Star Phoenix, an AIM listed company (AIM: STA) focused on growth through attractive opportunities, today releases its half-year report (unaudited) for the 6 months ending 31 December 2020.
About this Report
This half-year report (unaudited) is a summary of Star Phoenix Group Ltd ("Star Phoenix") operations, activities and financial position for the half-year ended 31 December 2020. It complies with Australian reporting requirements. Star Phoenix (ABN 88 002 522 009) is a company limited by shares and is incorporated and domiciled in Australia.
Unless otherwise stated in this report, all references to Star Phoenix, the Group, the Company, we, us and our, refer to its controlled entities as a whole. References to the half-year or period are to the half-year ended 31 December 2020. All dollar figures are expressed in United States currency unless otherwise stated.
The Directors of Star Phoenix and the entities it controls (together, the "Group") present the financial report for the half-year ended 31 December 2020.
The persons who were Directors at any time during or since the end of the half-year are:
Mr Zhiwei (Kerry) Gu
Mr Lubing Liu
Executive Director and Chief Operating Officer
Dr Mu (Robin) Luo
Dr YuFeng Meng
Non-Executive Director (appointed 14 April 2020; removed 25 September 2020)
The Directors were in office for the entire period unless otherwise stated.
During the half-year, the Company's main focus was on securing new attractive acquisition and investment opportunities to provide future growth and value for the Company and its shareholders. In addition, the Company's efforts were aimed at resolving matters in relation to its legacy assets and transactions.
No dividends have been declared, provided for or paid in respect of the half-year ended 31 December 2020 (half-year ended 31 December 2019: Nil).
The loss for the financial half-year ended 31 December 2020 amounted to US$2,129,934 (loss for half-year ended 31 December 2019: US$5,517,131).
At 31 December 2020, the Group had net assets of US$237,570 (30 June 2020: net assets of US$2,488,818) and cash of US$2,732,471 (30 June 2020: US$3,164,752).
Auditor's Independence Declaration
The Lead auditor's independence declaration under section 307C of the Corporations Act 2001 is set out on page 7 for the half-year ended 31 December 2020. This report is made in accordance with a resolution of the Board of Directors.
Operational and Corporate Review
New acquisition opportunities
The Company's key focus remains on securing new attractive acquisition opportunities to provide future growth and value for the Company and its shareholders. During the previous 12 months, the Company had reviewed significant number of new projects and investment opportunities. Currently, discussions are ongoing with several parties in relation to new projects in the energy sector. The directors are confident that these discussions will eventuate in securing a new project for the Company on attractive terms.
Oilfield services business
During the half-year, the Company took necessary steps to further cut the ongoing costs of its oilfield services business in Trinidad ("Range Resources Drilling Services Limited" or "RRDSL") in light of the COVID-19 pandemic. As part of the cost reduction programme, the Company completed a comprehensive organization restructuring of RRDSL along with other cost cutting measures.
To provide additional cashflow and to strengthen the financial position, the Company completed the sale of four smaller production rigs and equipment for a total sum of US$278,965.
Following extensive efforts by the Company to find a suitable purchaser for its non-operated 23% interest in the Indonesia project, the Company made a decision to no longer pursue the sale opportunities of its interest and will instead focus on relinquishing any interests in the project.
Outstanding payable from LandOcean
Following the sale of Range Resources Trinidad Limited (which held interests in the upstream assets in Trinidad) to LandOcean Energy Services Co Ltd ("LandOcean") on 31 March 2020, certain sums remain due and payable to the Company.
During the half-year, the Group received US$282,610 from LandOcean towards the outstanding balance. At 31 December 2020, the Board made the decision to fully impair the receivable from LandOcean to adhere to accounting standards given the situation and age of the balances, resulting to an impairment of US$1,722,462. No further payments have been received to date.
Shares issue to Executives
The Executive Directors and senior management of the Company agreed to accept ordinary shares in the Company ("Shares") in lieu of the accrued salaries in order to preserve cash resources of the Company, resulting in total cash saving of US$201,651 to the Company.
Following shareholder approval received at the Annual General Meeting held on 11 December 2020, the Company issued a total of 7,195,036 at a deemed price of 2 pence to two Executive Directors. Of which, Mr Zhiwei Gu, Executive Chairman, was issued 5,468,959 Shares and Mr Lubing Liu, Executive Director and Chief Operating Officer, was issued 1,726,077 Shares. These Shares were issued subsequent to the half-year end. The management were issued 420,040 Shares at a deemed price of 2 pence subsequent to the half-year end.
The Company entered into a consultancy agreement with Fire Phoenix Ltd ("Consultant") effective from 10 November 2020 to provide the Company with business development and M&A advisory services for a monthly fee of US$13,000. The Consultant is deemed to be a related party of Beijing Sibo Investment Management LP (Sibo) which holds over 10% shareholding in the Company, for the purposes of the AIM Rules for Companies (AIM Rules). In view of this, the entry into the Consultancy Agreement comprised a related party transaction for the purposes of the AIM Rules. The Consultant's total remuneration for the period was US$21,667.
Extraordinary General Meeting of Shareholders
On the requests from two separate Shareholders, each of which holds at least 5% of the votes that may be cast at a general meeting of the Company, the Company held an Extraordinary General Meeting of Shareholders to consider the resolutions proposed pursuant to these requests. The Meeting was held on 25 September 2020, where only one resolution relating to the removal of Dr YuFeng Meng as a Director (nominee of shareholder Sibo) was duly passed. As a result, Dr Meng was removed as a director effective 25 September 2020.
Change of registered office and principal place of business
The Company's registered office and the principal place of business changed to c/o Edwards Mac Scovell, 8 St Georges Terrace, Perth, WA 6000, Australia.
The impact of the Coronavirus (COVID-19) pandemic is ongoing, and it has been financially negative for the Group. It is not practicable to estimate the potential impact as the situation is continuously developing and is dependent on measures imposed by the governments of different countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
Events subsequent to reporting date
Oilfield services business
The Company engaged an independent specialist broker to assist with sale of the remaining eight rigs and related equipment. Whilst the marketing campaign is currently underway (there being no guarantee that it will eventuate in sale agreements being reached), the Company secured dry lease agreements for some of the rigs which will generate additional revenue for the Company.
The Company and Strait Oil and Gas Limited ("SOG"), a private company incorporated in Gibraltar, in which Star Phoenix holds a 65% interest had been working with their legal advisers on progressing an arbitration claim against the government of Georgia.
The Advisers had formally notified the government of Georgia of the existence of an investment dispute under the Energy Charter Treaty (ECT) ("Notice of Dispute"). The Notice of Dispute set out the position on SOG's unfair treatment in Georgia and how its investment in Georgia, which exceeds US$22 million, was damaged. SOG and its shareholders are intending to submit an investment treaty claim under the ECT to international arbitration.
Outstanding payable from LandOcean
The Company's legal advisers notified LandOcean that the Company elected to terminate the SPA due to repudiatory breach by LandOcean and is claiming various sums of US$10,248,000. The Company is planning to commence arbitration proceedings in the London Court of International Arbitration to recover the sums.
Although the receivable amount was fully impaired, the Company remains confident that at least part of these sums will be recovered.
Shares issue to Executives
Following shareholder approval received at the Annual General Meeting held on 11 December 2020, the Company issued a total of 7,195,036 shares to two Executive Directors, of which, Mr Zhiwei Gu, Executive Chairman, was issued 5,468,959 shares and Mr Lubing Liu, Executive Director and Chief Operating Officer, was issued 1,726,077 shares. The shares were issued subsequent to the half-year end. The management were issued 420,040 shares subsequent to the half-year end.