TIDMEOG
Europa Oil & Gas (Holdings) plc / Index: AIM / Epic: EOG / Sector: Oil & Gas
3 October 2016
Europa Oil & Gas (Holdings) plc ('Europa' or 'the Company')
Final Results for the year to 31 July 2016
Europa Oil & Gas (Holdings) plc, the AIM listed oil and gas exploration,
development and production company focused on Europe, announces its final
results for the 12 month period ended 31 July 2016.
The full Annual Report and Accounts will be available today on the Company's
website at www.europaoil.com and will be mailed to those shareholders who have
requested a paper copy later this month.
Operational highlights
* Proceeding with development of Wressle discovery in North Lincolnshire with
production expected to commence early 2017
* Three new UK onshore awards in 14th Round (one subsequently declined)
* Five new Licensing Options ('LOs') awarded offshore Ireland
* Europa estimates 2.1 billion barrels of oil equivalent ('boe') and 1.5 tcf
gas gross mean unrisked prospective and indicative resources on new Irish
LOs
* 100% interest and operatorship secured for FEL 2/13 and FEL 3/13 offshore
Ireland following transfer from Kosmos
* Mean unrisked NPV10 of US$7 billion for 100% interest in three prospects
with 1.5 billion boe in FEL 3/13 provided by ERC Equipoise
* Positive Holmwood planning decision, preparatory work for drilling in 2017
underway
* Farmout of 7.5% of PEDL143; Europa has 32.5% interest, paying 25% of the
cost of the Holmwood exploration well up to a gross cost of GBP3.2m
* 123 boepd produced from UK onshore (2015: 141 boepd)
Financial performance
* Group revenue of GBP1.3m (2015: GBP2.2m)
* 33% reduction in cost of sales from lower operating costs
* 39% reduction in administrative expenses from non-recurring 2015 items and
other savings
* Pre-tax loss excluding exploration write-off and impairment of GBP0.7m (2015:
loss GBP0.8m)
* Pre-tax loss of GBP1.9m after GBP1.2m exploration write-off in Béarn des Gaves
(2015: loss GBP4.1m after GBP2.2m exploration write-off in PEDL181 and GBP1.1m
impairment against the West Firsby field)
* Post-tax loss for the year GBP1.6m (2015: loss GBP1.8m)
* Cash used in operating activities GBP0.3m (2015: cash used GBP0.3m)
* Net cash balance as at 31 July 2016 GBP1.7m (31 July 2015: GBP3.2m)
Post reporting date events
* Extension of phase 1 of FEL 2/13 and FEL 3/13 licences to 4 July 2017
* Acquisition of Shale Petroleum (UK) Limited (renamed as "Europa Oil & Gas
(UK) Limited") increasing Europa's interest in PEDL299 (including the
Hardstoft oil field) to 33.32% and in PEDL343 (containing the Cloughton gas
discovery) to 45%
* Elected not to accept the award of PEDL286 in the southern Cleveland basin
* Wressle and Broughton North CPR published
* Sold 3.34% interest in PEDL180 (Wressle) and PEDL182 (Broughton North) to
Union Jack Oil plc for GBP0.6m cash
Europa's CEO, Hugh Mackay said, "In the face of difficult market conditions for
the oil and gas sector we have delivered strong performance. We have reduced
costs by one third, our UK production is set to double, we are preparing to
drill a high impact well onshore UK at Holmwood, we have delivered three deals,
landed seven new licences in the UK and Ireland and perhaps most importantly
built a leading position in Atlantic Ireland. The tide is turning in Atlantic
Ireland: the 2015 Licensing Round was the most successful licensing round ever
in Ireland. Major oil companies are back and have already begun substantive
work programmes. This is a remarkable outcome given sub $50 oil prices and in
due course we expect that this activity will likely result in exploration
drilling. We will continue to mature our Irish portfolio with the intention of
delivering half a dozen drill-ready prospects - any one of which has the
potential to be a company maker for Europa."
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014.
For further information please visit www.europaoil.com or contact:
Hugh Mackay Europa + 44 (0) 20 7224
3770
Phil Greenhalgh Europa + 44 (0) 20 7224
3770
Matt Goode finnCap Ltd + 44 (0) 20 7220
0500
Simon Hicks finnCap Ltd + 44 (0) 20 7220
0500
Frank Buhagiar St Brides Partners Ltd + 44 (0) 20 7236
1177
Susie Geliher St Brides Partners Ltd + 44 (0) 20 7236
1177
Chairman's statement
With the low oil price environment seen in the 12 months to 31 July 2016, we
have been concentrating on reducing our cost base through a number of
operational efficiencies and voluntary temporary salary reductions amongst head
office staff. These changes have resulted in a year on year 33% reduction in
our cost of sales and a 39% reduction in our administrative expenses. Despite
this reduction in costs, Hugh and the team have continued with our programme of
selectively expanding Europa's portfolio and maturing its assets.
Highlights during this period have included:
* The addition of two new licences onshore UK, which contain hydrocarbon
discoveries and where gas and oil appraisal opportunities have been identified.
* The addition of five new Licensing Options offshore Ireland, including the
strategically important exploration block LO 16/2 adjacent to our FEL 3/13
licence in the Porcupine basin. This acreage was awarded in the first phase of
the recent Atlantic Margin Licensing Round, which was a highly competitive
process, with awards being granted to a number of major international oil
companies, including Eni, ExxonMobil, Nexen, Statoil, Woodside and BP. The
other LOs awarded in the second phase cover acreage near the Corrib gasfield;
near our existing FEL 2/13 licence in the South Porcupine basin; and in the
Padraig basin.
* Europa has already identified significant potential resources across the
new licences totalling 2.1 billion boe and 1.5 tcf gas (gross mean unrisked
prospective and indicative resources). Work continues on the farmout process
for our Irish acreage where we have seen considerable interest from major oil
companies.
* The transfer of interest from Kosmos such that Europa now holds 100% and is
operator of FEL 2/13 and FEL 3/13 offshore Ireland with a further 2.1 billion
boe gross mean unrisked prospective and indicative resources.
* Work continues on the development of Wressle with first production expected
early in 2017.
* Successful planning approval was obtained for an exploration well at
Holmwood, which is a conventional prospect with gross mean unrisked prospective
resources of 5.6 million boe. Located in the Weald basin, near the recent
drilling success at Horse Hill, Holmwood is a very exciting prospect for Europa
and its partners. Following the farmout Europa retains a 32.5% interest in the
PEDL143 licence and will pay 25% of the Holmwood well up to a gross cost of GBP
3.2 million. Work continues on well planning and we anticipate drilling in
2017.
These activities are part of our ongoing programme to mature and grow our
portfolio of prospects and leads and most importantly prove these up via the
drill bit. We also continue to evaluate potential corporate transactions to
follow on from the farmout of Holmwood, the post year end acquisition of Shale
Petroleum (UK) Limited and sale of interest in PEDL180 and PEDL182.
All of this has been against a backdrop of continued low oil prices which has
seen the price achieved for sales during the 12 months to end July 2016 average
US$41.5 per barrel (2015: US$68.2). Europa's board continues to work hard to
maximise efficiencies and to avoid incurring debt for its activities,
preferring to farmout exploration obligations and/or monetise assets wherever
possible. Our focus in the last year has been on managing our cost and asset
base to ensure we remain fully funded for future operations and this strategy
will continue in 2017.
Financials
The fall in oil price has a direct effect on our revenues and the average of
123 boepd recovered from our UK onshore fields generated GBP1.3 million in
revenues (2015: 141 boepd and GBP2.2 million). Net cash spent on operations was GBP
0.3 million (2015: cash spent GBP0.3 million). Our cash balance at the end of
July 2016 was GBP1.7 million (31 July 2015: GBP3.2 million).
If Wressle were to produce at the expected initial flowrate of 500 bopd gross,
even at today's sub US$50 per barrel oil price, Europa will return to a
positive operating cashflow. It should be noted that following the March 2016
UK Budget which halved the Supplementary Charge with effect from 1 January
2016, Europa's future profits would be taxed at 40% (previously 50%).
Oil and gas exploration onshore France is frustrated by the French Government's
lack of support for the industry. This is demonstrated by the continuing delay,
since February 2015, in approving Europa's farmout of the Tarbes val d'Adour
permit interest to Vermillion. In fact no onshore France permits have been
issued or renewed in the past 12 months. Europa will continue to progress its
operations in France, but has taken the decision to write down the carrying
value of the Béarn des Gaves permit to nil - resulting in an exploration
write-off in the current period of GBP1.2 million (2015: Exploration write-off GBP
2.2 million for the Kiln Lane well and impairment of the producing West Firsby
field GBP1.1 million).
Outlook
The continuing low oil price presents challenges for all E&P companies, but I
am confident that through a combination of cost efficiencies and sound asset
management Europa is now well poised to deliver growth by maturing its diverse
portfolio of assets. Through the recent awards in Ireland and the UK, Hugh and
the team have developed a pipeline of licence interests at various stages of
maturity, which will provide cashflow to cover corporate overheads and, in some
cases, have the exploration potential to be company makers. I am very excited
by the Irish acreage position we have put in place and the arrival of the
majors and supermajors in the last licensing round indicates that the basin is
seen as having strong potential. This bodes well for our ongoing farmout
discussions.
We have seen the results of the initial technical work on our Porcupine basin
interests translated into prospective resources confirmed by a Competent
Persons Report ('CPR') on FEL 3/13 with Europa exposed to 1.5 billion boe of
gross mean unrisked prospective resources with a mean risked NPV10 of US$7
billion. This excludes the recently awarded LO 16/2 with a further 895 million
boe and FEL 2/13 with 595 million boe of gross mean unrisked prospective
resources.
In the UK, with Wressle moving from discovery to producer, we are poised to see
an increase in production, revenue and cashflow, which should coincide with
work preparing for the exploration well at Holmwood.
I would like to thank the management, operational teams, my fellow Board
members and our advisers for their hard work over the year.
Finally I would like to reiterate my thanks to our shareholders for their
continued support during what has been a challenging year for all of the oil
and gas sector, but particularly small exploration and production companies
like Europa.
Colin Bousfield
Non executive Chairman
30 September 2016
Our portfolio
Country Area Licence Field/ Operator Equity Status
Prospect
Ireland South FEL 2/13 Doyle A/B/C, Europa 100% Exploration
Porcupine Heaney
FEL 3/13 Beckett, Europa 100% Exploration
Wilde, Shaw
LO 16/2 3 prospects Europa 100% Exploration
LO 16/19 2 leads Europa 100% Exploration
Slyne LO 16/20 2 leads Europa 100% Exploration
basin
LO 16/21 4 leads Europa 100% Exploration
Padraig LO 16/22 6 leads Europa 100% Exploration
basin
UK East DL 003 West Firsby Europa 100% Production
Midlands
DL 001 Crosby Europa 100% Production
Warren
PL 199/215 Whisby-4 BPEL 65% Production
PEDL180 Wressle Egdon 30%1 Development
PEDL181 Europa 50% Exploration
PEDL182 Broughton Egdon 30%1 Exploration
North
PEDL299 Hardstoft Ineos 33.3% Field rejuvenation
PEDL343 Cloughton Third 45% Appraisal
Energy
Weald PEDL143 Holmwood Europa 32.5% Exploration
SNS Block 41/24 Maxwell Europa 50% Promote
France Aquitaine Béarn des Berenx Europa 100% Exploration
Gaves
Tarbes val Vermilion 20% Exploration
d'Adour
[1] Following the post year end sale to Union Jack Oil plc and assuming OGA
approval
Strategic report - Operations
Exploration - Ireland
Europa is now a leading operator in Irish exploration. We are ranked top for
net operated area under licence (5,818 km2), equal top for number of operated
licences (seven) and we were awarded more licences in the 2015 Atlantic Margin
Licensing Round than any other operator (five).
South Porcupine / FEL 2/13; FEL 3/13; LO 16/2; LO 16/19
In June 2016 we announced the receipt of consent from Ireland's Minister for
Communications, Climate Action and the Environmentfor the transfer of interest
in FEL 2/13 and FEL 3/13 from Kosmos Energy Ireland. Following the transfer,
Europa has 100% interest in, and operatorship of both licences.
In February and May 2016 two additional LOs in the South Porcupine were awarded
to Europa: LO 16/2 and LO 16/19.
In August 2016, we announced that phase 1 of FEL 2/13 and FEL 3/13 had been
extended by one year to 4 July 2017. This extension allows us to mature
existing prospects and perform detailed mapping of all potential prospective
levels on both licences, including the pre-rift, syn-rift and post-rift plays,
whilst continuing to seek a farmout partner for drilling.
Europa now has four licences in the South Porcupine basin, these can be
considered as two licence pairs:
FEL 3/13 and LO 16/2 on the east flank of the basin
Europa identified three new pre-rift prospects in LO 16/2 which have combined
gross mean unrisked prospective resources of 895 million boe. The pre-rift play
has proved very successful in the Flemish Pass basin offshore Newfoundland and
it is believed that this play may also be developed in the South Porcupine
basin in addition to the Cretaceous fan play.
The three new prospects were mapped on Europa's proprietary 3D seismic which
was acquired in 2013 and covers both FEL 3/13 and LO 16/2.
The Cretaceous fan play is developed in FEL 3/13. A CPR by ERC Equipoise
confirmed gross mean unrisked prospective resources of 1.5 billion boe and
unrisked NPV10 of US$7 billion across three Cretaceous fan prospects on the
licence: prospects Wilde, Beckett and Shaw. Prospect Wilde is considered drill
ready. Wilde has a geological chance of success of 1 in 5, gross mean unrisked
prospective resources are 428 million boe and the drill costs are estimated to
be US$37 million excluding mobilisation and demobilisation.
There is clear technical and commercial synergy between the two licences. The
one year extension for FEL 3/13 phase 1 will enable completion of technical
work and integration with LO 16/2. The combined audited and unaudited gross
mean unrisked prospective resource of the two licences is almost 2.4 billion
boe.
FEL 2/13 and LO 16/19 on the west flank of the basin
Europa has a 100% interest in FEL 2/13 and LO 16/19. FEL 2/13 contains a number
of Cretaceous submarine channels mapped on Europa's proprietary 948 km2 3D
seismic survey which cross the licence from west to east feeding submarine fans
developed in LO 16/19. The seismic architecture of the channels in FEL 2/13
contain features consistent with sandstone deposition and Europa believes that
these sandstones are also deposited in the fans in LO 16/19. In addition,
there is evidence of gas escape features on seismic and sea bed pock marks
suggesting the presence of an active source rock. BP well 43/13-1 drilled in
1998 approximately 20 km from LO 16/19 saw oil shows and encountered source
rocks.
Four prospects (Doyle A, B, C and Heaney) were mapped on 3D seismic in FEL 2/13
with gross mean unrisked prospective resources of 595 million boe. There is
potential for several Cretaceous submarine fans with a range of 300 million to
1 billion boe gross mean unrisked prospective resources in LO 16/19.
During the period of the LO Europa will further mature the prospect inventory
and will seek a farmin partner with which to convert to an FEL, acquire a 3D
seismic survey and in due course drill an exploration well (subject to a
positive technical and commercial outcome from the 3D seismic programme). The
one year extension for FEL 2/13 phase 1 will enable completion of technical
work and integration with LO 16/19.
Europa's experience in the basin leads the directors to believe that 3D seismic
over LO 16/19 will profoundly change the prospect inventory and a positive
outcome may not only provide greater clarity on prospect mapping and
volumetrics, but may also substantially de-risk the prospects. Other operators
are exploring for Cretaceous fans in the basin and any exploration drilling
success in the Cretaceous fan play has the potential to further de-risk the
prospects in all of Europa's South Porcupine licences.
Slyne basin / LO 16/20; LO 16/21
Not everything offshore west Ireland is high risk, deepwater, frontier
exploration. LO 16/20 and 16/21 in the Greater Corrib area of the Slyne basin
represent exploration in a proven play, in the vicinity of the Corrib gas field
that is newly on production and with substantial gas infrastructure already in
place. The Greater Corrib play comprises Triassic sandstone reservoirs in
tilted fault block structures with hydrocarbons generated from Carboniferous
source rocks. Water depths range from 300 to 2,000 metres and the licences are
partially covered by historic 3D seismic data as well as extensive 2D seismic.
Our strategy is to expedite exploration by reprocessing historic 3D seismic
over LO 16/20 and LO 16/21, maturing leads to drillable prospect status and
securing a farmin partner with which to drill a low-cost, low-risk exploration
well.
Gross mean unrisked prospective and indicative resources:
* LO 16/20 1.0 tcf gas
* LO 16/21 0.5 tcf gas
Clearly we are at a very early stage in the exploration cycle, however, equally
clearly we have a well-defined work programme to de-risk the play. In
particular it is hoped that successful reprocessing of historic 3D seismic
might allow us to mature existing leads to drillable prospect status without
the need to acquire new seismic data.
Prospect TR1 in LO 16/20 lies 16 km to the northwest of Corrib in water depths
of 500 metres. Were the prospect to achieve drillable status it is expected
that the geological chance of success will be high, drill costs will be low
(reflecting the comparatively shallow water depth) and the proximity to gas
infrastructure is potentially a very favourable factor.
Padraig basin / LO 16/22
The Padraig basin is a remnant Jurassic basin on the eastern margin of the
Rockall Trough. The most relevant analogue is the conjugate margin play
offshore Newfoundland in the Flemish Pass basin. Good quality 1998 2D seismic
suggest structures of significant size and multiple leads have been mapped in
water depths ranging from 800 to 2,000 metres in both pre-rift and syn-rift
hydrocarbon plays.
Gross mean unrisked indicative resources are estimated to be in the range of
300 to 600 million boe.
Our strategy is to expedite exploration by utilising the historic 2D seismic
and wealth of high quality technical work previously performed by major oil
companies to mature leads to drillable prospect status and secure a farmin
partner with which to drill an exploration well.
Following Statoil's exploration success at the play-opening Bay du Nord oil
discovery in the Flemish Pass basin offshore Newfoundland, there is
considerable industry interest in analogues offshore west Ireland. Whilst most
of the industry is currently focused on exploring for this play in the South
Porcupine basin our restoration of the conjugate margin prior to Atlantic
seafloor spreading suggests the possibility that the Padraig basin may be a
better fit with the Flemish Pass basin.
Exploration - UK
East Midlands / PEDL181
In July 2016, Europa announced entry into the second phase of the licence -
having fulfilled phase 1 work obligations by the drilling of the Kiln Lane well
in 2015. Following analysis of seismic and geological data, together with the
results of the Kiln Lane well, Europa elected to relinquish 380 km2 of the
licence. An area of 160 km2 in the southeast of the licence was retained. The
retained area provides exposure to the conventional and unconventional
hydrocarbon potential of the Humber basin. It has technical synergy with the
adjacent licence PEDL334 which was awarded to an Egdon led group in the 14th
Round for the purpose of conventional and unconventional exploration.
East Midlands / PEDL299 (Hardstoft)
PEDL299 contains the Hardstoft oil field. This was discovered in 1919 by the
UK's first ever exploration well and produced 26,000 barrels of oil from
Carboniferous limestone reservoir. A CPR on Hardstoft, issued by joint venture
partner Upland Resources, identified gross 2C contingent resources of 3.1
million boe and gross 3C contingent resources of 18.5 million boe in PEDL299.
Production testing methodologies for carbonate reservoirs have evolved since
1919 and our hope is that commercial oil flowrates can be obtained.
As a consequence of our acquisition of Shale Petroleum (UK) Limited post year
end we have increased our equity from 16.66% to 33.32%. Europa's interest in
PEDL299 is restricted to the conventional prospectivity, and Ineos are
operator.
East Midlands / PEDL343 (Cloughton)
PEDL343 (initially granted as PEDL348) was our top ranked block out of our
three 14th Onshore Licensing Round applications. PEDL343 is operated by Third
Energy and contains the Cloughton gas discovery made by Bow Valley. The 1986
exploration well flowed a small amount of gas to surface on production test
from Carboniferous sandstone reservoirs. We regard Cloughton as a gas appraisal
opportunity with the critical challenge being to obtain commercial flowrates
from future production testing operations. The acquisition of Shale Petroleum
(UK) Limited post year end increased our equity in the licence from 22.5% to
45%.
Weald / PEDL143 (Holmwood)
PEDL143 contains the Holmwood conventional oil prospect. Europa regards this as
one of the best undrilled prospects in onshore UK. Following the farmout to
Union Jack Oil plc, we remain as operator with a 32.5% interest in the licence
and have a partial carry on our share of the exploration well costs up to a cap
of GBP3.2 million. The well is currently being planned for drilling in 2017.
The results of the Horse Hill well 12 km to the east of the Holmwood prospect
in PEDL137 are relevant. Horse Hill is along-strike from Holmwood in a very
similar geological structure. Correlation of seismic data indicates that the
Holmwood well will penetrate a similar stratigraphic section to that at Horse
Hill. Whilst we cannot guarantee that Holmwood will encounter similar
hydrocarbons to Horse Hill the results are encouraging.
In addition to producing oil from Portland sandstone reservoirs Horse Hill also
produced oil from micritic limestone formations in the Kimmeridge section. This
is an interesting development. One of the peculiarities of limestone reservoir
rocks (compared with sandstones) is that typically there are no, or very weak,
direct hydrocarbon shows whilst drilling and often only inconclusive
indications of hydrocarbons on electric logs. It is therefore encouraging that
perseverance at Horse Hill yielded 1,365 bopd aggregate flowrate from two
limestone intervals. It is possible that the micritic limestone may be a
"missed pay" in the Weald basin.
Whilst the results of Horse Hill are encouraging our estimate of geological
chance of success is unchanged at 1 in 3 and our guidance for gross mean
prospective resources remains at 5.6 million boe with a range of 1 to 11
million barrels. At 5.6 million boe Holmwood would be the fifth largest onshore
field in UK history.
Southern North Sea / Block 41/24
This is a promote licence awarded in July 2015 over Block 41/24 in the Southern
North Sea to a joint venture comprising Europa and Arenite Petroleum Limited.
The licence was awarded as part of the 28th Seaward Licensing Round. Block 41/
24 adjoins the Yorkshire coast and contains the Maxwell gasfield which was
discovered in Permian Zechstein carbonates by Total with the drilling of
offshore well 41/24a-1 in 1969. Two follow-up appraisal wells: 41/24a-2 drilled
by Total (1981) and 41/24-3 by Conoco (1992) targeted this fractured Zechstein
carbonate reservoir and flowed gas and condensate. The exploration emphasis of
the licence is to address the Carboniferous prospectivity in the Namurian and
Dinantian sequences. The adjoining onshore extension of the Cleveland basin
contains a number of gas fields and discoveries including Kirby Misperton,
Ebberstone Moor and Cloughton.
The promote licence is for two years duration and requires financial, technical
and environmental capacity to be in place and a firm drilling (or agreed
equivalent substantive activities) commitment to have been made by the end of
the second year.
Development - UK
East Midlands / PEDL180 (Wressle); PEDL182 (Broughton North)
The operator Egdon continues to bring the Wressle oil discovery forward to
development. Reservoir engineering analyses indicate an initial production flow
rate of 500 bopd gross from the Ashover Grit interval, which even at sub US$50
per barrel oil prices, will return Europa to a positive operating cashflow. An
application for planning permission and applications for Environment Agency
permits were submitted in June 2016. The Field Development Plan ('FDP') was
submitted on 8 September 2016 and a CPR issued on 26 September. On 27 September
Europa announced the sale of 3.34% interest in PEDL180 and PEDL182 to Union
Jack Oil plc for a cash consideration of GBP600,000. The transaction implies a
mark to market value of GBP5.4 million for Europa's remaining 30% interest in the
licences. The CPR identifies gross 2P reserves of 0.65 mmboe in the Ashover and
Wingfield Flags and gross 2C contingent resources of 1.86 million boe in the
Penistone Flags on the Wressle structure; and gross mean unrisked prospective
resources of 0.6 million boe at the Broughton North exploration prospect.
Production - UK
East Midlands / West Firsby; Crosby Warren; Whisby-4
Production from the three fields declined in line with expectations. In the
year 123 boepd were recovered, down from 141 boepd in 2015. The change to beam
pumps (nodding donkeys) away from jet pumps at West Firsby and successful
rateable value appeals were the main drivers of the 33% reduction in cost of
sales which was achieved. The pump change enabled savings in utility costs,
chemicals and the need for interventions in order to keep the field producing.
Exploration - France
Aquitaine / Tarbes val d'Adour
Europa announced a farmout to Vermilion Energy on 16 February 2015. The farmout
agreement being subject to the relevant approvals from the French authorities:-
for the transfer of equity and operatorship to Vermilion and the granting of an
extension to the permit. The approvals processes started in 2014.
We continue to try to progress the necessary approvals, but we believe that it
is prudent at this stage to assume that the relevant approvals will not be
forthcoming.
Aquitaine / Béarn des Gaves / Berenx
The current phase of the permit expires in March 2017. Although we successfully
obtained a farmin partner for Tarbes Val d'Adour we have been unable to find a
partner for Béarn des Gaves. It is unlikely that we will be able to conclude a
farmin in the time remaining, and even if we did, it is unlikely that we could
obtain the necessary approvals and extension from the French authorities. We
have therefore decided to write-off the carrying value of the permit in the
current year.
Financials
With a small contribution from the Wressle testing our production this year
averaged 123 boepd and generated GBP1.3 million in revenues (2015: 141 boepd and
GBP2.2 million). The average oil price achieved in the year was US$41.5 per
barrel (2015: US$68.2).
As announced last year, while most of the costs associated with our production
are fixed in nature we implemented various cost saving measures to help
mitigate the effect of the falling oil price and as a result we have reduced
cost of sales to GBP1.3 million (2015: GBP1.9 million). The cost of sales savings
arise partly from lower production rates, successful appeals against property
rateable values, and from the switch to nodding donkeys, as opposed to jet
pumps, at West Firsby.
Administrative expenses also showed a significant reduction at GBP0.6 million
(2015: GBP1.0 million). Some of the saving occurred as a result of the
non-recurrence of 2015 costs associated with licence applications and the
Tarbes farmout. Material savings arose from a voluntary, temporary, salary
reduction agreed with head office staff. There were further savings generated
from the sublet, and eventual sale, of the Abingdon property.
Our cash balance at 31 July 2016 stood at GBP1.7 million (31 July 2015: GBP3.2
million).
Result for the year
The Group loss for the year after taxation from continuing activities was GBP
1,638,000 (2015: GBP1,784,000).
The financial information set out below does not constitute the company's
statutory accounts for 2016 or 2015. The financial information has been
prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union on a basis that is consistent with the
accounting policies applied by the group in its audited consolidated financial
statements for the year ended 31 July 2016. Statutory accounts for the years
ended 31 July 2016 and 31 July 2015 have been reported on by the Independent
Auditors.
The Independent Auditors' Report on the Annual Report and Financial Statements
for 2016 and 2015 were unqualified, did not draw attention to any matters by
way of emphasis, and did not contain a statement under 498(2) or 498(3) of the
Companies Act 2006.
Statutory accounts for the year ended 31 July 2015 have been filed with the
Registrar of Companies. The statutory accounts for the year ended 31 July 2016
will be delivered to the Registrar in due course.
**S**
Consolidated statement of comprehensive income
For the year ended 31 July 2016 2015
Note GBP000 GBP000
Revenue 1,269 2,205
Cost of sales (1,282) (1,900)
Exploration write-off 1 (1,162) (2,205)
Impairment of producing fields 2 - (1,100)
Total cost of sales (2,444) (5,205)
------ ------
Gross loss (1,175) (3,000)
Administrative expenses (593) (975)
Profit/(loss) on fixed asset disposal 28 (2)
Finance income 64 55
Finance expense (228) (208)
------ ------
Loss before taxation (1,904) (4,130)
Taxation credit 266 2,346
------ ------
Total comprehensive loss for the year (1,638) (1,784)
attributable to the equity shareholders of the
parent
====== ======
Earnings per share (EPS) attributable to the Pence per Pence per
equity shareholders of the parent share share
Basic and diluted EPS (0.67)p (0.86)p
Consolidated statement of financial position
As at 31 July 2016 2015
Note GBP000 GBP000
Assets
Non-current assets
Intangible assets 1 4,453 4,839
Property, plant and equipment 2 1,060 1,562
Deferred tax asset 157 -
------- -------
Total non-current assets 5,670 6,401
------- -------
Current assets
Inventories 23 13
Trade and other receivables 210 374
Cash and cash equivalents 1,718 3,151
------- -------
1,951 3,538
------- -------
Total assets 7,621 9,939
====== ======
Liabilities
Current liabilities
Trade and other payables (444) (1,043)
Current tax liabilities (148) (141)
Derivative - (32)
Short-term borrowings - (23)
------- -------
Total current liabilities (592) (1,239)
------ ------
Non-current liabilities
Long-term borrowings - (141)
Deferred tax liabilities - (109)
Long-term provisions (2,347) (2,143)
------- -------
Total non-current liabilities (2,347) (2,393)
------- -------
Total liabilities (2,939) (3,632)
------- -------
Net assets 4,682 6,307
====== ======
Capital and reserves attributable to equity
holders
of the parent
Share capital 2,449 2,449
Share premium 15,901 15,901
Merger reserve 2,868 2,868
Retained deficit (16,536) (14,911)
------- -------
Total equity 4,682 6,307
====== ======
These financial statements were approved by the Board of Directors and
authorised for issue on 30 September 2016 and signed on its behalf by:
Phil Greenhalgh, Finance Director
Company registration number 5217946
Consolidated statement of changes in equity
Attributable to the equity holders of the parent
Share Share Merger Retained Total
capital premium reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 August 2,049 14,080 2,868 (13,154) 5,843
2014
Issue of share capital 400 1,821 - - 2,221
(net of costs)
Loss for the year - - - (1,784) (1,784)
attributable to the
equity shareholders of
the parent
Share based payment - - - 27 27
------ ------ ------ ------ ------
Balance at 31 July 2015 2,449 15,901 2,868 (14,911) 6,307
====== ====== ====== ====== ======
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 August 2,449 15,901 2,868 (14,911) 6,307
2015
Loss for the year - - - (1,638) (1,638)
attributable to the
equity shareholders of
the parent
Share based payment - - - 13 13
------ ------ ------ ------ ------
Balance at 31 July 2016 2,449 15,901 2,868 (16,536) 4,682
====== ====== ====== ====== ======
Consolidated statement of cash flows
For the year ended 31 July 2016 2015
GBP000 GBP000
Cash flows used in operating activities
Loss after tax from continuing operations (1,638) (1,784)
Adjustments for:
Share based payments 13 27
Depreciation 195 386
Exploration write-off 1,162 2,205
Impairment of property, plant & equipment - 1,100
Disposal of fixed asset (28) 2
Finance income (64) (55)
Finance expense 228 208
Taxation credit (266) (2,346)
Decrease in trade and other receivables 170 79
(Increase)/decrease in inventories (10) 19
Decrease in trade and other payables (84) (102)
------ ------
Net cash used in operating activities (322) (261)
====== ======
Cash flows used in investing activities
Purchase of property, plant and equipment (1) (4)
Sale of property 338 -
Purchase of intangible assets (1,224) (3,394)
Repayment of derivative (30) -
Expenditure on well decommissioning - (4)
Interest received 4 7
------ ------
Net cash used in investing activities (913) (3,395)
====== ======
Cash flows (used in)/from financing activities
Proceeds from issue of share capital (net of - 2,221
issue costs)
(Decrease)/increase in payables relating to share (71) 71
capital issue costs
Repayment of borrowings (164) (22)
Finance costs (17) (18)
------ ------
Net cash (used in)/from financing activities (252) 2,252
====== ======
Net decrease in cash and cash equivalents (1,487) (1,404)
Exchange gain on cash and cash equivalents 54 54
Cash and cash equivalents at beginning of year 3,151 4,501
------ ------
Cash and cash equivalents at end of year 1,718 3,151
====== ======
Notes to the financial statements
1 Intangible assets
Intangible assets - Group 2016 2015
GBP000 GBP000
At 1 August 4,839 3,553
Additions 776 3,491
Exploration write-off (1,162) (2,205)
------ ------
At 31 July 4,453 4,839
====== ======
Intangible assets comprise the Group's pre-production expenditure on licence
interests as follows:
2016 2015
GBP000 GBP000
France Béarn des Gaves - 1,160
Ireland FEL 2/13 (Doyle A/b/c, Heaney) 224 149
Ireland FEL 3/13 (Beckett, Wilde, Shaw) 487 318
Ireland LO 16/2 35 -
Ireland LO 16/19-22 8 -
UK PEDL143 (Holmwood) 721 681
UK PEDL180 (Wressle) 2,672 2,270
UK PEDL181 47 43
UK PEDL182 (Broughton North) 223 218
UK PEDL299 (Hardstoft) 5 -
UK Block 41/24 (Maxwell) 31 -
--------- ---------
Total 4,453 4,839
====== ======
Exploration write-off
France (Béarn des Gaves) 1,162 -
PEDL181 (Kiln Lane) - 2,205
---------- -----------
Total 1,162 2,205
===== =====
The UK PEDL143 exploration licence carries a well commitment by September 2018.
If the Group elects to continue with this licence, it will need to fund the
drilling of a well by raising funds or by farming down. If the Group is not
able to raise funds, farmdown, or extend the PEDL143 licence; or elects not to
continue in any other licence, then the impact on the financial statements will
be the impairment of some or all of the intangible assets disclosed above.
2 Property, plant and equipment
Furniture Leasehold Producing Total
& building fields
computers
GBP000 GBP000 GBP000 GBP000
Cost
At 1 August 2014 48 437 10,785 11,270
Additions 4 - - 4
Disposal (2) - - (2)
------ ------ ------ ------
At 31 July 2015 50 437 10,785 11,272
Additions 1 - - 1
Disposal - (437) - (437)
------ ------ ------ ------
At 31 July 2016 51 - 10,785 10,836
====== ====== ====== ======
Depreciation, depletion and
impairment
At 1 August 2014 40 99 8,085 8,224
Charge for year 4 23 359 386
Impairment in year - - 1,100 1,100
------ ------ ------ ------
At 31 July 2015 44 122 9,544 9,710
Charge for year 3 7 185 195
Disposal - (129) - (129)
------ ------ ------ ------
At 31 July 2016 47 - 9,729 9,776
====== ====== ====== ======
Net Book Value
At 31 July 2014 8 338 2,700 3,046
====== ====== ====== ======
At 31 July 2015 6 315 1,241 1,562
====== ====== ====== ======
At 31 July 2016 4 - 1,056 1,060
====== ====== ====== ======
The producing fields referred to in the table above are the production assets
of the Group, namely the oilfields at Crosby Warren and West Firsby, and the
Group's interest in the Whisby W4 well, representing three of the Group's cash
generating units.
The carrying value of each producing field was tested for impairment by
comparing the carrying value with the value in use. The value in use was
calculated using a discounted cash flow model with production decline rates of
7-8%, Brent crude prices rising from US$54 per barrel in 2017 to US$74 in 2020
and a pre-tax discount rate of 18%. The pre-tax discount rate is derived from a
post-tax rate of 10%, and is high because of the applicable rate of tax in the
UK. Cash flows were projected over the expected life of the fields which is
expected to be longer than 5 years.
There was no impairment in the year (2015: GBP1,100,000 relating to the West
Firsby site).
The leasehold building at Abingdon was sold in the period.
END
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