TIDMDELT
RNS Number : 8047V
Deltic Energy PLC
19 April 2021
19 April 2021
Deltic Energy Plc / Index: AIM / Epic: DELT / Sector: Natural
Resources
Deltic Energy Plc ("Deltic" or "the Company")
Final Results
Deltic Energy Plc, the AIM-quoted natural resources investing
company with a high impact exploration and appraisal portfolio
focused on the Southern and Central North Sea, is pleased to
announce its audited results for the year ended 31 December 2020
('FY 2020').
Highlights
-- Completed rigorous technical programme on Pensacola (Licence
P2252) resulting in the post period announcement that the
Deltic-Shell JV will drill a well on the prospect in May 2022
-- Ongoing technical work on Selene (Licence P2437) delivering
resource update including increase in GIIP and significantly
enhanced geological chance of success. Exploration well expected in
2022
-- Significant progress on Cupertino Area (Licence P2428)
following reprocessing of seismic data to deliver a material
resource update with combined P50 prospective gas resource of close
to 1 TCF (over 150mmboe). Farmout process underway with significant
interest from potential partners
-- Reprocessing of legacy seismic on Cortez prospects (Licence
P2424) with Primary Cortez South prospect identified with estimated
P50 prospective resources of over 300 BCF
-- Award of six new licences in UK's 32nd Licensing Round
including the previously held Cadence prospect (blocks 43/11 and
43/12)
-- Further expansion of partnership with Shell with the award of
an additional new joint licence to the north of Pensacola (blocks
41/5b and 42/1b)
-- Net cash outflow from operations and investing activity for
the year of GBP1.8 million (2019: GBP1.8 million)
-- Cash position of GBP12.0 million at 31 December 2020 (2019:
GBP13.8 million) with no debt. As at 31 March 2021, the Company had
cash on hand (unaudited) of GBP11.52 million
Graham Swindells, Chief Executive of Deltic Energy,
commented:
"Over the last year, we have continued to make significant
progress in advancing our existing licence portfolio and both
materially expanding and diversifying the overall asset base of the
Company. We have continued to work closely with our partner Shell
on our two most advanced projects resulting in the recent firm well
investment decision on the Pensacola Prospect while continuing to
move closer to a well investment decision on Selene. The Company
continues to execute its natural gas focussed exploration strategy,
strengthening its strategic position in the Southern North Sea
following another successful outcome in the UK's latest licensing
round which doubled the number of licences the company holds. With
our attractive portfolio of gas-focussed prospects located close to
existing infrastructure, coupled with an improved outlook in the
form of commodity prices and increased levels of activity, we are
in a strong position to deliver growth. We look forward to further
progressing our prospects towards drilling and continuing to
develop our partnership with Shell as we move closer to drilling
our first well at Pensacola."
Chairman's Statement
To say 2020 was a challenging year would be an understatement in
so many ways. It was a very difficult situation to manage for many
in our industry but especially for those with complex offshore
operations involving workers travelling to and from many places in
the UK and the rest of the world. To add to the challenge, global
demand along with other external factors caused commodity prices in
our sector to fall dramatically.
Setting aside the direct aspects of the pandemic and the
roll-out of effective vaccines around the world, we have already
seen very strong signs of recovery in terms of our sector.
Just a year ago, in April 2020, a barrel of Brent Crude, a
standard indicator for a range of commodities, was trading at about
$25. At the time of writing the price is above $60 per barrel.
Natural Gas prices have also recovered well.
In the same period, we have seen growing UK Government support,
clearly displayed in the publication of the North Sea Transition
Deal which the Government announced during March 2021. This clearly
recognises the importance of our sector for the UK in terms of
security of energy supply, tax receipts and jobs; balanced with our
industry's need to play our part in the transition to a net-zero
emissions future.
Linked to that, no statement describing our industry in April
2021 would be complete without reference to climate change and
plans to tackle the problems we face across the globe as a result
of its effects. 2019 was the year the UK Government led the world
in being the first to sign into law a commitment to having a
net-zero contribution to global greenhouse gas emissions by 2050,
following the recommendations of the independent Committee on
Climate Change. At Deltic, we support this position entirely and
are fully committed to playing our part in the next stage of the
UK's development.
This decision by the UK Government shifted the climate change
argument from 'the what and the why?' in 2019 into 'the how?' in
2020. This in turn raised difficult questions and caused sensible
voices to emerge with solutions showing, among other things, that
natural gas is part of the solution and not part of the problem.
Combined with hydrogen, carbon capture and storage (CCS) and other
technologies, natural gas, the single greatest contributor to UK
total energy supply in 2019, remains an important part of an
affordable, reliable, low carbon energy mix for the foreseeable
future. Clearly, a domestic supply of this natural resource beats
imported gas in terms of jobs, Treasury receipts and environmental
impact.
Deltic Energy has an excellent position within this context:
Planning of our first exploration well is underway at Pensacola
with Shell, a worldwide leader in Exploration and Production, as
the Operator. Our CEO, Graham, will cover this in more detail but
clearly this is a defining moment for our company as we prepare to
drill prospects identified by Deltic. Further, this is entirely
in-line with our stated strategy of building a conveyor belt of
opportunities from identification and acquisition of assets through
to discovery. Pensacola will be the first of many prospects to go
through this process with Selene not far behind and a series of
other prospects including Cadence, Cupertino and others under
analysis by interested parties.
Mark Lappin
Chairman
16 April 2021
CEO Statement
The Company continues to execute its natural gas focussed
exploration strategy and has built a strong strategic position in
the Southern North Sea through a number of licensing rounds.
Despite the challenges presented by Covid-19, 2020 has been a year
in which Deltic has continued to make significant progress with its
licences having been advanced and the overall asset base of the
Company materially expanded and diversified.
We strongly believe that this technically-led approach to
portfolio development and an increasing focus on natural gas to
support the energy transition will continue to deliver multiple
opportunities and create value for shareholders in the coming
years. Over the last year, the team has worked hard with our
partner Shell to secure a positive well investment decision on the
Pensacola Prospect and we are looking forward to drilling the
Company's first well there in 2022. At the same time, we continue
to work towards delivering a positive well investment decision on
the Selene Prospect.
Pensacola & Selene
The decision to drill the Pensacola gas prospect followed a
rigorous evaluation of the new 3D data acquired in 2019 and this
positive outcome fully endorses our technical work and ability to
identify previously missed opportunities. One of the other
extremely positive outcomes from this work is the substantial
de-risking of the prospect with the geological chance of success
increasing from 20% (pre-3D seismic) to 55%. With gross P50
Prospective Resources estimated at 309 BCF, a successful outcome on
this high impact opportunity would be transformational for Deltic
and could have positive read across to other prospects in the
emerging Zechstein Reef fairway, including the large Plymouth Reef
prospect on licence P2428.
The Deltic-Shell JV has confirmed to the Oil and Gas Authority
its intention to drill the Pensacola well, now scheduled to be
drilled in May 2022 and it is intended that this rig slot will form
part of a UK North Sea multi well drilling campaign by Shell. With
well costs and timings being firmed up, Deltic remains comfortably
funded for its 30% share of well costs.
Following a year in which such investment decisions, especially
in relation to exploration, were severely curtailed across the
industry, this confirmation is particularly significant and
represents the achievement of a key milestone for Deltic. We are
excited to be entering this next phase of our partnership with
Shell and look forward to further news flow as we turn our
attention to well planning and operational matters in the run up to
well drilling.
On the Selene prospect on Licence P2437, the Company's other JV
with Shell, the partnership has continued to progress the technical
and commercial workflows required to support a well investment
decision. This detailed technical work has enabled us to report a
material upgrade to the estimated gas in place in the second half
of 2020, which has been further refined such that we now estimate
P50 Gas Initially In Place (GIIP) to be 661 BCF with P50
prospective resources of 271 BCF. This work has also further
de-risked the prospect with the estimated geological chance of
success having been significantly increased from 39% to 70% and
confirms Selene's position as one of the largest and most
attractive untested prospects in this mature Leman Sandstone
fairway.
As with Pensacola, it is highly encouraging and testament to our
technical team that the detailed work being undertaken by the
Shell/Deltic partnership is continuing to support the previous work
completed by Deltic. The technical work is substantially complete,
and the JV is now focussed on project economics and well design
work required to support the investment decision, with the well
still expected to be drilled in the course of 2022.
Other key licences
Our technical team continues to produce exceptional work across
the portfolio as they mature opportunities from the pre-application
phase through to drillable prospects ready for farm-out.
During 2020, significant progress was made on licence P2428
(Cupertino Area) following the delivery of reprocessed seismic data
late in 2019. The new data allowed the Company to identify new
prospects and provide a significant resource update on this
licence. Three distinct prospects in Plymouth, Richmond and
Cupertino have been delineated in the Zechstein, Leman Sandstone
and the Carboniferous respectively. Each of the prospects has the
scale and potential to be commercial in their own right and w ith
combined P50 prospective gas resources estimated at close to 1 TCF
of gas (equivalent to more than 150 million barrels of oil), these
prospects are highly material in terms of their scale both
individually and collectively. A farm out process is now underway
which has attracted a significant level of interest and our focus
now is to seek to introduce the best possible partner to progress
these prospects towards drilling.
The Company has also recently completed the reprocessing of
legacy seismic data across licence P2424, which contains the Cortez
prospects, and the interpretation and analysis is currently being
completed by our technical team. The primary target on this licence
is now the Cortez South prospect with estimated P50 prospective
resources of over 300 BCF of gas. Once interpretation and analysis
has been completed, the Company will determine the best way forward
in order to progress this licence.
The Company's Dewar oil prospect had attracted early interest,
but as a direct result of the collapse in oil prices, which
remained depressed for much of 2020, this process was effectively
put on hold. However, with the recent recovery in oil prices, given
the relatively straightforward development, proximity to existing
infrastructure and attractive economics, the company remains
confident that a sustained recovery will allow the Company to
complete a transaction and introduce a partner which ultimately
leads to the drilling of Dewar.
Expansion of portfolio/32(nd) Licensing Round success
In September 2020, the Company was delighted to be able to
confirm a highly successful outcome in the UK's 32(nd) Licensing
Round with the award of six new licences covering twelve blocks and
part blocks.
These newly awarded blocks are highly prospective and contain a
variety of exploration prospects which will significantly enhance
both our pipeline of potential drilling opportunities and the
overall prospective resources associated with the Company's
assets.
All of the new licences were awarded to the Company on a 100%
basis, with the exception of one, which was jointly awarded with
Shell UK who hold a 70% working interest. Five of the six new
licences awarded to Deltic are in the Southern North Sea where the
Company has now amassed a total of ten gas licences which when
combined with its existing licence position, further enhances the
Company's strong strategic position in the gas basin.
In addition to expanding its partnership with Shell to now
include three licences, the Company was also delighted to be
re-awarded a licence over block 43/11 (and 43/12) which contains
the Cadence prospect. This was a big win for the Company given the
TCF scale prospectivity and competition associated with this
licence. With the benefit of the technical work that the Company
has previously completed on Cadence, we are in a strong position to
progress this licence in a relatively short timeframe.
The new licences reinforce the Company's North Sea
exploration-focussed model which is based upon creating a steady
'conveyor belt' of opportunities that can be progressed to support
a long-term diversified programme of exploration wells.
Change of Name
In June 2020, we completed the change of the Company's name to
Deltic Energy Plc. The new name and the associated rebranding have
been well received by our various stakeholders and symbolises the
transition in our portfolio to a more operational phase following
our farm-outs with Shell and the planned drilling activity.
Proposed bids
In July and September 2020, the Company received unsolicited
approaches from two different companies regarding potential all
share offers for Deltic. In both cases the Board concluded that the
value implied by the offers materially undervalued Deltic and its
portfolio of assets, in particular its two high impact exploration
wells expected to be drilled with Shell and were not in the best
interests of shareholders. Consequently, and following discussions
with certain of the Company's largest shareholders, both proposed
offers were rejected.
While being in an "offer period" during these times was both
restricting and a distraction, we were encouraged by the level of
support received from the Company's shareholders and we believe the
decision not to proceed with the offers has been borne out by both
the subsequent operational progress made by the Company and also
the significant increase in the market value of Deltic since
then.
Financial/funding
With continued strict financial discipline coupled with
additional decisive steps to reduce expenditure and preserve cash
throughout 2020, the Company maintained a strong balance sheet with
cash of GBP12.0 million as at 31 December 2020. Crucially, our
company remains well funded and debt free.
Outlook
With commodity prices back at pre-COVID levels, we are starting
to see strong signs of recovery in the UK North Sea with
significant M&A activity in the first few months of 2021, and
many projects which were deferred in 2020 are expected to be
restarted during this year. As the global roll-out of vaccines
gathers pace and companies start to look to the future of energy
and the transition to a lower carbon future, I am increasingly
confident in the outlook for our Company.
The recent publication of the UK Government's Energy White Paper
clearly recognises the important role that hydrocarbons, and
especially gas, have to play in the transition to a lower carbon
future. The industry as a whole is supportive of the Government's
'net zero' ambitions and Deltic's gas-focussed exploration
portfolio in the Southern North Sea has a key role to play in that
transition through the potential supply of natural gas to hydrogen
projects in the North East of England and Bacton where Shell
operates its gas terminal. The production of 'blue' hydrogen from
natural gas is predicted to dominate the hydrogen economy until the
late 2040s before 'green' hydrogen production technologies may
become commercially competitive.
With UK gas demand more than double current domestic gas
production, the prioritisation of local UK produced natural gas is
key to the development of the hydrogen economy and to facilitate
the energy transition. Not only will domestic UK production
displace much higher carbon intensity imported LNG, it will support
UK employment and allow the UK to continue to benefit significantly
from the North Sea's significant remaining reserves.
At Deltic we have a strong focus on gas and specifically the
Southern North Sea gas basin where ten of our thirteen licences are
located. With gas clearly being a key component of the energy mix
for many decades to come, we believe the fundamentals for gas
remain strong. In addition, the UK remains one of the most
attractive jurisdictions for oil and gas investment due to its
stable operating environment, existing infrastructure, a
transparent licensing process and competitive tax regime, and we
expect this to influence the investment decisions of many
established companies as they look to lower the carbon intensity of
their global E&P portfolio. Against this backdrop, I believe
Deltic is well placed to benefit from its high quality, strategic
licence position and gas-focussed asset base with net resources of
over 500 mmboe.
Looking ahead, throughout 2021 and following the well commitment
on Pensacola, we will be working closely with Shell throughout the
well planning phase and progressing towards a well investment
decision on Selene while at the same time continuing to progress
the exciting prospects on the Company's other licences such as
Cupertino, Cortez, Dewar and the recently awarded Cadence licence,
all of which should stimulate newsflow throughout the course of
this year. Looking further ahead to 2022, Deltic is in the unique
position of having two high impact wells expected to be drilled
with an outstanding partner in Shell, with success on either being
transformational for our company.
A key part of 2020 was adapting to a new working environment and
continuing to build our business while also ensuring the wellbeing
of our staff. I believe we have been successful in meeting that
challenge and I would therefore like to take this opportunity to
thank all the members of our small, focussed team for the hard
work, dedication and resilience they have demonstrated as well as
our other stakeholders, in particular our partners and
shareholders, for their ongoing support as we enter this exciting
phase and seek to create value for our shareholders.
Graham Swindells
Chief Executive Officer
16 April 2021
Operating Statement
Introduction
Despite the significant adjustment in working practices brought
on by the global COVID-19 pandemic, the Company has continued to
make significant progress across its gas-focussed exploration
assets including a significant expansion in the number of licences
and gross acreage it holds following an extremely successful
outcome in the 32(nd) offshore licensing round.
The team has worked closely with our partners at Shell
throughout the year as we built towards the positive well
investment decision on the Pensacola prospect and near-term well
investment decision on Selene. In addition, the technical work
required to support the farm-out process on licence P2428
(Cupertino area) identified significant new prospects in the proven
Leman Sandstone (Richmond prospect) and the Zechstein Reef
(Plymouth prospect), which has caught the imagination of a number
of our peers.
The strategic contiguous acreage position of >2,700km(2) that
we have built in the heart of the Carboniferous and Zechstein play
fairways over the last few years will continue to be the focus of
our technical work and will continue to deliver a conveyor belt of
high-quality gas prospects as we apply our deep geological
knowledge of the area to improved legacy datasets over the coming
year.
P2252 - Pensacola (30% Deltic non-operated)
The majority of 2020 was focussed on the re-processing of new 3D
seismic data acquired over the Pensacola prospect in the summer of
2019. While a number of interim products were made available by
Shell during the 3(rd) quarter of 2020, further advanced depth
processing workflows were required before a final product was
eventually delivered in January 2021.
A reinterpretation of the prospect has confirmed our views on
the potential volumes of gas associated with the Pensacola prospect
with Deltic estimating gross P50 Prospective Resources of 309 BCF
(103 BCF net to Deltic). This re-interpretation of the new 3D
seismic, when taken in combination with regional work on analogous
fields across Europe completed by the Operator, has significantly
improved our understanding of the Pensacola prospect, which in turn
has allowed us to update the prospect volumetrics and significantly
increase the Geological Chance of Success (GCoS) associated with
the prospect.
Deltic now estimates the Pensacola prospect contains gross P50
Prospective Resources of 309 BCF with a P90-P10 range of 39 BCF to
1,181 BCF with a GCoS of 55%.
On 29 March 2021, it was announced that the Shell-Deltic JV had
confirmed its intention to drill the Pensacola well to the OGA and
subsequently the contingent well commitment became firm on 31 March
2021.
The Operator expects the well to be drilled in May 2022 with
this timing allowing the Shell/Deltic JV to take advantage of a
drilling unit that will be contracted by Shell as part of a
multi-well drilling campaign which in turn brings advantageous day
rates and operational efficiencies for the JV.
Deltic is fully funded for its 30% working interest in this well
and we look forward to supporting Shell in their role as Operator
throughout the year.
P2437 - Selene (50% Deltic operated)
Working jointly with our partners at Shell throughout 2020 has
resulted in the JV having a significantly better understanding of
the Selene prospect through detailed assurance of the velocity
model, basin modelling and analogue reviews. This led to a
significant increase in in-place resource and GCoS which was
announced on 11 August 2020 where estimated P50 Gas Initially In
Place (GIIP) was reported as 629 BCF with a GCoS of 70%. This
confirmed Selene's status as one of, if not the, largest untested
prospect in the world-class Leman Sandstone fairway.
Since then, work has focussed on defining the potentially
recoverable resources associated with the Selene prospect based on
a review of potential production scenarios and the performance of
other fields in the area with similar reservoir characteristics.
The outcome of this work has resulted in a slightly revised view on
both GIIP and recoverable gas and as such the Company now estimates
gross P50 Prospective Resources of 271 BCF with a P90-P10 range of
83 BCF to 553 BCF. The GCoS remains unchanged at 70%.
We are currently working with Shell on a preferred well
location, data collection programme and preliminary well design to
support a well investment decision which we expect to occur in the
near term. We remain confident that this well will be drilled
during 2022.
P2428 - Cupertino (100% Deltic)
During the course of the year, work was focussed on the
re-interpretation and integration of re-processed 2D seismic data
into the Company's existing geological framework. The pre-Stack
Depth Migration (PSDM) re-processing of the legacy 2D data in 2019
resulted in a significant uplift in image quality at all levels and
supported a re-interpretation of the Cupertino prospect and the
identification of two further prospects on the licence. Following
completion of technical work on the reprocessed seismic, updated
volumetrics and risking for the Cupertino, Richmond and Plymouth
prospects were announced on 23 November 2020 and confirmed combined
P50 Prospective Resources of approximately 900 BCF with prospect
GCoS ranging from 19% to 30%.
The Cupertino prospect is a large three-way dip and fault sealed
prospect with potential for stacked sandstone reservoirs in the
early Carboniferous Scremerston and Yoredale Formations. These
reservoirs are proven producers within the basin and key trap
elements including intra-Carboniferous top seal and fault seal
within low net-to-gross fluvial sequences are proven in other
discoveries and fields. The Cupertino prospect is estimated to
contain P50 Prospective Resources of 370 BCF with a GCoS of
26%.
The Richmond prospect is a Leman Sandstone prospect with many
genetic similarities to the giant Cygnus gas field which is located
some 50km to the south west. The prospect has been overlooked
historically due to the previous operator's misidentification of
the Leman Sandstone as older Carboniferous rocks in a number of
legacy wells on the periphery of the licenced acreage. This
three-way dip and fault-sealed structure is estimated to contain
P50 Prospective Resources of 211 BCF and have a GCoS of 20%. Both
Richmond and the deeper Cupertino prospect could be evaluated with
a single exploration well.
The Plymouth prospect is a reefal build-up of the Z2 Zechstein
carbonate which is analogous to the Crosgan discovery and the
Pensacola prospect which the Company is due to drill with Shell in
2022. The delineation of the Plymouth prospect has only been made
possible by the recent reprocessing of the legacy 2D seismic data
completed by Deltic which preserved significantly more low
frequency seismic data and highlighted internal structures within
the Zechstein which were not visible on the legacy data. The
Plymouth prospect is estimated to contain P50 Prospective Resources
of 282 BCF with a GCoS of 19% which we anticipate could be
significantly improved following acquisition of 3D seismic over
this area in the same way as the GCoS on the Pensacola prospect was
upgraded based on new data.
A formal farm-out process was commenced in December 2020 and
there has been a significant level of interest from established
operators working within the UK Continental Shelf (UKCS) with
multiple parties active in the dataroom. Given the prospects
identified on the Cupertino block are imaged on mixed vintage
legacy 2D seismic data, we anticipate that the acquisition of 3D
data over the licence area will be a priority for any potential
partner, with a future well decision aided by the interpretation of
that new 3D seismic data.
P2424 - Cortez (100% Deltic)
During 2020, the work programme on the Cortez licence focussed
on the reprocessing of legacy 2D data on the western part of the
licence which fills a gap between 3D seismic data coverage. In
total, more than 650 kilometre lines of data were re-processed to
pre-SDM and significant improvements were achieved in the post-salt
stratigraphy with less uplift seen in the pre-salt section which
was to be expected given the vintage of the original data and
relatively short cable lengths used during acquisition. The data
was delivered to Deltic in December 2020, a few months later than
anticipated, due to utilisation of a more advanced workflow to try
and improve pre-salt imaging and some general inefficiencies due to
remote working forced upon Deltic and its contractors by the
current COVID pandemic.
Work has commenced on the re-interpretation and integration of
this new seismic data with the primary focus being on the Cortez
South prospect which is similar to the Cupertino and Cadence
prospects located on contiguous licences to the east. Cortez South
is currently estimated to contain P50 Prospective Resources of 331
BCF and have a GCoS of 28%, but we expect this to increase as we
continue to integrate the newly reprocessed seismic data and
learnings from the Cupertino area into the local geological
model.
P2435 - Blackadder (25% Deltic non-op)
Operated by The Parkmead Group, the Blackadder licence has
remained largely in a 'care and maintenance' state throughout 2020.
We will continue to work with the licence Operator to assess the
technical and commercial viability of the Blackadder prospect and
expect to take a decision on the future of this licence during
2021. Deltic holds a minority (25%) non-operated position in
licence P2435.
P2352 - Dewar (100%)
The Dewar prospect in the Central North Sea was effectively
placed on 'care and maintenance' at the start of the COVID-19
pandemic due to the volatility of the oil price environment during
this period which resulted in significant uncertainty for many of
those companies that had been participating in the farm-out process
at the time. With the recovery of commodity prices and many
companies now indicating a more positive outlook for exploration
over the next 12 to 18 months, we will look to re-engage with those
parties that were previously active in the dataroom as well as
additional parties that have expressed an interest and explore
potential pathways to getting the Dewar prospect drilled.
32(nd) Round Awards
Six new licences awarded to Deltic in the 32(nd) Offshore
licensing round became effective on 1(st) December 2020. Five of
these licence awards were made on a 100% basis to Deltic with the
sixth licence located to the north and east of the Pensacola
licence being awarded jointly with Shell.
This successful licensing round has allowed us to consolidate a
strategic position in the Southern North Sea where we now hold a
contiguous acreage position of approximately 2,730km(2) that
extends from the gas fields in the Tolmount area in the south west,
to Breagh in the north and towards Cygnus in the east (both of
which are large producing gas fields) and covers identified play
fairways in the Carboniferous, Zechstein and Triassic, Bunter
Sandstone.
The most recent awards included the re-acquisition of the
Cadence area across block 43/11 which forms a key link along the
same highly prospective structural trend which includes the Crosgan
discovery and Breagh in the west and runs through Cortez (P2424)
through the newly awarded Cadence area (P2567) through to the
Cupertino area (P2428) awarded in the 30(th) licensing round.
Three of these new licences form a significant contiguous
acreage position in an underexplored part of the basin located
between the Tolmount and Breagh gas fields. Although relatively
immature in terms of our detailed understanding of this area we
believe that there is potential in the Carboniferous, Leman
Sandstone and the Zechstein and a significant legacy dataset that
will respond well to modern re-processing workflows.
In addition to the five licences awarded in the Southern North
Sea, Deltic was also awarded a single licence in the Central North
Sea. Licence P2542 is located in a highly prospective area on the
flanks of the Arbroath-Montrose high between the Glengorm discovery
and the Carnoustie and Montrose fields. The licence contains the
Syros oil prospect which will be evaluated during Phase A of the
licence.
Future
While most people will, quite rightly, be focussed on the
drilling activity on the Pensacola prospect, and potentially
Selene, in 2022 the Company's subsurface team is already looking
beyond this activity to future wells. The immediate focus is on the
farm-out processes for the Cupertino, Cortez and Cadence licence
areas which have the potential to support a significant level of
exploration activity including the acquisition of new seismic data
and the drilling of wells in the coming years.
In recognition of the move towards 'Net Zero' operations in the
basin, the Company will look to demonstrate the importance of a
gas-focussed portfolio as we transition towards a lower carbon
future. The ability to combine a significant natural gas resource
with new approaches to production infrastructure, such as
electrification, while making the most of existing pipelines,
onshore facilities and the potential to support emerging blue
hydrogen and carbon capture and storage (CCUS) projects could
result in future production from Deltic's portfolio having a lower
CO(2) intensity than hydrocarbon production from other areas within
the UK and significantly lower than that for imported gas and
liquefied natural gas (LNG).
Portfolio and Resource Summary - April 2021
The Company's current licence portfolio and prospect inventory,
as of the end of February 2021, is summarised below:
Southern North Sea
Licence Block Deltic Project ID Discovery Net Prospective GCoS%
Ref: ID Equity (D) Resource
Prospect (BCF)
(P)
Lead (L)
--------------------
P90 P50
Low Best
----- ------ -----
41/5a,
41/10a Pensacola -
P2252(1) & 42/1a 30% Zechstein Reef P 12 93 354 55
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
P2437 48/8b 50% Sloop - Leman D 4 9 19 100
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
Selene - Leman P 41 135 276 70
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
Endymion - Leman L 18 24 31 27
------------------------- ---------- ----- ------ ----- ------
Rig & Jib -
Leman L 7 18 29 35
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
43/7
& Cupertino -
P2428 43/8 100% Scremerston P 92 370 1134 26
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
Richmond - Leman P 62 211 547 20
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
Richmond - Carboniferous
BPU P 9 32 97 30
------------------------- ---------- ----- ------ ----- ------
Plymouth - Zechstein P 32 282 1267 19
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
42/14
P2424 & 42/15b 100% Furasta - Bunter D 7 18 30 100
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
Burbank - Bunter P 70 200 567 32
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
Cortez - Carboniferous L 24 107 433 29
------------------------- ---------- ----- ------ ----- ------
Cortez South
- Carboniferous L 129 331 732 28
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
43/11
&
P2567 43/12b 100% Cadence - Scremerston P 30 143 472 26
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
Cadence - Fell L 188 454 861 16
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
Cordova - Millstone
Grit L 32 124 329 26
------------------------- ---------- ----- ------ ----- ------
Bassett - Bunter
Sst P 36 128 303 37
------------------------- ---------- ----- ------ ----- ------
Bathurst - Bunter
Sst L 119 275 571 22
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
47/10d Bob (Teviot)
P2435(2) & 48/6c 25% - Leman D 2.8 5.5 10.3 100
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
Blackadder -
Leman P 17.8 28.3 42.5 45
---------- ---------- -------- ------------------------- ---------- ----- ------ ----- ------
P2258(1) 41/5b 30% Pensacola North To Be Determined
& 42/1b
---------- ---------- -------- ------------------------- ----------------------------------------
P2560 42/13b 100% To Be Determined
42/17
& 42/18
---------- ---------- -------- -------------------------------------------------------------------
P2561 42/19 100% To Be Determined
& 42/20b
---------- ---------- -------- -------------------------------------------------------------------
P2562 42/22 100% To Be Determined
& 42/23
---------- ---------- -------- -------------------------------------------------------------------
(1) Operated by Shell
(2) Operated by Parkmead
Central North Sea
Licence Block CLNR Project ID Discovery Net Prospective GCoS%
Ref: ID Equity (D) Resource
Prospect ( MMBOE )
(P)
Lead (L)
---------------------
P90 P50 P10
Low Best High
----- ------ ------
22/24f
P2352 & 22/25g 100% Dewar - Forties P 10.5 39.5 80.5 40
---------- -------- ------------------ ---------- ----- ------ ------ ------
Tesla - Pentland D To be determined -
mean STOIIP estimated
@ 24 mmboe
---------- -------- ------------------ ---------- -----------------------------
P2384 22/19f 100% Manhattan Complex To be determined
---------- -------- ------------------ -----------------------------------------
P2542 22/17a 100% Syros To be determined
---------- -------- ------------------ -----------------------------------------
Andrew Nunn
Chief operating Officer
16 April 2021
Financial Review
All major expenditure in the last five years has been focussed
on the development of the Company's portfolio of conventional North
Sea assets in accordance with the Company's investing policy, in
addition to on-going administrative expenditure.
Loss for the year
The Company incurred a loss for the year to 31 December 2020 of
GBP1,665,575 (2019: GBP2,360,248). The prior year included a
GBP801,307 charge resulting from the impairment of intangible
assets following the relinquishment of Licence P2248. This occurred
following the failure of the preferred bidder on Licence P2248 to
demonstrate the necessary financial capacity to fund the forward
work programme within a timeframe that was acceptable to the Oil
and Gas Authority (OGA), resulting in the initial term of the
licence expiring and the Company being required to relinquish the
licence with effect from 29 March 2019. During the current year,
the Company has been re-awarded the same 43/11 block which contains
the Cadence prospect as part of its new licence (P2567). The
previously capitalised value, which was written off in 2019, has a
commercial value to the Company and the extensive work previously
carried out on the Licence will be used to progress the licence
towards drilling. However, under IFRS6 a previously derecognised
asset cannot result in a reversal of a previously recognised
impairment charge.
Administrative expenses of GBP1,699,344 (2019: GBP1,709,069)
were incurred during the year. The current administrative expenses
include costs associated with two unsuccessful takeover approaches
that the Company received. Even with these one-off costs,
administrative expenses were less than the previous year reflecting
cost savings, which were communicated earlier in the year,
associated with exercise of a break clause on its office and
relocation to smaller, lower cost space and management of
contractor costs.
Finance income of GBP59,818 (2019: GBP71,020) decreased due to
lower interest-bearing deposits on surplus funds. Finance costs of
GBP26,049 (2019: GBP28,763) represent the interest charge on a
lease liability recognised.
Financial position
The Company's cash was GBP11,968,858 at 31 December 2020 (2019:
GBP13,849,400) with the year-on-year decrease in cash being
explained below.
The increase in intangible assets to GBP1,430,915 (2019:
GBP1,127,942) reflects the development of the Company's exploration
portfolio and in particular the technical enhancements with Licence
2437 (Selene Prospect), Licence P2428 (Cupertino Prospect) and
Licence P2424 (Cortez prospect). The Company was fully carried
during the year for costs associated with the P2252 Licence
(Pensacola Prospect).
Property, plant and equipment of GBP496,542 (2019: GBP47,313)
includes a right of use asset relating to the office lease with a
net book value of GBP350,696 (2019: GBP33,545). Total liabilities,
which include short-term creditors, accruals and lease liabilities,
increased to GBP246,041 (2019: GBP198,656).
The decrease in total equity to GBP13,437,735 (2019:
GBP14,955,576) mainly represents the loss for the year and other
movements set out in the Statement of Changes in Equity.
Global economic uncertainty
The Company is in a position of relative strength in these
uncertain global economic times. The Company is well positioned to
capture the recovery in gas prices, has no direct exposure to oil
prices, has no debt and remains well capitalised following a
fundraising in July 2019.
Cash flow
In the year to 31 December 2020, the net cash outflow from
operating activities was GBP1,368,117 (2019: GBP1,412,879). The net
cash outflow from investing activities was GBP458,740 (2019:
GBP372,389), comprising GBP358,672 (2019: GBP895,647) related to
expenditure on exploration assets and GBP159,886 (2019: GBP6,426)
relating to expenditure of property, plant and equipment, and
interest received of GBP59,818 (2019: GBP59,549). The net cash
outflow from financing activities was GBP53,685 (2019:
GBP14,208,682, inflow), comprising the principal portion of lease
liabilities and interest paid. The prior year financing activities
related to the issue of new ordinary shares.
Consequently, in the year to 31 December 2020, the Company
experienced a net cash outflow of GBP1,880,542 (2019: inflow of
GBP12,423,414).
Closing cash and cash equivalents
As at 31 December 2020, the Company held cash and cash
equivalents totalling GBP11,968,858 (2019: GBP13,849,400).
Shareholders' equity
As at 31 December 2020, there were 1,405,964,855 (2019:
1,405,964,855) ordinary shares in issue. Additionally, a total of
up to 94,840,450 (2019: 88,308,192) new ordinary shares may be
issued pursuant to the exercise of share options.
Going concern
The Directors have assessed the Company's ability to continue as
a going concern. Although the oil and gas industry still faces the
challenges of COVID-19, fortunately, having taken the decision to
raise funds in 2019 to protect itself from market volatility, the
Company is currently well funded with no debt. Based on the cash
and cash equivalents balance at year end and the Company's
commitments, the Directors are of the opinion that the Company has
adequate financial resources to meet its budgeted exploration
programme and working capital requirements, and accordingly will be
able to continue and meet its liabilities as they fall due for a
minimum of 12 months from the date of signing these financial
statements.
Key performance indicators
At this stage in its development, the Company is focusing on the
development of its North Sea gas and oil assets, applying for
additional licences, maintaining and extending existing licences,
as well as the evaluation of various oil and gas opportunities that
may arise. The Directors closely monitor and manage the levels of
overheads and other administrative expenditure, exploration
expenditure, cash and deposit balances, as set out above. As and
when the Company's investments move into production, other key
performance indictors (KPIs) will become relevant and will be
measured and reported as appropriate.
Sarah McLeod
Chief Financial Officer
16 April 2021
Investing policy
In addition to the development of the North Sea gas licences the
Company has acquired to date, the Company proposes to continue to
evaluate other potential oil and gas projects in line with its
investing policy, as it aims to build a portfolio of resource
assets and create value for shareholders. As disclosed in the
Company's AIM Admission Document in May 2012, the Company's
substantially implemented Investment Policy is as follows:
The proposed investments to be made by the Company may be either
quoted or unquoted; made by direct acquisition or through farm-ins;
either in companies, partnerships or joint ventures; or direct
interests in oil & gas and mining projects. It is not intended
to invest or trade in physical commodities except where such
physical commodities form part of a producing asset. The Company's
equity interest in a proposed investment may range from a minority
position to 100% ownership.
The Board initially intends to focus on pursuing projects in the
oil & gas and mining sectors, where the Directors believe that
a number of opportunities exist to acquire interests in attractive
projects. Particular consideration will be given to identifying
investments which are, in the opinion of the Directors,
underperforming, undeveloped and/or undervalued, and where the
Directors believe that their expertise and experience can be
deployed to facilitate growth and unlock inherent value.
The Company will conduct initial due diligence appraisals of
potential projects and, where it is believed further investigation
is warranted, will appoint appropriately qualified persons to
assist with this process. The Directors are currently assessing
various opportunities which may prove suitable although, at this
stage, only preliminary due diligence has been undertaken.
It is likely that the Company's financial resources will be
invested in either a small number of projects or one large
investment which may be deemed to be a reverse takeover under the
AIM Rules. In every case, the Directors intend to mitigate risk by
undertaking the appropriate due diligence and transaction analysis.
Any transaction constituting a reverse takeover under the AIM Rules
will also require Shareholder approval.
Investments in early stage and exploration assets are expected
to be mainly in the form of equity, with debt being raised later to
fund the development of such assets. Investments in later stage
projects are more likely to include an element of debt to equity
gearing. Where the Company builds a portfolio of related assets, it
is possible that there may be cross holdings between such
assets.
The Company intends to be an involved and active investor.
Accordingly, where necessary, the Company may seek participation in
the management or representation on the Board of an entity in which
the Company invests with a view to improving the performance and
use of its assets in such ways as should result in an upward
re-rating of the value of those assets.
Given the timeframe the Directors believe is required to fully
maximise the value of an exploration project or early stage
development asset, it is expected that the investment will be held
for the medium to long term, although disposal of assets in the
short term cannot be ruled out in exceptional circumstances.
The Company intends to deliver Shareholder returns principally
through capital growth rather than capital distribution via
dividends, although it may become appropriate to distribute funds
to Shareholders once the investment portfolio matures and
production revenues are established.
Given the nature of the Investing Policy, the Company does not
intend to make regular periodic disclosures or calculations of its
net asset value.
The Directors consider that as investments are made, and new
investment opportunities arise, further funding of the Company will
be required.
This strategic report contains certain forward-looking
statements that are subject to the usual risk factors and
uncertainties associated with the oil and gas exploration and
production business. Whilst the Directors believe the expectation
reflected herein to be reasonable in light of the information
available up to the time of their approval of this report, the
actual outcome may be materially different owing to factors either
beyond the Company's control or otherwise within the Company's
control but, for example, owing to a change of plan or strategy.
Accordingly, no reliance may be placed on the forward-looking
statements.
Mark Lappin Graham Swindells
Chairman Chief Executive Officer
16 April 2021 16 April 2021
Qualified Person
Andrew Nunn, a Chartered Geologist and Chief Operating Officer
of Deltic Energy Plc, is a "Qualified Person" in accordance with
the AIM Note for Mining, Oil and Gas Companies of the London Stock
Exchange. Andrew has reviewed and approved the information
contained within this announcement.
**S**
For further information please contact the following:
Deltic Energy Plc Tel: +44 (0) 20 7887
2630
Graham Swindells / Andrew Nunn / Sarah McLeod
Allenby Capital Limited (Nominated Adviser Tel: +44 (0) 20 3328
& Joint Broker) 5656
David Hart / Alex Brearley (Corporate Finance)
Kelly Gardiner (Sales and Corporate Broking)
Stifel Nicolaus Europe Limited (Joint Broker) Tel: +44 (0) 20 7710
7600
Callum Stewart / Simon Mensley / Ashton
Clanfield
Vigo Communications (PR Adviser) Tel: +44 (0) 20 7390
0230
Patrick d'Ancona / Chris McMahon / Simon
Woods
Glossary of Technical Terms
PRMS: Petroleum Resources Management System (2007)
BCF: Billion Cubic Feet
GIIP: Gas Initially In Place
SCF: Standard Cubic Feet
STOIIP Stock-Tank Oil Initially In Place
Mmbbl Million barrels
mmboe: Million barrels of oil equivalent
Prospective Resources: Are estimated volumes associated with
undiscovered accumulations. These represent quantities of petroleum
which are estimated, as of a given date, to be potentially
recoverable from oil and gas deposits identified on the basis of
indirect evidence but which have not yet been drilled.
Chance of Success (GCoS): for prospective resources, means the
chance or probability of discovering hydrocarbons in sufficient
quantity for them to be tested to the surface. This, then, is the
chance or probability of the prospective resource maturing into a
contingent resource. Prospective resources have both an associated
chance of discovery (geological chance of success) and a chance of
development (economic, regulatory, market and facility, corporate
commitment and political risks). The chance of commerciality is the
product of these two risk components. These estimates have been
risked for chance of discovery but not for chance of
development.
TCF: Trillion Cubic Feet
P90 resource: reflects a volume estimate that, assuming the
accumulation is developed, there is a 90% probability that the
quantities actually recovered will equal or exceed the estimate.
This is therefore a low estimate of resource.
P50 resource : reflects a volume estimate that, assuming the
accumulation is developed, there is a 50% probability that the
quantities actually recovered will equal or exceed the estimate.
This is therefore a median or best case estimate of resource.
P10 resource: reflects a volume estimate that, assuming the
accumulation is developed, there is a 10% probability that the
quantities actually recovered will equal or exceed the estimate.
This is therefore a high estimate of resource.
Pmean: is the mean of the probability distribution for the
resource estimates. This is often not the same as P50 as the
distribution can be skewed by high resource numbers with relatively
low probabilities.
The GIIP volumes and Prospective Resources have been presented
in accordance with the 2007 Petroleum Resources Management System
(PRMS) prepared by the Oil and Gas Reserves Committee of the
Society of Petroleum Engineers (SPE), reviewed, and jointly
sponsored by the World Petroleum Council (WPC), the American
Association of Petroleum Geologists (AAPG) and the Society of
Petroleum Evaluation Engineers (SPEE).
Income Statement
for the year ended 31 December 2020
Notes 2020 2019
Continuing operations GBP GBP
Administrative expenses:
Impairment of intangible assets 10 - (801,307)
Other administrative expenses (1,699,344) (1,709,069)
--------------------------------- ----- ----------- -----------
Total administrative expenses (1,699,344) (2,510,376)
Other operating income 10 - 107,871
----------- -----------
Operating loss (1,699,344) (2,402,505)
Finance income 4 59,818 71,020
Finance costs 5 (26,049) (28,763)
--------------------------------- ----- ----------- -----------
Loss before tax 6 (1,665,575) (2,360,248)
Income tax expense 8 - -
--------------------------------- ----- ----------- -----------
Loss for the year (1,665,575) (2,360,248)
--------------------------------- -----
Loss per share from continuing
operations
expressed in pence per share:
Basic and diluted 9 (0.12)p (0.24)p
--------------------------------- ----- ----------- -----------
Statement of Comprehensive Income
for the year ended 31 December 2020
2020 2019
GBP GBP
Loss for the year (1,665,575) (2,360,248)
Other comprehensive income - -
------------------------------------------------------- ----------- -----------
Total comprehensive expense for the year attributable
to the equity holders of the Company (1,665,575) (2,360,248)
-------------------------------------------------------- ----------- -----------
Balance Sheet
as at 31 December 2020
Notes 2020 2019
GBP GBP
Assets
Non-current assets
Intangible assets 10 1,430,915 1,127,942
Property, plant and equipment 11 496,542 47,313
Other receivables 12 37,422 -
--------------------------------------------- ----- ------------ ------------
Total non-current assets 1,964,879 1,175,255
Current assets
Trade and other receivables 12 53,887 129,577
Cash and cash equivalents 11,968,858 13,849,400
--------------------------------------------- ----- ------------ ------------
Total current assets 12,022,745 13,978,977
Total assets 13,987,624 15,154,232
--------------------------------------------- ----- ------------
Capital and reserves attributable to the
equity holders of the Company
Shareholders' equity
Share capital 13 7,029,824 7,029,824
Share premium 20,296,030 20,296,030
Share-based payment reserve 20 990,378 842,644
Accumulated retained deficit (14,878,497) (13,212,922)
--------------------------------------------- ----- ------------ ------------
Total equity 13,437,735 14,955,576
--------------------------------------------- ----- ------------ ------------
Liabilities
Current liabilities
Trade and other payables 15 153,436 172,869
Lease liabilities 16 92,605 25,787
--------------------------------------------- ----- ------------ ------------
Total current liabilities 246,041 198,656
--------------------------------------------- ----- ------------ ------------
Non-current liabilities
Lease liabilities 16 303,848 -
--------------------------------------------- ----- ------------ ------------
Total non-current liabilities 303,848 198,656
--------------------------------------------- ----- ------------ ------------
Total liabilities 549,889 198,656
--------------------------------------------- ----- ------------ ------------
Total equity and liabilities 13,987,624 15,154,232
--------------------------------------------- ----- ------------ ------------
Statement of Changes in Equity
for the year ended 31 December 2020
Share Share Share-based Accumulated Total
capital premium payment retained equity
reserve deficit
GBP GBP GBP GBP GBP
Balance at 1 January 2020 7,029,824 20,296,030 842,644 (13,212,922) 14,955,576
Comprehensive income for the year
Loss for the year - - - (1,665,575) (1,665,575)
-------------------------------------------- --------- ---------- ----------- ------------ -----------
Total comprehensive loss for the
year - - - (1,665,575) (1,665,575)
Contributions by and distributions
to owners
Share-based payment - - 147,734 - 147,734
Total contributions by and distributions
to owners - - 147,734 - 147,734
Balance at 31 December 2020 7,029,824 20,296,030 990,378 (14,878,497) 13,437,735
-------------------------------------------- --------- ---------- ----------- ------------ -----------
Balance at 1 January 2019 2,690,866 10,286,493 749,487 (10,932,012) 2,794,834
Comprehensive income for the year
Loss for the year - - - (2,360,248) (2,360,248)
-------------------------------------------- --------- ---------- ----------- ------------ -----------
Total comprehensive loss for the
year - - - (2,360,248) (2,360,248)
Contributions by and distributions
to owners
Issue of share capital 4,338,958 10,802,138 (79,338) 79,338 15,141,096
Expenses of issue - (792,601) - - (792,601)
Share-based payment - - 172,495 - 172,495
Total contributions by and distributions
to owners 4,338,958 10,009,537 93,157 79,338 14,520,990
Balance at 31 December 2019 7,029,824 20,296,030 842,644 (13,212,922) 14,955,576
-------------------------------------------- --------- ---------- ----------- ------------ -----------
Statement of Cash Flows
for the year ended 31 December 2020
2020 2019
GBP GBP
Cash flows from operating activities
Loss before tax (1,665,575) (2,360,248)
Finance income (59,818) (71,020)
Finance costs 26,049 28,763
Income from farm-out of licence interest 2,783 (107,871)
Depreciation 106,029 110,469
Amortisation 6,711 9,735
Impairment of intangible assets - 801,307
Share-based payment 147,734 172,495
(1,436,087) (1,416,370)
(Decrease)/increase in other receivables 38,270 (17,106)
Increase in trade and other payables 29,700 20,597
------------------------------------------------------- ----------- -----------
Net cash outflow from operating activities (1,368,117) (1,412,879)
------------------------------------------------------- ----------- -----------
Cash flows from investing activities
Purchase of intangible assets (358,672) (895,647)
Purchase of property, plant and equipment (190,108) (6,426)
Property, plant & equipment landlord contributions 30,222 -
Proceeds from farm-out of exploration licence
interest - 470,135
Interest received 59,818 59,549
Net cash outflow from investing activities (458,740) (372,389)
------------------------------------------------------- ----------- -----------
Cash flows from financing activities
Proceeds of share issue - 15,141,096
Expenses of share issue - (792,601)
Payment of principal portion of lease liabilities (27,635) (111,050)
Interest paid (26,050) (28,763)
Net cash (outflow)/inflow from financing
activities (53,685) 14,208,682
------------------------------------------------------- ----------- -----------
(Decrease)/Increase in cash and cash equivalents (1,880,542) 12,423,414
Cash and cash equivalents at beginning of
year 13,849,400 1,425,986
------------------------------------------------------- ----------- -----------
Cash and cash equivalents at end of year 11,968,858 13,849,400
------------------------------------------------------- ----------- -----------
Notes to the Financial Information
for the year ended 31 December 2020
1. Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards ('IFRS'), as adopted by
the EU and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
The financial information for the year ended 31 December 2020
and 31 December 2019 set out in this announcement does not
constitute the Company's statutory financial statements for the
year ended 31 December 2019 but is extracted from the audited
financial statements for those years. The 31 December 2019 accounts
have been delivered to the Registrar of Companies. The statutory
financial statements for 2020 will be delivered to the Registrar of
Companies in due course.
While the financial information included in this announcement
has been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards
(IFRSs and IFRIC interpretations) issued by the International
Accounting Standards Board and as endorsed for use in the European
Union, and with those parts of the Companies Act 2006 applicable to
companies preparing their accounting under IFRS, this announcement
does not itself contain sufficient information to comply with
IFRSs.
The principal accounting policies adopted in the preparation of
the financial information in this announcement are set out in the
Company's full financial statements for the year ended 31 December
2020.
Going concern
The Directors have assessed the Company's ability to continue as
a going concern. Although the oil and gas industry is still
recovering from the dual challenge of recent commodity price
volatility coupled with the effects of Covid-19, fortunately,
having taken the decision to raise funds in 2019 to protect itself
from market volatility, the Company is currently well funded with
no debt. Based on the cash and cash equivalents balance at year end
and the Company's commitments, the Directors are of the opinion
that the Company has sufficient funds to cover its budgeted
exploration programme and working capital requirements, and
accordingly it will be able to continue and meet its liabilities as
they fall due for a minimum of 12 months from the date of signing
these financial statements, therefore they continue to adopt the
going concern basis of accounting in the preparation of these
financial statements.
2. Loss per Share
The Company has issued share options over ordinary shares both
of which could potentially dilute basic earnings per share in the
future.
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
Due to the losses incurred during the year, a diluted loss per
share has not been calculated as this would serve to reduce the
basic loss per share. There were 94,840,450 (2019: 88,308,192)
share incentives outstanding at the end of the year that could
potentially dilute basic earnings per share in the future.
Basic and diluted loss per share
2020 2019
Loss per share from continuing operations (0.12)p (0.24)p
------------------------------------------- -------- --------
The loss and weighted average number of ordinary shares used in
the calculation of loss per share are as follows:
2020 2019
GBP GBP
Loss used in the calculation of total basic
and diluted loss per share (1,665,575) (2,360,248)
--------------------------------------------- ------------ ------------
Number of shares 2020 2019
Number Number
Weighted average number of ordinary shares
for the purposes of basic and diluted loss
per share 1,405,964,855 979,603,077
--------------------------------------------- -------------- ------------
3. Intangible Assets
Exploration Software
& evaluation licences Total
assets GBP GBP
GBP
Cost
At 1 January 2019 1,595,015 39,257 1,634,272
Additions 684,161 - 684,161
Farm-out of licence (362,264) - (362,264)
Deduction - licence relinquished (801,307) - (801,307)
------------------------------------ ------------- --------- ---------
At 31 December 2019 1,115,605 39,257 1,154,862
Additions 309,685 - 309,685
At 31 December 2020 1,425,290 39,257 1,464,547
------------------------------------ ------------- --------- ---------
Amortisation and impairment
At 1 January 2019 - 17,185 17,185
Charge for year - 9,735 9,735
Impairment 801,307 - 801,307
Deduction - licence relinquished (801,307) - (801,307)
------------------------------------ ------------- --------- ---------
At 31 December 2019 - 26,920 26,920
Charge for year - 6,711 6,711
At 31 December 2020 - 33,632 33,632
------------------------------------ ------------- --------- ---------
Net Book Value
At 31 December 2020 1,425,290 5,625 1,430,915
------------------------------------ ------------- --------- ---------
At 31 December 2019 1,115,605 12,337 1,127,942
------------------------------------ ------------- --------- ---------
At 1 January 2019 1,595,015 22,072 1,617,087
------------------------------------ ------------- --------- ---------
The net book value of exploration and evaluation assets at 31
December 2020 and 2019 relates solely to the Company's North Sea
Licences.
In 2019, following the failure of the preferred bidder on
Licence P2248 (block 43/11), (which contains the Cadence Prospect)
to demonstrate the necessary financial capacity to fund the forward
work programme within a timeframe that was acceptable to the OGA,
the initial term of the licence expired and the Company was
required to relinquish the licence with effect from 29 March 2019.
As a consequence, the exploration asset relating to Licence P2248
was fully impaired in 2019 and an impairment charge of GBP801,307
was included in the Income Statement for that year.
During the current year, the Company has been re-awarded the
same 43/11 block which contains the Cadence prospect as part of its
new licence (P2567) by the OGA. The previously capitalised value,
that was subsequently written off in 2019, has a commercial value
to the Company and the extensive work previously carried out on the
Licence will be used to progress the licence towards drilling.
However, under IFRS6 a previously derecognised asset cannot result
in a reversal of a previously recognised impairment charge.
Accordingly, Licence P2567 will be recognised in the financial
statements at the cost of acquiring the new licence and eligible
exploration and evaluation work performed subsequent to the date
the licence was acquired.
Aggregate cash proceeds arising from the farm-out of Licence
P2437 to Shell during 2019 amounted to GBP470,135. An amount of
GBP362,264 was deducted from exploration and evaluation assets,
being the previously capitalised expenditure relating to that
licence. The surplus of the proceeds over the carrying value
amounted to GBP107,871 and was recognised as a gain on disposal of
the partial interest and included as other operating income in the
Income Statement for 2019.
Additions of GBP 309,685 (2019: GBP684,161) differ to the cash
flows in the Statement of Cash Flows owing to a decrease in trade
and other payables of GBP48,987 (2019: GBP211,486 decrease)
relating to intangible assets.
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