TIDMIGAS
RNS Number : 3315D
Igas Energy PLC
26 April 2017
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
26 April 2017
IGas Energy plc (AIM: IGAS)
Unaudited Preliminary results for the year ended 31 December
2016
IGas Energy plc ("IGas" or "the Company" or "the Group"), one of
the leading producers of hydrocarbons onshore in Britain, announces
its preliminary results for the year ended 31 December 2016.
Successful financial restructuring and fundraising with net debt
reduced to c.$7 million
Planning permissions granted for three shale exploration wells
all within carried work programme of up to $230 million
Results Summary
Nine
Year months
ended to
31 Dec 31 Dec
2016 2015
GBPm GBPm
----------------------------------- ------- -------
Revenues 30.5 25.1
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Adjusted EBITDA(1) 10.2 18.3
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Loss after tax (32.9) (44.8)
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Net cash from operating activities 12.4 1.0
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Notes
1. EBITDA is considered by the Company to be a useful additional
measure to help understand underlying performance. A reconciliation
to loss before tax is included in the financial review.
Financial Summary
-- Successful completion of balance sheet restructuring and fundraising in April 2017
o Kerogen 28% shareholder for $35m investment; further new
equity raised (placing and open offer) of $21.9m
o Secured bonds debt for equity swap ($40m), cash buyback
($49.2m) and amended terms for remaining bonds ($30.1m)
o Unsecured bonds full debt for equity swap @ 62.5c into $17.1m
of equity
o Net debt reduced from $122m at 31 December 2016 to c.$7m upon
completion
Operational Summary
-- Stable average 2016 net production of 2,355 boepd (2015:
2,570 boepd); forecast production for 2017 of c.2,500 boepd
-- Continued focus on cash generation and costs; operating costs
for 2016 of $28.8/boe (2015: $24.6/boe); forecast 2017 operating
expenditure of c.$25/boe
-- Significant value of conventional portfolio confirmed by D&M
o 2P post tax valuation of US$181m based on market consensus
price curve (as at 31 October 2016)
-- D&M has estimated that IGas has 2.5 trillion cubic feet
(ca. 440 MMboe) of net risked shale gas resources
-- Shale appraisal and development plan covered by up to $230
million carried work programme with INEOS and Total
o Two planning permissions granted for shale appraisal in North
Nottinghamshire: Springs Road and Tinker Lane; both projects are
carried
Outlook
-- Bringing forward opportunities as part of the shale work programme:
o North West sites and applications planned in 2017
-- Sanction of gas monetisation project in second half of 2017
Board Changes
As IGas enters the next stage of its growth a number of changes
to the Board have been announced today:
-- Chairman and Founder, Francis Gugen, and Non-executive
director John Bryant to retire following the AGM in June 2017
-- Mike McTighe, Deputy Chairman, to be appointed Non-executive Chairman following the AGM
-- John Blaymires and Julian Tedder will resign from the PLC
board following the AGM but will remain directors of the operating
companies and continue to hold their executive roles
-- Two Directors from Kerogen Capital, Philip Jackson and Tushar
Kumar, appointed as Non-executives to the Board with immediate
effect
Commenting today Stephen Bowler, Chief Executive Officer,
said:
"Following the successful completion of our financial
restructuring, IGas is positioned strongly for the future. We have
a healthy balance sheet, supported by operating cashflow from our
production assets, which will enable us to focus on delivering the
significant potential of both our production and development assets
and provide a solid foundation for the longer-term future of the
Company.
We look forward to the next 12 months with confidence as both
IGas and the wider industry start to drill and hydraulically
fracture shale gas appraisal wells and collect important data for
the future development of the UK shale industry."
A results presentation will be available at
http://www.igasplc.com/investors/presentations.
The Company's Report and Accounts for the 12 months to 31
December 2016 will be made available to shareholders once approved
and will be available to view and download on the Company's website
at http://www.igasplc.com/investors/publications-and-reports, in
accordance with AIM Rule 20.
John Blaymires, Chief Operating Officer of IGas Energy plc, and
a qualified person as defined in the Guidance Note for Mining, Oil
and Gas Companies, June 2009, of the London Stock Exchange, has
reviewed and approved the technical information contained in this
announcement. Mr. Blaymires has more than 30 years' oil and gas
exploration and production experience.
For further information please contact:
IGas Energy plc
Tel: +44 (0)20 7993 9899
Stephen Bowler, Chief Executive Officer
Julian Tedder, Chief Financial Officer
Ann-marie Wilkinson, Director of Corporate Affairs
Investec Bank plc (NOMAD and Joint Corporate Broker)
Tel: +44 (0)20 7597 4000
Sara Hale/Jeremy Ellis/George Price
Canaccord Genuity (Joint Corporate Broker)
Tel: +44 (0)20 7523 8000
Henry Fitzgerald-O'Connor
Vigo Communications
Tel: +44 (0)20 7830 9700
Patrick d'Ancona/Chris McMahon
Chairman's Statement
Over the course of the last two years, we have been
de-leveraging the balance sheet through a combination of farm-outs
and Bond buy-backs as well as through the amortisation of the
Secured Bonds. However, despite the oil price improving
considerably from lows in the first quarter of 2016 and the
de-leveraging of the balance sheet, the Board has for some time
considered that significant corrections to the Company's capital
structure were necessary to achieve a structure that is sustainable
in the current oil price environment, as well as enabling the
business to capitalise on future value accretive opportunities.
Accordingly, much of the Board's activity over the year related
to the restructuring of the Company's balance sheet, which I am
pleased to report, successfully concluded in April 2017. We have
now significantly reduced our debt and are cash generative at
current oil prices. With up to $230 million of gross shale carry in
place and having now secured planning applications, the Company is
poised to capitalise on its potential.
I am pleased that the business continues to deliver
operationally whilst retaining a sharp ongoing focus on managing
its costs.
We are at a critical juncture in the UK for the future of our
energy mix and supply. At the peak of North Sea production we were
net exporters of gas but we now face future import dependency
levels of up to 80% if we are unable to address our supply
challenges. With the demise of coal production, UK sourced gas is
increasingly important as part of the energy mix for security of
supply whilst also providing environmental benefits compared to
imported gas. The UK needs a secure supply of gas as a bridging
fuel until renewable sources can provide sufficient stable energy
for society's needs.
Performance
The teams have worked hard during the year to keep production
steady and average production for the year was 2,355 boepd.
We have secured a number of planning consents for future
conventional projects across the country as part of our strategy to
replace underlying decline, grow production in the longer term and
monetise our stranded gas assets.
In July 2016, DeGolyer & MacNaughton ("D&M"), a leading
international reserves and resources auditor, completed an
independent evaluation of both our conventional and shale
interests. Their estimates show an increase in proven and probable
reserves to 13.77 MMboe (as at 30 June 2016) and subsequently,
based on these reserves, IGas valued the 2P reserves (post tax) at
$181m based on market consensus price curve (as at 30 October
2016).
D&M have also estimated shale gas net risked prospective
resources of 2.5Tcf, which in oil equivalent terms is c.440mmboe.
The estimate takes into account a recovery factor, adjustments for
productive areas and geological risk but, even heavily risked, this
is still a significant number for IGas and to give it a context,
equivalent to almost the entire UK gas consumption for a year.
We have also enjoyed success in moving our appraisal assets
forward. We have been granted planning permission for two sites in
North Nottinghamshire and in the North West we are in the process
of site selection and pre-application preparations.
Health, Safety and the Environment
Health and safety is a priority across the Company and
particularly in the current lower cost environment, we will not
compromise on the integrity and safety of our people and
operations. We continue to set ourselves challenging HSE targets to
drive continuous improvement in all these areas. All of our
production and drilling operations retain their ISO 14001 and 9001
certifications.
This year, we were proud to have received RoSPA's President's
Award, which is awarded for ten consecutive years of Gold Awards
for our health and safety performance. We are very proud of this
great achievement and this award demonstrates our ongoing
commitment to continuing to raise HSE standards.
As an operator of producing assets we are extremely conscious of
our role in the communities in which we operate and that any
activity is done safely and with as little impact to the
environment as possible.
We have a long history of giving back to the communities in
which we operate and one way we do this is through the awards made
annually by our IGas Community Fund. The Community Fund exists to
help make a positive difference to community and voluntary
organisations and our goal is to continue making sustainable
donations and to make commitments in terms of time, supporting and
helping the community.
Board Changes
I have served as Chairman of the Company since I founded it in
2003. In that time IGas has grown to be one of the largest onshore
oil and gas players in the UK, with one of the largest and most
diverse shale acreage positions. Post the recent refinancing, the
Company is poised to capitalise on its potential. Accordingly, I
have decided that this is the right time to retire from the Board,
which I will do at the AGM in June 2017. It has been a privilege to
lead IGas through many milestones to become the Company it is
today. I feel that I am leaving the Company in capable hands, with
a very strong executive team.
I am delighted that Mike McTighe is to succeed me as Chairman.
Mike joined the Board in August 2016 as Non-executive Deputy
Chairman with a wealth of experience and wide industry and
regulatory knowledge. Mike is currently Chairman of WYG Ltd, the
project management and technical consultants, Openreach, Together
Financial Services Ltd, Arran Isle Ltd and Gortmullan Holdings
Ltd.
John Bryant will also be retiring from the Board at the AGM.
John has served on the Board for the last nine years, since the
Company was first listed on AIM. We have all benefitted greatly
from his independent advice and significant contribution to the
Company and we wish him the very best going forward.
In August 2016, Non-executive director, Robin Pinchbeck stepped
down from the Board having served on the Board for over four years.
I would like to thank Rob for his valuable contribution and
commitment to the Board and the Company during his tenure and wish
him well for the future.
We also welcome to the Board, following the successful
fundraising, Philip Jackson and Tushar Kumar of Kerogen Capital as
Non-executive Directors who join with immediate effect. Philip
Jackson is appointed to the Remuneration Committee and Nomination
Committee with immediate effect and will be appointed as Chairman
of the Remuneration Committee with effect from the conclusion of
the AGM. Tushar Kumar becomes a member of the Audit Committee with
immediate effect.
Philip has over 30 years' experience in investments and
corporate finance in energy and infrastructure projects. He started
his career with the energy team at Ashurst LLP before moving to its
client Trafalgar House plc, one of the UK's leading independent oil
and gas companies at the time.
Tushar has 15 years' experience in investing, investment banking
and equities, working with a range of oil and gas companies
including upstream, downstream, majors and National Oil Companies
across Europe, the Middle East and, Asia.
It has been agreed to reduce the size of the Board and therefore
John Blaymires and Julian Tedder will resign from the PLC board
with effect from the conclusion of the AGM. They will remain
directors of the operating companies and continue to hold their
executive roles, which will include regular attendance at Board
meetings.
I would like to thank the board for all that they have done this
year and the executive team who have worked resolutely to steer the
business through a number of challenges. They deserve our thanks as
do all our employees.
Outlook
As we look forward to 2017, we see a number of opportunities for
the business. An improving oil price environment and the fall in
sterling following the referendum, have boosted the economics for
our production business as well as emphasising the importance of
shale development in Britain. Technological advances in shale
extraction, principally in the United States, bring further
benefits for efficiencies and costs and we, as well as others in
the industry, are set to be drilling this year as we start to roll
out our shale development plan.
In the low oil price environment, the Board's priority has been
to take considered and measured actions to reset business plans to
meet near-term priorities. Cost and capital discipline remain key
to ensuring we are well placed to deliver maximum value from our
existing production whilst maintaining the capabilities needed to
safely and successfully develop these reserves and our shale
resources for the benefit of the UK; whilst always fully respecting
the environment and the local communities within which we
operate.
We remain grateful to all of our stakeholders for their ongoing
support and now that we have successfully completed the
restructuring process we can look forward to benefitting from a
strong balance sheet, as well as a carried work programme of up to
$230 million from our partners.
Chief Executive Officer's Statement
Against the challenging commodity price backdrop of the last 12
months, IGas has continued to work hard to deliver operationally
and has made solid progress across many areas of the business.
Given the macro environment, the focus has been on operational
efficiencies including further reductions to our cost base
alongside improvements in an already strong safety performance.
In early April 2017, we completed a significant financial
restructuring which was ongoing throughout much of the second half
of 2016. We have been delighted to attract well known and
experienced investors such as Kerogen Capital, alongside other new
institutional investors and were pleased with the level of support
received for the transaction from our existing bondholders and
shareholders.
This restructuring has significantly improved our financial
position and we are now generating positive operating cashflow at
current oil prices and accordingly, are well positioned for the
future.
Production Assets
Production for 2016 was 2,355 boepd, marginally below guidance
of c.2,400 - 2,600 boepd, which was impacted by two key factors.
Firstly, the Group reduced its capital expenditure budget in order
to preserve cash and focus on projects that maximised economic
benefits thereby delaying some planned production. In addition, the
Group had unplanned downtime as a number of wells were worked over
during the summer.
There remains significant potential in our existing producing
fields. We have identified some infill drilling opportunities and
have since applied for and secured planning permissions for infill
drilling at Singleton. In addition, we received a field life
extension at Stockbridge, both of these projects being in the Weald
Basin.
We have also made good progress on our incremental projects
during the year. Planning permissions were granted for our gas
monetisation projects at Albury, Bletchingley, Lybster and
Singleton and commercial discussions at Lybster are now at an
advanced stage.
During the year, DeGolyer & MacNaughton ("D&M"), a
leading international reserves and resources auditor, undertook a
full Competent Persons Report ("CPR") across our assets. Their
estimates confirmed a continuing high conventional reserves
replacement driven principally by successful well operations,
decreasing field decline rates and further lowering of operating
costs.
The D&M evaluation also included an estimate of net
contingent conventional resources of 21.8 MMboe for IGas
properties. These resources include oil and gas resources within
producing and undeveloped fields that can be readily developed with
infill drilling and gas monetisation projects.
The oil price, although having recovered from its lows in early
2016, is still relatively low and we remain focussed on cash
generation and capital discipline. Significant potential remains
within our existing assets and should commodity prices improve we
will accelerate our capital investment in projects that have short
payback periods and attractive internal rates of return.
Appraisal Assets
We operate one of the largest acreage positions in the UK, of
over 1 million acres (gross), with a total gross carried shale work
programme of up to $230 million as at 31 December 2016.
We continue to move our shale development plan forward. In
November 2016, following a recommendation from the Planning
Officer, Nottinghamshire County Council's Planning and Licensing
Committee granted planning consent for our application to develop a
hydrocarbon wellsite and drill up to two exploratory wells in
Misson Springs, North Nottinghamshire. In March 2017, we were
granted planning permission for one exploratory well at our second
site in North Nottinghamshire, at Tinker Lane. Both permissions are
subject to the completion of Section 106 planning agreements which
are both currently being agreed with the requisite authorities.
Results from these wells will improve our understanding of the
shale gas potential in North Nottinghamshire and the wider
Gainsborough Trough. Following the final 3D seismic interpretation
and assessment in the North West, which confirms, alongside
previous wells, the shale potential within the survey area, the
data is being utilised to identify drilling locations and will
allow us to firm up a development programme.
D&M also produced a separate independent evaluation of
risked prospective shale gas resources in the IGas East Midlands
and North West licence areas.
D&M has estimated an IGas gross mean gas initially in place
("GIIP") of 221 Tcf. D&M reports an IGas gross GIIP best
estimate of 106 Tcf using PRMS guidelines.
After application of adjustments for productive areas and
recovery factors based on D&M's worldwide experience with
analogous shale gas basins, D&M has estimated unrisked IGas net
shale gas prospective resources of 11 Tcf.
D&M has estimated that IGas has 2.5 Tcf (ca. 440 MMboe) of
net risked shale gas resources after taking into account an
estimated geological chance of success. Our new Round 14 blocks
were included in this estimate.
In July 2016, IGas was formally awarded 17 blocks, across 9
PEDLS, in the UK's 14(th) Onshore Oil and Gas Licensing round. The
blocks, across three key basins, represent a total gross area of c.
257,000 acres; IGas' net interest is c. 115,000 acres.
Health, Safety and the Environment
The welfare of our employees, contractors, partners and
communities neighbouring our operations is at the very top of our
agenda and we constantly strive to improve this critical area of
our business.
Lost Time Injuries ("LTIs") represent a direct measure of our
safety procedures and the quality of training and have the
potential to impact our reputation and ability to operate
effectively. During the year we had zero LTIs.
Our endeavours were recognised this year through the President's
Award from RoSPA. This special honour is presented to those
organisations which have achieved more than 10 consecutive gold
awards and I would like to thank the HSE team and the wider
operation teams for their continuous demonstrable commitment to
ensuring that health and safety is at the top of the agenda.
Everywhere we operate we are committed to safe and
environmentally responsible activity. Throughout our operations
robust measures are put in place and regulated to protect the
environment.
IGas in the Community
The IGas Community fund is now in its eighth year and has
awarded more than GBP850,000 to deserving community projects close
to our operations. We support projects that make a difference to
life in the mainly rural communities where we operate.
We are committed to having an open dialogue with the public. It
is vital for the industry to understand specific communities' needs
and to help people to understand the process and what it means for
them.
As part of our commitment to open and transparent communications
IGas undertakes extensive community engagement alongside our
planning applications. This engagement consists of a number of
different elements from community meetings and exhibitions to site
visits, project websites, newsletters and social media
campaigns.
Political and Regulatory Update
Following the vote in June 2016 to leave the EU, a new
Government was formed in July 2016 under the leadership of a new
Prime Minister, Theresa May. In her opening speech, the Prime
Minister said that she wants an energy policy that emphasises the
reliability of supply and lower costs for users. Since her
appointment, the Prime Minister has created a new Department of
Business, Energy and Industrial Strategy headed by Greg Clark,
formerly Secretary of State for Communities and Local
Government.
In July 2016, the Committee on Climate Change published a report
which stated that "shale gas could make a useful contribution to UK
energy supplies, including providing some energy security
benefits." The report also confirmed that widespread shale gas
production is compatible with the carbon budgets provided three
tests are met. These tests are already met by existing UK
regulations and policy.
On 8 August 2016, the Government launched a Shale Wealth Fund
consultation to seek views on on the delivery method and priorities
of the fund, including direct payments to communities. The
consultation closed at the end of October 2016 and we await its
recommendations.
In November 2016, UKOOG, the UK onshore oil and gas industry
body, agreed a partnership with Community, the steel, iron and
manufacturing industries trade union, to promote the importance of
home-grown oil and gas and to protect British jobs.
This builds further links with key industry trade unions
following the UKOOG and GMB joint charter on shale gas, focusing on
safety, skills and supply chain development. A copy of the charter
can be found at
http://www.ukoog.org.uk/images/ukoog/pdfs/UKOOG-GMB_Charter_-_8_June_2015.pdf.
Role of Oil and Gas
Gas provides 84% of our homes with heat, 61% with the means to
cook, up to 50% of our electricity and the employment of over half
a million people in industries that turn natural gas into everyday
products such as computers, mobile phones, cosmetics, medicines,
fertilisers for our farmers and even solar panels.
The 2015 Paris Agreement re-emphasises the obligation on us to
focus on minimising environmental impact. Governments agreed to
reduce emissions and developing renewable sources of energy is
vital to reducing greenhouse gas emissions. However, renewables
cannot entirely satisfy demand themselves right now, and natural
gas is needed to help clean energy sources grow.
Gas supports renewables in a number of ways. Gas provides
back-up power for days when the wind does not blow and you can
track this using Gridwatch http://www.gridwatch.templar.co.uk/
which gives live information on how we are generating our
electricity. Gas and renewable energy sources also play different
but complementary roles in the energy mix. Currently renewables
generally provide electricity but today, 8 out of 10 homes in the
UK are heated using gas and as we continue to decarbonise our
electricity, it will be gas that will keep us warm. Finally, gas is
used as a raw material to help build renewable energy hardware.
Solar panels are a good example. Materials made from gas (and oil)
protect and bind together the solar cells using items such as
silicon rubber, plastic and polyesters.
People
As we move our business forwards it is important to review its
effectiveness and efficiency and we have been carefully monitoring
and reviewing the current organisational structure in light of the
anticipated increase in our shale operational activity in 2017. We
have streamlined ourselves not only to meet current challenges but
to deliver effectively against our future corporate targets.
Looking back at the year it has certainly been a challenging one
for us all but everyone has risen to the task in hand. When I go
out into the business I have been struck by the commitment,
enthusiasm and dedication of our people. I want to pay particular
tribute to all of our employees and thank them for their efforts
during 2016, and look forward to working with them in the next
phase of our development.
Outlook
Following the completion of our restructuring, we now have a
strong balance sheet which will enable us to focus on delivering
the significant potential of our production and development assets
and provide a solid foundation for the long-term future of the
Company.
We are forecasting net production for 2017 to be c.2,500 boepd
with capital expenditure of c.GBP4m in the year. We are focused on
cash generation in our production business and anticipate operating
costs of $25/boe for the year, which at these current oil price
levels and our anticipated general and admin and financing costs
means we will be cash generative.
We have now received two planning permissions in the East
Midlands and we anticipate spudding these wells in the second half
of 2017 to improve our understanding of the Gainsborough Trough.
All wells are carried by our partners under our $230 million
carried work programme. In the North West, having interpreted the
3D data, we are moving forward with site selection and
pre-application preparations.
Our strategy remains clear and focused, as we look to maximise
the potential of our existing assets and develop our shale gas
business from appraisal to future production.
We look forward to the future with renewed confidence following
the refinancing and are excited by the opportunities that increased
momentum across the UK shale industry, including further well data,
will present during 2017.
Operational Review
Production
2016 was a challenging year for the industry with low oil prices
driving cost efficiencies across the sector to ensure competiveness
was maintained. The impact on IGas' production business was no
different and various actions were taken to ensure that the
business remained sustainable in the prevailing circumstances. The
main actions implemented entailed a thorough and comprehensive
review of the Production business with the aim of reducing
operating expenditure by some 15% and revisiting the proposed
budgeted capital expenditure to preserve cash.
This review, which was part of the broader corporate cost
reduction initiative, entailed a comprehensive assessment of
existing processes, practice and costs and encouraged paradigm
shifts in approach to achieve the target savings. Some of the key
outputs from this exercise included changes in working and shift
patterns to better utilise key skills and expertise; emphasis on
integration and harmonisation of operations in the East Midlands
and the Weald area, for example in maintenance, well services and
outsourcing non-core services such as transportation. Unlike the
North Sea, the opportunity to materially derive savings through the
supply chain were not as tangible owing to the fact that the low
levels of onshore related activity means the supply chain is
historically already very cost conscious. Nevertheless, some more
modest savings were achieved through this avenue.
In 2016, the overall operational expenditure was reduced by
c.15% in sterling terms. This is a significant reduction in costs
which has been achieved without impacting safety and is testimony
to the hard work and commitment of our staff.
As part of the cost reduction exercise a thorough review of
capital expenditure was also undertaken and as a consequence a
number of projects were deferred to reduce capex and optimise value
to the business. These projects offer economic solutions but were
recognised as being discretionary and that they would be more
attractive in a higher oil price scenario.
Production for the year averaged c.2,355 boepd against guidance
of c.2,400 - 2,600 boepd. Production during the year was impacted
by two key items, firstly the reduced capital expenditure had an
effect and secondly, a number of wells were worked over during the
summer.
Despite the backdrop of low oil prices, we were able to continue
to advance the initiatives to sustain production and boost recovery
through our technical work programmes and application of
technology. Key successes included increased well performance
through detailed modelling of lift performance and subsequent
changes to well completions. The application of downhole gauges and
Rod Pump Off Controllers (RPOC's) has provided the Engineering
teams with live data against which they are able to evaluate and
recommend beneficial changes to the well configurations. This has
been a key contributor to lowering costs whilst maintaining
production efficiency.
What has been very pleasing is that we have "instrumented" our
fields, providing real time data, largely through the efforts of
our "in house" team at a fraction of the cost that a similar
exercise would have incurred from an industry recognised supplier.
In effect we have built our own "digital oilfield" capability and
continue to expand this concept with positive cost effective
results.
Another key area we have continued to make good progress on is
our water injection initiative. Building on the successful pilot
conducted at Welton we are pursuing opportunities to expand this
initiative both at Welton and in other fields. In parallel we have
been trialling technology that can "clean up" produced water to
drinking water standards. These trials have proven very successful
and offer the opportunity to treat our produced water, removing
solids and salts before it is re-injected back into the reservoir.
This helps the injection efficiency and keeps costs down. This
technology will also be invaluable in terms of re-circulating water
used in the shale arena and in doing so help to reduce the overall
consumption as well as reducing the number of truck movements
required to transport the water.
Water injection has several advantages, it can increase
production, extend field life and importantly boost recovery. Some
of the incremental reserves referred to below is as a result of the
commitment to expanding the water injection project.
Our producing assets portfolio consists largely of mature fields
which have historically suffered from relatively high operating
costs and low levels of production efficiency. Over the last two
years we have embarked upon a number of measures to lower costs and
improve production efficiency. We are now seeing these initiatives
come to fruition in terms of reduced opex, sustained production
levels, even in a reduced capex environment, and year on year
increases in booked reserves.
Reserves and Resources
Independent Reserves and Resources Evaluations
On 17 October 2016 IGas announced the publication of the full
and final results of the Competent Persons Report ("CPR") by
DeGolyer & MacNaughton ("D&M"), a leading international
reserves and resources auditor.
The reports comprised an independent evaluation of IGas
conventional oil and gas interests as of 31 July 2016, a report as
of 31 July 2016 on the unconventional prospective resources and a
report as of 30 June 2016 on reserves and revenue and contingent
resources. The full reports can be found on the IGas website.
The D&M independent evaluation also included an estimate of
2C net contingent conventional resources of 21.8 MMboe for IGas
properties based on 5.8 Mcf/boe. These resources include oil and
gas resources within producing and undeveloped fields that can be
readily developed with infill drilling and gas monetisation
projects. Three gas monetisation projects now require only sales
agreements and final investment decisions (FID) to be able to
proceed, which will lead to future reserves additions and
incremental production.
Prospective Shale Gas Resources
D&M also produced a separate independent evaluation of
risked prospective shale gas resources in the IGas East Midlands
and North West licence areas.
Using a deterministic method adopted by the British Geological
Survey and including 14(th) Round licences awarded in 2016, D&M
estimated an IGas gross mean GIIP of 221 Tcf. D&M reported an
IGas gross GIIP best estimate of 106 Tcf using PRMS guidelines.
These estimates included uncertainty in the productive area.
After application of adjustments for productive areas and
recovery factors based on D&M's worldwide experience with
analogous shale gas basins, D&M estimated unrisked IGas net
shale gas prospective resources of 11 Tcf.
Finally, D&M estimated that IGas has 2.5 Tcf (ca. 440 MMboe)
of net risked shale gas resources after taking into account an
estimated geological chance of success.
Net IGas Shale Units Comments
Gas Estimates (TcF)
------------------------ ------- --------------------------------
Gas in Place 102 Using BGS deterministic method
------------------------ ------- --------------------------------
Unrisked Prospective 11 Adjusted for productive area
Resource and recovery factor
------------------------ ------- --------------------------------
Risked Mean Prospective 2.5 Adjusted for geological chance
Resource of success
------------------------ ------- --------------------------------
Assets
In addition to the 24 onshore fields IGas operates in the UK,
predominantly centred in the East Midlands and the Weald Basin, we
operate one of the largest net acreage positions in the UK, with a
total gross carried shale work programme of up to $230 million as
at 31 December 2016.
We continually monitor and manage our portfolio with a view to
optimising the economic recovery of oil and gas. During 2016 there
were some significant changes to the portfolio involving the
relinquishment of acreage no longer deemed core to the business,
reduction in equity in PEDLs 293 and 295 as a result of INEOS
Upstream Limited ("INEOS") exercising an option to increase their
holding, a farm-in into PEDL 278 and a successful outcome from the
14(th) Round Licensing awards.
As part of our 14(th) Round awards, in the East Midlands and
Yorkshire, blocks SE31c/SE41e, SK59b/SK49, and SK89e/SK88b/SK87c
were awarded to a joint venture comprising IGas, Total E&P UK
Limited ("Total") and Egdon Resources plc ("Egdon"). IGas will be
operator of the licences with a 35% interest, Total will have a 50%
interest and Egdon a 15% interest. These licences are located in
the Gainsborough Trough close to where the Company currently
operates 80 sites, the majority of which have been in production
for many years. IGas will conduct a shale work programme including
3D seismic surveys and three firm wells. Two further 100% blocks,
TF18b and SK99a, were awarded to IGas in the East Midlands with a
work programme consisting of two drill or drop wells targeting
conventional prospects and 12km of 2D seismic.
In the North West, blocks SJ64/SJ65 and SJ75/SJ76 were awarded
to a joint venture comprising IGas and ENGIE E&P UK Limited
("ENGIE"). In March 2017, INEOS completed its acquisition of ENGIE
's interests in certain UK onshore licences held jointly with IGas
which included these blocks. IGas will be operator of the licences
with a 65% interest and INEOS will have a 35% interest. A work
programme consisting of 2D seismic and two drill or drop wells will
help to establish the hydrocarbon potential of the shale in this
area.
In the South East, IGas has been awarded blocks SU81c, SU81d,
SU90a and TQ34d and will be the operator with a 100% interest.
These blocks have conventional oil and gas potential and are
located adjacent to the IGas Singleton and Bletchingley fields in
the Weald Basin. A work programme consisting of 2D seismic
acquisition will drive the decision on the two drill or drop
wells.
The impact of these various changes to the portfolio is
summarised below:
Gross ('000 Net ('000
acres) acres)
------------- ------------ ----------
31 Dec 2015 1,052 769
------------- ------------ ----------
31 Dec 2016 1,037 632
------------- ------------ ----------
Development
Gas Monetisation
The planning application at Bletchingley for gas production and
the application for compressed natural gas (CNG) at Albury have
both now been approved. We continue to seek further cost savings in
these projects where possible. Commercial discussions are underway
and a formal FID will follow upon their conclusions.
At Lybster, in Scotland, we have been granted planning
permission for the facilities upgrade and oil/gas and CNG
production streams and discussions are ongoing in respect of the
relevant off-take options.
In addition, an application for the installation of a CNG
facility at the Singleton field in the Weald has been approved and
options on commercial arrangements are being investigated.
Weald Basin
In addition to the planning consent for the CNG plant at
Singleton, we also obtained planning consent for two further
production wells at Singleton and extended the life of our site at
Stockbridge.
East Midlands and Yorkshire
In November 2016, we received planning permission to drill two
exploratory wells at a site at Springs Road in the parish of
Misson, North Nottinghamshire. The planning application had been
submitted in October 2015 and several rounds of information
gathering and public consultation were undertaken before a decision
was taken by Nottinghamshire County Council Planners.
As part of the planning obligations IGas agreed to sign a S106
legal agreement which covers issues including where HGV's will be
routed, the continuation of a community liaison group and the
creation of a bond for site restoration. Once these and the other
conditions which were imposed have been agreed work can commence on
the site. Meanwhile, our Ground Water Monitoring Boreholes are now
operational and data is being collected and sent to the Environment
Agency.
At our Tinker Lane site, which is also situated in North
Nottinghamshire near Blyth, a planning application to drill a
single well along with accompanying ground water monitoring
boreholes was submitted in May 2016. In March 2017, following a
recommendation by Planning Officers to grant consent, planning
permission was granted, also subject to the completion of a S106
legal agreement.
Both of these developments will help us to understand the shale
gas potential in the region and more widely. There is a pressing
need to deliver lower carbon energy that is home grown, provides
important energy security for the future alongside economic
benefits to the local communities as well as the country as a
whole. Depending on the results of these wells we may submit
planning applications to carry out hydraulic fracturing in the
future.
During the course of 2016 we have continued with an extensive
community engagement programme in the area, with a dedicated
Community Liaison representative living within the community and
holding regular Community Liaison Group meetings and public events.
We distributed two newsletters to over 5,000 people in the area and
continue to engage with the community, businesses and other
stakeholders who have an interest in these developments.
North West
Following the successful 3D North Dee seismic acquisition
campaign in Q4 2015 the IGas and Joint Venture partnership
geoscience teams have been evaluating the comprehensive data set to
refine an initial subsurface target area for exploration and
appraisal in the area. On the back of the geological work the IGas
Lands & Planning team are in the process of securing surface
location options to enable initial exploration and appraisal well
applications to move forward.
International Assets
Further progress on divestment of International assets has been
made during 2017. All Indonesian operations have been divested.
Licences previously held in Germany and Australia have been
relinquished or divested. The office in Brisbane has been closed
and the lease has not been renewed. Operations in India have been
completed and application made to relinquish the last remaining
licence has been submitted. The deregistration of the companies in
China and Vietnam have progressed and are expected to be finalised
in December 2017.
Financial Review
A key objective for the Group for the year ended 31 December
2016 was to reach a consensual solution with its bondholders in
relation to its forecast non-compliance with certain of its
covenants during the year. After many months of discussions,
agreement was ultimately reached with bondholders on a
restructuring proposal which was formally approved by all
stakeholders in April 2017. The restructure involved new equity of
$55 million being raised net of expenses, $40 million of secured
bonds being exchanged for equity at par, $49.2 million of secured
bonds being bought by the Company at par, $27.4 million unsecured
bonds being exchanged for equity at 62.5 cents and the remaining
$30 million of secured bonds having their terms amended. This
resulted in net debt being reduced from c.$122 million to under $10
million post completion of the transaction.
Results for the year
Oil price volatility and the fall in the value of sterling
against the US dollar both had a significant impact on the results
of the Group during the year. The price of Brent crude reached a
low of $27/bbl in January 2016 and a high of $55/bbl in December
2016, with an average price of $44/bbl during the year. Sterling
weakened against the US dollar following the result of the EU
referendum and the exchange rate declined from GBP1:$1.50 at the
beginning of the year to GBP1:$1.23 in December 2016, having a
negative impact on our US dollar denominated debt.
In the twelve months ended 31 December 2016 adjusted EBITDA was
GBP10.2 million (Nine months ended 31 December 2015: GBP18.3
million) whilst a loss was recognised from continuing activities
after tax of GBP31.8 million (Nine months ended 31 December 2015:
loss GBP47.2 million). The main factors driving the movements
between the twelve months ended 31 December 2016 and the nine
months ended 31 December 2015 were as follows:
-- Revenues increased to GBP30.5 million (Nine months ended 31
December 2015: GBP25.1 million) principally due to higher sales
volumes in the longer accounting period. Lower average daily
production and a lower US dollar price per barrel were partially
offset by a strengthening US dollar;
-- Other costs of sales increased to GBP20.9 million (Nine
months ended 31 December 2015: GBP14.4 million) mainly due to
higher sales volumes over the full year;
-- Administrative expenses increased to GBP11.4 million (Nine
months ended 31 December 2015: GBP6.0 million) due to the inclusion
of GBP3.0 million (Nine months ended 31 December 2015: GBPnil) of
legal and professional costs relating to refinancing, higher
non-cash share based payment charges of GBP2.6 million (Nine months
ended 31 December 2015: GBP0.5 million) and lower capitalisation of
costs due to lower capital activity in the year. Restructuring
costs were GBP0.6 million (Nine months ended 31 December 2015:
GBP2.1 million) as the cost reduction programme was completed
primarily in 2015;
-- Impairment charges of GBPnil on property, plant and equipment
(Nine months ended 31 December 2015: GBP8.9 million net of tax) and
impairment charges of GBPnil on goodwill (Nine months ended 31
December 2015: GBP39.2 million) due to higher reserves, higher
estimated future oil prices and a favourable USD/GBP exchange
rate;
-- An exploration write off of GBP4.5million (Nine months ended
31 December 2015: GBP12.9 million);
-- A profit on disposal of oil and gas assets of GBPnil (Nine
months ended 31 December 2015: GBP4.0 million on the INEOS
farm-out);
-- Other income decreased to GBP0.7 million (Nine months ended
31 December 2015: GBP5.1 million); and
-- A tax credit of GBP13.0 million mainly due to the reversal of
temporary timing differences and a reduction in the supplementary
corporation tax rate from 20% to 10% from 1 January 2016 (Nine
months ended 31 December 2015: GBP17.3 million credit due to timing
difference reversals caused by the impairment of assets).
Income statement
The Group recognised revenues of GBP30.5 million in the year
(Nine months ended 31 December 2015: GBP25.1 million). Group
production in the year was an average of 2,355 boepd (Nine months
ended 31 December 2015: 2,570 boepd). Revenues for the year
included GBP3.3 million (Nine months ended 31 December 2015: GBP2.4
million) relating to the sale of third party oil, the bulk of which
is processed through our gathering centre at Holybourne in the
Weald Basin.
The average pre hedge realised price for the year was $44.1/bbl
(Nine months ended 31 December 2015: $51.3/bbl) and post hedge
$58.1/bbl (Nine months ended 31 December 2015: $58.9/bbl). The
realised gain on hedges was GBP8.5 million (Nine months ended 31
December 2015: GBP3.3 million) reflecting the movement in oil
prices. The average GBP/USD exchange rate for the year was GBP1:
$1.37 (Nine months ended 31 December 2015: GBP1: $1.53) which
positively impacted revenues.
Cost of sales for the year were GBP27.2 million (Nine months
ended 31 December 2015: GBP21.5 million) including depreciation,
depletion and amortisation (DD&A) of GBP6.3 million (Nine
months ended 31 December 2015: GBP7.1 million), and operating costs
of GBP20.9 million (Nine months ended 31 December 2015: GBP14.4
million). Operating costs include a cost of GBP2.7 million (Nine
months ended 31 December 2015: GBP2.2 million) in relation third
party oil. The contribution received from processing this third
party oil was GBP0.6 million (Nine months ended 31 December 2015:
GBP0.2 million).
Operating costs per barrel of oil equivalent (boe) were GBP21.1
($28.8), excluding third party costs (Nine months ended 31 December
2015: GBP16.1 ($24.6) per boe). Operating costs per boe were higher
in 2016 due to the impact of lower volumes on fixed costs, higher
transportation costs and a credit in 2015 of GBP3.6/boe ($5.5/boe)
related to a refund for land rates.
Adjusted EBITDA in the year was GBP10.2 million (Nine months
ended 31 December 2015: GBP18.3 million). Gross profit for the year
was GBP3.3 million (Nine months ended 31 December 2015: GBP3.6
million). Administrative costs increased by GBP5.4 million to
GBP11.4 million (Nine months ended 31 December 2015: GBP6.0
million) principally due to the longer accounting period,
additional legal and professional costs relating to refinancing of
GBP3.0 million (Nine months ended 31 December 2015: GBPnil),
increase in non-cash share based payment charges to GBP2.6 million
(Nine months ended 31 December 2015: GBP0.5 million) and lower
capitalisation of costs due to lower capital activity in the year,
partially offset by higher restructuring costs in 2015.
No impairment charge was recognised in the year principally as a
result of higher reserves, higher estimated future oil prices and a
favourable USD/GBP exchange rate (Nine months ended 31 December
2015: GBP48.1 million net of tax - GBP8.9 million relating to
producing assets and GBP39.2 million relating to goodwill).
Exploration costs written off were GBP4.5 million (Nine months
ended 31 December 2015: GBP12.9 million) relating to relinquishment
of licences during the year.
Other income of GBP0.7 million included GBP0.4 million (Nine
months ended 31 December 2015: GBP4.9 million) relating to a fair
value adjustment on the contingent deferred consideration in
relation to an amount payable to a joint venture partner.
Net finance costs were GBP28.8 million for the year (Nine months
ended 31 December 2015: GBP7.8 million), which primarily related to
interest on borrowings of GBP11.9 million (Nine months ended 31
December 2015: GBP8.7 million), a net foreign exchange loss of
GBP14.8 million principally on the US$ denominated debt (Nine
months ended 31 December 2015: gain GBP0.1 million) and a realised
loss on the sale of bonds of GBP1.5 million (Nine months ended 31
December 2015: GBP0.9 million gain on bonds repurchased)
The Group made a loss on oil price derivatives of GBP3.5 million
for the year (Nine months ended 31 December 2015: gain GBP8.6
million).
Cash flow
Net cash generated from operating activities for the year was
GBP12.4 million (Nine months ended 31 December 2015: GBP1.0
million). The Group invested GBP8.8 million across its asset base
during the year (Nine months ended 31 December 2015: GBP9.4
million), of which GBP6.5 million was invested in the conventional
assets in order to maintain current levels of production and GBP2.3
million in unconventional assets in furtherance of our shale
exploration programme.
The Company repaid GBP4.9 million ($7.1 million) of principal on
borrowings to bondholders in the period in accordance with the
terms of the bonds (Nine months ended 31 December 2015: GBP6.1
million ($8.2 million)), which represents a repayment of 5% of the
original principal amount of the secured bonds. The Company also
resold bonds with a face value of $8.0 million for $6.5 million in
November 2016 (Nine months ended 31 December 2015: repurchased
bonds with a face value of $7.0 million for $5.3 million).
The Company paid GBP11.6 million ($15.5 million) in interest
(Nine months ended 31 December 2015: GBP5.9 million ($9.0
million)). Cash and cash equivalents were GBP24.9 million at the
end of the year (31 December 2015: GBP28.6 million).
Balance sheet
Net assets were GBP70.5 million at 31 December 2016 (31 December
2015: GBP98.8 million) with the decrease in net assets principally
resulting from the loss arising during the year.
Trade and other receivables decreased by GBP8.0 million mainly
due to a reduction in receivables from JV partners following lower
activity and a receivable in respect of a rates refund included in
2015.
Borrowings increased from GBP102.9 million to GBP124.6 million
mainly as a result of the negative impact of the strengthening of
the US dollar on US dollar denominated debt and the sale of $8.0
million secured bonds during the year.
At 31 December 2016, the Group's derivative instruments had a
net negative fair value of GBP0.9 million (31 December 2015: net
positive fair value of GBP6.6 million).
Net debt, being borrowings less cash, at the period end amounted
to GBP99.7 million (31 December 2015: GBP73.3 million).
At the Annual General Meeting of the Company held on 25th May
2016, a special resolution was passed approving a reduction of the
Company's capital by way of the cancellation of the whole of the
amount standing to the credit of the Company's share premium
account and the capital redemption reserve thus eliminating the
current deficit position and creating distributable reserves.
Following the approval of the High Court and the subsequent
registration of the Court order with the Registrar of Companies the
Capital Reduction has now become effective.
The Company issued 4,082,114 ordinary shares at a nominal value
of 10p each. 1,767,220 shares were issued in connection with the
disposal of the Company's interest in Sangatta West CBM Inc under a
Share Transfer Agreement with Ephindo International CBM Holding
Inc. thereby disposing of the Group's remaining interest in
Indonesia. The balance of shares were issued in connection with the
IGas Energy Share Incentive Plan. (Nine months ended 31 December
2015: 1,899,102 shares issued)
Adjusted EBITDA and underlying Operating Profit are considered
by the Company to be useful additional measures to help understand
underlying performance.
Adjusted EBITDA
Year Nine months
to 31 to 31
December December
2016 2015
GBP
million GBP million
Loss before tax (44.8) (64.5)
Net finance costs 28.8 7.8
Depletion, depreciation & amortisation 6.5 7.2
Share based payment charges 2.6 0.5
Restructuring costs and one-off
costs relating to Ineos farm-out 0.6 2.7
Impairments/write offs 4.5 69.8
Unrealised loss/(gain) on hedges 12.0 (5.3)
Adjusted EBITDA 10.2 18.3
---------- ------------
Underlying Operating Profit
Year Nine months
to 31 to 31
December December
2016 2015
GBP
million GBP million
Operating loss (16.0) (56.6)
Share based payment charges 2.6 0.5
Restructuring costs and one
off costs relating to Ineos
farm-out 0.6 2.7
Impairments/write offs 4.5 69.8
Loss/(gain) on oil price derivatives 12.0 (5.3)
Underlying operating profit 3.7 11.1
---------- ------------
Principal risks and uncertainties
The Group constantly monitors the Group's risk exposures and
reports to the Audit Committee and the Board on a regular basis.
The Audit Committee receives and reviews these reports and focuses
on ensuring that the effective systems of internal financial and
non-financial controls including the management of risk are
maintained. The results of this work are reported to the Board
which in turn performs its own review and assessment.
The principal risks for the Group can be summarised as:
-- Strategy fails to meet shareholder expectations;
-- Planning, environmental, licensing and other permitting risks
associated with its operations and, in particular, with drilling
and production operations;
-- No guarantee can be given that oil or gas can be produced in
the anticipated quantities from any or all of the Group's assets or
that oil or gas can be delivered economically;
-- Development of shale gas resources not successful;
-- Loss of key staff;
-- Market price risk through variations in the wholesale price
of oil in the context of the production from oil fields it owns and
operates;
-- Market price risk through variations in the wholesale price
of gas and electricity in the context of its future unconventional
production volumes;
-- Exchange rate risk through both its major source of revenue
and its major borrowings being priced in US$ while most of the
Group's operating and G&A costs are denominated in UK pounds
sterling.
-- Liquidity risk through its operations;
-- Capital risk resulting from its capital structure, including
operating within the covenants of its existing bond agreements;
and
-- Political risk such as change in Government or the effect of local or national referendum.
Going Concern
The strength of the Group's balance sheet has been improved
significantly by the capital restructuring completed in April 2017.
Based on the Group's strategic plans and working capital forecasts,
the Directors have a reasonable expectation that the Group has
adequate resources to continue in existence for the foreseeable
future. Thus the Directors continue to adopt the going concern
basis in the preparation of the financial statements.
Outlook
Following the completion of the capital restructuring in April
2017 we have a strong balance sheet that will allow us to fully
pursue our strategy of achieving long term value creation for all
our stakeholders.
Stephen Bowler Julian Tedder
Chief Executive Officer Chief Financial Officer
25 April 2017 25 April 2017
Consolidated Income Statement
For the year ended 31 December 2016
Year ended Nine months ended
31 December 2016 31 December 2015
Notes GBP000 GBP000
----------------------------------------------------------------- ----- ----------------- -----------------
Revenue 2 30,471 25,123
Cost of sales:
Depletion, depreciation and amortisation (6,323) (7,105)
Other costs of sales (20,857) (14,416)
----------------------------------------------------------------- ----- ----------------- -----------------
(27,180) (21,521)
Gross profit 3,291 3,602
Administrative expenses (11,406) (5,973)
Restructuring costs (557) (2,117)
Impairment of goodwill 8 - (39,227)
Exploration and evaluation assets written off 9 (4,485) (12,900)
Impairment of property, plant and equipment 10 - (17,720)
Profit on disposal of oil and gas assets 3 - 3,998
(Loss)/gain on oil price derivatives (3,496) 8,618
Other income 4 660 5,070
Operating loss (15,993) (56,649)
Finance income 5 277 1,302
Finance costs 5 (29,057) (9,127)
----------------------------------------------------------------- ----- ----------------- -----------------
Loss from continuing activities before tax (44,773) (64,474)
Income tax credit 6 13,006 17,257
----------------------------------------------------------------- ----- ----------------- -----------------
Loss after tax from continuing operations attributable to equity
shareholders of the Group (31,767) (47,217)
(Loss)/gain after tax from discontinued operations (1,144) 2,395
----------------------------------------------------------------- ----- ----------------- -----------------
Net loss attributable to equity shareholders of the Group (32,911) (44,822)
----------------------------------------------------------------- ----- ----------------- -----------------
Loss attributable to equity shareholders:
Basic loss per share (pence/share) 7 (10.99p) (15.15p)
Diluted loss per share (pence/share) 7 (10.99p) (15.15p)
----------------------------------------------------------------- ----- ----------------- -----------------
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Year ended Nine months ended
31 December 2016 31 December 2015
GBP000 GBP000
------------------------------------------------------------------ ----------------- -----------------
Loss for the year/period (32,911) (44,822)
Other comprehensive income/(loss) for the year/period
Currency translation adjustments recycled to the income statement 105 1,229
Currency translation adjustments (1,231) (5,058)
------------------------------------------------------------------ ----------------- -----------------
Total comprehensive loss for the year/period (34,037) (48,651)
------------------------------------------------------------------ ----------------- -----------------
Consolidated Balance Sheet
For the year ended 31 December 2016
31 December 31 December
2016 2015
Notes GBP000 GBP000
--------------------------------------------------------------- ----- ----------- -----------
ASSETS
Non-current assets
Intangible exploration and evaluation assets 9 112,448 113,394
Property, plant and equipment 10 97,709 82,911
Goodwill 8 4,801 4,801
214,958 201,106
--------------------------------------------------------------- ----- ----------- -----------
Current assets
Inventories 1,270 1,208
Trade and other receivables 7,015 14,809
Cash and cash equivalents 24,946 28,614
Other financial assets - restricted cash - 1,007
Derivative financial instruments - 6,654
Assets classified as held for sale - 1,837
--------------------------------------------------------------- ----- ----------- -----------
33,231 54,129
--------------------------------------------------------------- ----- ----------- -----------
Total assets 248,189 255,235
--------------------------------------------------------------- ----- ----------- -----------
LIABILITIES
Current liabilities
Trade and other payables (8,170) (9,218)
Current tax liabilities (1,318) (2,004)
Borrowings 11 (6,084) (4,819)
Other liabilities (11) (147)
Derivative financial instruments (876) -
Liabilities associated with assets classified as held for sale - (1,837)
(16,459) (18,025)
--------------------------------------------------------------- ----- ----------- -----------
Non-current liabilities
Borrowings 11 (118,495) (98,060)
Deferred tax liabilities (1,779) (14,636)
Provisions 12 (40,924) (25,323)
Contingent deferred consideration - (420)
(161,198) (138,439)
Total liabilities (177,657) (156,464)
--------------------------------------------------------------- ----- ----------- -----------
Net assets 70,532 98,771
--------------------------------------------------------------- ----- ----------- -----------
EQUITY
Capital and reserves
Called up share capital 30,282 29,882
Share premium account 32 121,623
Capital redemption reserve - 64,882
Foreign currency translation reserve (7,990) (6,864)
Other reserves 28,757 23,544
Surplus/(Accumulated deficit) 19,451 (134,296)
--------------------------------------------------------------- ----- ----------- -----------
Total equity 70,532 98,771
--------------------------------------------------------------- ----- ----------- -----------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Share Foreign
Called up premium Capital currency
share account redemption translation Other Accumulated
capital reserve reserve* reserves** surplus/(deficit) Total equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ----------- --------- ------------ ------------- ------------ ----------------- --------------
At 1 April 2015 26,446 117,463 41,239 (3,035) 1,264 (36,757) 146,620
Adjustment 3,246 3,892 23,643 - 22,222 (53,003) -
---------------- ----------- --------- ------------ ------------- ------------ ----------------- --------------
Adjusted balance
at 1 April
2015*** 29,692 121,355 64,882 (3,035) 23,486 (89,760) 146,620
Loss for the
period - - - - - (44,822) (44,822)
Employee share
plans - - - - 1,344 - 1,344
Forfeiture of
LTIPs under the
employee share
plan - - - - (1,000) - (1,000)
Lapse of LTIPs
under the
employee share
plan - - - - (286) 286 -
Issue of shares 190 268 - - - - 458
Currency
translation
adjustments - - - (3,829) - - (3,829)
---------------- ----------- --------- ------------ ------------- ------------ ----------------- --------------
Adjusted balance
at 31 December
2015 and 1
January 2016 29,882 121,623 64,882 (6,864) 23,544 (134,296) 98,771
Loss for the
period - - - - - (32,911) (32,911)
Capital
reduction - (121,776) (64,882) - - 186,658 -
Employee share
plans - - - - 5,344 - 5,344
Forfeiture of
LTIPs under the
employee share
plan - - - - (131) - (131)
Issue of shares 400 185 - - - - 585
Currency
translation
adjustments - - - (1,126) - - (1,126)
At 31 December
2016 30,282 32 - (7,990) 28,757 19,451 70,532
---------------- ----------- --------- ------------ ------------- ------------ ----------------- --------------
* The foreign currency translation reserve represents exchange
gains and losses arising on translation of foreign currency
subsidiaries net assets and results and on translation of those
subsidiaries intercompany balances which form part of the net
investment of the Group.
** Other reserves include: 1) EIP/MRP/LTIP/VCP/EDRP reserves
which represent the cost of share options issued under the long
term incentive plans; 2) share investment plan reserve which
represents the cost of the partnership and matching shares; 3)
treasury shares reserve which represents the cost of shares in IGas
Energy plc purchased in the market and held by the IGas Employee
Benefit Trust to satisfy awards held under the Group incentive
plans; and 4) capital contribution reserve which arose following
the acquisition of IGas Exploration UK Limited.
*** Reclassification of the Group's share capital, share
premium, capital redemption reserve and other reserves to align
with those of the parent company. This adjusts the classification
adopted on the reverse acquisition in December 2007.
Consolidated Cash Flow Statement
For the year ended 31 December 2016
Notes
Year ended Nine months ended
31 December 2016 31 December 2015
GBP000 GBP000
Cash flows from operating activities:
Loss before tax for the year/period (44,773) (64,474)
Adjustment for non-operating gain relating to farm-out - (3,998)
Adjustment for gain relating to deferred consideration 4 (420) (4,947)
Depletion, depreciation and amortisation 10 6,474 7,233
Decommissioning costs incurred (418) (6)
Share based payment charge 3,499 600
Impairment of goodwill - 39,227
Exploration and evaluation assets written off 9 4,485 12,900
Impairment of property, plant and equipment - 17,720
Unrealised loss/(gain) on oil price derivatives 11,969 (5,281)
Finance income 5 (277) (1,302)
Finance costs 5 29,057 9,127
Other non-cash adjustments (13) (326)
Operating cash flow before working capital movements 9,583 6,473
Decrease/(increase) in trade and other receivables and other
financial assets 3,366 (5,568)
Increase in trade and other payables, net of accruals related to
investing activities 698 130
Increase in inventories (176) (248)
Cash generated from continuing operating activities 13,471 787
-------------------------------------------------------------------- ------ ------------------ --------------------
Cash (used in)/generated from discontinued operating activities (489) 175
-------------------------------------------------------------------- ------ ------------------ --------------------
Taxation paid - continued (559) -
Net cash generated from operating activities 12,423 962
-------------------------------------------------------------------- ------ ------------------ --------------------
Cash flows from investing activities:
Purchase of intangible exploration and evaluation assets (2,304) (2,963)
Purchase of property, plant and equipment (6,509) (6,396)
Disposal of subsidiary (171) -
Disposal of exploration and evaluation assets - 30,000
Disposal of oil and gas assets 22 181
Interest received 34 107
-------------------------------------------------------------------- ------ ------------------ --------------------
Cash (used in)/generated from continuing investing activities (8,928) 20,929
Cash used in discontinued investing activities (177) (52)
Net cash (used in)/generated from investing activities (9,105) 20,877
-------------------------------------------------------------------- ------ ------------------ --------------------
Cash flows from financing activities:
Cash proceeds from issue of ordinary share capital 136 125
Interest paid (11,570) (5,925)
Bond renegotiation costs - (940)
Repayment of borrowings 11 (4,916) (6,147)
Cash proceeds from sale of bonds 4,914 -
Cash used in continuing financing activities (11,436) (12,887)
Net cash used in financing activities (11,436) (12,887)
-------------------------------------------------------------------- ------ ------------------ --------------------
Net (decrease)/increase in cash and cash equivalents in the
year/period (8,118) 8,952
Net foreign exchange difference 4,450 637
Cash and cash equivalents at the beginning of the year/period 28,614 19,025
--------------------------------------------------------------------
Cash and cash equivalents at the end of the year/period 24,946 28,614
-------------------------------------------------------------------- ------ ------------------ --------------------
Consolidated Financial Statements - Notes
For the year ended 31 December 2016
1 Accounting policies
(a) Basis of preparation of financial statements and corporate
information
The financial information set out above does not constitute the
Group's statutory accounts for the year ended 31 December 2016, but
is derived from the Group's full financial accounts, which are in
the process of being audited. The Group's full financial accounts
will be prepared under International Financial Reporting Standards
as adopted by the European Union. The condensed consolidated
financial information has been prepared under the historical cost
convention basis, as modified by the revaluation of financial
assets and financial liabilities (including derivative instruments)
at fair value through profit and loss.
IGas Energy plc is a public limited company incorporated and
registered in England and Wales and is listed on the Alternative
Investment Market ("AIM"). The Group's principal area of activity
is exploring for, appraising, developing and producing oil and gas
resources in Great Britain.
The financial information is presented in UK pounds sterling and
all values are rounded to the nearest thousand (GBP000) except when
otherwise indicated.
(b) Going concern
The strength of the Group's and Company's balance sheet has been
improved significantly by the capital restructuring as disclosed in
note 13 to the financial statements. Based on their strategic plans
and working capital forecasts, the Directors have a reasonable
expectation that the Group and the Company have adequate resources
to continue in existence for the foreseeable future. Thus they
continue to adopt the going concern basis in the preparation of the
financial statements.
2 Revenue and segment information
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker ("CODM")
to make decisions about resources to be allocated to the segments
and assess their performance, and for which financial information
is available. In the case of the Group, the CODM are the Chief
Executive Officer and the Board of Directors and all information
reported to the CODM is based on the consolidated results of the
Group representing core (UK) and non-core (Rest of the World)
operating segments. Therefore the Group has two operating and
reportable segments as reflected in the Group's consolidated
financial statements.
All revenue, which represents turnover, arises solely within the
United Kingdom and relates to external parties. Revenues of
approximately GBP16.0 million and GBP10.3 million were derived from
the Group's two largest customers (nine months ended 31 December
2015: GBP11.8 million and GBP10.1 million).
The majority of the Group's non-current assets are in the United
Kingdom.
Year ended
31 December 2016
UK Rest of the World Group
GBP000 GBP000 GBP000
Oil sales to external customers 30,009 - 30,009
Electricity sales to external customers 462 - 462
-------- ------------------- -----------------
30,471 - 30,471
-------- ------------------- -----------------
(15,926) (67) (15,993)
Segment operating loss
Interest expense (note 5) (11,930) - (11,930)
Interest income (note 5) 63 - 63
Other finance costs - net (note 5) (16,913) - (16,913)
Loss before tax and discontinued operations (44,706) (67) (44,773)
-------- ------------------- -----------------
Other segment information
Capital expenditure - exploration and evaluation (note 9) 3,616 - 3,616
Capital expenditure - property, plant and equipment (note 10) 5,964 - 5,964
Depletion, depreciation and amortisation (note 10) 6,494 - 6,494
-------- ------------------- -----------------
Nine months ended
31 December 2015
UK Rest of the World Group
GBP000 GBP000 GBP000
Oil sales to external customers 24,753 - 24,753
Electricity sales to external customers 370 - 370
-------- ------------------- -----------------
25,123 - 25,123
-------- ------------------- -----------------
Segment operating loss (56,408) (241) (56,649)
Interest expense (note 5) (8,731) - (8,731)
Interest income (note 5) 105 - 105
Other finance income - net (note 5) 801 - 801
-------- ------------------- -----------------
Loss before tax and discontinued operations (64,223) (241) (64,474)
Other segment information
Capital expenditure - exploration and evaluation (note 9) 2,931 - 2,931
Capital expenditure - property, plant and equipment (note 10) 7,573 - 7,573
Depletion, depreciation and amortisation (note 10) 7,249 - 7,249
-------- ------------------- -----------------
3 Profit on disposal of oil and gas assets
The profit on disposal of oil and gas assets for the period
ended 31 December 2015 arose as a result of the farm-out agreement
with INEOS Upstream Limited ("INEOS") which completed in May 2015.
Under the agreement, INEOS acquired a 50% interest in IGas' UK
Onshore PEDLs 147, 184, 189 and 190 and a 60% interest in IGas' UK
Onshore PEDLs 145, 193 and EXL 273, (the "Bowland Licences") in the
North West of England. In addition, INEOS acquired IGas' entire
working interest in the acreage held under PEDL 133 in Scotland. In
the East Midlands, INEOS also acquired a 20% interest in in PEDLs
012 and 200. INEOS assumed operatorship of PEDLs 145 and 193 and
EXL 273. IGas retained operatorship of all other Bowland Licences.
INEOS made a cash payment to IGas of GBP30.0 million on completion
of the deal, resulting in a gain of GBP4.0 million, and will
provide a fully funded future work programme of up to GBP138.0
million gross, of which IGas' share is expected to amount to
approximately GBP56.0 million.
4 Other income
Other income includes GBP0.4 million (nine months ended 31
December 2015: GBP4.9 million) relating to the release of
contingent deferred consideration.
5 Finance income and costs
Nine
Year months
ended ended
31 December 31 December
2016 2015
GBP000 GBP000
------------------------------------- ------------ ------------
Finance income:
Interest on short-term deposits 63 105
Foreign exchange gains - 51
Other interest 78 1
Gain on Bond buyback (note 11) - 943
Gain on fair value of warrants 136 202
Finance income recognised in income
statement 277 1,302
------------------------------------- ------------ ------------
Finance expense:
Loss on sale of bonds (note 11) 1,540 -
Interest on borrowings 11,930 8,731
Foreign exchange loss 14,841 -
Unwinding of discount on provisions
(note 12) 746 396
Finance expense recognised in income
statement 29,057 9,127
------------------------------------- ------------ ------------
6 Taxation
i) Tax charge on loss from continuing ordinary activities
Nine
months
Year ended ended
31 December 31 December
2016 2015
GBP000 GBP000
-------------------------------------- ------------ ------------
UK corporation tax:
Current tax on income for the year - 1,253
Credit in relation to prior year (149) (335)
Total current tax charge (149) 918
-------------------------------------- ------------ ------------
Deferred tax:
Current year credit relating to the
origination or reversal of temporary
differences (6,009) (16,418)
Current year credit relating to the
movement due to the tax rate changes (6,270) -
Credit in relation to prior year (578) (1,757)
-------------------------------------- ------------ ------------
Total deferred tax credit (12,857) (18,175)
-------------------------------------- ------------ ------------
Tax credit on profit on ordinary
activities (13,006) (17,257)
-------------------------------------- ------------ ------------
ii) Factors affecting the tax charge
The majority of the Group's profits are generated by
"ring-fence" businesses which attract UK corporation tax and
supplementary charge at a combined average rate of 40%. This has
decreased from 50% following the reduction in the supplementary
charge rate from 20% to 10% with effect from 1 January 2016.
7 Earnings per share (EPS)
Basic EPS amounts are based on the loss for the year after
taxation attributable to ordinary equity holders of the parent of
GBP32.9m (nine months ended 31 December 2015: GBP44.8m) and the
weighted average number of ordinary shares outstanding during the
period of 299.5 million (31 December 2015: 295.9 million).
Diluted EPS amounts are based on the loss after taxation
attributable to the ordinary equity holders of the parent and the
weighted average number of shares outstanding during the period
plus the weighted average number of ordinary shares that would be
issued on the conversion of all the potentially dilutive ordinary
shares into ordinary shares, except where these are
anti-dilutive.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
Nine
Year months
ended ended
31 December 31 December
2016 2015
-------------------------------------- ------------ ------------
Basic EPS - ordinary shares of 10p
each (pence) (10.99p) (15.15p)
Diluted EPS - ordinary shares of
10p each (pence) (10.99p) (15.15p)
Loss for the year/period attributable
to equity holders of the parent -
GBP000 (32,912) (44,822)
Weighted average number of ordinary
shares in the year/period - basic
EPS 299,542,623 295,947,728
Weighted average number of ordinary
shares in the year/period - diluted
EPS 299,542,623 295,947,728
-------------------------------------- ------------ ------------
There are 32,727,361 potentially dilutive warrants and options
over the ordinary shares at 31 December 2016 (31 December 2015:
23,305,230), which are not included in the calculation of diluted
earnings per share because they were anti-dilutive as their
conversion to ordinary shares would decrease the loss per
share.
8 Goodwill
31 December 31 December
2016 2015
GBP000 GBP000
---------------- ----------- -----------
Opening balance 4,801 44,028
Impairment - (39,227)
4,801 4,801
---------------- ----------- -----------
Goodwill is monitored by conventional and unconventional CGUs
for internal management purposes. The carrying value of goodwill
relates to unconventional assets acquired as part of the Dart
acquisition in 2014. Goodwill related to the conventional assets
was impaired in full in the year ended 31 December 2015.
The Group tests goodwill for impairment annually or more
frequently if there are indications that goodwill might be
impaired. The Group reviewed the valuation of goodwill as at 31
December 2016 and assessed it for impairment by estimating the fair
value of risked contingent resources using an estimated market
valuation of resources based on a recent transaction. The fair
value is a level 3 fair value measurement. No impairment was
required for the year (31 December 2015: GBP39.2 million). Full
details of the 2015 goodwill impairment are disclosed in the
Group's 2015 Annual Report which is available at www.igasplc.com.
There was no tax effect of the impairment of goodwill for the year
ended 31 December 2015.
9 Intangible exploration and evaluation assets
Year ended Nine months ended
31 December 2016 31 December 2015
GBP'000 GBP'000
------------------------------- ------------------ -----------------
At 1 January/April 113,394 151,615
Additions 3,616 2,931
Farm-out - (28,252)
Changes in decommissioning(**) (77) -
Amounts written off* (4,485) (12,900)
At 31 December 112,448 113,394
------------------------------- ------------------ -----------------
* 2016 - write off of unconventional exploration and evaluation
assets of GBP4.5 million due to relinquishment of licences
considered to be uncommercial.
2015 - write off of unconventional exploration and evaluation
assets of GBP7.0 million due to relinquishment of licences
considered to be uncommercial; impairment of UK-conventional
exploration and evaluation assets of GBP5.9 million.
**The decommissioning asset increased in line with the
decommissioning liability following a review of the estimate and
assumptions at 31 December 2016 (note 12).
Under the terms of the secured bond agreement, the secured
bondholders have a fixed and floating charge over these assets.
The Group's exploration and evaluation assets were reviewed for
indicators of impairment as at 31 December 2016. No indicators of
impairment were identified. As at 31 December 2015, the impairment
of UK-conventional assets was GBP5.9 million pre-tax (GBP2.9
million post-tax). Full details of the assumptions used in the 2015
review of impairment are disclosed in the Group's 2015 Annual
Report which is available at www.igasplc.com.
10 Property, plant and equipment
Year ended 31 December 2016 Nine months ended 31 December 2015
------------------------------------------ -----------------------------------------------
Oil and gas Other fixed Oil and gas Other fixed
assets assets Total assets assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------ ----------------- --------- ----------------- ----------------- ---------
Cost
At 1 January/April 147,434 3,731 151,165 144,230 4,318 148,548
Additions 5,622 342 5,964 7,480 93 7,573
Disposals (77) (306) (383) (383) (555) (938)
Changes in
decommissioning(**) 15,350 - 15,350 (3,893) - (3,893)
Write off - - - - (118) (118)
Foreign exchange - - - - (7) (7)
--------------------- ------------ ----------------- --------- ----------------- ----------------- ---------
At 31 December 168,329 3,767 172,096 147,434 3,731 151,165
--------------------- ------------ ----------------- --------- ----------------- ----------------- ---------
Depreciation and
Impairment
At 1 January/April 66,815 1,439 68,254 42,524 1,710 44,234
Charge for the
year/period 6,156 338 6,494(*) 6,956 293 7,249*
Disposals (77) (284) (361) (383) (440) (823)
Impairment - - - 17,720 - 17,720
Write off - - - - (118) (118)
Foreign exchange - - - (2) (6) (8)
--------------------- ------------ ----------------- --------- ----------------- ----------------- ---------
At 31 December 72,894 1,493 74,387 66,815 1,439 68,254
--------------------- ------------ ----------------- --------- ----------------- ----------------- ---------
NBV at 31 December 95,435 2,274 97,709 80,619 2,292 82,911
--------------------- ------------ ----------------- --------- ----------------- ----------------- ---------
* Charge for the year includes GBP20 thousand (nine months ended
31 December 2015: GBP15 thousand) relating to capitalised equipment
used for exploration and evaluation
**The decommissioning asset increased in line with the
decommissioning liability following a review of the estimate and
assumptions at 31 December 2016 (note 12).
Under the terms of the secured bond agreement, the secured
bondholders have a fixed and floating charge over these assets.
Impairment of oil and gas properties
Due to the continuing volatility in oil and gas prices, the
Group's oil and gas properties were reviewed for impairment as at
31 December 2016. CGUs for impairment purposes are the group of
fields whereby technical, economic and/or contractual features
create underlying interdependence in cash flows. The Group has
identified the three main producing CGUs as: North, South, and
Scotland. The impairment assessment for the North and South was
prepared on a value-in-use basis and using discounted future cash
flows based on 2P reserve profiles. The impairment assessment for
Scotland was prepared on a fair value less costs of disposal basis.
The future cash flows were estimated using price assumption for
Brent of $55/bbl for 2017, $60/bbl for 2018, $65/bbl for 2019,
$70/bbl for 2020 and $75/bbl thereafter, and a USD/GBP foreign
exchange rate of $1.25/GBP1.00. Cash flows were discounted using a
pre-tax discount rate of 14%. No impairment was required in the
year to 31 December 2016 (nine months ended 31 December 2015:
impairment charge of GBP17.7 million pre-tax (GBP8.8 million
post-tax)).
Sensitivity of changes in assumptions
As discussed above the principal assumptions are recoverable
future production and resources and estimated Brent prices. Neither
a 10% reduction in production, an average $10/bbl reduction in
Brent prices nor a 10% decline in the value of sterling against the
US dollar would result in an impairment.
11 Borrowings
31 December 2016 31 December 2015
------------------------- -------------------------
Greater Greater
Within than Within than
1 year 1 year Total 1 year 1 year Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- ------- ------- ------- ------- ------- -------
Bonds - secured* 6,084 96,700 102,784 4,819 80,125 84,944
Bonds - unsecured* - 21,795 21,795 - 17,935 17,935
------------------- ------- ------- ------- ------- ------- -------
Total 6,084 118,495 124,579 4,819 98,060 102,879
------------------- ------- ------- ------- ------- ------- -------
*No additional transaction costs relating to debt were incurred
during the year (31 December 2015: costs of GBP1.0 million which
have been netted against the liability).
In 2013, the Company and Norsk Tillitsmann ("Bond Trustee")
entered into a Bond Agreement for the Company to issue up to
US$165.0 million secured bonds and up to US$30.0 million unsecured
bonds (issued at 96% of par). The bonds were subsequently listed on
Oslo Bors and the Alternative bond market in Oslo. During the
period to 31 December 2015 the Company amended the terms of the
Bond Agreement. The primary changes were in relation to the
covenants and the maintenance of financial ratios including the
establishment of the DSRA.
Both secured and unsecured bonds carry a coupon of 10% per annum
(where interest is payable semi-annually in arrears). The secured
bonds are amortised semi-annually at 2.5% of the initial loan
amount. Final maturity on the secured bonds is on 22 March 2018 and
on the unsecured bonds is 11 December 2018.
During the year to 31 December 2016, the Company sold a total of
8,000,000 secured bonds resulting in an aggregate loss of GBP1.5
million (nine months ended 31 December 2015: repurchased 5,414,747
secured bonds resulting in a gain of GBP0.5m).
No unsecured bonds were sold or repurchased during the year to
31 December 2016. During the nine months to 31 December 2015, the
Company repurchased a total of 1,600,000 unsecured bonds resulting
in an aggregate gain of GBP0.4 million.
The liability has increased compared to 31 December 2015
reflecting the impact of the decline in the value of sterling
against the US dollar.
See note 13 for details of changes to the liability since the
year end.
12 Provisions for liabilities and charges
31 December
2016 31 December 2015
--------------------------------- ---------------------------------
Decommissioning Other Total Decommissioning Other Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- --------------- ------- ------- --------------- ------- -------
At the beginning of
the year/period 25,284 39 25,323 28,787 39 28,826
Utilisation of provision (418) - (418) (6) - (6)
Unwinding of discount
(note 5) 746 - 746 396 - 396
Reassessment of decommissioning
provision/liabilities 15,273 - 15,273 (3,893) - (3,893)
At the end of the
year/period 40,885 39 40,924 25,284 39 25,323
-------------------------------- --------------- ------- ------- --------------- ------- -------
Decommissioning provision
Provision has been made for the discounted future cost of
restoring fields to a condition acceptable to the relevant
authorities. The abandonment of the fields is expected to happen at
various times between 2 and 29 years from the year end (31 December
2015: 2 to 32 years). These provisions are based on the Groups'
internal estimate as at 31 December 2016. Assumptions based on the
current economic environment have been made, which management
believes are a reasonable basis upon which to estimate the future
liability. The estimates are reviewed regularly to take into
account any material changes to the assumptions. Actual
decommissioning costs will ultimately depend upon future costs for
decommissioning which will reflect market conditions and
regulations at that time. Furthermore, the timing of
decommissioning is uncertain and is likely to depend on when the
fields cease to produce at economically viable rates. This, in
turn, will depend on factors such as future oil and gas prices,
which are inherently uncertain.
The risk free rate range of 0.58% to 3.80% is used in the
calculation of the provision as at 31 December 2016 (31 December
2015: Risk free rate range of 0.68% to 3.58%).
13 Subsequent events
SIP scheme
On 30 January 2017, the Company issued 484,956 Ordinary 10p
shares in relation to the Group's SIP scheme.
Capital restructure
During the year, the Company disclosed that it expected to be
non-compliant with its leverage covenants under its secured bond
agreement at 31 December 2016 and that it also expected to breach
its daily liquidity covenant in late March 2017. The Company
therefore engaged in discussions with its bondholders, a strategic
investor and other potential investors and stakeholders with regard
to possible restructuring options in order to provide a remedy to
the expected breach and achieve a capital structure that would be
sustainable in the current oil price environment. In March 2017,
the Company announced final terms of the restructuring and
fundraising package which were subsequently approved at the
meetings of the Company's secured and unsecured bondholders and at
the general meeting of shareholders on 3 April 2017. In addition,
the shareholders approved the subdivision of each of the
303,305,534 ordinary shares of 10p each of the Company into one new
ordinary share of 0.0001p each and one deferred share of 9.9999p
each.
On 4 April 2017, the Company announced that all new ordinary
shares issued in accordance with the terms of the fundraising were
admitted to trading and, as a result, the restructuring of the
Company's secured bonds and unsecured bonds and the fundraising had
become effective in accordance with their respective terms. The
principal terms are set out below:
-- 679,282,165 new ordinary shares were issued to Unconventional
Energy Limited, an affiliate of Kerogen Capital, pursuant to a
subscription agreement (including 40,030,273 new ordinary shares at
nominal value pursuant to a top-up mechanism) raising GBP28.77
million and giving Unconventional Energy Limited an interest of 28%
in the Company;
-- 403,069,644 new ordinary shares were issued pursuant to a
placing, open offer and ancillary subscription raising GBP18.04
million;
-- 528,175,031 new ordinary shares were issued to holders of
secured bonds who accepted voluntary equity exchange of secured
bonds extinguishing $28.92 million (GBP23.78 million) in face value
of the secured bonds;
-- 202,398,542 new ordinary shares were issued to holders of
secured bonds pursuant to a conditional secured debt for equity
swap extinguishing a further $11.08 million (GBP9.11 million) in
face value of the secured bonds;
-- c.$49.2 million (GBP40.4million) in face value of secured
bonds were cancelled in consideration for c.$49.2 million (GBP40.4
million) cash pursuant to a voluntary cash offer;
-- 312,776,818 new ordinary shares were issued to holders of
unsecured bonds on the conversion of all unsecured bonds into
equity extinguishing $27.4 million (GBP22.5 million) in face value,
being all of, the unsecured bonds not held by the Company;
-- the Company cancelled $13.09 million (GBP10.7 million) in
face value of the secured bonds and unsecured bonds held by the
Company, being all of the unsecured bonds and secured bonds held by
the Company;
-- the renegotiated terms and conditions and covenants for the
remaining secured bonds (total aggregate face value of c.$30.08
million) came into effect upon admission; and
-- the new ordinary shares were issued at a price of 4.5p per share.
14 Preliminary results announced
The Annual Report and Accounts 2016 will be made available to
shareholders once approved and will be available on the Company's
website - www.igasplc.com
Glossary
GBP The lawful currency of the United Kingdom
$ The lawful currency of the United States of America
1P Low estimate of commercially recoverable reserves
2P Best estimate of commercially recoverable reserves
3P High estimate of commercially recoverable reserves
1C Low estimate or low case of Contingent Recoverable Resource
quantity
2C Best estimate or mid case of Contingent Recoverable Resource
quantity
3C High estimate or high case of Contingent Recoverable Resource
quantity
AIM AIM market of the London Stock Exchange
boepd Barrels of oil equivalent per day
bopd Barrels of oil per day
GIIP Gas initially in place
MMboe Millions of barrels of oil equivalent
MMscfd Millions of standard cubic feet per day
PEDL United Kingdom petroleum exploration and development
licence.
PL Production licence
Tcf Trillions of standard cubic feet of gas
UK United Kingdom
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LFFFLSSIEFID
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