CROWN POINT ENERGY INC.
Condensed Interim Consolidated Financial Statements
For the three and nine months ended September 30, 2024
(Unaudited)
Notice of No Auditor Review of
Condensed Interim Consolidated Financial Statements
In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed these unaudited condensed interim consolidated financial statements as at and for the three and nine months ended September 30, 2024.
CROWN POINT ENERGY INC.
CONSENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
(United States Dollars)
September 30 | December 31 | ||||||
As at | Note | 2024 | 2023 | ||||
Assets | |||||||
Current assets: | |||||||
Cash | $ | 283,740 | $ | 191,507 | |||
Investments | 3 | - | 2,667,792 | ||||
Trade and other receivables | 4 | 2,744,212 | 1,917,440 | ||||
Hydrocarbon inventories | 480,946 | 1,456,822 | |||||
Prepaid expenses and other current assets | 5 | 1,983,738 | 1,402,847 | ||||
5,492,636 | 7,636,408 | ||||||
Exploration and evaluation assets | 14,094,575 | 14,103,353 | |||||
Property and equipment | 6 | 41,925,646 | 45,834,731 | ||||
Restricted cash | 9 | 131,588 | 123,653 | ||||
Deferred tax asset | 18 | 1,790,468 | - | ||||
Other non-current assets | 7 | 2,780,520 | 87,520 | ||||
$ | 66,215,433 | $ | 67,785,665 | ||||
Liabilities and Shareholders' Equity | |||||||
Current liabilities: | |||||||
Trade and other payables | 10 | $ | 5,564,137 | $ | 5,768,105 | ||
Bank debt | 8 | 6,918,248 | 508,114 | ||||
Current portion of notes payable | 9 | 22,061,186 | 12,298,533 | ||||
Current portion of decommissioning provision | 11 | 365,112 | 360,546 | ||||
Current portion of lease liabilities | 12 | 256,857 | 487,044 | ||||
35,165,540 | 19,422,342 | ||||||
Non-current trade and other payables | 10 | 1,491,526 | 1,480,545 | ||||
Notes payable | 9 | 7,183,054 | 16,459,187 | ||||
Decommissioning provision | 11 | 10,264,898 | 10,061,672 | ||||
Lease liabilities | 12 | 318,496 | 378,124 | ||||
Deferred tax liability | 18 | - | 2,151,708 | ||||
54,423,514 | 49,953,578 | ||||||
Shareholders' equity: | |||||||
Share capital | 56,456,328 | 56,456,328 | |||||
Contributed surplus | 691,343 | 691,343 | |||||
Accumulated other comprehensive loss | (18,233,078) | (18,217,300) | |||||
Deficit | (27,122,674) | (21,098,284) | |||||
11,791,919 | 17,832,087 | ||||||
$ | 66,215,433 | $ | 67,785,665 | ||||
Going concern | 1 | ||||||
Commitments | 23 | ||||||
Subsequent events | 24 | ||||||
Approved on behalf of the Board of Directors: | "Gordon Kettleson" | "Pablo Peralta" | |||||
Gordon Kettleson, Director | Pablo Peralta, Director |
See accompanying notes to condensed interim consolidated financial statements. | 2 |
CROWN POINT ENERGY INC.
CONSENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS
AND COMPREHENSIVE LOSS
(Unaudited)
(United States Dollars)
For the three months ended | For the nine months ended | ||||||||
September 30 | September 30 | ||||||||
Note | 2024 | 2023 | 2024 | 2023 | |||||
Revenue | |||||||||
Oil and natural gas sales | 15 | $ | 5,560,809 | $ | 7,400,992 | $ | 17,246,209 | $ | 21,235,332 |
Processing income | 84,491 | 64,507 | 244,556 | 191,658 | |||||
Export tax | (76,514) | (139,494) | (309,309) | (377,964) | |||||
Royalties and turnover tax | (999,926) | (1,299,685) | (3,045,017) | (3,557,850) | |||||
4,568,860 | 6,026,320 | 14,136,439 | 17,491,176 | ||||||
Expenses | |||||||||
Operating | 4,877,196 | 4,793,415 | 14,118,773 | 15,048,736 | |||||
General and administrative | 16 | 851,857 | 605,244 | 2,265,586 | 2,048,239 | ||||
Depletion and depreciation | 1,555,900 | 1,925,601 | 6,167,207 | 5,724,323 | |||||
Share-based payments | 13 | - | - | - | 16,148 | ||||
Foreign exchange gains | (76,428) | 180,198 | (554,168) | (630,642) | |||||
7,208,525 | 7,504,458 | 21,997,398 | 22,206,804 | ||||||
Operating loss | (2,639,665) | (1,478,138) | (7,860,959) | (4,715,628) | |||||
Other income | - | - | 133,993 | - | |||||
Net finance expense | 17 | (850,431) | (606,838) | (2,239,600) | (3,035,410) | ||||
Loss before taxes | (3,490,096) | (2,084,976) | (9,966,566) | (7,751,038) | |||||
Tax recovery | 18 | 1,426,124 | 57,339 | 3,942,176 | 1,719,489 | ||||
Net loss | (2,063,972) | (2,027,637) | (6,024,390) | (6,031,549) | |||||
Other comprehensive income | |||||||||
(loss) | |||||||||
Items that may subsequently be | |||||||||
reclassified to profit or loss | |||||||||
Exchange differences on translation | |||||||||
of Canadian parent company | 16,175 | (17,192) | (15,778) | 10,971 | |||||
Total comprehensive loss | $ | (2,047,797) | (2,044,829) | $ | (6,040,168) | (6,020,578) | |||
Net loss per share | 14 | ||||||||
Basic | $ | (0.03) | (0.03) | $ | (0.08) | (0.08) |
See accompanying notes to condensed interim consolidated financial statements. | 3 |
CROWN POINT ENERGY INC.
CONSENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(United States Dollars)
For the nine months ended September 30 | Note | 2024 | 2023 | |
Share capital | ||||
72,903,038 common shares issued and outstanding | ||||
Balance, January 1 and September 30 | $ | 56,456,328 | $ | 56,456,328 |
Contributed surplus | ||||
Balance, January 1 | 691,343 | 675,195 | ||
Share-based payments | 13 | - | 16,148 | |
Balance, September 30 | 691,343 | 691,343 | ||
Accumulated other comprehensive loss | ||||
Balance, January 1 | (18,217,300) | (18,260,539) | ||
Exchange differences on translation of Canadian | ||||
parent company | (15,778) | 10,971 | ||
Balance, September 30 | (18,233,078) | (18,249,568) | ||
Deficit | ||||
Balance, January 1 | (21,098,284) | (12,970,652) | ||
Net loss | (6,024,390) | (6,031,549) | ||
Balance, September 30 | (27,122,674) | (19,002,201) | ||
Total shareholders' equity | $ | 11,791,919 | $ | 19,895,902 |
See accompanying notes to condensed interim consolidated financial statements. | 4 |
CROWN POINT ENERGY INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(United States Dollars)
For the nine months ended September 30 | Note | 2024 | 2023 | |
Operating activities | ||||
Net loss | $ | (6,024,390) | $ | (6,031,549) |
Items not affecting cash: | ||||
Depletion and depreciation | 6,167,207 | 5,724,323 | ||
Share-based payments | 13 | - | 16,148 | |
Net finance expense | 2,061,377 | 3,002,912 | ||
Unrealized foreign exchange gains | (347,910) | (1,493,533) | ||
Tax recovery | 18 | (3,942,176) | (1,719,489) | |
Funds flow used in operating activities | (2,085,892) | (501,188) | ||
Change in non-cash working capital | 19 | (775,528) | 2,954,759 | |
Net cash (used in) provided by operating activities | (2,861,420) | 2,453,571 | ||
Financing activities | ||||
Bank debt proceeds | 8 | 11,363,883 | 5,786,255 | |
Bank debt repayments | 8 | (4,640,062) | (6,797,771) | |
Bank debt interest payments | 8 | (1,311,270) | (2,152,382) | |
Notes payable proceeds | 7,064,733 | 7,344,886 | ||
Notes payable repayments | 9 | (6,281,900) | - | |
Notes payable interest payments | 9 | (882,938) | (438,396) | |
Restricted cash | 22,983 | 93,793 | ||
Lease payments | 12 | (403,067) | (428,598) | |
Net cash provided by financing activities | 4,932,362 | 3,407,787 | ||
Investing activities | ||||
Exploration and evaluation expenditures | - | (10,523) | ||
Property and equipment expenditures | 6 | (1,976,370) | (4,928,762) | |
Settlement of contingent consideration liability | - | (219,888) | ||
Collection of contingent consideration receivable | - | 86,022 | ||
Proceeds from redemption of investments | 3 | 2,930,954 | - | |
Acquisition advance payment | 7 | (2,693,000) | - | |
Change in non-cash working capital | 19 | (211,433) | (589,211) | |
Net cash used in investing activities | (1,949,849) | (5,662,362) | ||
Change in cash | 121,093 | 198,996 | ||
Foreign exchange effect on cash held in foreign currencies | (28,860) | (331,817) | ||
Cash, January 1 | 191,507 | 536,752 | ||
Cash, September 30 | $ | 283,740 | $ | 403,931 |
See accompanying notes to condensed interim consolidated financial statements. | 5 |
CROWN POINT ENERGY INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2024
(Unaudited)
(United States Dollars)
1. REPORTING ENTITY AND GOING CONCERN:
Crown Point Energy Inc. ("Crown Point" or the "Company") was incorporated under the laws of British Columbia and continued under the laws of Alberta on July 27, 2012. Crown Point is based in Calgary, Alberta and is involved in the exploration for, and development and production of, petroleum and natural gas in Argentina.
The Company's registered office is Suite 2400, 525 - 8th Avenue SW, Calgary, Alberta, T2P 1G1.
As at September 30, 2024, Liminar Energía S.A. ("Liminar"), the Company's largest shareholder owned approximately 63.9% of the Company's issued and outstanding common shares. See Note 20(a).
These consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and the payment of liabilities in the ordinary course of business.
For the three and nine months ended September 30, 2024, the Company reported a loss of $6 million (nine months ended September 30, 2023 - $6 million) and a working capital deficit of $29.7 million at that date (December 31, 2023 - $11.8 million working capital deficit). As of September 30, 2024, the carrying amount of notes payable outstanding is $29.2 million (Note 9), of which $22.1 million is classified as a current liability. The maturities of the Company's financial liabilities based on contractual cash flows are disclosed in Note 21. In addition, the Company has significant future capital commitments to develop its properties (Note 23).
The ability of the Company to continue as a going concern is dependent upon the Company's ability to obtain additional financing through bank debt and/or the issuance of notes payable or equity, and the generation of funds from operating activities to meet current and future obligations. Management plans to secure the necessary financing for its debt and future capital commitments through the issuance of new notes payable or other debt or equity instruments, however, there is no assurance that these initiatives will be successful. The need to obtain additional capital to repay or refinance bank debt and notes payable (Note 24) and to fund the Company's existing commitments and ongoing operations creates a material uncertainty that may cast significant doubt about the Company's ability to meet its obligations as they become due, and accordingly, the appropriateness of the use of accounting principles applicable to a going concern.
These consolidated financial statements do not reflect adjustments in the carrying values of the assets and liabilities, expenses and the statements of financial position classifications that would be necessary if the going concern assumption were not appropriate. Such adjustments could be material.
2. BASIS OF PRESENTATION:
The unaudited condensed interim consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards") and adhere to the guidance of International Accounting Standard 34 - Interim Financial Reporting. Certain information and disclosures included in the December 31, 2023 audited consolidated financial statements, prepared in accordance with IFRS Accounting Standards, have been condensed or omitted. The Company has consistently applied the same accounting policies throughout all periods presented. These unaudited condensed interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023.
The unaudited condensed interim consolidated financial statements were approved and authorized for issuance by the Board of Directors on November 11, 2024.
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CROWN POINT ENERGY INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2024
(Unaudited)
(United States Dollars)
3. INVESTMENTS:
A continuity of the Company's investments is as follows:
Balance, December 31, 2023 | $ | 2,667,792 |
Proceeds on redemption | (2,930,954) | |
Interest income | 333,324 | |
Change in fair value (Note 17) | (23,182) | |
Effect of change in exchange rates | (46,980) | |
Balance, September 30, 2024 | $ | - |
4. TRADE AND OTHER RECEIVABLES:
The Company's trade and other receivables are exposed to the risk of financial loss if the counterparty fails to meet its contractual obligations. The Company's trade and other receivables include amounts due from the sale of crude oil and natural gas. The majority of the Company's oil production is exported by the Company to two international traders and sold to two Argentine companies; the majority of the Company's natural gas production is sold by the Company to several Argentine companies.
Three major purchasers that represents 96% of oil revenue reported in the nine months ended September 30, 2024 comprise $1,863,004 of accounts receivable at September 30, 2024 (December 31, 2023 - two major purchasers, 89% of oil revenue, $1,394,639 of accounts receivable) and one major purchaser that represents 77% of natural gas revenue reported in the nine months ended September 30, 2024 comprises $430,761 of accounts receivable at September 30, 2024 (December 31, 2023
- two major purchasers, 75% of natural gas revenue, $290,808 of accounts receivable) (Note 15).
The Company's maximum exposure to credit risk at September 30, 2024 and December 31, 2023 in respect of trade and other
receivables consists of: | ||||
September 30 | December 31 | |||
2024 | 2023 | |||
Due from Argentine companies | $ | 1,676,656 | $ | 1,470,396 |
Due from an international company | 656,579 | 296,157 | ||
Due from related parties (Note 20(d)) | 430,761 | 290,769 | ||
Other receivables | 215,206 | 95,157 | ||
Allowance for credit losses | (234,990) | (235,039) | ||
Total trade and other receivables | $ | 2,744,212 | $ | 1,917,440 |
The Company's trade and other receivables are aged as follows: | ||||
September 30 | December 31 | |||
2024 | 2023 | |||
Not past due (less than 90 days) | $ | 2,761,107 | $ | 1,934,822 |
Past due (more than 90 days) | 218,095 | 217,657 | ||
2,979,202 | 2,152,479 | |||
Allowance for credit losses | (234,990) | (235,039) | ||
Total trade and other receivables | $ | 2,744,212 | $ | 1,917,440 |
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
September 30 | December 31 | |||
2024 | 2023 | |||
Prepaid expenses | $ | 1,545,857 | $ | 1,027,441 |
Value Added Tax | 437,881 | 375,406 | ||
Total prepaid expenses and other current assets | $ | 1,983,738 | $ | 1,402,847 |
Value Added Tax ("VAT") on purchases is applied against VAT on sales to reduce the amount paid to the Argentine Government. VAT is included in prepaid expenses when amounts are expected to be offset with VAT on current sales. VAT does not expire and may be carried forward indefinitely.
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CROWN POINT ENERGY INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2024
(Unaudited)
(United States Dollars)
6. PROPERTY AND EQUIPMENT:
Argentina | Canada | |||||
Development | ||||||
and production | Right-of- | Other | Other | |||
assets | use assets | assets | assets | Total | ||
Cost: | $ | $ | $ | $ | $ | |
Balance, December 31, 2023 | 126,133,260 | 1,225,613 | 658,466 | 295,192 | 128,312,531 | |
Additions | 1,846,299 | - | 130,071 | - | 1,976,370 | |
Right-of-use asset revisions | - | 30,941 | - | - | 30,941 | |
Government grants | (50,850) | - | - | - | (50,850) | |
Decommissioning revisions | (115,452) | - | - | - | (115,452) | |
Effect of change in exchange rates | - | (16,989) | - | (5,973) | (22,962) | |
Balance, September 30, 2024 | 127,813,257 | 1,239,565 | 788,537 | 289,219 | 130,130,578 | |
Accumulated depletion and depreciation: | ||||||
Balance, December 31, 2023 | 72,355,454 | 379,147 | 577,368 | 289,831 | 73,601,800 | |
Depletion and depreciation | 5,385,294 | 378,673 | 33,571 | 1,174 | 5,798,712 | |
Right-of-use asset revisions | - | (63,840) | - | - | (63,840) | |
Effect of change in exchange rates | - | (1,884) | - | (5,856) | (7,740) | |
Balance, September 30, 2024 | 77,740,748 | 692,096 | 610,939 | 285,149 | 79,328,932 | |
Accumulated impairment: | ||||||
Balance, December 31, 2023 and | ||||||
September 30, 2024 | 8,876,000 | - | - | - | 8,876,000 | |
Net carrying amount: | ||||||
At December 31, 2023 | 44,901,806 | 846,466 | 81,098 | 5,361 | 45,834,731 | |
At September 30, 2024 | 41,196,509 | 547,469 | 177,598 | 4,070 | 41,925,646 |
Government grants
In July 2021 the Province of Mendoza created the Mendoza Activa Hydrocarbons II Program ("Program II") to promote and increase the development and reactivation of hydrocarbon activity in the Province. Program II provides a refund ("government grant") of up to 40% of amounts invested in the Province prior to December 31, 2022, that met certain technical and economic requirements. Government grants are paid as follows:
- 50% in the form of a turnover tax credit that is freely transferable and may be applied against up to 10% of the holder's monthly turnover tax balance; and
- 50% in the form of a royalty credit that can be applied against provincial royalties on incremental production obtained from the related investment.
Government grants received under Program II expire on December 31, 2025, and may be extended for up to three years if certain criteria are met.
During the nine months ended September 30, 2024, the Company received ARS 43.5 million ($0.05 million) of Program II turnover tax and royalty credits related to investments in the CH Concession.
Future development costs
The depletion expense calculation for the nine months ended September 30, 2024, included $75.6 million (December 31, 2023
- $76.2 million) for estimated future development costs associated with petroleum and natural gas proved and probable reserves in Argentina.
Right-of-use asset revisions
During the nine months ending September 30, 2024, the Company renewed certain leases for which the related lease liability and right-of-use asset was determined to be $138,667 on the renewal date. The remaining right-of-use asset net book value of the original office lease was $43,886 with a corresponding lease liability of $50,537 (Note 12), resulting in $6,651 gain reported in finance income (Note 17).
8
CROWN POINT ENERGY INC.
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2024 (Unaudited)
(United States Dollars)
7. OTHER NON-CURRENT ASSETS | ||||
September 30 | December 31 | |||
2024 | 2023 | |||
Santa Cruz Concessions acquisition advance payment (a) | $ | 2,400,000 | $ | - |
Tierra del Fuego Concessions acquisition advance payment (b) | 293,000 | - | ||
Contingent consideration receivable | 87,520 | 87,520 | ||
Total non-current assets | $ | 2,780,520 | $ | 87,520 |
- On February 1, 2024, the Company's wholly owned subsidiary, Crown Point Energía S.A. ("Crown Point Energía"), entered into an asset sale and purchase agreement (the "Acquisition Agreement") with Pan American Energy S.L., Sucursal Argentina (the "Seller") to acquire the Seller's 100% working interest in the Piedra Clavada and Koluel Kaike hydrocarbon exploitation concessions (the "Santa Cruz Concessions", and collectively, the "Acquisition"). The purchase price is comprised of $12 million cash, subject to closing adjustments, plus contingent in-kind consideration payable throughout a 15-year period following closing. On February 7, 2024, the Company made a $2.4 million advance payment to the Seller.
The Acquisition closed on October 31, 2024 (Note 24(c)) and the effective date of the Acquisition is January 1, 2024. - On August 12, 2024, the Company entered into a sale and purchase agreement with an arm's length party (the "Seller") to acquire the Seller's 16.9972% non-operating participating interest (the "Participating Interest Acquisition") in the Rio Cullen, Las Violetas and La Angostura hydrocarbon exploitation concessions (the "TDF Concessions") located in the
Tierra del Fuego region of the Austral basin in southern Argentina. The purchase price payable by Crown Point to the Seller is $0.7 million cash ($0.3 million of which has been paid as a deposit), subject to customary closing adjustments, including for crude oil and natural gas inventories attributable to the participating interest on the effective date of the Acquisition, which is July 1, 2024.
Completion of the Participating Interest Acquisition is subject to, among other things, the receipt of all necessary regulatory, stock exchange and Provincial approvals, the waiver or expiration of applicable rights of first refusal ("ROFR"), and other customary closing conditions. Crown Point's partners in the TDF Concessions have ROFRs in connection with the Participating Interest Acquisition. If one or more of such partners exercises its ROFR, the Company will acquire the portion of the participating interest in respect of which the ROFR has not been exercised and the purchase price shall be adjusted accordingly.
8. BANK DEBT:
The Company's bank debt is not subject to covenants. A continuity of the Company's current bank debt is as follows:
Balance, December 31, 2023 | $ | 508,114 |
Proceeds | 11,363,883 | |
Repayments | (4,640,062) | |
Interest accrued (Note 17) | 1,428,950 | |
Interest paid | (1,311,270) | |
Effect of change in exchange rates | (431,367) | |
Balance, September 30, 2024 | $ | 6,918,248 |
As at September 30, 2024 and December 31, 2023, bank debt was comprised of the following balances:
September 30 | December 31 | |||
2024 | 2023 | |||
Banco Hipotecario S.A. (a) | $ | 1,000,412 | $ | - |
Banco Galicia S.A.U. (b) | 361,505 | 67,019 | ||
Banco de la Nación (c) | 1,443,718 | 441,095 | ||
HSBC Bank Argentina S.A. (e) | 206,815 | - | ||
Banco CMF S.A. (f) | 206,270 | - | ||
Banco Macro S.A. (g) | 2,510,000 | - | ||
Banco Ciudad (h) | 574,487 | - | ||
Related party loan (i) | 615,041 | - | ||
$ | 6,918,248 | $ | 508,114 |
- Banco Hipotecario S.A.
The Company has an overdraft loan agreement with Banco Hipotecario S.A. for up to ARS 1,600 million ($1.75 million) available until August 7, 2024, with a variable interest rate determined monthly. The overdraft loan agreement was renewed until November 15, 2024, for a reduced amount of ARS 500 million ($0.5 million). The overdraft loan is guaranteed by Grupo ST S.A. under an agreement with Banco Hipotecario S.A. pursuant to which the Company is charged a loan guarantee fee of 1% of the loan balance per annum (Note 20(c)).
9