80] Operating Results Analysis Total sales volume and production revenue significantly decreased due to well shutdowns and lower commodity prices, while operating, G&A, and finance costs increased Daily Production and Sales Volumes (as of September 30) | Metric | Three Months Ended 2024 | Three Months Ended 2023 | Change | Nine Months Ended 2024 | Nine Months Ended 2023 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total production (boe/day) | 30 | 1,902 | (98%) | 594 | 1,650 | (64%) | | Total sales volume (boe/day) | 33 | 1,914 | (98%) | 606 | 1,687 | (64%) | - For the three and nine months ended September 30, 2024, total sales volume was 98% and 64% lower than the respective prior periods, primarily due to natural gas wells being shut in from June to September 30, 2024[82] Production Revenue (as of September 30) | Metric | Three Months Ended 2024 (thousand CAD) | Three Months Ended 2023 (thousand CAD) | Change | Nine Months Ended 2024 (thousand CAD) | Nine Months Ended 2023 (thousand CAD) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Natural gas | – | 2,641 | (100%) | 2,153 | 7,225 | (70%) | | Crude oil | 237 | 499 | (53%) | 894 | 1,603 | (44%) | | Total production revenue | 252 | 3,951 | (94%) | 3,794 | 10,383 | (63%) | - For the three and nine months ended September 30, 2024, production revenue decreased by 94% and 65% respectively compared to the same periods in 2023, primarily due to declining commodity prices and natural gas production shutdowns[86] Average Commodity Sales Prices (as of September 30) | Metric | Three Months Ended 2024 (CAD) | Three Months Ended 2023 (CAD) | Change | Nine Months Ended 2024 (CAD) | Nine Months Ended 2023 (CAD) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Natural gas (CAD/Mcf) | – | 2.66 | (100%) | 2.38 | 2.85 | (16%) | | Crude oil (CAD/barrel) | 79.72 | 96.84 | (18%) | 90.78 | 95.50 | (5%) | | Natural gas liquids (CAD/barrel) | 208.82 | 25.97 | 704% | 96.81 | 30.75 | 215% | | Condensate (CAD/barrel) | 24,087.93 | 100.51 | 23866% | 96.81 | 99.71 | (3%) | - For the nine months ended September 30, 2024, realized natural gas sales prices decreased by 16% compared to the same period in 2023, mainly due to lower AECO pricing and unseasonably warm winter temperatures[88] Total Operating Costs (as of September 30) | Metric | Three Months Ended 2024 (thousand CAD) | Three Months Ended 2023 (thousand CAD) | Change | Nine Months Ended 2024 (thousand CAD) | Nine Months Ended 2023 (thousand CAD) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total operating costs | 3,169 | 3,702 | (14%) | 10,143 | 10,218 | (1%) | | Average cost (CAD/boe) | 1,164.47 | 21.16 | 5403% | 62.32 | 22.69 | 175% | - For the three and nine months ended September 30, 2024, total crude oil expenditures significantly increased, primarily due to a controlled oil spill at the company's wells, with cleanup costs of approximately 70,000 CAD[92] Total General and Administrative Expenses (as of September 30) | Metric | Three Months Ended 2024 (thousand CAD) | Three Months Ended 2023 (thousand CAD) | Change | Nine Months Ended 2024 (thousand CAD) | Nine Months Ended 2023 (thousand CAD) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total general and administrative expenses | 314 | 264 | 19% | 1,151 | 1,150 | 0% | | Capitalized personnel expenses | 27 | 60 | (56%) | 86 | 226 | (62%) | - For the three months ended September 30, 2024, total general and administrative expenses were 19% higher year-over-year, primarily due to changes in Board and related director fees[94] - For the nine months ended September 30, 2024, depletion, depreciation, and amortization totaled 1,464 thousand CAD, a 63% decrease year-over-year, but the cost per barrel of oil equivalent significantly increased due to reduced production[98][99] - For the nine months ended September 30, 2024, total loss and comprehensive loss was 11,490 thousand CAD, a 66% increase year-over-year, primarily due to declining commodity prices and production, and increased long-term payables[101] - For the nine months ended September 30, 2024, capital expenditures for property, plant, and equipment were 74 thousand CAD, and for exploration and evaluation assets were 19 thousand CAD[102] Liquidity and Capital Resources The company manages its capital structure, facing working capital deficiencies, and relies on recent debt and equity financing for liquidity and general working capital - The company's capital management objective is to maintain financial flexibility, fund growth strategies using internal cash flow and debt capacity, and optimize capital utilization[104] - As of September 30, 2024, the company had a working capital deficiency of 22.9 million CAD, and the CIMC and JX loans of 11.5 million USD were fully drawn[111] - The company's ability to continue as a going concern depends on generating positive cash flow from operations, securing equity financing, disposing of assets, or making other arrangements[111] - Net proceeds from private placements in November 2023 and March 2024 (1.20 million CAD and 1.26 million CAD, respectively) were used for general working capital[114][112] Issued Securities and Commitments The company issued ordinary shares via private placements, entered convertible bond agreements, forfeited warrants, maintains a share option scheme, and has various business commitments - As of September 30, 2024, the company had 522,886,520 ordinary shares issued and outstanding[118] - On July 24, 2024, the company entered into a 1.6 million USD convertible bond agreement, convertible into 63,947,219 ordinary shares at maturity[120] - There are 3.08 million outstanding options under the company's share option scheme[121] - The company has various business commitments and contingencies; details are provided in Notes 21 and 28 to the financial statements[122] Corporate Governance and Risk Management The company adheres to high corporate governance standards, with the Board overseeing risk management and internal controls, addressing risks from commodity prices, regulations, and environmental policies - The company did not approve the payment of dividends for the three and nine months ended September 30, 2024, and 2023[123] - For the three and nine months ended September 30, 2024, and 2023, the company was not involved in any off-balance sheet transactions[123] - All assets are pledged to support the company's debt arrangements[124] - The Board is fully responsible for establishing and overseeing the company's risk management framework and regularly reviews the effectiveness of internal control systems[128][136] - The company faces risks from changes in market indicators such as commodity prices, foreign exchange rates, and interest rates, as well as potential adverse impacts from changes in government policies, regulations, royalty regimes, or taxation[138] - The company complies with the Corporate Governance Code under the Listing Rules, but Mr. Liu Yongtan concurrently serves as Chairman and interim Chief Executive Officer, deviating from Code Provision C.2.1[144] - The Audit and Risk Committee has reviewed the interim results and believes they are prepared in compliance with applicable accounting standards, laws, regulations, and the Listing Rules[148] Non-IFRS Financial Measures The company uses non-IFRS measures like "Operating Netback" and "Adjusted EBITDA" to assess profitability and efficiency, noting they are not IFRS-defined - Operating Netback and Adjusted EBITDA are non-IFRS financial measures used to evaluate the company's operating performance and efficiency[141] Operating Netback (as of September 30) | Metric | Three Months Ended 2024 (thousand CAD) | Three Months Ended 2023 (thousand CAD) | Change | Nine Months Ended 2024 (thousand CAD) | Nine Months Ended 2023 (thousand CAD) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating netback | (2,968) | (210) | 1313% | (6,358) | (387) | 1544% | Adjusted EBITDA (as of September 30) | Metric | Three Months Ended 2024 (thousand CAD) | Three Months Ended 2023 (thousand CAD) | Change | Nine Months Ended 2024 (thousand CAD) | Nine Months Ended 2023 (thousand CAD) | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | (3,280) | (549) | 498% | (7,491) | (1,636) | 358% | Selected Abbreviations This section defines abbreviations for crude oil, natural gas, and other units, including imperial to metric conversion factors used in the report - Abbreviations used in the report include Bbls/d (barrels per day), Boe (barrels of oil equivalent), Mcf (thousand cubic feet), among others[150][151] - Imperial to metric conversion factors are provided, such as 1 barrel = 0.1590 cubic meters and 1 acre = 0.4047 hectares[153]