TIDMEOG
Europa Oil & Gas (Holdings) plc / Index: AIM / Epic: EOG / Sector: Oil & Gas
17 October 2018
Europa Oil & Gas (Holdings) plc ('Europa' or 'the Company')
Final Results for the year to 31 July 2018
Europa Oil & Gas (Holdings) plc, the UK and Ireland focussed oil and gas
exploration, development and production company, announces its final results
for the 12 month period ended 31 July 2018.
The full Annual Report and Accounts will be available shortly on the Company's
website at www.europaoil.com and will be mailed in November 2018 to those
shareholders who have requested a paper copy.
Operational highlights
Offshore Ireland
* Six prospects with combined potential of 2.5 trillion cubic feet ('tcf') of
Gas Initially In Place ('GIIP') mapped on LO 16/20 in the Slyne basin.
* Completed Pre-Stack Depth Migration ('PSDM') reprocessing of 1,548km2 3D
seismic covering FEL 1/17 and FEL 3/13, in the South Porcupine. Prospect
inventory upgraded to 3.5 billion boe gross mean unrisked prospective
resources ('GMUPR') in six prospects.
* Completed PSDM reprocessing of 950 km2 3D seismic over FEL 2/13. Prospect
inventory identified 817mmboe GMUPR in three top ranked prospects.
* Porcupine virtual data room ('VDR') and farmout process opened.
* Commenced PSDM reprocessing of 770 km2 3D seismic data over LO 16/20 and
preliminary drilling planning for a possible 2019 exploration well on the
Inishkea prospect.
* Completed 976 km2 3D seismic acquisition over Cairn Energy operated LO 16/
19.
UK
* PEDL180 (Wressle) the Planning Inspectorate rejected an appeal against
North Lincolnshire County Council Planning Committee's decision to reject a
planning application for the Wressle oil development. A new planning
application for the Wressle oil development has been submitted to North
Lincolnshire County Council and is in the review process.
* The application to extend planning permission at the Wressle site was
refused by the planning committee; an appeal against this decision has been
submitted to the Planning Inspectorate.
Financial
* Group revenue of GBP1.6m (2017: GBP1.6m)
* Exploration write-off GBP1.3m (2017: nil)
* Pre-tax loss of GBP2.3m (2017: loss GBP0.7m)
* Post-tax loss for the year GBP2.6m (2017: loss GBP0.5m)
* Cash used in operating activities GBP0.48m (2017: cash used GBP0.26m)
* Net cash balance as at 31 July 2018 GBP1.8m (31 July 2017: GBP3.6m)
Post reporting date events
* PEDL143 (Holmwood) the Secretary of State for Environment, Food and Rural
Affairs, decided not to renew the lease at Bury Hill Wood, Coldharbour Lane
leading to a withdrawal of the planning application to drill from the site.
Europa's CEO, Hugh Mackay, said "Europa has made a large technical and
financial investment across virtually its whole Atlantic Ireland portfolio.
This has involved three substantial 3D PSDM seismic reprocessing projects that
started in January 2017 and will complete in October 2018.
"Two South Porcupine reprocessing projects have been completed and have
resulted in new prospect inventories for our three operated Porcupine licences,
4.3 billion barrels GMUPR and six drill ready prospects. Our farmout process
commenced in July 2018 and the target market of supermajors, majors and large
independents are in the virtual and physical datarooms (VDR and PDR). We are
encouraged by the recent farm-in of ExxonMobil to Nexen in FEL 3/18 and note
that their 2019 Iolar well has the potential to de-risk 1 billion boe in five
Europa pre-rift prospects in the basin.
"Our Inishkea reprocessing project is nearing completion and the new prospect
inventory will be issued in December, at which point the new VDR and PDR will
be opened to potential farminees. We are looking to drill as early as 2019,
subject to industry or financial partnering and we have been sufficiently
encouraged by the positive results to commence both the well planning and site
survey preparation necessary for a 2019 spud. With the Corrib gas field going
into decline and Ireland's demand for both gas and electricity forecast to
increase in response to its vibrant economy we believe there is a window of
opportunity for gas that we must seize at Inishkea.
"Elsewhere, our existing UK onshore production continues to generate meaningful
revenues which at current oil prices more than cover our operational expenses.
We are hopeful these are set for a major boost in the year ahead should the
planning application to develop the Wressle oil discovery in the East Midlands
be approved. At an estimated gross rate of 500bopd, Wressle would more than
double our net output to around 240 bopd which, at today's oil prices, would
provide us with a highly cash generative platform with which to invest in other
projects. This could include new ventures which we are actively pursuing.
Together with ongoing discussions with potential partners for our Atlantic
Ireland licences, there is much activity taking place focused on generating
significant value for our shareholders."
Chairman's statement
For an explorer and producer such as Europa, drilling wells is a key value
driving activity. While Europa did not participate in drilling activity during
the review period, considerable technical work has been undertaken across our
asset base to make our prospects drill ready. We have initiated the planning
phase for drilling what could be a transformational well on our Inishkea
prospect in the Slyne Basin, offshore Ireland as early as 2019. Our intention
is to participate in not one, but a series of high impact wells offshore
Ireland and we have therefore been focused on building a pipeline of
drill-ready opportunities, each of which has game-changing potential. I am
pleased to report that we are on target to exceed the six drill ready prospects
by the end of 2018 foreseen in our last Annual Report and Accounts.
Offshore Ireland
With six licences covering an area of 4,985 km2 and containing over 30
prospects that potentially hold GMUPR of more than 6.4 billion barrels of oil
equivalent and 2.5 tcf of GIIP, Europa has an industry-leading position in
Atlantic Ireland. For an oil and gas company of Europa's size to be actively
involved in opening up an emerging hydrocarbon region alongside supermajors,
majors and large independents such as Exxon, Nexen, Equinor, TOTAL, Woodside
and Cairn Energy, is a considerable achievement and one which we intend to
build on.
During the year and post period end, technical work programmes have been
undertaken across our offshore Ireland portfolio. The objective, specifically
for our South Porcupine and Slyne licences, has been to de-risk existing
prospects and leads and deliver drill-ready targets. Though work is ongoing,
this programme has been highly successful and today Europa has six drill-ready
targets, with more expected by the end of the year. We are now in a position
to embark on the next phase of exploration in Atlantic Ireland, namely
drilling.
In line with this, planning is underway to drill a potentially transformational
well as early as 2019 on LO 16/20 in the Slyne Basin, the Group's flagship
licence where multiple structures with potentially over 2.5 tcf GIIP have been
mapped. The combination of a robust geological model that has undergone
rigorous technical scrutiny, the targeting of a gas play that has been proven
up by the nearby producing Corrib field and the Shell 18/20-7 gas discovery
well drilled in 2010, the close proximity to infrastructure, and relatively low
drilling costs due to shallow water depths, all make LO 16/20 a compelling
investment. We are therefore focusing on securing industry or financial
partners at the project level to enable operations to commence as soon as
possible.
Elsewhere work on FELs 2/13, 3/13 and 1/17 in the South Porcupine has been
centred on upgrading previously mapped prospects to drill-ready status so that
once partners are in place, well planning and drilling can commence. The
results have exceeded expectations. Not only has the multi-billion barrel
prospectivity of the licences been confirmed and drill-ready targets been
defined for each of the licences, but the definition of the structures and
geology have been greatly enhanced. The very positive response by the industry
to the formal launch of the farmout in July 2018 suggests we are not alone in
being impressed by the results.
Subject to farmouts being secured and in line with our strategy, shareholders
could soon be exposed to a series of high impact wells offshore Ireland.
Furthermore, following a major seismic acquisition programme over the last few
years, other operators are moving forward with their own drilling plans. Nexen,
for example, is due to drill a well in FEL 3/18 during 2019. Our licences
feature all the plays being targeted, including the Cretaceous Fan play (a
prolific producer offshore West Africa), the Cretaceous Shelf (which has
yielded large discoveries offshore Senegal), the pre-rift play (from which 15
billion barrels have already been produced from the UKCS Brent Province) and
the Syn-Rift play (which has attracted considerable investment offshore
Newfoundland). As a result, Europa stands to benefit from any and all
successes in Atlantic Ireland.
Onshore UK
During the year under review, Europa's production averaged 94 boepd from three
fields in the East Midlands petroleum province, confirming Europa's position as
the third largest onshore UK oil producer. We constantly strive to increase
our production, not just by making new discoveries, but also by evaluating and
implementing initiatives to increase production and recovery rates at our
existing oil fields. A number of operational initiatives are underway and we
hope to be in a position to report the results later in 2018.
Bringing new discoveries online offers the potential to step up production
rates. With this in mind, we had hoped the Wressle discovery would be brought
onstream in the first half of 2018 at an estimated rate of 500 bopd gross. At
this level, our 30% interest would have resulted in more than a doubling of our
net production to over 240 boepd. Following two unsuccessful planning
applications to develop the field in 2017, both of which had been recommended
by North Lincolnshire Council's own planning officers, Wressle remains
undeveloped. A new application has since been submitted by the operator, Egdon
Resources, and a decision by the Council's Planning Committee is expected later
in 2018. The partners are confident that this latest plan comprehensively
deals with all outstanding issues and that this lucrative low risk development
opportunity will soon gain the necessary approvals to enable it to be brought
on stream without further delay.
There has been disappointment for our Holmwood prospect on PEDL143 which lies
close to the Horse Hill discovery and Brockham field in the Weald Basin. Post
period end the Secretary of State for Environment, Food and Rural Affairs
declined to renew the lease for the drill site. As a consequence we have had to
withdraw our application to extend planning permission to drill from the Bury
Hill Wood site. The plan now is to evaluate PEDL143's remaining prospectivity
and develop a forward plan for the licence in conjunction with our partners.
New licence areas
In the year we have evaluated a number of new opportunities outside our
existing portfolio. These have been at various stages of development and I am
pleased to report that following completion of a comprehensive new country
screening study an application has been made for a high impact exploration
licence that has technical synergy with our existing Atlantic margin portfolio.
We shall continue to seek projects that will add value, diversity and strength
to Europa's portfolio.
Board Changes
In January 2018, changes were made to the Board, including my appointment as
Non-Executive Chairman following Colin Bousfield's decision to step down from
this role. I am a petroleum engineer with a background in senior oil and gas
management, deal evaluation and execution, fundraising and investor relations
most recently with Gemini Oil and Gas and Enterprise Oil. Brian O'Cathain, a
geologist and petroleum engineer, was also appointed as a Non-Executive
Director. He has held senior technical and commercial roles in major E&P
companies, including Shell International, Enterprise Oil and Tullow Oil and
gained first-hand knowledge of Corrib and the Slyne Basin when he was Managing
Director of Enterprise Oil Ireland with responsibility for advancing Corrib
towards development. Together we look forward to continuing our contribution to
the exciting future of Europa.
Outlook
A significant part of Europa's strategy is high impact exploration centred on
gaining early entry into new plays, undertaking comprehensive technical work to
identify and de-risk targets to the point of drilling and then securing
partners to take licences forward. Having built up an industry leading licence
position in the emerging hydrocarbon hotspot that is Atlantic Ireland and
having subsequently established an inventory of high-grade prospects in various
plays that is attracting the attention of industry heavyweights, Europa's
management and technical teams have shown they can deliver. The Board is
therefore keen to replicate this success elsewhere and as a result new ventures
that complement Europa's existing skillset and portfolio offshore Ireland and
onshore UK licences are being pursued.
Much work still remains to be done across our existing assets, notably securing
partners with whom we can drill wells in the South Porcupine and also
completing well planning in the proven Slyne Basin so that we are in a position
to drill. A considerable amount of activity is taking place both inside and
outside our existing portfolio and I look forward to providing further updates
during the year ahead, as we focus on exposing our shareholders to multiple
value additive opportunities in a cost and risk efficient manner.
I would like to thank the management, employees, consultants and operational
personnel for their dedicated work and also the Board for their support and
help with the changes during the year.
Finally, may I thank our shareholders for their steadfast support over the past
year when we have seen the beginnings of a recovery in our industry which I
believe will be to the ultimate benefit of Europa.
Simon Oddie
Chairman
Operations
Offshore Ireland: Exploration
Europa's portfolio of six licences in Atlantic Ireland covers an area of over
4,985 km2, includes six play types in three basins and contains over 30
prospects and leads that potentially hold over 6.4 billion barrels GMUPR of oil
and 2.5 tcf of gas (GIIP).
The region has seen considerable activity and investment by supermajors, majors
and leading independents in recent years. Specifically, 30,000 km2 of 3D
seismic has been acquired by blue chip operators such as Exxon, Woodside,
Nexen, Cairn and Equinor as part of work programmes centred on de-risking a
diverse range of plays that have proven to be prolific elsewhere in the North
and South Atlantic margins. In the South Porcupine Basin, these include the
Cretaceous Fan and Shelf plays which are considered to be analogous to the
Jubilee and Mahogany oil fields in the equatorial Atlantic Margin province and
Cairn's SNE discovery, offshore Senegal; the Pre-rift that is analogous to the
North Sea Brent Province and Syn-rift plays that are analogous to the Flemish
Pass play offshore Newfoundland. Meanwhile due to the producing Corrib gas
field, Triassic gas is a proven play in the Slyne basin. Europa has a
diversified prospect portfolio and is exposed to all these hydrocarbon plays.
Any success in the region by other operators is therefore expected to have a
positive read across for the Company.
The acquisition and interpretation of substantial volumes of 3D seismic data by
the industry has taken place over the last five years and represents the first
phase of exploration in the Irish Atlantic Margin. The next five-year stage is
likely to involve a sustained period of drilling activity, starting in 2019
with Nexen testing the Iolar prospect on FEL 3/18. Europa intends to play an
active role in this drilling phase, initially at its flagship Inishkea gas
exploration project near the Corrib gas field in LO 16/20. Here the Company has
identified 2.5 tcf of GIIP across six prospects on the licence. In parallel
with ongoing work to upgrade the prospects on LO 16/20 to drill ready status,
planning has commenced with a view to drilling a well in 2019.
Outside LO 16/20, during the period a substantial 2,498 km2 Pre-Stack Depth
Migration ("PSDM") 3D seismic reprocessing project was completed over the
Company's three operated licences in the South Porcupine, FELs 2/13, 3/13 and 1
/17. Following this work, Europa now has six drill-ready targets in the basin:
Kiely East and Kiely West in FEL 2/13, Beckett and Wilde in FEL 3/13 and
Edgeworth and Ervine in FEL 1/17. Our top ranked prospects for site survey and
drilling are Kiely East, Wilde and Edgeworth. A virtual data room for
prospective farminees was opened in July 2018 with the objective to secure
partners to drill wells on the Company's Porcupine licences. Target farminees
are supermajors, majors and large independents and they are currently active in
both the physical and virtual data rooms.
Slyne Basin: LO 16/20 (Inishkea)
LO 16/20 is located in the Slyne Basin adjacent to the producing Corrib gas
field. Unlike licences in the South Porcupine Basin, LO 16/20 is very much
exploration in a proven basin comprised of Triassic sandstone reservoirs in
tilted fault block structures, with gas generated from Carboniferous source
rocks. In 2010, Shell drilled the 18/20-7 exploration well into the Corrib
North structure on LO 16/20, 7 km from the Corrib gas field. Recently released
well data has revealed that the well encountered a 70m gas column in the same
Triassic sandstone reservoir as the Corrib field. As drilling was terminated
in the reservoir, Europa believes the full gas column could be up to 170m and
the surface area of the structure could extend to 5.75 km2. The presence of a
gas reservoir substantially de-risks not just Corrib North but other prospects
on the licence.
Based on the interpretation of historic 3D and 2D seismic, Europa has to date
identified 2.54 tcf GIIP in six prospects and leads in the Triassic Gas
hydrocarbon play on LO 16/20 (see table):
Prospect GIIP (tcf)
Corrib North discovery 0.04
Inishkea 1.10
Inishkea NW 1.09
Inishkea W 0.21
Corrib NW 0.03
Bofin lead 0.07
Total 2.54
The over 2 tcf of prospective GIIP on LO 16/20 is likely to result in
significant prospective resources assuming the 80% recovery factor achieved at
Corrib is appropriate. The Inishkea prospects are in relatively shallow water
in a proven gas play some 18 km from the Corrib gas field and associated
infrastructure connecting it to the 350 million cubic feet of gas per day
Bellanaboy gas processing plant. The Corrib field production is currently in
decline and spare capacity may become available in the Corrib gas
infrastructure well before any LO 16/20 discovery would be developed. LO 16/20
offers low risk, high impact exploration prospects that can be potentially fast
tracked to commercialisation. As a result, during the year under review the
Inishkea prospects were upgraded by the Group to flagship status.
The objective is to be able to drill a well on LO 16/20 in 2019. To get to
this point, various work streams are being run concurrently to upgrade the
prospects to drill ready status, oversee well planning, find a rig and secure
funding partners. PSDM reprocessing of the existing 3D seismic is being
undertaken to upgrade the quality of the data, deliver a new prospect inventory
and de-risk the prospects. Reprocessing started in March 2018 and remains on
course to be completed on schedule and on budget in Q4 2018. At this point and
subject to the results, a drill location for an Inishkea exploration well will
be identified and we anticipate adding further drill ready prospects to the six
already identified in the South Porcupine. OPC, a specialist subsurface and
production engineering group, has been engaged for porosity and permeability
modelling, development scenarios and costings.
Given these circumstances, the Company is confident its dual focused strategy
to fund an Inishkea exploration well will be successful either by securing
industry partners via a conventional farmout or financial partners investing
directly into the Company's wholly owned subsidiary Europa Oil & Gas (Inishkea)
Limited.
South Porcupine Basin: FELs 1/17, 2/13 and 3/13
Europa holds four licences in the South Porcupine Basin. These include three
operated licences, FELs 1/17, 2/13 and 3/13, which are estimated to hold gross
mean un-risked prospective resources of 4.3 billion barrels of oil equivalent
(boe) across our top nine prospects, including firm drilling targets Edgeworth
in FEL 1/17, Wilde in 3/13 and Kiely East in 2/13. The above volumetrics are
utilise prospect mapping based on the 2017 and 2018 reprocessed PSDM 3D seismic
data originally acquired in 2013. This has resulted in a marked improvement in
seismic quality and a substantial de-risking of the prospect inventory. The
table below summarises the GMUPR across selected prospects in FELs 1/17, 2/13
and 3/13 in the South Porcupine Basin:
Licence Prospect Play Gross Un-risked Prospective Resources
mmboe*
Low Best High Mean
FEL 1/17 Ervine Pre-rift 63 159 363 192
FEL 1/17 Edgeworth Pre-rift 49 156 476 225
FEL 1/17 Egerton Syn-rift 59 148 301 167
FEL 3/13 Beckett mid-Cretaceous Fan 111 758 4229 1719
FEL 3/13 Shaw+ mid-Cretaceous Fan 20 196 1726 747
FEL 3/13 Wilde Early Cretaceous 45 241 1082 462
Fan
FEL 2/13 Kiely East Pre-rift 52 187 612 280
+
FEL 2/13 Kiely West Pre-rift 23 123 534 225
+
FEL 2/13 Kilroy+ Cret. Slope Apron 37 177 734 312
Total 4,329
*million barrels of oil equivalent. The hydrocarbon system is considered an oil
play and mmboe is used to take account of associated gas. However, due to the
significant uncertainties in the available geological information, there is a
possibility of gas charge.
+prospect extends outside licence, volumes are on-licence
The new PSDM datasets for FEL 3/13, FEL 1/17 and FEL 2/13 from reprocessing
completed in October 2017 and May 2018 has not only resulted in changes to the
respective prospect volumes but, by significantly improving the accuracy of the
maps, have substantially increased the company's confidence in the numbers.
For example, the reprocessed data provided new insights into the Cretaceous fan
prospects including the best evidence yet of hydrocarbons including updip
pinchout, a gas-oil contact and conformance to structure.
The completion of the PSDM programme and new prospect inventory acted as the
trigger for the opening of a virtual data room for prospective farminees to our
three South Porcupine licences. Despite only launching in July 2018, the
company has been highly encouraged by the numbers of companies who have already
entered or are seeking access to both the physical and virtual data rooms.
The 2019 Nexen well in FEL 3/18 will drill the Iolar prospect. We understand
that this is a pre-rift play. Europa has five pre-rift prospects in FEL 2/13
and FEL 1/17 with combined GMUPR of just over 1 billion boe. If Iolar is
successful there may be positive technical and commercial read across resulting
in a de-risking of Europa's prospects.
South Porcupine Basin: LO 16/19
Europa holds a 30% interest in the Cairn-operated LO 16/19 on the west side of
the South Porcupine. 3D seismic was acquired in mid-2017 and delivery of a
final processed product is expected in Q4 2018 leading to a prospect inventory
in 2019. Following the farm-out in April 2017, Europa is carried on this work
programme by Cairn Energy up to a cap of US$6 million.
Padraig Basin: LO 16/22
LO16/22 is located in the Padraig Basin on the eastern margin of the Rockall
Trough. The most relevant analogue for Padraig, which is a remnant Jurassic
basin, is the conjugate margin play offshore Newfoundland in the Flemish Pass
basin and which hosts the 300 million barrel Bay du Nord oil discovery made in
2013. While the South Porcupine Basin is also a possible analogue for the
Flemish Pass basin, Europa's restoration of the conjugate margin prior to the
spreading of the Atlantic seafloor suggests Padraig could be a better fit.
Recent geochemical studies on light oil recovered from seabed cores show the
presence of the bisnorhopane biomarker and indicates an affinity with Late
Jurassic sourced oil similar to the Dooish discovery in Rockall and West of
Shetland oil fields.
Structures of significant size have been mapped on 2D seismic acquired in 1998,
along with multiple leads in both pre-rift and syn-rift hydrocarbon plays in
water depths ranging from 800m to 2,000m. Gross mean un-risked indicative
resources are estimated to be approximately 500 million boe. Work is underway
to mature the leads to prospect status using historic 2D seismic and building
on the high-quality technical work previously conducted by major oil companies.
Slyne Basin: LO 16/21
Following completion of the agreed work programme, including a full technical
assessment, Europa concluded that the prospectivity of LO 16/21 was limited.
Europa believes that the licence would compete poorly with other prospects in
Atlantic Ireland and be unlikely to attract drilling funds in the short to
medium term. On that basis, we decided to relinquish the licence.
Relinquishment became effective 30 June 2018. Accumulated expenditure of GBP
97,000 was written off in the period.
UK - Onshore Production
East Midlands: West Firsby; Crosby Warren; Whisby-4
Europa produces from three oilfields in the East Midlands: West Firsby (100%
working interest); Crosby Warren (100% working interest); and the Whisby-4 well
(65% non-operated interest). During the twelve months to 31 July 2018, 94
boepd were recovered from the three fields (2017: 113 boepd) with all the oil
transported by road to the Immingham refinery. In terms of UK onshore oil
production (excluding gas) Europa ranks third behind the Wytch Farm Group and
IGas.
At current oil prices the company's existing production covers our operating
overhead. Initiatives are underway to increase production at the existing
operated oil fields at Crosby Warren and West Firsby. This work is expected to
be completed in the fourth quarter of 2018.
UK - Development
East Midlands: PEDL180 (Wressle); PEDL182 (Broughton North)
The Wressle oil discovery is located on PEDL180 which lies on the same
structural trend as, and 5km southeast of, Europa's producing Crosby Warren
field. The Wressle-1 conventional exploration well was drilled in August 2014
and production testing in 2015 delivered a combined flowrate of over 700 boepd
from three reservoir intervals: Ashover Grit; Wingfield Flags; and Penistone
Flags. Reservoir engineering analyses indicate an initial production flow rate
of 500 bopd gross from the Ashover Grit interval at Wressle. The Broughton
North exploration prospect on PEDL182 lies adjacent and north of PEDL180. In
1984, a well drilled by BP discovered oil at Broughton.
A CPR undertaken in 2016 by ERCE assigned gross 2P reserves of 0.65 million boe
to the Wressle structure in the Ashover and Wingfield Flags and gross 2C
contingent resources of 1.86 million boe in the Penistone Flags. The CPR also
assigned gross mean un-risked prospective resources of 0.6 million boe and a
geological chance of success of 50% to Broughton North.
In January 2018 the Planning Inspectorate rejected an appeal by the partnership
against North Lincolnshire Council Planning Committee's decision to refuse
planning permission for the Wressle oil development. A new planning application
for the Wressle oil field development was submitted in July 2018 by the
operator Egdon Resources. This is currently being processed by North
Lincolnshire Council's planning officers ahead of their recommendation being
made to the Council's Planning Committee, expected later in 2018. A separate
application to extend planning consent at the Wressle site to 1 August 2019 was
also submitted but, despite being recommended for approval by the Council's
planning officers, was refused by the Planning Committee in August 2018. The
partners have submitted an appeal against this refusal to the Planning
Inspectorate.
We have considered the possible impairment of the PEDL180 asset in the light of
the planning decisions. The Council's professional planning officers have
consistently recommended the development for approval and we continue to
believe that the case for a development of the Wressle discovery is strong and
the partnership is committed to bringing the field into production.
Europa holds a 30% working interest in PEDLs 180 and 182. On 24 November 2016,
Europa agreed the sale of a 10% interest in the two licences to Upland
Resources. Completion of the sale was subject to planning and Field
Development Plan ("FDP") approvals. Following the decision by the Planning
Inspector in January 2018 to reject the appeals by the operator Egdon against
the two planning refusals by North Lincolnshire County Council's Planning
Committee, Upland elected to withdraw from the sale agreement and Europa has
repaid the GBP160,000 deposit to Upland in the period.
UK - Exploration
Weald Basin: PEDL143 (Holmwood)
Europa holds a 20% interest in and is the operator of PEDL143, which lies in
the Weald Basin, Surrey, 8km to the East of the Horse Hill discovery. PEDL143
contains the Holmwood conventional oil prospect which was assigned gross mean
prospective resources of 5.6 million boe.
In September 2015 planning permission was granted to drill a temporary
exploratory borehole from the Bury Hill Wood site to a depth of 1,400m. In
July 2018, the Environment Agency granted a permit to allow the drilling and
testing of a single well for the purposes of oil and gas exploration. The
initial term of PEDL143 was extended by the Oil and Gas Authority to 30
September 2020.
Post period end, the Secretary of State for the Environment, Food and Rural
Affairs, refused an application to extend the site lease and acting on behalf
of the partnership, Europa withdrew its application to extend planning
permission to drill the Holmwood exploration well from the Bury Hill Wood site.
The partnership has since re-instated the site. The remaining prospectivity of
PEDL143 will now be considered which, in addition to the established Portland
sandstone reservoirs, includes the Kimmeridge Limestone, an emerging play in
the Weald Basin. As evidence of possible impairment existed prior to the
reporting date, we have written down the value of the intangible asset being
largely the investment to date in obtaining planning permission to drill from
the Bury Hill Wood site, a charge to income of GBP1,145,000.
East Midlands: PEDL299 (Hardstoft)
PEDL299 contains the Hardstoft oil field which was discovered in 1919 by the
UK's first ever exploration well. Hardstoft produced 26,000 barrels of oil
from Carboniferous limestone reservoirs in the 1920s. We believe there is more
oil in the Hardstoft structure and gross 2C contingent resources of 3.1 million
boe and gross 3C contingent resources of 18.5 million boe were identified in a
CPR issued by joint venture partner Upland Resources. We believe that
application of modern production testing and drilling methodologies could well
lead to commercial oil flowrates being achieved. Europa's interest in PEDL299,
which is restricted to the conventional prospectivity including Hardstoft, is
25%, alongside Upland 25% and INEOS, the operator, 50%.
Cleveland Basin: PEDL343 (Cloughton)
PEDL343 contains the Cloughton gas discovery, which was successfully drilled by
Bow Valley in 1986 and flowed a small amount of gas to surface on production
test from conventional Carboniferous sandstone reservoirs. Europa regards
Cloughton as a gas appraisal opportunity with the critical challenge being to
obtain commercial flowrates from future production testing operations. Europa
holds a 35% interest in PEDL343 alongside Arenite 15%, Third Energy 20%
(operator), Egdon Resources 17.5% and Petrichor Energy 12.5%.
Southern North Sea: Block 41/24
In December 2017, Europa announced the sale of its 50% interest in Promote
Licence P2304 (UKCS Block 41/24) to Egdon along with joint venture partner
Arenite Petroleum Limited ("Arenite") which also sold its 50% interest to Egdon
as part of the same transaction. P2304 is located to the immediate south of
Egdon's 100% owned licence P1929 (UKCS Blocks 41/18 and 41/19) offshore North
Yorkshire. GBP46,000 spent on the licence was written off in the period.
East Midlands: PEDL181
PEDL181 provides exposure to the hydrocarbon potential of the Humber basin. The
licence has technical synergy with the adjacent PEDL334 which was awarded to an
Egdon Resources-led group in the 14th Round for the purpose of conventional and
unconventional exploration.
New Ventures
In the period, Europa has considered potential new venture opportunities in
seven countries outside of Ireland and the UK. These range from greenfield
exploration to brownfield re-development projects in North Africa, Western
Europe, and Central Europe. Only those opportunities which stand up to robust
technical and commercial scrutiny and which meet the Company's strict
investment criteria, particularly in terms of cost, strategic fit, political,
security and regulatory risk, and have clearly defined paths to value creation
are being pursued. We continue to screen possible new ventures in areas which
fit well with Europa's strategy and technical skillset.
Non-financial KPIs
There were no reportable accidents or incidents in the year (2017: zero). The
Environment Agency completed the repermitting of the Crosby Warren and West
Firsby sites in the year.
There were no new licence awards in the year (2017: zero).
Financials
Revenue was GBP1.6 million (2017: GBP1.6 million). An improving oil price offset
the decline in production and unfavourable exchange rates during the period.
The average oil price achieved was US$64.5/bbl (2017: US$48.9/bbl) and the
average Sterling exchange rate was US$1.35 (2017: US$1.27). An average of 94
boepd (2017: 113 boepd) was recovered from our three UK onshore fields, down as
a result of natural decline and the loss of around 10 boepd from the West
Firsby 6 well. Work aimed at restoring production from West Firsby 6 is
ongoing.
Stringent cost controls continue to be implemented. Cost of sales was GBP
1,365,000 (2017: GBP1,459,000).
Administrative expenses of GBP967,000 (2017: GBP553,000) included GBP151,000 spent on
projects and GBP229,000 on new licence evaluations. In January 2018 salaries of
head office staff were restored to their 2016 levels.
Net cash spent on operating activities was GBP479,000 (2017: cash spent GBP
255,000).
Purchase of intangible fixed assets of GBP1.3 million (2017: GBP1.5 million) was
largely spent advancing the Irish portfolio and on Holmwood. The Holmwood
intangible asset was subsequently largely written off. As a result of the delay
in receipt of planning consent for the Wressle development, GBP160,000 was repaid
to Upland Resources.
A deferred tax asset in respect of accumulated tax losses of the Group was
de-recognised in the period, to the extent that it exceeded the deferred tax
liability, as the timing of utilisation of those losses is uncertain. That
resulted in a GBP0.7 million charge to the income statement.
The Group's cash balance at 31 July 2018 was GBP1.8 million (31 July 2017: GBP3.6
million).
Conclusion and Outlook
The team's confidence in the Company's Atlantic Ireland licences has never been
stronger. The results of the technical work on our three operated licences in
the South Porcupine are eye-catching and have already attracted the target
blue-chip audience to the recently opened data rooms. Ongoing work in the
proven Triassic gas play in the Slyne Basin meanwhile has encouraged us to
commence well planning so that we are able to drill a well in 2019. With 2.5
tcf GIIP, a well on LO 16/20 would target substantial commercial volumes of
gas. At a time when the decline of the nearby Corrib field is expected to
gather pace, a discovery on LO 16/20 could become a major part of Ireland's
energy supply. Together with access to existing infrastructure and a strong
gas price outlook, the Inishkea project is worthy of flagship status.
Nexen's upcoming well in FEL 3/18 is anticipated to herald a new wave of
drilling activity in Atlantic Ireland. We are working hard to ensure Europa
does not merely watch from the sidelines in the knowledge that our industry
leading licence position, which provides us with exposure to all the various
plays being targeted, will benefit from any success in the region. Europa has
played a pioneering role in Atlantic Ireland exploration and we intend to
continue doing so by being directly involved in the next phase of activity,
either by drilling wells as an operator or as a partner alongside major
industry players.
HGD Mackay
Chief Executive Officer
The financial information set out below does not constitute the company's
statutory accounts for 2018 or 2017. 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 2018. Statutory accounts for the years
ended 31 July 2018 and 31 July 2017 have been reported on by the Independent
Auditors.
The Independent Auditors' Report on the Annual Report and Financial Statements
for 2018 and 2017 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 2017 have been filed with the
Registrar of Companies. The statutory accounts for the year ended 31 July 2018
will be delivered to the Registrar in due course.
Consolidated statement of comprehensive income
For the year ended 31 July note
2018 2017
GBP000 GBP000
Revenue
1,634 1,569
Cost of sales
(1,365) (1,459)
Impairment of producing fields 2 (142)
-
Exploration write-off 1
(1,289) -
Total cost of
sales (2,796)
(1,459)
=-------- ---------
Gross (loss)/
profit (1,162)
110
Administrative expenses
(967) (553)
Finance income
10 2
Finance
expense (171)
(234)
=-------- ---------
Loss before taxation
(2,290) (675)
Taxation (charge)/credit
(341) 184
=-------- ---------
Total comprehensive loss for the year attributable to the equity shareholders
of the parent
(2,631) (491)
Earnings per share (EPS) attributable to the equity shareholders of the parent
Pence per share Pence per share
Basic and diluted EPS
(0.87)p (0.19)p
Consolidated statement of financial position
As at 31 July 2018 2017
Note GBP000 GBP000
Assets
Non-current assets
Intangible assets 1 5,959 5,276
Property, plant and equipment 2 668 882
Deferred tax asset - 341
---------------------------------- ----------------------------------
Total non-current assets 6,627 6,499
---------------------------------- ----------------------------------
Current assets
Inventories 20 14
Trade and other receivables 471 886
Cash and cash equivalents 1,771 3,591
---------------------------------- ----------------------------------
2,262 4,491
---------------------------------- ----------------------------------
Total assets 8,889 10,990
Liabilities
Current liabilities
Trade and other payables (1,299) (945)
------------------------------------ ------------------------------------
Total current liabilities (1,299) (945)
------------------------------------ ------------------------------------
Non-current liabilities
Long-term provisions (2,735) (2,570)
Total non-current liabilities (2,735) (2,570)
----------- -----------
Total liabilities (4,034) (3,515)
----------- -----------
Net assets 4,855 7,475
Capital and reserves attributable to equity
holders
of the parent
Share capital 3,014 3,014
Share premium 18,481 18,481
Merger reserve 2,868 2,868
Retained deficit (19,508) (16,888)
----------- -----------
Total equity 4,855 7,475
These financial statements were approved by the Board of Directors and
authorised for issue on 16 October 2018 and signed on its behalf by:
P Greenhalgh, Finance Director
Company registration number 5217946
Consolidated statement of changes in equity
Attributable to the equity holders of the parent
Share Share premium GBP000 Merger Retained deficit Total
capital GBP000 reserve GBP000 GBP000 equity
GBP000
Balance at 1 August 2016 2,449 15,901 2,868 (16,536) 4,682
Comprehensive loss for the
year
Total comprehensive loss for
the year - - - (491) (491)
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total comprehensive loss for
the year - - - (491) (491)
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Contributions by and
distributions to owners
Issue of share capital 565 2,603 - - 3,168
Issue of share options - (23) - 23 -
Share based payment - - - 116 116
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total contributions by and 565 2,580 - 139 3,284
distributions to owners
Balance at 31 July 2017 3,014 18,481 2,868 (16,888) 7,475
Merger
Share Share premium reserve Retained deficit Total
capital equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 August 2017 3,014 18,481 2,868 (16,888) 7,475
Comprehensive loss for the
year
Loss for the year
attributable to the equity - - - (2,631) (2,631)
shareholders of the parent
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Total comprehensive loss for -
the year - - (2,631) (2,631)
---------------------------------- ---------------------------------- --------------------------------- ------------------------------ -------------------------------
Contributions by and
distributions to owners
Share based payment - - - 11 11
---------------------------------- ---------------------------------- ---------------------------------- --------------------------------- ------------------------------
Total contributions by and - - - 11 11
distributions to owners
Balance at 31 July 2018 3,014 18,481 2,868 (19,508) 4,855
Consolidated statement of cash flows
For the year ended 31 July 2018 2017
Note GBP000 GBP000
Cash flows used in operating activities
Loss after tax from continuing operations (2,631) (491)
Adjustments for:
Share based payments 11 116
Depreciation 2 72 184
Impairment of producing field 2 142 -
Exploration write-off 1 1,289 -
Finance income (10) (2)
Finance expense 171 234
Taxation charge/(credit) 341 (184)
Decrease/(increase) in trade and other 69 (108)
receivables
(Increase)/decrease in inventories (6) 9
Increase/(decrease) in trade and other payables 73 (13)
------------- -------------
Net cash used in operations (479) (255)
Income taxes paid - (144)
------------- -------------
Net cash used in operating activities (479) (399)
Cash flows used in investing activities
Purchase of property, plant and equipment - (6)
Purchase of intangible assets (1,336) (1,491)
Sale of part interest in licence - 600
Interest received 10 2
----------------------------------- -----------------------------------
Net cash used in investing activities (1,326) (895)
Cash flows (used in)/from financing activities
Proceeds from issue of share capital (net of - 3,145
issue costs)
(Decrease)/increase in payables relating to share (16) 16
capital issue costs
Option based equity movement on share issue - 23
Finance costs (3) (3)
----------------------------------- -----------------------------------
Net cash (used in)/from financing activities (19) 3,181
Net (decrease)/increase in cash and cash (1,824) 1,887
equivalents
Exchange gain/(loss) on cash and cash equivalents 4 (14)
Cash and cash equivalents at beginning of year 3,591 1,718
----------------------------------- -----------------------------------
Cash and cash equivalents at end of year 1,771 3,591
Notes to the financial statements
1. Intangible assets
Intangible assets 2018 2017
GBP000 GBP000
At 1 August 5,276 4,453
Additions 1,972 1,423
Sale of 3.34% interest in PEDL180 and PEDL182 - (600)
Exploration write-off (1,289) -
--------------- -------------
At 31 July 5,959 5,276
Intangible assets comprise the Group's pre-production expenditure on licence
interests as follows:
2018 2017
GBP000 GBP000
Ireland FEL 2/13 (Doyle A, B, C, Kilroy, Keane & 799 340
Kiely)
Ireland FEL 3/13 (Beckett, Wilde, Shaw) 1,093 725
Ireland FEL 1/17 453 224
Ireland LO 16/19 71 61
Ireland LO 16/20 454 206
Ireland LO 16/21 - 38
Ireland LO 16/22 125 48
UK PEDL143 (Holmwood) 10 901
UK PEDL180 (Wressle) 2,745 2,527
UK PEDL181 95 60
UK PEDL182 (Broughton North) 26 24
UK PEDL299 (Hardstoft) 12 12
UK PEDL343 (Cloughton) 76 69
UK Block 41/24 - 41
-------------------------------- --------------------------------
Total 5,959 5,276
========= ========
Exploration write-off
UK PEDL143 (Holmwood) 1,145 -
Ireland LO 16/21 97 -
UK Block 41/24 47 -
----------------------------------- -----------------------------------
Total 1,289 -
================================== =================================
If the Group is not able to 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.
In 2018 the interest and accumulated expenditure in respect of FEL
1/17 was transferred to the subsidiary company Europa Oil & Gas (Ireland East)
Limited and LO16/20 was transferred to Europa Oil & Gas (Inishkea) Limited.
LO 16/21 was relinquished due to a lack of commercial prospects and the GBP97,000
spent to date was written off.
2. Property, plant & equipment
Furniture & Producing Total
computers fields
GBP000 GBP000 GBP000
Cost
At 1 August 2016 51 10,785 10,836
Additions 1 5 6
----------- ------------- ------------
At 31 July 2017 52 10,790 10,842
Additions - - -
----------- ------------- ------------
At 31 July 2018 52 10,790 10,842
=========== ============= ============
=========== ============= ============
========= ===== =======
Depreciation, depletion and
impairment
At 1 August 2016 47 9,729 9,776
Charge for year 2 182 184
----------- ------------- -----------
At 31 July 2017 49 9,911 9,960
Charge for year 2 70 72
Impairment in year - 142 142
---------- ----------- ---------
At 31 July 2018 51 10,123 10,174
=========== ============= ============
=========== ============= ============
========= ===== =======
Net Book Value
At 31 July 2016 4 1,056 1,060
=========== ============= ============
=========== ============= ============
========= ===== =======
At 31 July 2017 3 879 882
=========== ============= ============
=========== ============= ============
========= ===== =======
At 31 July 2018 1 667 668
=========== ============= ============
=========== ============= ============
========= ===== =======
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 the Group's three 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 7.5-11%, Brent crude prices rising from US$72 per barrel in 2019 to
US$77 per barrel in 2022 and a pre-tax discount rate of 19%. The pre-tax
discount rate is derived from a post-tax rate of 10% and is high because of the
applicable rates 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 an
impairment in the year of GBP142,000 relating to the West Firsby site (2017: no
impairment
* * ENDS * *
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
Camille Gochez 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
END
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