TIDMPANR
RNS Number : 8871P
Pantheon Resources PLC
23 November 2016
23 November 2016
Pantheon Resources plc
Final Results for the Year Ended 30 June 2016
Pantheon Resources plc ("Pantheon" or "the Company"), the
AIM-quoted oil and gas exploration and development company with a
working interest (of 50% - 58%) in several conventional projects
located onshore in Tyler & Polk Counties, East Texas, today
announces its final results for the year ended 30 June 2016.
HIGHLIGHTS
-- A significant year for Pantheon, progressing from a pure play
exploration and appraisal business into a development business on
the brink of production
-- Progress made possible by the continued success of the
drilling programme which has seen all four drilled wells encounter
hydrocarbon resources in the Eagle Ford sandstone target horizon
and validate the accuracy of our geological model
-- During the period, both VOS#1 and VOBM#1 wells encountered
significant hydrocarbons in the primary target horizon and
displayed encouraging flow data
-- Loss from operations GBP0.9m (2015: GBP1.15m)
-- Cash on hand at 30 June 2016 GBP17.9m (2015: GBP5.3m)
-- The Company completed an oversubscribed capital raising at
GBP1.15 per share in March 2016, raising GBP21.2 million before
expenses
-- Targeting first production revenues in Spring 2017
-- Fully funded for anticipated 2017 drilling programme
-- Post-year end, our first horizontal well VOBM#2H well
encountered hydrocarbons and flared natural gas, however was
suspended with a view to being re-entered and drilled vertically on
cost/benefit grounds, following completion of VOBM#4 which is
presently being drilled
-- Post year-end, VOBM#3 was successfully drilled vertically on
time and on budget encountering hydrocarbons in the target zones.
Currently being flow tested
-- Post year-end, acquisition of an additional 8% stake in the
two defined Eagle Ford sandstone Polk County plays, increasing
Pantheon's attributable P50 prospective resource (recoverable)
potential by c.9Mmboe. The acquisition included 8% of the existing
VOBM#1 discovery well
-- Under the terms of the acquisition, Pantheon to receive 70%
of all revenues (after royalties and production taxes) from Polk
County production until acquisition costs recouped
-- Projected economics continue to be profitable even assuming
low case pricing scenarios of oil prices below US$30/barrel.
Capital and operating costs estimated to be potentially as low as
$5/Boe
-- Project P50 Prospective Resource (Recoverable) estimated at
301Mmboe of which Pantheon has a 50-58% working interest
Jay Cheatham, CEO, said:
"Despite the technical challenges, I find it difficult to look
back on the year just gone with anything other than growing
confidence. The company is 4 for 4 with its drilling programme
having found potentially significant hydrocarbons with each well
and is poised for production and cash flow in Spring 2017 in Polk
County. Crude and natural gas prices have shown improvement and the
modelled per well economics at current and lower prices are very
profitable. We have further important drilling results to look
forward to over the coming year. Our balance sheet is strong and we
continue to improve our understanding and overcome the challenges
of developing the complex but high reward geology we are
targeting.
"Pantheon is a results-driven company and I believe we are
poised for an outstanding 2017".
Annual Report and Accounts
The Annual Report and Accounts for the financial year ending 30
June 2016 will be posted to shareholders today, together with a
Notice of Annual General Meeting. Copies will be available today on
the Company's website at: www.pantheonresources.com
The Annual General Meeting of the Company will be held at the
offices of FTI Consulting at 200 Aldersgate Street, London, EC1A
4HD on 16 December, 2016 at 10.00am.
Further information:
+44 20 7484
Pantheon Resources plc 5359
Jay Cheatham, CEO
Justin Hondris, Director, Finance
and Corporate Development
Stifel Nicolaus Europe Limited (Nominated +44 20 7710
Adviser and broker) 7600
Callum Stewart
Nicholas Rhodes
Ashton Clanfield
+44 20 3727
FTI Consulting 1000
Ed Westropp
James Styles
For further information on Pantheon Resources plc, see the
website at: www.pantheonresources.com
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
This announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
In accordance with the AIM Rules - Note for Mining and Oil &
Gas Companies - June 2009, the information contained in this
announcement has been reviewed and signed off by Jay Cheatham, a
qualified Chemical & Petroleum Engineer, who has over 40 years'
relevant experience within the sector.
Estimates of reserves and resources contained in this
announcement were prepared in accordance with the Petroleum
Resource Management System guidelines endorsed by the Society of
Petroleum Engineers, World Petroleum Congress, American Association
of Petroleum Geologists and Society of Petroleum Evaluation
Engineers.
- Ends -
Glossary
Boe Barrels of oil equivalent
Boepd Barrels of oil equivalent
per day
Resources Incorporates reserves
but adds categories for
contingent and prospective
resources.
Prospective resources Prospective resources
are estimated volumes
associated with undiscovered
accumulations. These represent
quantities of petroleum
which are estimated, as
of a given date, to be
potentially recoverable
from oil and gas deposits
identified on the basis
of indirect evidence but
which have not yet been
drilled.
Fracture stimulation A treatment performed
(fracking) to restore or enhance
the productivity of a
well. Fracturing treatments
are performed above the
fracture pressure of the
reservoir formation and
create a highly conductive
flow path between the
reservoir and the wellbore.
Stimulation typically
occurs in shale gas reservoirs.
Horizon (oil) The upper surface of oil
in a well, or the stratum
in which the oil surface
is located.
Mcf Thousands of cubic feet
Mmboe Millions of barrels of
oil equivalent
P50 (Resources) The outcome for which
the probability of occurrence
of that value or greater
is 50 percent.
Permeability The state or quality of
being to allow liquids
to pass through something
(usually a rock).
Pmean The expected average value
or risk-weighted average
of all possible outcomes.
Total depth (TD) The depth of the bottom
of the well. Usually,
it is the depth where
drilling has stopped.
DIRECTORS, SECRETARY AND ADVISERS
Directors John Walmsley (Non-Executive Chairman)
John ("Jay") Cheatham (Chief Executive Officer)
Justin Hondris (Executive Director, Finance and Corporate
Development)
Company Secretary Ben Harber
Registered Office Shakespeare Martineau
6th Floor
60 Gracechurch Street
London EC3V 0HR
Company Number 05385506
Auditors UHY Hacker Young
Quadrant House
4 Thomas More Square
London E1W 1YW
Solicitors Berwin Leighton Paisner LLP
Adelaide House
London Bridge
London EC4R 9HA
Registrars Computershare Investor Services plc
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Principal Bankers Barclays Bank plc
Level 27, 1 Churchill Place
London E14 5HP
Nominated Adviser Stifel Nicolaus Europe Limited
& Broker 150 Cheapside
London EC2V 6ET
Communications FTI Consulting
& Public Relations 200 Aldersgate
Aldersgate Street
London EC1A 4HD
CHAIRMAN'S STATEMENT
FOR THE YEARED 30 JUNE 2016
The year to June 2016 was a very significant one for your
Company, during which we made considerable progress in growing the
value of the company, funding and initiating a successful drilling
programme. This has continued into the current financial year and
taken us to the brink of first production from the technically
challenging, but potentially very low cost, Eagle Ford sandstone
formation in East Texas. Although operational issues with two of
our recent wells delayed our progress, we look forward with great
optimism to the next phase of this very exciting and impactful
project.
The first achievement to note is that the transition from an
exploration and appraisal play to production company, which we
looked forward to a year ago is now close to complete. Rather than
produce immediately from the first discovery well in Polk County,
we have waited for the results of the next two wells in order to
analyse a range of competing commercial options and finalise a
single co-ordinated production plan for the whole prospect.
Although this has moved the estimated date of first production back
to spring 2017, it means we will obtain higher profit margins once
production starts, an important and positive trade-off.
The second aspect of note is the continued success of our
drilling programme. We have now drilled four wells, two since the
period end and a fifth is currently underway. All four, as we
hoped, have encountered hydrocarbon resources in the Eagle Ford
sandstone target horizon. I said a year ago that we were
optimistic, following our extensive geological study with the
Bureau of Economic Geology at the University of Texas, that we
could validate our model of the Eagle Ford sandstone in East Texas.
Our drilling track record to date clearly adds to the strength of
that belief, with successes in both Tyler County and Polk
County.
The third thing we can now say is that our initial pre-drilling
estimates of the resource position on our acreage appear to be well
supported by the well results we now have. Everything we have
learnt so far validates the estimate of P50 prospective
(recoverable) resources attributable to the acreage (301Mmboe, of
which Pantheon has a 50% - 58% working interest). Indeed, the
results to date have done nothing to dent our optimism that some of
the wells we drill will exceed modelled P50 well estimates.
The fourth positive achievement to note is that we completed a
successful capital raising in March 2016, which was well
oversubscribed and brought a high quality list of institutional
investors onto the company's share register. We raised
GBP21.1million before expenses, at a time when both oil and natural
gas prices were depressed near this current cycle's lows. It left
us as a well-funded company, in a good position to press on with
our drilling programme and to take advantage of the current lower
cost operating environment. Since the year end we have taken the
opportunity to acquire an additional 8% interest in our Polk County
acreage at what we believe to be an extremely attractive price.
A final notable feature of the past 12 months, while outside our
control, is the improved tone of the oil and gas market. Drilling
and service costs have dropped significantly, greatly benefitting
our operations. Oil prices have firmed since the start of 2016 and
natural gas prices in the United States, our area of operation,
have risen too after recent declines. As always, caution is needed
when attempting to look forward to future market conditions. Even
with those normal caveats however, the fact that current prices are
materially higher than the low case assumptions we were using just
six months ago is welcome. Any sustained rise in prices will feed
through directly to the value of our operations, which we believe
will be profitable at much lower prices, given our projected $5/Boe
combined capital and operating costs for a modelled P50 well.
While our knowledge and understanding of the geology we are
targeting has gone from strength to strength, we have also had to
face and overcome some challenging operational issues. Two of the
four wells we have drilled to date (VOBM#1 and VOBM#3) have been
comfortably completed on schedule and within budget, but it is fair
to say that the VOS#1 and VOBM#2H wells have not run quite as
smoothly. Jay Cheatham, your CEO, expands on some of these issues
in his operational report.
Although we have learnt our own valuable lessons, the
operational problems we have faced are unfortunately also
symptomatic of an industry that has been savaged by the severity of
the recent oil and gas price downturn. We have observed a marked
decline in the quality of service and equipment provided by third
party service providers, something we are working hard to offset.
The most important outcome of the setback we encountered drilling
VOBM#2H horizontally is that we will revert to drilling future
wells vertically, a lower risk and lower cost option. The two most
recent wells we have drilled vertically are within time and
budget.
Looking forward, as the Company completes its transition to
producer status, there will be more to say about well results,
future drilling plans and details of the impending first production
from our network of Polk County wells. As our Company grows, we
also expect to be strengthening the Board and our internal
operational capabilities.
As I noted a year ago, you can never entirely eliminate risk
from the E&P business, but I am encouraged and enthused that
the fundamentals of Pantheon's business - a track record of
repeated exploration success, growing capital values, a sound
balance sheet and access to some of the lowest cost resources
anywhere in the world - are sound and on a clear upward trajectory.
The Board is therefore looking forward to 2017 with great
confidence.
John Walmsley
22 November 2016
CHIEF EXECUTIVE OFFICER'S STATEMENT AND OPERATIONAL REVIEW
FOR THE YEARED 30 JUNE 2016
Overview
Your Company's strategy remains unchanged. Management plans to
drill enough wells to delineate all our acreage in both Polk and
Tyler Counties in East Texas. Once completed, we intend to seek an
exit in the most tax-efficient and value-accretive means for our
shareholders. We will only exit if the Board is satisfied that we
are receiving fair value for our producing acreage, operational
infrastructure, intellectual property and proprietary geological
and geophysical data. If drilling progresses as planned, we hope to
be in this position by late 2018.
All the drilling we have done to date confirms our belief that
our acreage may contain up to five Double A Wells lookalike
prospects. These five prospects were deemed in 2014 to have the
potential for up to 209 wells, including up to 167 vertical wells
in the Eagle Ford sandstone, and 301Mmboe of P50 prospective
recoverable resource on a 100% basis (Pantheon has a 50% - 58%
working interest in the Polk and Tyler County prospects). Nothing
has changed our view of that potential. Drilling to date has fully
confirmed the accuracy of our geological model, as is evidenced by
the fact that we have so far drilled four wells on our acreage and
found hydrocarbons at our primary target horizon within all four of
them.
Each of the well results we have obtained display similar
characteristics to the analogue Double A Wells field, just as our
studies and seismic suggested they would. They encourage us to
believe that the P50 assumption has the potential to be
conservative. Our drilling in Tyler County, in particular,
indicates that there may be significant upside in the LP2 offset
area, where we drilled our first Tyler County well, and in
Prospects B and C, which we call the core offset area. If so, in a
success case we could achieve higher recovery rates than those
associated with a P50 well. We cannot know for sure however until
we have completed the drilling programme and analysed actual
production experience.
What we do know is that our modelled economics already stack up
exceptionally well against some of the best reservoirs in North
America. Given a modelled P50 well, with an assumed 1.4Mmboe of
recoverable resource, and our current estimated drilling and
completion costs in Polk County, capital expenditure per well
(capex) is below $4 per Boe and operating expenditure (opex) could
be as low as $1 per Boe. In Tyler County, the per well costs are
slightly higher, but the higher reservoir pressures encountered
there have the potential to produce higher per well recoveries than
in Polk County, meaning that the overall per well economics are
broadly similar.
Operations
The two wells we drilled in 2015, one in Polk County (VOBM#1)
and the second in Tyler County (VOS#1), both found commercial
quantities of hydrocarbons in the Eagle Ford sandstone. Both 2015
discoveries have the potential to be P50 or better wells, with
VOBM#1 tested at over 1,500 Boepd and VOS#1, despite a partial well
blockage, tested initially at 750 Boepd through a 12/64" choke and
at 920 Boepd through a 14/64" choke after fracture stimulation.
Those results clearly validate our thesis that we could
successfully locate and access mini-basins in the Eagle Ford
sandstone. The three-year study of this complex geological
formation we carried out with the Bureau of Economic Geology at the
University of Texas at Austin may have taxed shareholders' patience
at the time, but the investment of time and money has been fully
justified by the results. The success of the first two well results
enabled us to raise an additional GBP21.1million before costs in a
placing in March 2016 to continue the exploration and appraisal of
our acreage position.
Since the period end, Pantheon has since spudded three follow-up
wells, two (VOBM#2H and VOBM#3) in Polk County and the third
(VOBM#4), still drilling at the time of writing, in Tyler County.
Despite encountering technical problems with VOBM#2H, which we will
be re-drilling shortly as a vertical completion, all the wells to
date have encountered significant hydrocarbons in the target
horizon, consistent with our expectations. We are flow testing
VOBM#3 as I write this. A fifth well, VOBM#4, has been spudded in
Tyler County. It is drilling ahead and is expected to complete
around the turn of the year.
VOBM#2H is the only well that we have attempted to drill
horizontally. The well has been suspended and will be re-entered
and completed vertically once the Nabors F-12 rig has reached
target depth at VOBM#4 in Tyler County. The idea behind drilling a
well horizontally was that, if successful, an individual well could
have increased ultimate recovery and well flow rates by two or
three times those of a vertical well, justifying the 50-60%
increase in per well costs. What we have now learnt is that the
Eagle Ford sandstone is too hard and abrasive to drill
horizontally. By the time we suspended the well for future
completion as a vertical well, we had already experienced multiple
MWD (measurement while drilling) tool, mud motor, drill bit and
other downhole assembly failures, each one of which required us to
come out of the hole to change the assembly, adding to the cost and
prolonging the over-run against schedule.
The well successfully located the Eagle Ford sandstone formation
and flared gas for several days. When we re-drill we will be able
to test and announce the flow rates. All the modelling and planning
we do has always been predicated on 100% vertical drilling, so the
outcome, while disappointing, is more of a lost opportunity than a
significant direct cost. When we re-drill VOBM#2H, it will be in a
similar fashion to VOBM#3, which was successfully drilled on time
and within its $3.75million budget, but the re-drill will be at a
significantly lower cost given we can utilize much of the existing
wellbore. The most encouraging feature of our drilling programme is
that our vertical well costs are declining as we and the rig crews
accumulate experience and become more efficient. By the time that
VOBM#4 has also been completed, we will have accumulated an even
deeper body of knowledge and operational experience across both the
Polk County and Tyler County prospects.
In Tyler County the original VOS#1 well, a step-out from Vison
Resources' LP-2 well, was drilled to a total depth of 15,150 feet
and again successfully found hydrocarbons in the Eagle Ford
sandstone. During drilling we encountered a productive formation at
a shallower depth that required us to plug back and sidetrack the
well. This knowledge has been applied to the VOBM#4 well design,
which contemplates this feature. VOS#1 also encountered significant
natural gas shows in the Austin Chalk, which we expected given the
highly successful Austin Chalk wells drilled by Anadarko and Ergon
to the north of our acreage.
We initially completed VOS#1 as an Eagle Ford sandstone well
only. Having reviewed the well results, we subsequently decided to
perform a fracture stimulation ("frack") on the top 25' of the 270'
sand section, as our diagnostics had indicated possible skin damage
near the wellbore from heavy drilling mud, as well as some
permeability variations across the formation. During the fracture
treatment we also perforated and fracked a 20 foot section of the
Austin Chalk, as this will be our only chance to test this
formation in Tyler County for some time, given our other drilling
priorities. Because of its slightly lower reservoir pressures, the
Austin Chalk is likely to contribute production later in the well's
productive life than the Eagle Ford sandstone.
We had hoped that the fracture stimulation would produce a 2x to
3x improvement in flow rates from VOS#1 compared to the original
testing. In the event, we saw only a modest improvement. However we
did also observe an excellent flowing tubing pressure response to
changes in choke size, which is a potentially positive indicator
that once we move into production initial flow rates can be
sustained for longer. VOS#1 still has the possibility of being a
great well whose characteristics are similar to some very long life
Double A Wells field wells which are still producing after more
than 30 years, however it will take a period of sustained
production history before a definitive assessment can be made. At
the tested flow rates, and at current oil and gas prices, this well
has the potential to recover its costs in a little more than a year
- a result which would please most companies in today's
environment.
Next steps
With the results that we already have in confirming the
commerciality of our Eagle Ford sandstone discoveries, we are well
advanced with planning the company's first production, another
important milestone in the company's transformation from pure
exploration play to proven oil and gas development company. We have
three options for processing the gas from Polk County; (1) tie into
one of the nearby existing facilities; (2) build our own smaller
skid mounted facility; or (3) contract a third party to build a
fully dedicated production facility on our land. All three options
are open and a decision will be made soon after VOBM#3 testing is
complete. The results of all three wells, taken together, will
enable us to implement an integrated production plan for the entire
Polk County operation. We are aiming to achieve first production in
spring 2017. Putting back the start date from our initial target in
2016 was a deliberate choice that has proved its worth, enabling us
to engineer an outcome that will produce higher netbacks when
production begins and take advantage of stronger commodity
prices.
On the drilling front, we spudded VOBM#4, a large step out
extension from the VOS#1, in Tyler County. This well is riskier
than previous wells, as it is in a new basin, one for which we have
only 2-D rather than 3-D seismic. It is about the same distance
from VOS#1 as VOS#1 was from the LP-2 discovery. It will help
better determine the real extent of the reservoir that lies under
our acreage in Tyler County. A success could add materially to the
value of our Tyler County holding. The Nabors F-12 rig will then go
back to complete drilling VOBM#2. The remainder of 2017 will be
taken up with further drilling to prove up our acreage, possibly
with two rigs operating simultaneously. The details will be
announced as our plans are finalised.
Well # Location Spudded TD Status Well type Eagle Ford
-------- --------- ------------- ------- ------------------------- ----------- -----------
VOBM#1 Polk 28-July-2015 14,200 Flow tested Vertical Confirmed
-------- --------- ------------- ------- ------------------------- ----------- -----------
VOS#1 Tyler 9-Sept-2015 15,150 Flow tested and fracked Vertical Confirmed
-------- --------- ------------- ------- ------------------------- ----------- -----------
VOBM#2H Polk 17-May-2016 16,450 Will re-drill vertically Horizontal Confirmed
-------- --------- ------------- ------- ------------------------- ----------- -----------
VOBM#3 Polk 1-Sept-2016 14,500 Being tested Vertical Confirmed
-------- --------- ------------- ------- ------------------------- ----------- -----------
VOBM#4 Tyler 01-Nov-2016 Drilling now Vertical
-------- --------- ------------- ------- ------------------------- ----------- -----------
Summary of drilling programme to date, Tyler & Polk
Counties
Financial
As noted in the Chairman's statement we raised GBP21.1 million
before expenses in March 2016. The placing price was GBP1.15 pence
per share. As well as funding our drilling programme, this
subsequently allowed us to opportunistically increase our stake in
the two defined Eagle Ford sandstone plays in Polk County by 8%. We
acquired this 8% working interest for an upfront payment of $6.5
million, plus 20% of the costs associated with the VOBM#2H and
VOBM#3 wells. In respect of the 8% working interest acquired,
Pantheon will benefit from an accelerated payback mechanism whereby
it will receive 20% of production revenues until such time as the
purchase consideration has been recouped, at which point revenues
will revert back to an 8% revenue interest. On the basis of the
2014 resource assessment, the additional 8% interest has increased
our resource potential by approximately 9Mmboe. As at 30 June 2016,
the end date for this set of results, the group had cash of c.GBP18
million.
It may be worth emphasising that the carrying value of our
assets in the accounts is based on the historic cost of drilling
and related operations, not on their current value. By way of
illustration, an individual modelled P50 well (1.4Mmboe) is
estimated to have a net present value (on a 100% basis), discounted
at 10% per annum, of $14 million at current market prices of
$45/barrel oil and $2.90/Mcf natural gas, assuming drilling and
completion costs of $4 million. On the same basis a modelled PMean
well (3Mmboe) would have a net present value of over $32 million.
In a low case pricing scenario of $30/barrel oil and $2.00/natural
gas, a modelled P50 well is calculated to have a net present value
of $8.7m and $21m for a PMean well. These are illustrative examples
based upon modelled well types, however demonstrate the compelling
economics achievable in a success case.
Because it is impossible to know how prices will move in future,
and future drilling results are subject to uncertainties, all such
estimates are by their nature subject to change. Nevertheless it is
evident that the capital value of the resource attributable to
shareholders, given the possibility of more than 150 wells across
four Eagle Ford prospects, is potentially many multiples higher
than the group's carrying values.
Conclusion
Despite the technical challenges thrown at us, I find it
difficult to look back on the year just gone with anything other
than growing confidence. The company is 4 for 4 with its drilling
programme finding significant hydrocarbons with each one and is
poised for production and cash flow in Spring 2017 in Polk County.
Crude and natural gas prices have improved and the modelled per
well economics at current prices are very profitable. We have
further important drilling results to look forward to over the
coming year. Our balance sheet is strong and we continue to improve
our understanding and overcome the challenges of developing the
complex but high reward geology we are targeting. Pantheon is a
results-driven company and I believe we are poised for an
outstanding 2017.
Jay Cheatham
22 November 2016
Financial Review
The Group made a total loss from operations for the financial
year ended 30 June 2016 of GBP924,313 (2015: GBP1,148,900). The
decrease over the prior year is primarily due to a reduction in the
non cash accounting charges made in relation to the amortization of
previously issued share options.
Impairments
The total impairment charge for the year was GBPnil (2015:
GBPnil).
Accounting policies
There have been no major changes to accounting policies during
the year.
Capital structure
The Company issued 18,601,062 new fully paid ordinary shares at
an issue price GBP1.15 per share during the year, raising cash
proceeds of c.GBP21.1m before expenses.
As at 30 June 2016 there were 214,957,458 shares in issue (2015:
196,356,396).
The Company has 10,000,000 options outstanding to acquire
ordinary shares (2015: 10,000,000) at an exercise price of GBP0.30
per share. As at 30 June 2016 all share options were fully
vested.
Going concern
The Directors are satisfied with the Group's ability to operate
as a going concern for the next 12 months, as documented further in
Note 1.4.
Taxation
The Group incurred a loss for the year and has not incurred a
tax charge. The Directors have not considered it appropriate to
recognise a deferred tax asset to reflect the potential benefit
arising from these timing differences.
Risk assessment
The Group's oil and gas activities are subject to a variety of
risks, both financial and operational, including but not limited to
those outlined below. These and other risks have the potential to
materially affect the financial performance of the Group.
Liquidity and Interest Rate Risk
Liquidity risk remains elevated for many companies in the
natural resources sector for a number of reasons including but not
limited to the slowdown in the Global economy, the volatility in
commodity prices, recent political and other influences, which have
negatively impacted energy prices and created economic
uncertainty.
Oil & Gas Price Risk
Oil and Gas sales revenues were subject to the volatility of the
underlying commodity prices throughout the year. Over the past year
the energy sector has been impacted by, but not limited to,
volatility in commodity prices which has resulted in very difficult
market conditions for the sector. The Group did not engage in any
commodity price hedging activity during the year.
Currency Risk
Almost all capital expenditure and operational revenues for the
year were denominated in US dollars. The Group keeps the majority
of its cash resources denominated in US dollars throughout the year
to minimise volatility and foreign currency risk. The Group did not
engage in any foreign currency hedging activity during the
year.
Financial Instruments
As this stage of the Group's activities it has not been
considered appropriate or necessary to enter into any derivatives
strategies or hedging strategies. Once the Group's production
revenues increase substantially, such strategies will be reviewed
on a more regular basis.
Justin Hondris
22 November 2016
STRATEGIC REPORT
FOR THE YEARED 30 JUNE 2016
Principal activity
The Company is registered in England and Wales, having been
incorporated under the Companies Act with registered number
05385506 as a public company limited by shares.
The principal activity of the Group is the investment in oil and
gas exploration and development. The Group operates in the U.K.
through its parent undertaking and in the U.S.A. through subsidiary
companies, details of which are set out in the Note 8 to these
accounts.
Review of the Business and Key Performance Indicators
Please refer to the Finance Director's Report on page 10 for the
review of the business and analysis of the Key Performance
Indicators of the business.
Financial Position and Future Prospects
Please refer to the Chief Executive Officer's statement and
operation review on page 6 for an overview of the Company position
and prospects.
Key operational risks and uncertainties
The Group is in the business of exploration and production of
oil and gas. Accordingly, the principal operational risks and
uncertainties affecting the Group include, but are not limited to,
the time and monetary costs associated with the unsuccessful
drilling of prospects; the potential for incorrect geological
interpretation or evaluation; mechanical or other technical
problems encountered during the drilling of prospects; lease
issues; lease costs; environmental or permitting issues; costs and
contractual obligations relating to gas processing and
distribution; mechanical or other technical problems which may from
time to time affect existing production; the potential for
increased costs for drilling or operating in a tight rig market;
the uncertainty surrounding potential recoverability of reserves;
deterioration in commodity prices, political risk or economic
conditions; and the potential for unexpected deterioration or
abandonment of existing production. Pursuant to the terms of the
respective operational agreements, and typical for the industry,
the Group is also potentially exposed to the timing, financial and
operational position of counterparties, in particular with respect
to the timing, and therefore payment for the proposed drilling of
wells.
By order of the board.
Justin Hondris
Director
22 November 2016
DIRECTORS' REPORT
FOR THE YEARED 30 JUNE 2016
The Directors present their report together with the audited
accounts of Pantheon Resources plc ("Pantheon" or "the Company")
and its subsidiary undertakings (together "the Group") for the year
ended 30 June 2016.
Results and dividends
The Group results for the period are set out on page 21. The
Directors do not propose to recommend any distribution by way of a
dividend for the year ended 30 June 2016.
Information to shareholders - website
The Group maintains its own website (www.pantheonresources.com)
to facilitate provision of information to external stakeholders and
potential investors and to comply with Rule 26 of the AIM Rules for
Companies.
Group structure and changes in share capital
Details of the Group structure and the Company's share capital
during the period are set out in Notes 8 and 14 to these
accounts.
Directors
The following Directors held office during the year:
John Walmsley (Non-Executive Chairman)
John Cheatham (Chief Executive Officer)
Justin Hondris (Director, Finance & Corporate
Development)
Directors' interests
The beneficial and non-beneficial interests in the Company's
shares of the Directors and their families were as follows:
30 June 2016
Number of
Name Ordinary shares of GBP0.01
J Cheatham 3,554,249
J Hondris* 1,135,000
J Walmsley* 1,859,938
*Some of these ordinary shares are beneficially owned by the
respective spouses of Messrs J Walmsley and J Hondris.
Share options
Share options for Ordinary shares of GBP0.01, held by Directors
on 30 June 2016 were as follows:
Number of options
Exercise price GBP0.30
J Walmsley 1,000,000
J Cheatham 4,385,000
J Hondris 3,865,000
Total 9,250,000
==================
These are 100% vested as at 30 June 2016.
Report on Directors' remuneration and service contracts
The service contracts of all the Directors are subject to a six
month termination period.
Pensions
Following implementation of the mandatory work place pension
scheme the company is now fully compliant.
Directors' remuneration
Fees/basic Share-based Benefits 2016 2015
salary payments in kind Total Total
GBP GBP GBP GBP GBP
J Cheatham 203,609 23,569 - 227,178 354,783
J Hondris 127,500 20,774 - 148,274 283,996
J Walmsley 62,500 5,375 - 67,875 100,125
393,609 49,718 - 443,327 738,904
=========== ============ ========= ======== ========
Director incentive scheme
In 2012 the Company implemented a short term executive director
incentive scheme ("the scheme") developed in conjunction with
executive remuneration specialists at Deloitte LLP. Any incentive
bonus resulting from the scheme will be shared by executive
Directors and will be calculated as 2.25% of the value of
"net-booked reserves" for a period (deducting any net-booked
reserves recognised in earlier periods for this purpose). For the
purposes of the scheme, net-booked reserves will include 100% of
proved reserves and 25% of probable reserves booked to the Group,
as determined by an independent third party, where relevant, in
accordance with the classification definitions as mandated by the
Society of Petroleum Engineers.
The remuneration committee will determine the extent to which
any annual bonus resulting from the scheme will be settled in cash
or share options with a discounted exercise price. The cash
component will be at least one third of the total and there is no
obligation to pay any of the annual bonus by way of share options.
In the event of a sale of the Company or other change of control,
the calculation will be undertaken by reference to the equity value
of the Company (less the value of net booked reserves recognised in
earlier periods). The remuneration committee believes that the
scheme, together with the granting of share options provides an
appropriate and reasonable structure to reward and motivate the
executive Directors for performance that is aligned to the
interests of shareholders and provides a balance of long term and
short term performance measurement. Any potential benefit from the
scheme is linked to the booking of net-booked reserves which is
considered to be a key milestone reflecting potential "value add"
for the benefit of shareholders. The value of share options is
directly linked to the longer term share price performance and is
therefore also considered to be a suitable metric as a basis for
executive remuneration.
No benefit has been paid from the scheme since inception.
Subsequent Events
On 19 July, 2016 the Company announced the acquisition of an
additional 8% working interest in the "West West Double A"* and
"West Double A"** prospects (previously referred to respectively as
"New Prospect D" and "New Prospect A"), located in Polk County,
East Texas. Upon completion of the acquisition, Pantheon's working
interest in these two prospects, including the VOBM#1 discovery
well, increased from 50% to 58%. The Company's working interest in
its Tyler County prospects remain unchanged at 50% and its working
interest in
"New Prospect E" remains unchanged at 25%. Further detail on the
acquisition of this additional working interest can be found at
Note 23.
A detailed update on operational activities subsequent to 30
June 2016 can be found at Note 23, and has also been discussed in
the CEO and Chairman's statements at the beginning of this annual
report.
Substantial shareholders
The Company has been notified, in accordance with Chapter 5 of
the FCA Disclosure and Transparency Rules, of the under noted
interests in its ordinary shares as at 18 November 2016
Number of Ordinary Shares % of Share Capital
Ferlim Nominees Limited 26,265,327 12.22
Jim Nominees Limited 13,732,199 6.39
Vidacos Nominees Limited 10,717,665 4.99
The Bank of New York (Nominees) Limited 8,475,662 3.94
Barclayshare Nominees Limited 7,398,665 3.44
Lynchwood Nominees Limited 7,068,297 3.29
Political and charitable contributions
There were no political or charitable contributions made by the
Company during the year ended 30 June 2016 (2015: GBPNil).
Remuneration and Nomination Committee
The Board of Directors has established the Remuneration and
Nomination Committee of the Board. John Walmsley is the chairman of
the committee and Justin Hondris is the other member. Other
Directors may attend meetings by invitation.
The Remuneration and Nomination Committee meets as required, but
aims to meet at least twice a year. Its role is to determine the
remuneration arrangements and contracts of executive Directors and
senior employees, and the appointment or re-appointment of
Directors. It also has the responsibility for reviewing the
performance of the executive Directors and for overseeing
administration of the Company's share option schemes. No Director
is however involved in deciding his own remuneration.
Audit Committee
An Audit Committee of the Board has been established. During the
year, the Audit Committee consisted of John Walmsley as chairman
and Jay Cheatham as the other member. This Committee provides a
forum through which the Group's finance functions and auditors
report to the non-executive Directors. Meetings may be attended, by
invitation, by the Company Secretary, other Directors and the
Company's auditors.
The Audit Committee meets at least twice a year. Its terms of
reference include review of the Annual and Interim Accounts,
consideration of the Company and Group's accounting policies, the
review of internal control, risk management and compliance
procedures, and consideration of all issues surrounding the annual
audit. The Audit Committee will also meet with the auditors and
review their reports relating to accounts and internal control
systems.
To follow best practice the external auditors have held
discussions with the Audit Committee on the subject of auditor
independence and have confirmed their independence in writ
Conflicts Committee
A Conflicts Committee of the Board has been established. This
Committee consists of John Walmsley as chairman, Justin Hondris and
Jay Cheatham.
The role of the Conflicts Committee is to assist the Board in
monitoring actual and potential conflicts of interest under the
definitions of the Companies Act 2006. Under the Companies Act 2006
Directors are responsible for their individual disclosures of
actual or potential conflict. To follow best practice, the
Conflicts Committee holds discussions with the Company's UK
lawyers.
Anti-Corruption & Bribery Committee
An Anti Corruption & Bribery Committee has been established.
This committee consists of Justin Hondris (as Chairman) and Jay
Cheatham.
The purpose of the Anti-Corruption & Bribery Committee is to
ensure the Company's compliance with the Bribery Act 2010.
Corporate Governance
The Directors acknowledge their responsibility for, and
recognise the importance of implementing and maintaining, high
standards of corporate governance. Given its current size,
personnel limitations and operational status the Company has not
adopted a formal corporate governance code, however it does liaise
closely with the Nomad and company. However the Company does, where
practical, comply with relevant aspects from the UK Corporate
Governance Code as appropriate for a company of its size, nature
and stage of development.
EU Market Abuse Regulations
The EU Market Abuse Regulation came into effect in the UK on 3
July 2016 and the company has implemented relevant policies and
procedures to ensure compliance with the requirements of the
regime.
Statement of Directors' responsibilities
The Directors are responsible for preparing the financial
statements in accordance with applicable laws and International
Financial Reporting Standards ("IFRS") as adopted by the European
Union. Company Law requires the Directors to prepare financial
statements for each financial period which give a true and fair
view of the state of affairs of the Group and of the Company and of
the profit or loss of the Group for that period. In preparing those
financial statements, the Directors are required to:
a) select suitable accounting policies and then apply them consistently;
b) make judgements and estimates that are reasonable and prudent;
c) prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business; and
d) state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
The Directors confirm that the financial statements comply with
the above requirements.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Group and Company and to enable them to
ensure that the financial statements comply with the Companies Act
2006. The Directors are also responsible for safeguarding the
assets of the Group and hence for taking steps for the prevention
and detection of fraud and other irregularities. The
Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company's
website.
Statement of disclosure to the auditors
So far as the Directors are aware:
a) there is no relevant audit information of which the Company's auditors are unaware; and
b) all the Directors have taken all the steps that they ought to
have taken to make themselves aware of any relevant audit
information and to establish that the auditors are aware of that
information.
Auditors
In accordance with Section 489 of the Companies Act 2006, a
resolution proposing that UHY Hacker Young be reappointed as
auditors of the Company and that the Directors be authorised to
determine their remuneration will be put to the next Annual General
Meeting.
By order of the board
Justin Hondris
Director
22 November 2016
DIRECTORS' BIOGRAPHIES
FOR THE YEARED 30 JUNE 2016
John Walmsley, Non Executive Chairman
John Walmsley has over 30 years' experience in the energy sector
as either adviser or principal. This includes periods as Chief
Executive of Hardy Oil & Gas (1994 - 1998) and Managing
Director, Finance and Business Development, of Enterprise Oil plc
(1984 - 1993). He is currently Executive Chairman of Consilience
Energy Advisory Group Ltd (CEAG) and non-executive Chairman of TSX
and AIM listed Orosur Mining Inc. He has international business and
financial experience in Europe, Asia-Pacific and North America at
the corporate, institutional and senior government level. He is a
fellow of the Institute of Chartered Accountants in England and
Wales and was a Tax Partner at Arthur Anderson prior to joining
Enterprise Oil. He acts as Chairman of Pantheon's Audit,
Remuneration and Nomination and Conflicts Committees.
Jay Cheatham, Chief Executive Officer
Jay Cheatham has more than 40 years' experience in all aspects
of the petroleum business. He has extensive international
experience in both oil and natural gas, primarily for ARCO. At
ARCO, Jay held a series of senior appointments. These include
Senior Vice President and District Manager (ARCO eastern District)
with direct responsibility for Gulf Coast US operations and
exploration and President of ARCO International where he had
responsibility for all exploration and production outside the U.S.
Jay's most recent appointment was as President and CEO of
Rolls-Royce Power Ventures, where he had the key responsibility for
restructuring the Company.
Jay also has considerable financial skills in addition to his
corporate and operational expertise. He has acted as Chief
Financial Officer for ARCO's US oil and natural gas company (ARCO
Oil & Gas). Moreover he has understanding of the capital
markets through his past position as CEO to the Petrogen Fund, a
private equity fund.
Justin Hondris, Director, Finance and Corporate Development
Justin Hondris has over 10 years experience in public company
management in the upstream oil and gas sector and has wide ranging
experience in corporate finance, private equity and capital markets
in the UK and abroad. Prior to Pantheon, Justin held a senior
position in the private equity sector where he gained valuable
experience in both investment and exit strategies for growth
companies.
He is responsible for the financial, legal, administrative and
corporate development functions of the company.
INDEPENT AUDITORS' REPORT
TO THE MEMBERS OF PANTHEON RESOURCES PLC
FOR THE YEARED 30 JUNE 2016
We have audited the financial statements of Pantheon Resources
plc for the year ended 30 June 2016 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated and Parent
Company Statements of Changes in Equity, the Consolidated and
Parent Company Statements of Financial Position, the Consolidated
and Parent Company Statements of Cash Flows and the related notes.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors'
Responsibilities, set out in page 16-17, the directors are
responsible for the preparation of the financial statements and for
being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us
to comply with the Auditing Practices Board's (APB's) Ethical
Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the FRC's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 30
June 2016 and of the Group's loss for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union; and
-- the Parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion the information given in Directors' Report for
the financial year for which the financial statements are prepared
is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the Parent Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of Directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit
Colin Wright (Senior Statutory Auditor)
For and on behalf of UHY Hacker Young
Chartered Accountants and Statutory Auditor
UHY Hacker Young
Quadrant House
4 Thomas More Square
London E1W 1YW
22 November 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2016
Notes 2016 2015
GBP GBP
Continuing operations
Revenue 3 385 3,389
Cost of sales (515) (230)
------------ ----------------
Gross (loss)/profit (130) 3,159
Administration expenses (874,675) (778,779)
Share-based payments 20 (53,813) (376,688)
------------ ----------------
Operating loss 4 (928,618) (1,152,308)
Interest receivable 6 4,305 3,408
------------ ----------------
Loss before taxation (924,313) (1,148,900)
------------ ----------------
Taxation 7 - -
------------ ----------------
Loss for the year (924,313) (1,148,900)
============ ================
Other comprehensive income for the year
Exchange differences from translating foreign operations 5,128,926 645,921
Total comprehensive income for the year 4,204,613 (502,979)
============ ==============
Loss per share
Loss per ordinary share - basic from continuing operations 2 (0.46)p (0.67)p
Loss per ordinary share - diluted from
continuing operations (0.46)p (0.67)p
The loss for the current and prior years and the total
comprehensive loss for the current year and prior years are wholly
attributable to the equity holders of the parent company, Pantheon
Resources Plc.
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2016
Share Share Retained Currency Equity Total
capital premium losses reserve reserve Equity
GBP GBP GBP GBP GBP GBP
Group
At 1 July 2015 1,963,564 38,822,059 (20,313,141) 920,469 376,688 21,769,639
Net loss for the year - - (924,313) - - (924,313)
Other comprehensive income:
Foreign currency translation - - - 5,128,926 - 5,128,926
------------ ------------- --------------- ------------ ---------- -------------
Total comprehensive income for
the year - - (924,313) 5,128,926 - 4,204,613
------------ ------------- --------------- ------------ ---------- -------------
Capital raising
Issue of shares 183,543 20,923,894 - - - 21,107,437
Issue of shares in lieu of
fees 2,467 281,317 - - - 283,784
Issue costs - (899,710) - - - (899,710)
Share-based payments
Issue of share options - - - - 53,813 53,813
Balance at 30 June 2016 2,149,574 59,127,560 (21,237,454) 6,049,395 430,501 46,519,576
============ ============= =============== ============ ========== =============
Share Share Retained Currency Equity Total
capital premium losses reserve reserve Equity
GBP GBP GBP GBP GBP GBP
Company
At 1 July 2015 1,963,564 38,822,059 (9,174,453) - 376,688 31,987,858
Net loss for the year - - (636,186) - - (636,186)
---------- ----------- ------------ --------- -------- -----------
Total comprehensive income for the year - - (636,186) - - (636,186)
---------- ----------- ------------ --------- -------- -----------
Capital raising
Issue of shares 183,543 20,923,894 - - - 21,107,437
Issue of shares in lieu of fees 2,467 281,317 - - - 283,784
Issue costs (899,710) - - - (899,710)
Share-based payments
Issue of share options - - - - 53,813 53,813
Balance at 30 June 2016 2,149,574 59,127,560 (9,810,639) - 430,501 51,896,997
========== =========== ============ ========= ======== ===========
CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2016
Share Share Retained Currency Equity Total
capital premium losses reserve reserve Equity
GBP GBP GBP GBP GBP GBP
Group
At 1 July 2014 1,020,998 21,915,804 (19,219,576) 274,548 55,335 4,047,109
Net loss for the year - - (1,148,900) - - (1,148,900)
Other comprehensive income:
Foreign currency translation - - - 645,921 - 645,921
------------ ------------- --------------- ---------- ----------- -------------
Total comprehensive income for
the year - - (1,148,900) 645,921 - (502,979)
------------ ------------- --------------- ---------- ----------- -------------
Capital raising
Issue of shares 926,097 17,595,875 - - - 18,521,972
Issue of shares in lieu of fees 16,469 312,882 - - - 329,351
Issue costs - (1,002,502) - - - (1,002,502)
Share-based payments
Issue of share options - - - - 376,688 376,688
Transfer of previously expensed
share-based payment on
cancellation of options - - 55,335 - (55,335) -
Balance at 30 June 2015 1,963,564 38,822,059 (20,313,141) 920,469 376,688 21,769,639
============ ============= =============== ========== =========== =============
Share Share Retained Currency Equity Total
capital premium losses reserve reserve Equity
GBP GBP GBP GBP GBP GBP
Company
At 1 July 2014 1,020,998 21,915,804 (8,332,984) - 55,335 14,659,153
Net loss for the year - - (896,804) - - (896,804)
---------- ------------ ------------ --------- --------- ------------
Total comprehensive income for the year - - (896,804) - - (896,804)
---------- ------------ ------------ --------- --------- ------------
Capital raising
Issue of shares 926,097 17,595,875 - - - 18,521,972
Issue of shares in lieu of fees 16,469 312,882 - - - 329,351
Issue costs - (1,002,502) - - - (1,002,502)
Share-based payments
Issue of share options - - - - 376,688 376,688
Transfer of previously expensed
share-based payment on cancellation of
options - - 55,335 - (55,335) -
---------- ------------ ------------ --------- --------- ------------
Balance at 30 June 2015 1,963,564 38,822,059 (9,174,453) - 376,688 31,987,858
========== ============ ============ ========= ========= ============
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
Notes 2016 2015
GBP GBP
ASSETS
Non-current assets
Exploration and evaluation
assets 12 28,510,585 16,406,313
Property, plant and
equipment 13 2,243 3,589
-------------
28,512,828 16,409,902
------------- -------------
Current assets
Trade and other receivables 9 263,753 182,263
Cash and cash equivalents 10 17,903,257 5,265,985
------------- -------------
18,167,010 5,448,248
------------- -------------
Total assets 46,679,838 21,858,150
------------- -------------
LIABILITIES
Current liabilities
Trade and other payables 11 160,262 88,511
------------- -------------
Total liabilities 160,262 88,511
-------------
Net assets 46,519,576 21,769,639
============= =============
EQUITY
Capital and reserves
Share capital 14 2,149,574 1,963,564
Share premium 14 59,127,560 38,822,059
Retained losses (21,237,454) (20,313,141)
Currency reserve 6,049,395 920,469
Equity reserve 20 430,501 376,688
------------- -------------
Shareholders' equity 46,519,576 21,769,639
============= =============
The financial statements were approved by the Board of Directors
on 22 November 2016 and signed on its behalf by:
Justin Hondris
Director
Company Number 05385506
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
Notes 2016 2015
GBP GBP
ASSETS
Non-current assets
Property, plant and machinery 13 2,243 3,589
Loans to subsidiaries 9 47,304,772 29,341,087
------------- -------------
47,307,015 29,344,676
-------------
Current assets
Trade and other receivables 9 94,975 53,459
Cash and cash equivalents 10 4,558,850 2,647,807
-------------
4,653,825 2,701,266
------------- -------------
Total assets 51,960,840 32,045,942
------------- -------------
LIABILITIES
Current liabilities
Trade and other payables 11 63,843 58,084
------------- -------------
Total liabilities 63,843 58,084
------------- -------------
Net assets 51,896,997 31,987,858
============= =============
EQUITY
Capital and reserves
Share capital 14 2,149,574 1,963,564
Share premium 14 59,127,561 38,822,059
Retained losses (9,810,638) (9,174,453)
Equity reserve 20 430,500 376,688
------------- -------------
Shareholders' equity 51,896,997 31,987,858
============= =============
The financial statements were approved by the Board of Directors
on 22 November 2016 and signed on its behalf by:
Justin Hondris
Director
Company Number 05385506
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2016
Notes 2016 2015
GBP GBP
Net cash inflow/(outflow) from operating activities 15 1,200,559 (497,522)
-------------- ---------------
Cash flows from investing activities
Interest received 4,305 3,408
Purchase of plant and equipment - (4,037)
Interest paid (15,000) -
Funds used for drilling and exploration 12 (9,044,104) (12,719,946)
--------------
Net cash outflow from investing activities (9,054,799) (12,720,575)
-------------- ---------------
Cash flows from financing activities
Proceeds from share issues 14 21,107,437 18,521,972
Issue costs paid in cash (615,925) (673,151)
-------------- ---------------
Net cash inflow from financing activities 20,491,512 17,848,821
Increase in cash and cash equivalents 12,637,272 4,630,724
Cash and cash equivalents at the beginning of the year 5,265,985 635,261
-------------- ---------------
Cash and cash equivalents at the end of the year 10 17,903,257 5,265,985
============== ===============
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2016
Notes 2016 2015
GBP GBP
Net cash outflow from operating activities 15 (605,610) (570,237)
--------------- ---------------
Purchase of plant and equipment - (4,037)
Interest received 3,825 2,539
Interest Paid (15,000) -
Loans to subsidiary companies (17,963,685) (14,767,511)
--------------- ---------------
Net cash outflow from investing activities (17,974,860) (14,769,009)
--------------- ---------------
Cash flows from financing activities
Proceeds from share issues 14 21,107,437 18,521,972
Issue costs paid in cash (615,925) (673,151)
Net cash inflow from financing activities 20,491,512 17,848,821
--------------- ---------------
Increase in cash and cash equivalents 1,911,042 2,509,575
Cash and cash equivalents at the beginning of the year 2,647,808 138,232
Cash and cash equivalents at the end of the year 10 4,558,850 2,647,807
=============== ===============
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 30 JUNE 2016
1. Accounting policies
A summary of the principal accounting policies, all of which
have been applied consistently throughout the year, is set out
below.
1.1. Basis of preparation
The financial statements have been prepared on a going concern
basis using the historical cost convention and in accordance with
the International Financial Reporting Standards ("IFRSs"),
including IFRS 6, 'Exploration for and Evaluation of Mineral
Resources', as adopted by the European Union ("EU") and in
accordance with the provisions of the Companies Act 2006.
The Group's financial statements for the year ended 30 June 2016
were authorised for issue by the board of Directors on 22 November
2016 and were signed on the Board's behalf by Mr J Hondris.
The Group and Company financial statements are presented in UK
pounds sterling.
In accordance with the provisions of Section 408 of the
Companies Act 2006, the Company has not presented an income
statement. A loss for the year ended 30 June 2016 of GBP636,186
(2015: loss of GBP896,804) has been included in the consolidated
income statement.
1.2. Basis of consolidation
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated from
the date that control ceases. The purchase method of accounting is
used to account for the acquisition of subsidiaries by the Group.
The cost of an acquisition is measured as the fair value of the
assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable
to the acquisition. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The excess of
the cost of acquisition over the fair value of the Group's share of
the identifiable net assets acquired is recorded as goodwill.
Goodwill arising on acquisitions is capitalised and subject to
impairment review, both annually and when there are indications
that the carrying value may not be recoverable.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated.
All the companies over which the Company has control apply,
where appropriate, the same accounting policies as the Company.
1.3. Interests in joint arrangements
IFRS defines a joint arrangement as an arrangement over which
two or more parties have joint control. Joint control is the
contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities (being
those that significantly affect the returns of the arrangement)
require unanimous consent of the parties sharing control.
Joint operations
A joint operation is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the assets and obligations for the liabilities, relating to the
arrangement. In relation to its interests in joint operations, the
Group recognises its:
- Assets, including its share of any assets held jointly
- Liabilities, including its share of any liabilities incurred
jointly
- Revenue from the sale of its share of the output arising from
the joint operation
- Share of the revenue from the sale of the output by the joint
operation
- Expenses, including its share of any expenses incurred
jointly
1.4. Going concern
The financial statements have been prepared on the going concern
basis, which contemplates the continuity of normal business
activity and the realisation of assets and the settlement of
liabilities in the normal course of business.
The Directors have reviewed the Group's overall position and
outlook and are of the opinion that the Group is sufficiently well
funded to be able to operate as a going concern for at least the
next twelve months from the date of approval of these financial
statements. The Directors believe that the use of the going concern
basis is appropriate. Accordingly, the Directors have prepared the
financial statements on a going concern basis.
1.5. Revenue
Oil and Gas revenue represents amounts invoiced (exclusive of
sales related taxes) for the Group's share of oil and gas sales in
the year.
Interest revenue is recognised on a proportional basis taking
into account the interest rates applicable to the financial
assets.
1.6. Foreign currency translation
(i) Functional and presentational currency
The financial statements are presented in Pounds Sterling
("GBP"), which is the functional currency of the Company and is the
Group's presentation currency. The company estimates that they will
commence generating production revenues from its Polk County
Operations in Q1 or Q2 2017, following which the functional
currency will change to the United States Dollar (USD).
Items included in the Company's subsidiary entities are measured
using United States Dollars ("US$"), which is the currency of the
primary economic environment in which they operate.
(ii) Transactions and balances
Transactions in foreign currencies are translated into Sterling
at the average exchange rate for the year. Monetary assets and
liabilities denominated in foreign currencies are translated at the
rate of exchange ruling at the balance sheet date. The resulting
exchange gain or loss is dealt with in the income statement.
The assets, liabilities and the results of the foreign
subsidiary undertakings are translated into Sterling at the rates
of exchange ruling at the year end. Exchange differences resulting
from the retranslation of net investments in subsidiary
undertakings are treated as movements on reserves.
1.7. Cash and cash equivalents
The Company considers all highly liquid investments, with a
maturity of 90 days or less to be cash equivalents, carried at the
lower of cost or market value.
1.8. Deferred taxation
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements.
Deferred tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the balance sheet date and
expected to apply when the related deferred tax is realised or the
deferred liability is settled.
Deferred tax assets are recognised to the extent that it is
probable that the future taxable profit will be available against
which the temporary differences can be utilized.
1.9. Exploration and evaluation costs
The Group follows the 'successful efforts' method of accounting
for exploration and evaluation costs. All costs associated with
oil, gas and mineral exploration and investments are capitalised on
a project by project basis, pending determination of the
feasibility of the project. Costs incurred include appropriate
technical and administrative expenses but not general corporate
overheads. If an exploration project is successful, the related
expenditures will be transferred to Developed Oil and Gas
Properties and amortised over the estimated life of the commercial
reserves on a unit of production basis. Where a licence is
relinquished or project abandoned, the related costs are written
off. Where the Group maintains an interest in a project, but the
value of the project is considered to be impaired, a provision
against the relevant capitalised costs will be raised.
The recoverability of all exploration and evaluation costs is
dependent upon the discovery of economically recoverable reserves,
the ability of the Group to obtain necessary financing to complete
the development of the reserves and future profitable production or
proceeds from the disposition thereof. When production commences
the accumulated costs for the relevant area are transferred from
intangible fixed assets to property, plant and equipment as
'Developed Oil & Gas Assets' or 'Production Facilities and
Equipment', as appropriate. Amounts recorded for these assets
represent historical costs and are not intended to reflect present
or future values.
1.10 Impairment of exploration and development costs and depreciation of assets
Impairment reviews on development and producing assets are
carried out at the end of the respective accounting period. When
events or changes in circumstances indicate that the carrying
amount of expenditure attributable to a successful well may not be
recoverable from future net revenues from oil and gas reserves
attributable to that well, a comparison between the net book value
of the cost attributable to that well and the discounted future
cash flows from that well is undertaken. To the extent that the
carrying amount exceeds the recoverable amount, the cost
attributable to that well is written down to its recoverable amount
and charged as an impairment.
Exploration and evaluation costs
In relation to the Tyler and Polk County projects, the carrying
value as at 30 June 2016 represents back costs and direct costs
paid in relation to the project, seismic, land and drilling costs
relating to the prospects as well as prepaid costs towards future
drilling.
Based on estimates by a third party technical consultant, the
Group estimates potential for up 167 wells at an average P50
prospective resource (recoverable) of 1.4Mmboe per well from the
Eagle Ford sandstone formation alone. Additionally, potential lies
in the separate and independent Austin Chalk structure which is
known to exist on the JV's Tyler Country acreage. Pantheon has
working interest ranging from 50% to 58% in these prospects. Based
upon those estimates and results achieved to date, the Directors
believe the carrying values at 30 June 2016 are supported.
Developed Oil and Gas Properties
Developed Oil and Gas Properties are amortised over the
estimated life of the commercial reserves on a unit of production
basis.
Other property, plant and equipment
Other property, plant and equipment are stated at cost less
depreciation. Depreciation is provided at rates calculated to write
off the costs less estimated residual value of each asset over its
estimated useful life as follows:
- Production Facilities and Equipment are depreciated by equal
instalments over their expected useful lives, being seven
years.
- Office equipment is depreciated by equal annual instalments
over their expected useful lives, being three years.
1.11. Financial instruments
IFRS7 requires information to be disclosed about the impact of
financial instruments on the Group's risk profile, how the risks
arising from financial instruments might affect the entity's
performance, and how these risks are being managed.
The Group's policies include that no trading in derivative
financial instruments shall be undertaken. These disclosures have
been made in Note 19 to the accounts.
1.12. Share based payments
On occasion the Company has made share-based payments to certain
Directors and advisers by way of issue of share options. The fair
value of these payments is calculated by the Company using the
Black-Scholes option pricing model. The expense is recognised on a
straight line basis over the period from the date of award to the
date of vesting, based on the Company's best estimate of the number
of shares that will eventually vest.
During the year GBP53,813 was charged to share based payments in
relation to previously granted share options to Directors and
employees.
1.13. Critical accounting estimates and judgements
The preparation of financial statements in conformity with
International Financial Reporting Standards requires the use of
accounting estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during
the reporting period. Although these estimates are based on
management's best knowledge of current events and actions, actual
results ultimately may differ from those estimates. IFRSs also
require management to exercise its judgement in the process of
applying the Group's accounting policies.
The areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to the
financial statements are as follows:
Impairment of tangible and intangible assets
Determining whether an asset is impaired requires an estimation
of whether there are any indications that its carrying value is not
recoverable.
At each reporting date, the Company reviews the carrying value
of its tangible and intangible assets to determine whether there is
any indication that those assets have been impaired. If such an
indication exists, the recoverable amount of the asset, being the
higher of the asset's fair value less costs to sell and value in
use, is compared to the asset's carrying value. Any excess of the
asset's carrying value over its recoverable amount is expensed to
the income statement.
Developed Oil & Gas Properties
Developed Oil & Gas Properties are amortised over the life
of the area according to the estimated rate of depletion of the
economically recoverable reserves. If the amount of economically
recoverable reserves varies, this will impact on the amount of the
asset which should be carried on the balance sheet.
Share-based payments
The Group records charges for share-based payments.
For option based share-based payments, to determine the value of
the options management estimate certain factors used in the option
pricing model, including volatility, vesting date, exercise date of
options and the number of options likely to vest. At each reporting
date during the vesting period management estimate the number of
shares that will vest after considering the vesting criteria. If
these estimates vary from actual occurrence, this will impact on
the value of the equity carried in the reserves.
1.14. New standards and interpretations not applied
As of the date of these financial statements the IASB and IFRIC
have issued a number of new standards, amendments and
interpretations. These new Standards, Amendments and
Interpretations are effective for accounting periods beginning on
or after the dates shown below. Of these, only the following are
expected to be relevant to the Group:
Standard Impact on initial application Effective
date
IAS 1* Presentation of Financial 1 January
Statements: Disclosure 2016
Initiative
IAS 7* Statement of cash flow 1 January
2017
IAS 12* Income taxes 1 January
2017
IAS 16* Clarification of Acceptable 1 January
Methods of Depreciation 2016
IAS 27* Separate Financial Statements 1 January
2016
IAS 28* Investments in Associates 1 January
and Joint Ventures 2016
IAS 28* Investment Entities: Applying 1 January
the Consolidation Exception 2016
IAS 38* Clarification of Acceptable 1 January
Methods of Amortisation 2016
IFRS 9* Financial Instruments 1 January
2018
IFRS 10* Consolidated Financial 1 January
Statements 2016
IFRS 10* Investment Entities: Applying 1 January
the Consolidation Exception 2016
IFRS 11 Joint Arrangements: Accounting 1 January
for Acquisitions of Interest 2016
in Joint Operations
IFRS 12* Investment Entities: Applying 1 January
the Consolidation Exception 2016
IFRS 14 Regulatory Deferral Accounts 1 January
2016
IFRS 15 Revenue from Contracts 1 January
with Customers 2018
IFRS 16 Leases 1 January
2019
* Amendments
The Group does not anticipate that the adoption of these
standards will have a material effect on its financial statements
in the period of initial adoption.
2. Loss per share
The total loss per share for the group of 0.46p (2015: 0.67p) is
calculated by dividing the loss for the year from continuing
operations by the weighted average number of ordinary shares in
issue of 202,115,081 (2015: 171,311,303).
The diluted loss per share has been kept the same as the basic
loss per share as the conversion of share options decreases the
basic loss per share, thus being anti-dilutive.
3. Segmental information
The Group's activities involve production of and exploration for
oil and gas. There are two reportable operating segments: USA and
Head Office. Non-current assets, income and operating liabilities
are attributable to the USA, whilst most of the corporate
administration is conducted through Head Office.
Each reportable segment adopts the same accounting policies.
In compliance with IFRS 8 'Operating Segments', the following
tables reconcile the operational loss and the assets and
liabilities of each reportable segment with the consolidated
figures presented in these Financial Statements, together with
comparative figures for the year ended 30 June 2016.
Year ended 30 June 2016
Geographical segment (Group) Head Office USA Consolidated
GBP GBP GBP
Revenue - 385 385
Cost of sales - (515) (515)
Interest receivable 3,825 480 4,305
Administration expenses (586,198) (288,477) (874,675)
Share-based payments (53,813) - (53,813)
------------- -------------- -------------
Loss by reportable segment (636,186) (288,127) (924,313)
============= ============== =============
Plant and equipment 2,243 - 2,243
Exploration and evaluation assets - 28,510,585 28,510,585
Trade and other receivables 94,975 168,778 263,753
Cash and cash equivalents 4,558,850 13,344,407 17,903,257
Intercompany balances 47,304,772 (47,304,772) -
------------- -------------- -------------
Total assets by reportable segment 51,960,840 (5,281,002) 46,679,838
------------- -------------- -------------
Total liabilities by reportable segment (63,843) (96,419) (160,262)
------------- -------------- -------------
Net assets by reportable segment 51,896,997 (5,377,421) 46,519,576
============= ============== =============
Year ended 30 June 2015
Geographical segment (Group) Head Office USA Consolidated
GBP GBP GBP
Revenue - 3,389 3,389
Cost of sales - (230) (230)
Interest receivable 2,539 869 3,408
Administration expenses (522,655) (256,124) (778,779)
Share-based payments (376,688) - (376,688)
------------ ------------- --------------
Loss by reportable segment (896,804) (252,096) (1,148,900)
============ ============= ==============
Plant and equipment 3,589 - 3,589
Exploration and evaluation assets - 16,406,313 16,406,313
Trade and other receivables 53,459 128,804 182,263
Cash and cash equivalents 2,647,807 2,618,178 5,265,985
Intercompany balances 29,341,087 (29,341,087) -
------------ ------------- --------------
Total assets by reportable segment 32,045,941 (10,187,791) 21,858,150
------------ ------------- --------------
Total liabilities by reportable segment (58,084) (30,427) (88,511)
------------ ------------- --------------
Net assets by reportable segment 31,987,858 (10,218,219) 21,769,639
============ ============= ==============
4. Operating loss
2016 2015
GBP GBP
Operating loss is stated after charging:
Depreciation 1,346 448
Auditor's remuneration
- group and parent company audit services 17,500 14,000
Auditor's remuneration for non-audit services
- taxation services and compliance services 12,213 4,495
------- -------
5. Employment costs
The employee costs of the Group, including Directors'
remuneration, are as follows:
2016 2015
GBP GBP
Wages and salaries 437,609 440,976
Social security costs 35,575 38,809
---------- ----------
473,184 479,785
========== ==========
There is one employee in addition to the Directors. Further
details on Directors' emoluments are shown in the Directors'
report.
6. Interest receivable
2016 2015
GBP GBP
Bank interest received 4,305 3,408
====== ======
7. Taxation
2016 2015
GBP GBP
Current tax
UK corporation tax - -
========== ============
Factors affecting the tax charge for the period
Loss on ordinary activities before taxation (924,313) (1,148,900)
---------- ------------
Loss on ordinary activities before taxation
multiplied by the standard rate of UK corporation
tax of 20% (2015: 20.5%) 184,863 (238,398)
---------- ------------
Effects of:
Non deductible expenses 11,657 78,917
Capital allowances 38 (198)
Tax losses carried forward not recognised as deferred tax asset 173,168 159,679
---------- ------------
Total tax charge - -
========== ============
Factors that may affect future tax charges
The Finance Act 2013 reduced the rate of corporate tax to 21%
from 1 April 2014 and to 20% from 1 April 2015. Finance (No.2) Bill
2015, which was substantively enacted on 26 October 2015, announced
that the corporation tax rate applying from 1 April 2017 would fall
to 19% and 18% from 1 April 2020.
The Group's deferred tax assets and liabilities as at 30 June
2016 have been measured at 20%, although no deferred tax has been
recognised as such in these accounts.
At the balance sheet date, the Group has unused losses carried
forward of GBP23.0m (2015: GBP22.2m) available for offset against
suitable future profits. Of these losses approximately GBP18.0m
(2015: GBP17.7m) were sustained in the USA. Unused US tax losses
expire in general within 20 years of the year in which they are
sustained.
The directors do not consider it appropriate to recognise a
deferred tax asset in respect of such losses, due to the uncertain
nature of future revenue streams. The contingent deferred tax asset
is estimated to be GBP4.614m (2015: GBP4.441m).
8. Subsidiary entities
The Company currently has the following wholly owned
subsidiaries all of which were incorporated on 3 February 2006:
Name Country of Percentage Activity
Incorporation ownership
Hadrian Oil & Gas LLC United States 100% Holding Company
Agrippa LLC United States 100% Holding Company
Pantheon Oil & Gas LP United States 100% Oil & gas exploration
Pantheon Oil & Gas LP is 99% owned by Agrippa LLC as its
limited partner and 1% by Hadrian Oil & Gas LLC as its general
partner.
9. Trade and other receivables
Group Group Company Company
2016 2015 2016 2015
GBP GBP GBP GBP
Amounts falling due within one year:
Trade receivables - 52,460 - -
Prepayments and accrued income 109,043 30,578 70,725 34,378
Other receivables 40,171 1,692 24,250 19,081
Receivable from Padre Island Authority 114,539 97,533 - -
--------------------- --------------------- -------------------- ------------------------
263,753 182,263 94,975 53,459
===================== ===================== ==================== ========================
The receivable from Padre Island Authority comprises a security
deposit provided to the Padre Island Environmental Authority. The
Directors expect this balance to be received before 30 June
2017.
9. Trade and other receivables (continued)
Group Group Company Company
2016 2015 2016 2015
GBP GBP GBP GBP
Amounts falling due after more than one year:
Amount due from subsidiary undertakings - - 47,304,772 29,341,087
======= ======= =========== ===========
An annual impairment review of the amount due from subsidiary
undertakings (loans to subsidiaries) is performed by comparing the
expected recoverable amount of the subsidiary's underlying tangible
and intangible assets to the carrying value of the loan in the
Company's statement of financial position.
The recoverable amount of the amount due from subsidiary
undertakings is based upon value in use calculations. The use of
this method requires the estimation of future cash flows from the
underlying assets, discounted using a suitable pre tax discount
rate. For the purposes of these calculations the Company's Tyler
& Polk County Eagle Ford sandstone project was modelled on a
P50 basis using a discount rate of 10%. The key assumptions upon
which the cash flow projections were based include recoverable
resource, number of wells drilled, cost of drilling and the future
prices of both oil and natural gas. Management also recognised that
material value is believed to exist in the separate and independent
Austin Chalk prospect. For the purpose of the calculations the
following assumptions were used:
Potential Number of vertical <160
wells drilled
Average reserves per well 1.4Mmboe
Oil price ($/Bbl) $44
Natural gas price ($/Mcf) $2.85
Cost of drilling typical
vertical well $3.75m
These key assumptions have been determined by reference to a
number of sources including information provided by the operator of
the project, external market information, published futures pricing
for oil and natural gas and management's expectations of future
events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
Management has performed sensitivity analysis on each of the key
assumptions including increasing the drilling costs, reducing
commodity prices and reducing average reserves per well by a number
of scenarios. None of these factors lead to an indication of
impairment; hence the Company concluded that no impairment was
required as of 30 June 2016.
10. Cash and cash equivalents
Group Group Company Company
2016 2015 2016 2015
GBP GBP GBP GBP
Cash at bank and in hand 17,903,257 5,265,985 4,558,850 2,647,807
=========== ========== ========== ==========
11. Trade and other payables
Group Group Company Company
2016 2015 2016 2015
GBP GBP GBP GBP
Trade creditors 81,654 30,801 21,290 30,801
Accruals 78,608 57,710 42,553 27,283
---------- ----------- --------- ---------
160,262 88,511 63,843 58,084
========== =========== ========= =========
12. Exploration and evaluation assets
Group 2016 2015
GBP GBP
Cost
At 1 July 16,406,313 3,389,552
Additions 9,044,104 12,719,946
Effects of foreign exchange 3,060,168 296,815
----------- --------------------
At 30 June 28,510,585 16,406,313
----------- --------------------
Amortisation and impairment
As at 1 July - -
Charge for period - -
As at 30 June - -
----------- --------------------
Net book value
At 30 June 2016 and 30 June 2015 28,510,585 16,406,313
=========== ====================
The Group additions for the year comprise the direct costs
associated with the preparation and drilling of oil and gas wells,
together with costs associated with leases and seismic acquisition
and processing.
The Group has performed value in use calculations on its
exploration and evaluation assets. These involved NPV calculations
with a variety of sensitivity assumptions for both commodity prices
and well recoverabilities using the geological estimates provided
by an independent geological consultant. The directors have
assessed the exploration and evaluation assets for impairment
indicators, and based upon the fact that leases are of good
standing and drilling results to-date have supported the geological
model, no impairment is considered necessary.
The Directors are satisfied that the NPV of the Group's
exploration and evaluation assets exceeds the carrying values and
believes that no impairment is required at 30 June 2016.
13. Property, plant and equipment
Developed Oil Production Facilities and Equipment
& Gas GBP Office
Group & Company Properties Equipment Total
GBP GBP GBP
Cost
At 1 July 2015 - - 11,374 11,374
Additions - - - -
At 30 June 2016 - - 11,374 11,374
--------------- ------------------------------------- ------------ --------
Depreciation
At 1 July 2015 - - 7,785 7,785
Depreciation for the year - - 1,346 1,346
At 30 June 2016 - - 9,131 9,131
--------------- ------------------------------------- ------------ --------
Net book value
At 30 June 2016 - - 2,243 2,243
=============== ===================================== ============ ========
At 30 June 2015 - - 3,589 3,589
=============== ===================================== ============ ========
Developed Oil Production Facilities and Equipment
& Gas GBP Office
Group & Company Properties Equipment Total
GBP GBP GBP
Cost
At 1 July 2014 - - 7,337 7,337
Additions - - 4,037 4,037
At 30 June 2015 - - 11,374 11,374
--- --- ---------------------- -------
Depreciation
At 1 July 2014 - - 7,337 7,337
Depreciation for the year - - 448 448
At 30 June 2015 - - 7,785 7,785
--- --- ---------------------- -------
Net book value
At 30 June 2015 - - 3,589 3,589
=== === ====================== =======
At 30 June 2014 - - - -
=== === ====================== =======
14. Share capital 2016 2015
GBP GBP
Allotted, issued and fully paid:
214,957,458 ordinary shares of GBP0.01 each 2,149,574 1,963,564
========== ==========
Number Issued and fully paid capital Share premium
GBP GBP
Issued share capital:
As at 30 June 2016 214,957,458 2,149,574 59,127,561
In March 2016 the company completed a placing of 18,601,062
shares with a nominal value of GBP0.01, raising cash proceeds of
c.GBP21.1m before expenses and c.GBP20.3m after expenses of the
share issue.
The ordinary shares rank pari passu in all respects including
the right to receive dividends and other distributions declared,
made or paid.
15. Net cash outflow from operating activities
Group Group
2016 2015
GBP GBP
Loss for the year (924,313) (1,148,900)
Net interest paid (received) 10,695 (3,408)
Unrealised losses on assets held for sale 3,731 -
Depreciation 1,346 448
Decrease in trade and other receivables (85,221) 9,824
Increase/(decrease) in trade and other payables 71,751 (81,280)
Share-based payments 53,813 376,688
Effect of translation differences 2,068,757 349,106
---------- ------------
Net cash inflow/(outflow) from operating activities 1,200,559 (497,522)
========== ============
Company Company
2016 2015
GBP GBP
Loss for the year (636,186) (896,803)
Net interest paid/(received) 11,175 (2,539)
Unrealised losses on assets held for sale - -
Depreciation 1,346 448
Increase in trade and other receivables (41,517) (4,344)
Increase/(decrease) in trade and other payables 5,759 (43,687)
Share-based payments 53,813 376,688
---------- ----------
Net cash outflow from operating activities (605,610) (570,237)
========== ==========
16. Control
No one party controls the Company.
17. Decommissioning expenditure
The Directors have considered the environmental issues and the
need for any necessary provision for the cost of rectifying any
environmental damage, as might be required under local legislation.
In their view, no provision is necessary for any future costs of
decommissioning or any environmental damage.
18. Exploration and evaluation commitments
The Group has no obligation to drill any further wells beyond
the current drilling programme, or make any further payments in
respect of any new wells in any of its operations. Should the Group
elect to not participate in any wells beyond the first well in the
Polk and Tyler County joint venture then it would forfeit an area
of acreage surrounding the particular well that the Group had
elected not to participate in.
As at 30 June 2016, the Group has no fixed financial commitments
in respect of any other programmes other than maintaining its
interest in its existing operations. Before any new wells are
commenced in relation to these operations, the Group must first
elect to participate in any proposed well thereby allowing the
Group to decline participation if it deems appropriate.
19. Financial instruments
The Group's principal financial instruments comprise cash and
cash equivalents, trade and other receivables and trade and other
payables.
The main purpose of cash and cash equivalents financial
instruments is to finance the Group's operations. The Group's other
financial assets and liabilities such as receivables and trade
payables, arise directly from its operations. It is, and has been
throughout the entire period, the Group's policy that no trading in
financial instruments shall be undertaken.
The main risk arising from the Group's financial instruments is
market risk. Other minor risks are summarised below. The Board
reviews and agrees policies for managing each of these risks.
Market risk
Market risk is the risk that changes in market prices, and
market factors such as foreign exchange rates and interest rates
will affect the entity's income or the value of its holdings of
financial instruments.
The objective of market risk management is to manage and control
market risk exposures within acceptable parameters while optimising
the return.
The Company does not use derivative products to hedge foreign
exchange risk and has exposure to foreign exchange rates prevailing
at the dates when funds are transferred into different
currencies.
Cash flow interest rate risk
The Group's exposure to the risks of changes in market interest
rates relates primarily to the Group's cash and cash equivalents
with a floating interest rate. These financial assets with variable
rates expose the Group to cash flow interest rate risk. All other
financial assets and liabilities in the form of receivables and
payables are non-interest bearing. The Group does not engage in any
hedging or derivative transactions to manage interest rate
risk.
19. Financial instruments (continued)
In regard to its interest rate risk, the Group continuously
analyses its exposure. Within this analysis consideration is given
to potential renewals of existing positions, alternative
investments and the mix of fixed and variable interest rates. The
Group has no policy as to maximum or minimum level of fixed or
floating instruments.
Interest rate risk is measured as the value of assets and
liabilities at fixed rate compared to those at variable rate.
Financial Weighted Fixed Non - interest
assets: average
interest interest bearing
rate rate
2016 2016 2016
% GBP GBP
Cash on deposit 0.15% 17,903,257 -
Trade and
other receivables - - 263,753
Net fair value
The net fair value of financial assets and financial liabilities
approximates to their carrying amount as disclosed in the statement
of financial position and in the related notes.
Currency risk
The functional currency for the Group's operating activities is
the Pound Sterling and for exploration activities the United States
of America dollar. The Group has not hedged against currency
depreciation but continues to keep the matter under review.
Financial risk management
The Directors recognise that this is an area in which they may
need to develop specific policies should the Group become exposed
to wider financial risks as the business develops.
Liquidity risk
Liquidity risk is the risk that the entity will not be able to
meet its financial obligations as they fall due.
The objective of managing liquidity risk is to ensure as far as
possible, that it will always have sufficient liquidity to meet its
liabilities when they fall due, under both normal and stressed
conditions.
The entity has established a number of policies and processes
for managing liquidity risk. These include:
- Continuously monitoring actual and budgeted cash flows and
longer term forecasting cash flows;
- Monitoring the maturity profiles of financial assets and
liabilities in order to match inflows and outflows; and
- Monitoring liquidity ratios (working capital).
Credit risk management
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group. The Group's main counterparties are the operators of the
respective projects. Funds are normally only remitted on a
prepayment basis a short period before the expected commencement of
drilling. The Group has adopted a policy of only dealing with what
it believes to be creditworthy counterparties and would consider
obtaining sufficient collateral where appropriate, as a means of
mitigating the risk of financial loss from defaults. The Group's
exposure and the credit ratings of its counterparties are
continuously monitored and the aggregate value of transactions
concluded is spread amongst approved counterparties. Trade
receivables at 30 June 2016 consist primarily of deposits and bonds
relating to the Company's previous Padre Island Joint Venture.
Ongoing credit evaluation is performed on the financial condition
of accounts receivable.
19. Financial instruments (continued)
Capital management
The Group's objective when managing capital is to ensure that
adequate funding and resources are obtained to enable it to develop
its projects through to profitable production, while in the
meantime safeguarding the Group's ability to continue as a going
concern. This is aimed at enabling it, once the projects come to
fruition, to provide appropriate returns for shareholders and
benefits for other stakeholders. Capital will continue to be
sourced from equity and from borrowings as appropriate.
20. Share-based payments
No share options were issued in the year. A charge of GBP53,813
(2015: GBP376,688) relates to share options issued in prior
years.
Movements in share options in issue
Exercise price Number of Issued during year Expired during year Number of
options issued options issued
as of 30 June 2015 as of 30 June 2016
GBP0.30 10,000,000 - - 10,000,000
Total 10,000,000 - - 10,000,000
==================== =================== ==================== ====================
The weighted average exercise price of share options outstanding
and exercisable at the end of the period was GBP0.30 (2015:
GBP0.30). The cost of all share options issued is calculated at the
time of issue using the Black & Scholes valuation model. All
share options have been fully expensed as at 30 June 2016.
21. Related party transactions
There were no related party transactions during the year other
than the payment of remuneration to Directors.
22. Contingent liability
Pantheon is in dispute with an independent third party
consultant who provided geological consultancy services to Pantheon
during the period 2008 to 2010. The consultant is seeking a payment
of $25,000 per successfully completed well and a 1% overriding
royalty interest on future revenues attributable to Pantheon from
Pantheon's Polk and Tyler County interests. Pantheon has filed a
lawsuit against the consultant, seeking a declaration that the
claims are without merit and that the consultant has no entitlement
to any such overriding royalty or cash payment. Regardless of the
outcome, the financial impact upon Pantheon is not considered
material.
23. Subsequent events
On 19 July, 2016 the Company announced the acquisition of an
additional 8% working interest in the "West West Double A"* and
"West Double A"** prospects (previously referred to respectively as
"New Prospect D" and "New Prospect A"), located in Polk County,
East Texas. Upon completion of the acquisition, Pantheon's working
interest in these two prospects, including the VOBM#1 discovery
well, increased from 50% to 58%. The Company's working interest in
its Tyler County prospects remain unchanged at 50% and its working
interest in "New Prospect E" remains unchanged at 25%.
Purchase consideration for the 8% working interest comprised an
up front cash payment of US$6.5m, plus an additional 20% of the
drilling and completion costs of the VOBM#2H and VOBM#3 wells. In
relation to the 8% working interest acquired, Pantheon will benefit
from an accelerated payback mechanism whereby it will receive 20%
of production revenues until such time as the purchase
consideration has been recouped, at which point revenues will
revert back to an 8% revenue interest. The opportunity to acquire
this additional working interest arose as a result of an internal
reorganisation within the privately-owned Vision Group. By mutual
agreement no third parties were involved. The transaction
maintained the confidentiality of intellectual property within the
group, minimised mid-drilling disruption and reinforces the
excellent established relationship between Pantheon and Vision.
* In respect of the West West Double A prospect, on which no
wells have yet been drilled, Black Stone Minerals Company ("BSMC"),
which granted the leases, holds an option to participate in future
wells drilled on the underlying land, or lands pooled with that
land for up to a 25% working interest (proportionately reduced to
the mineral interest of BSMC in the relevant well or unit). If
exercised in full, this could potentially reduce Pantheon's working
interest by up to 25% (of Pantheon's 58% working interest) in that
prospect.
** In respect of the West Double A prospect, BSMC also has an
option to participate in future wells drilled on the underlying
land, or lands pooled with that land for up to a 25% working
interest (proportionately reduced to the mineral interest of BSMC
in the relevant well or unit). In this case the option applies only
to Pantheon's newly acquired 8% working interest, not to its
existing 50% working interest. In order to exercise its option in
either case, BSMC must give notice within a prescribed notice
period before drilling commences and will be liable to its pro rata
proportion of all costs in relation to that well. BSMC has not
exercised its option in any well to date.
In September 2016 the Company announced that it had temporarily
suspended drilling operations at the VOBM#2H Polk County well after
reaching a measured depth of 16,450 feet. The well encountered
significant hydrocarbons in the objective horizon before drilling
was temporarily suspended due to low rates of penetration being
achieved when drilling the abrasive sandstone horizontally. It is
planned to re-enter the well and to drill it vertically subsequent
to completion of the VOBM#4 Tyler County well. The Company also
completed a fracture stimulation treatment of the VOS#1 well in
Tyler County. The well has now been shut-in pending results of the
VOBM#4 stepout well to determine the optimal pipeline and gas
processing options for the Tyler County prospects. In October 2016
the Company announced that it had drilled the VOBM#3 well to target
depth, and logs indicated the presence of hydrocarbons in a
potentially significant reservoir in the primary target.
Importantly, the vertical well was drilled on time and on budget.
Flow testing operations are presently underway.
In November 2016 the Company spudded the VOBM#4 well, which is a
large step exploration/appraisal well from the VOS#1 well in Tyler
County. Drilling operations are currently underway.
GLOSSARY
Bbl barrel of oil Mcfd thousand cubic feet per day
Boe barrel of oil equivalent Mmboe million barrels of oil equivalent
Boepd barrels of oil equivalent per day NPV net present value
Bopd barrels of oil per day $ United States dollar
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UUUARNNAAUUA
(END) Dow Jones Newswires
November 23, 2016 02:00 ET (07:00 GMT)
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