5th May 2017 07:00
For immediate release 5 May 2017
LGO Energy plc
("LGO" or "the Company")
Annual Report and Accounts 2016
LGO announces that the Company's audited Annual Report and Accounts for the year ended 31 December 2016 is being posted to shareholders and will be available from the Company's website, www.lgo-energy.com and extracts are set out below.
Chairman and Chief Executive's Review
Financial year 2016 was a transitional period whilst the Company addressed a number of restrictions on the Company's growth while it remained steadfastly focussed on its production operations and options in Trinidad. In 2016 we were highly constrained by the BNP Paribas ("BNPP") loan default and unable to deploy capital to Goudron operations and as a result saw production materially reduced. The Company's licence to operate and its reputation have, however, been preserved through careful management of relationships and the Company has successfully addressed the financial pressures that resulted from the loan covenant default in late 2015. The Company's focus in 2016 was on restructuring and improving its liquidity through the reduction of costs, renegotiation of the terms of its banking facility and through making payments to major creditors by way of LGO shares and through equity placements. In December 2016, the outstanding balance of the loan owed to BNPP was refinanced with Lind Partners LLP ("Lind") in the form of a convertible security agreement with repayment terms affordable from existing production cashflow and robust to oil price volatility.
Post period, LGO entered 2017 with renewed optimism and believes that restored financial stability, higher oil prices and the recommencement of development drilling operations at the Goudron Field will move the Company back on a trajectory to profitability. The new drilling campaign, targeting the underexploited Mayaro Sandstone interval, commenced in March 2017 with the drilling and successful completion of two new wells, GY-682 and GY-683.
Preparatory work for the enhanced oil recovery ("EOR") pilot scheme at Goudron is now also well advanced and will lead over time to the Company's ability to recover a higher proportion of the very large oil in place that is now independently certified in Goudron and to which contingent resources of up to 65 million barrels are assigned in two independent competent person's reports.
In the South West Peninsula of Trinidad ("SWP"), where LGO holds several exciting opportunities, the Company has continued to advance its lease holding towards drilling and has extended the exclusivity over certain leases in order to seek private petroleum licences. In March 2017 work started on assimilating the Bonasse Field operations into the Company's operations with the first oil having been successfully delivered at the beginning of May 2017. As 2017 progresses it is intended to finalise all lease acquisitions and to progress towards a full independent verification of the Company's previous prospect generation work with a view to seeking a partner for future drilling.
2016 Highlights
OPERATIONAL
· Production from the Goudron Field was materially affected by the slow-down in activity resulting from the BNPP loan default, however, Group oil sales of 464 bopd were achieved on average through 2016.
· Operational, environmental and safety standards were maintained, despite the lack of capital available to invest in the field and, as a result, no incidents occurred at Goudron during the year.
· Group oil sales in the 12-month period were 169,702 barrels net to LGO (2015: 323,080 barrels).
· A new updated resource assessment issued in July 2016 for the Goudron Field has increased gross reserves in all categories; proven (1.58 mmbbls), probable (11.79 mmbbls) and possible (25.60 mmbbls), and also increased contingent resources and oil in place.
· Lower royalty rates have been negotiated to support the Goudron production at oil prices below US$50/barrel, reducing the overriding royalty rate on the majority of barrels produced to below 10%, effective from 1 February 2016.
· Production operations were maintained uninterrupted throughout 2016 at the Ayoluengo Field in northern Spain.
· Despite a continuous dialogue and the submission of a comprehensive legal and technical application to extend the La Lora concession, granted in 1967, it formally expired at the end of January 2017 at which time the field had been suspended pending the granting of a new concession which is hoped to occur during 2017.
CORPORATE
· In the 12 months ending 31 December 2016, the Company raised a gross amount of £8.56 million through the issue of 5.10 billion ordinary shares at an average price of 0.17p (pre-consolidation equivalent of 3.4p post-consolidation). Of this total, 1.15 billion shares were issued to suppliers for settlement of creditor balances.
· On 9 December 2016, the balance of the BNPP facility was refinanced by means of a new facility from Lind Partners LLP, of which US$1.825 million were drawn-down to make a payment to BNPP and to remove the previous loan from default.
· In order to reduce the cash costs in the business the Directors deferred a substantial portion of their fees in 2016 and converted these deferred fees to shares at a 20% premium to the market price in early March 2017.
· The Board composition was revised in early 2017 to further reduce long-term operating costs with the roles of Chairman and Chief Executive being combined and a new Non-executive director being appointed.
FINANCIAL
· Revenue for period of £4.55 million (2015 £9.48 million).
· Gross profit for period was a loss of £0.15 million (2015 a profit of £0.33 million).
· Pre-tax Group loss for period of £11.89 million (2015 loss of £11.47 million).
Notes
All figures are net to LGO unless otherwise stated.
Enquiries:
LGO Energy plc | +44 (0) 203 794 9230 |
Neil Ritson/Fergus Jenkins | |
Beaumont Cornish Limited | +44(0) 20 7628 3396 |
Nomad and Joint Broker | |
Rosalind Hill Abrahams/Roland Cornish | |
VSA Capital | +44 (0) 20 3005 5000 |
Joint Broker | |
Andrew Monk/Andrew Raca | |
Camarco | +44 (0) 20 3757 4983 |
Public and Investor Relations Gordon Poole/Billy Clegg |
Chairman and Chief Executive's Review (continued)
Corporate
The Board spent a significant amount of time in 2016 on activities aimed at resolving the banking default and large trade creditor liability that was created following the GY-678 stuck-pipe incident in late 2015. Strenuous efforts were made to reduce cash outlays with selective staff cuts and the suspension of payments of Directors fees being implemented, along with a drastic reduction of discretional spend in such areas as advisors and travel. The overall objective was to maintain the underlying value of the asset portfolio and preserve the Company's licence to operate in Trinidad and Spain.
A strategic review initiated in late 2015 was pursued, including a formal sale process which commenced in December 2015, and which was ultimately terminated in March 2016.
Negotiations with BNPP continued throughout the year and various agreements were made to defer larger loan repayments in favour of smaller, affordable payments that allowed the steady reduction of the liability outstanding to BNPP under the terms of the defaulted 2015 pre-paid swap. Several trade creditors from the 2015 drilling campaign at the Goudron Field accepted equity in LGO as payment of their accrued remuneration. Following a General Meeting on 18 April 2016, the Company carried out several placements to raise working capital, which was deployed to reduce the trade creditors.
In December 2016 a new facility, a convertible security agreement, was signed with Lind Partners, LLP ("Lind") and the remaining balance due to BNPP was discharged in the form of a one off payment of US$1.75 million and a deferred payment of US$0.25 million, falling due in three years. The new agreement with Lind was for a headline limit of US$8.6 million with an initial draw-down of US$1.825 million in December 2016 to support the repayment to BNPP. The new facility which, was specifically designed to be affordable from the cashflow from Goudron, even at low oil prices, is repayable over 24 months. The facility has a combination of Company selectable conversion arrangements and a Lind call agreement to convert the outstanding balance at a fixed price of 3p per share (post-consolidation), though the first five payments were made in cash and the Company intends to make all payments in cash throughout the life of the facility. To date, no shares have been issued to Lind.
The new funding arrangements with Lind resulted in the elimination of all defaults and allowed the Trinidad business to pay all remaining historical trade creditors and to immediately commit to the drilling of two new Mayaro infill wells at the Goudron Field, through the use of cash in Trinidad, access to which had been previously restricted.
The Board was simplified in January 2017 by the combination of the Chairman and Chief Executives roles and the costs were further reduced by the Chief Executive and the Non-executive Directors reducing their fees to improve the sustainability of the Company. Gordon Stein, a chartered accountant and experienced Chief Financial Officer, was appointed as a new Non-executive Director and Chairman of the Audit Committee of the Company on 10 January 2017. To complement the new programme of value creation, VSA Capital were appointed as joint broker and Camarco as investor and public relations advisors.
With the balance sheet restored the Company called a further General Meeting in March 2017 to gain approvals to allot further shares, to consolidate the outstanding shares by 20 to 1 and to reaffirm the Board's commitment to future investment in Trinidad. All resolutions put to that General Meeting were passed.
Trinidad & Tobago
Strategically the Company remains focussed on Trinidad, which represents the majority of near-term activity and significant long-term growth potential within existing assets. The Company holds interests in three producing oil fields; Goudron, Icacos and Bonasse, and in a number of private petroleum leases where production has yet to be established.
Trinidad, with its long history of oil and gas operations and the significant remaining potential identified by the Trinidadian authorities and major international companies such as BP, Shell and BHP, continues to offer attractive investment opportunities. To date onshore Trinidad has produced over 3 billion barrels of oil and is estimated to contain a further 1 to 3 billion in new exploration and secondary recovery from known accumulations. A mature and competitive service sector supports further development where the key missing ingredient for growth is new investment.
The Company has assessed the potential for profitable growth within its existing assets, and in additional assets that would be acquired through third-party arrangements or directly from the Trinidad and Tobago government, and re-affirmed at its General Meeting held on 7 March 2017 that its investment strategy will remain Trinidad-focussed.
Goudron Field
LGO acquired the rights to the Goudron Field, by way of an Incremental Production Service Contract ("IPSC"), through its wholly owned subsidiary, Goudron E&P Limited ("GEPL"), in October 2012. The Goudron Field lies in the Eastern Fields Area in south eastern onshore Trinidad. Under the terms of the IPSC the Company acts as a service contractor to the Petroleum Company of Trinidad & Tobago ("Petrotrin") who reimburse LGO on the basis of the oil sales and oil price.
The Goudron Field contains two separate reservoir packages; the shallow Mayaro (formally referred to as Goudron) Sandstones and the deeper Grose Morne and Cruse equivalent C-sands. During drilling in 2014 and 2015 a deeper, pre-Cruse, interval of turbidite sands was penetrated and evaluated and this has added an additional, previously unexplored, deep resource for future exploitation.
The Company's plans for the development of the Goudron Field conceived at the time of purchase and still being pursued today included four distinct phases:
Phase 1: reactivation of existing wells and the repair and replacement of infrastructure
Phase 2: drilling of the deep C-sand reservoir to further raise production and establish the basis for an EOR project
Phase 3: infill drilling of the shallow Mayaro Sandstone reservoir and the simultaneous carrying out of a pilot waterflood project in the C-sands
Phase 4: a full-field EOR project depending on results of the pilot scheme
Phases 1 and 2 have been completed and work on Phase 3 is now underway in 2017.
Phase 3 consists of an infill programme of up to 70 Mayaro Sandstone wells designed to recover an estimated 4 mmbbls of incremental oil reserves from the shallow formations. Plans are in place for the first 10 locations and the Company already holds existing regulatory approval for 45 further wells. The average Mayaro Sandstone well will be drilled to a depth between 1,000 and 1,750 feet at an estimated cost of less than US$500,000 per well. The first two wells in this
programme, GY-682 and GY-683, were drilled in March and April 2017 and are now on production. Following the successful drilling and completion of the first two wells, GY-682 and 683, the Company now plans to embark on drilling two further wells once new drilling contracts have been negotiated. A number of additional well locations have been permitted and further wells are planned for 2017 should results justify and funding allow up to an overall 10 well programme.
In parallel with the Mayaro Sandstone infill drilling programme, and as part of Phase 3 of the development, a water injection pilot project has been designed using existing C-sand wells (using three injectors and up to six producers). Permitting of the Pilot EOR is expected to be complete in 2017 at which time, subject to funding, the project will commence. The results of the Phase 3 EOR Pilot will determine the detailed form of the Phase 4 development.
In July 2016 LGO issued a new updated resource assessment for the Goudron Field. The previous work by LR Senergy in 2015 was integrated with the ongoing studies by the Company and the data from the seven new wells acquired in 2015. The analysis was independently audited by Deloitte's Resource Evaluation & Advisory team in Alberta, Canada ("Deloitte"). As announced on 18 July 2016, volumes in all reserves categories, proven, probable and possible, have increased, as well as the estimated oil in place within the field which has risen by over 20 percent. Estimated oil initially in place ("STOIIP") within the field has increased since the 2015 independent review and is now reported to be up to 975 mmbbls. The majority of the 21% increase relates to a thickening of the C-sand and pre-Cruse reservoir unit which is observed in logs of wells drilled during the 2015 campaign, notably well GY-678.
The increased STOIIP is especially important in the context of a waterflood EORproject at Goudron which is currently at a planning stage. The present Deloitte report includes a gross 3C estimate of 63.4 mmbbls, which is very close to the 2012 estimate and again confirms the significant potential of the planned EOR phase of the field development.
Proved (1P) gross oil reserves in the Mayaro Sandstone and C-sand reservoirs has increased by 3% to 1.58 mmbbls, which when adjusted for the oil produced in the period (240,000 barrels), represents a 22% increase in proven reserves when compared to the June 2015 resource report. The gross proven and probable reserves (2P) have increased by 4% to 11.79 mmbbls. Proved, probable and possible reserves (3P) have increased by 9% to 25.60 mmbbls.
Table 1: Goudron Reserves and Contingent Resources (mmbbls)
Reserves | Contingent Resources | |||||
Proved | Proved + probable | Proved + probable + possible | Low Estimate | Best Estimate | High Estimate | |
Total Oil | 1.58 | 11.79 | 25.60 | 3.15 | 22.20 | 63.40 |
Deloitte CPR, April 2016
The Company was severely constrained as to the deployment of capital in the field following the loss of GY-678 and the oil price collapse in late 2015, and until April 2016 production levels dropped across all well types, old and new. From mid-2016 onwards the Company was able to deploy restricted amounts of capital to the maintenance of production and a number of wells were selected for additional perforating. Six wells; GY-50, GY-277, GY-288, GY-668, GY-671 and GY-673, were recompleted and placed on pumped production.
The Company was also able to negotiate a significant reduction in the overriding royalty charged by Petrotrin at lower oil prices, further improving the margin to support operations in the Goudron Field.
As noted above the drilling of the first of the Mayaro Sandstone infill targets has commenced, representing the start of the originally planned Phase 3 development, with GY-682 spudded on 4 March 2017 and GY-683 spudded on 31 March 2017. Both wells were placed on initial production at levels exceeding the anticipated average of 45 bopd which is encouraging for the programme as a whole.
South West Peninsula
Through its local subsidiary, Leni Trinidad Limited ("LTL"), LGO holds a 50% interest in the producing Icacos Oil Field in the South West Peninsula ("SWP") where production has been maintained in 2016 at roughly 25 bopd gross. LTL also holds a 25% shareholding in Beach Oilfield Limited ("BOLT") acquired in October 2015. BOLT operates the Bonasse Field where production remains low pending further work. LTL holds an exclusivity agreement with BOLT on acquiring the balance of the issued share capital in BOLT and thereby securing all BOLT's subsurface rights. Exclusivity has been extended by mutual agreement. Timeline to completion is linked to the award by the Trinidad and Tobago Ministry of Energy and Energy Industries ("MEEI") of a renewal of the relevant private petroleum licence ("PPL").
Operations in 2016 were restricted to routine well maintenance at the Icacos Field in order to maintain production at current levels. An application to the MEEI for a new PPL has been made for the Icacos Field and is a pre-requisite for further development work to commence. An extension of the PPL covering the Bonasse leases has also been applied for with the MEEI prior to commencing additional work, including drilling additional wells, to raise production levels. However, as a shareholder of BOLT, and under the existing licences, LTL commenced operations to reactivate the existing wells at Bonasse in early second quarter 2017 and commenced oil deliveries in May.
LGO also holds, through LTL, a number of 100% owned private petroleum leases totalling approximately 1,750 acres, and the Company is in the process of obtaining a PPL from the MEEI in order to finalise ongoing field survey activities with a view to drilling exploration wells at some point in the future.
A number of significant prospects for oil and gas have been identified in the SWP acreage using a combination of data acquired from BOLT and integrated with a proprietary soil geochemistry survey as well as the LTL sponsored Full Tensor Gravity airborne survey acquired in 2015. Future drilling of the various shallow and deep prospects now depends on completion of the licensing process currently with the MEEI for consideration.
Taken together LGO's involvement in the underexplored but highly prospective SWP provides the Company with a number of attractive opportunities over the coming months. The reactivation of production from Bonasse with the first oil having been successfully delivered at the beginning of May 2017, is the first step in a programme of activity that will involve well reactivations, the drilling of new shallow wells and the farming-out of deep drilling to a partner so that the large potential seen to exist in multiple Cruse and Herrera Sandstone plays can be fully exploited. The Board of LGO are excited by the potential in the SWP, which has already created significant interest and are confident that it will attract third-party involvement and capital.
Spain
Until the end of January 2017 LGO held 100% ownership in the La Lora Production Concession ("La Lora") through its wholly owned subsidiary, Compañia Petrolifera de Sedano S.L.U. ("CPS"). La Lora in northern Spain contains the Ayoluengo Oilfield. An application for the production of oil from the nearby Hontomin discovery within the Huermeces permit was made some time ago and is pending award. The award of an economically viable production concession at the Hontomin Field is dependent on the Ayoluengo oil field facilities remaining in place.
In August 2015 LGO made an application for La Lora to be extended for a further two 10-year periods from its expiry at the end of January 2017. In the application the initial post-renewal work plans included the side-tracking of a number of existing wells into areas of the reservoir believed to contain unswept oil, based on extensive studies of the well and 3D seismic data. The combination of new well bores into areas of unswept oil is anticipated to provide significant production uplift.
In anticipation of a successful extension the Company maintained a regular well intervention programme using a combination of hot oil, xylene and acid, which continued to provide improvements in production of these mature, active wells. These interventions, using the Company owned Cardwell work-over rig, continued throughout 2016 to optimise production whilst limiting operating costs.
Oil sales averaged 86 bopd in 2016 were made exclusively to the previously Saint-Gobain owned glass factory in the Burgos area of Northern Spain. Oil stocks were built up in periods of lower oil prices and released for sale in late 2016.
Due to a lack of access in some areas covered by national parks and a reduced interest in exploration, CPS completed a process, started in 2015, of relinquishing the exploration permits held in Northern Spain. Various performance bonds and other payments were returned by the Spanish authorities.
Despite the comprehensive application and strong engagement with the Spanish authorities, CPS's application for the extension of La Lora was unfortunately rejected by the Spanish authorities on legal grounds and, despite all other renewal criteria having been met, La Lora was formally terminated on 31 January 2017 by Royal Decree issued on 28 January 2017. Under European Union and Spanish legislation, the offer of a new concession requires a process of public tender in which the previous concession holder has preferential treatment. CPS has formally requested such a tender is initiated at the earliest possible opportunity in 2017. In the interim CPS has suspended all operations and the majority of staff contracts and is working to minimise ongoing costs whilst a new concession is sought.
Outlook
Key targets for 2017 include:
· The drilling and completion of further Mayaro Sandstone infill production wells in the Goudron Field
· Filing a comprehensive plan and technical justification for the first phase of a waterflood EOR project at the Goudron Field
· Completion of all leasing arrangements in the SWP of Trinidad and the issue of a Competent Persons Report covering the Company's assets
· Submitting a competitive application for a new 30-year concession at the Ayoluengo Field in Spain.
The Company continues to focus on the long-term value of the significant potential in its portfolio, most notably at Goudron and in the SWP of Trinidad, whilst continuing to maintain short-term capital discipline.
Production operations have been successfully maintained through the period of extreme capital constraint in 2016 and production has returned to a growth trajectory in 2017 as the drilling of new infill wells to the Mayaro Sandstone have commenced, with two wells GY-682 and 683, being completed before the issue of this report and approvals granted for four further wells, with two wells to commence once new drilling contracts have been negotiated. New infill drilling is anticipated to arrest underlying decline and to deliver approximately 45 bopd of growth in Goudron production per well. Depending on the number of new wells that are drilled, and their timing, production is projected to double within 12 months.
As noted above, the SWP assets represent a very significant medium term growth opportunity for the Company and will be pursued vigorously to ensure that the value they represent is delivered as soon as practical. Production operations are expected to be underway in Bonasse by mid-year and further development of the shallow (less than 2,000 feet) Bonasse will follow the updating of the private petroleum licence currently before the Ministry of Energy and Energy Affairs for final consideration and issue. The compilation of an independent Competent Persons Report ("CPR") for the SWP is expected to be completed in 2017 and will then provide the required support to a farm-out of the deep (greater than 12,000 feet) exploration wells.
To date, LGO has paid the capital and interest on the drawn balance of the funding agreement with Lind in cash derived from operations at Goudron and expects to continue to do so for the remaining life of the facility. The facility has significant undrawn capacity and this will be evaluated in any funding decisions made to support the Company's ongoing operations and growth options.
Safe and environmentally sound onshore production operations where there are proven reserves will remain central to the Company's long-term growth proposition.
The Board's firm view is that the assets owned and controlled by the Company in Trinidad, and the additional opportunities available in that market, provide significant value to LGO's shareholders and that that value will be best realised through the continued exploitation of those assets. After a very difficult 18 month period, the Company has re-established a platform for growth and is gaining momentum in its recovery, thereby creating a positive outlook for investors.
Neil Ritson
Chairman and Chief Executive Officer
4 May 2017
Qualified Person's statement:
The information contained in this document has been reviewed and approved by Neil Ritson, Chairman and Executive Director for LGO Energy plc. Mr Ritson is a member of the Society of Petroleum Engineers, a Fellow of the Geological Society and an Active Member of the American Association of Petroleum Geologists. Mr Ritson has over 38 years of relevant experience in the oil industry.
Finance Review
Results for the year
Trinidad and Corporate
The oil and gas industry experienced another difficult year in 2016, however, it also provided a turning point for LGO. With oil price sentiment eventually improving and with LGO refinancing its banking facility and settling the outstanding creditors, the Company was well positioned for a return to growth.
LGO started the year with US$10.9 million of bank debt and US$6.5 million of trade creditors from the drilling programme of 2015. It actively sought long term investors to refinance the bank debt, pay key creditors and allow the Company to restart investment, however, this process was impacted by the uncertain oil price environment and full resolution of the banking default was only completed late in Q4 2016, later than originally hoped.
Through discussions and negotiations with creditors, LGO was able to find the means to gradually pay down the outstanding balances, through the use of internally generated cashflow and through the issuance of share capital. This process, whilst successfully allowing the Company to restore itself, resulted in significant dilution to shareholders with shares in issue increasing over 150% in 2016 and the share price falling 59% in the year.
The process was supported by managing costs, including cost reductions and deferrals of UK corporate overheads, which fell 14% in the year and with the continuation of the deferral of Directors' fees which totalled £397,000, a process started in 2015. The focus on cost reduction continued into 2017 where significant savings have continued to be made and further reductions are planned.
By Q3 2016, most of the trade creditors had been repaid and the bank loan was at a much more manageable level. The improvement in oil price sentiment resulted in an increase in the number of potential investors interested in refinancing the defaulted bank loan and LGO actively focused on selecting and closing the best solution for the Company.
In December 2016, LGO announced that it had come to an agreement with BNPP to refinance its loan facility (then US$2.6 million outstanding) through the signing of a convertible facility with Lind, drawing down US$1.825 million from a facility with a face value total US$8.6 million. This successfully took LGO out of banking default and freed it to utilise its own local cash reserves in Trinidad to commence the preparation for further drilling.
Spain
Throughout 2016, the Company awaited the Spanish authorities' decision on the application for the extension of the Ayoluengo concession that was due to expire on 31 January 2017. No confirmation had arrived at the end of December 2016 and it was only in the last week of January 2017 that the Company was officially advised that the renewal would not be granted. The Company therefore ceased to operate the field on 31 January 2017.
A new tender is expected for the award of the Ayoluengo concession and whilst the Company is optimistic of winning the resulting bidding process, in light of the uncertainty of that result, the Company has decided to impair the Company's current book value of the concession. This has led to an impairment charge of £7.94m. All or part of this may be written back to the balance sheet in the event that concession is successfully re-awarded to the Company.
A number of potential liabilities exist as a result of the historical operatorship. Firstly, the cost to abandon the field is estimated at £0.81 million and the possibility of having to release all the staff that are currently suspended is estimated to be £0.33 million. These costs will not be paid by the Company at all if another bidder wins the tender or in the event that the Company successfully regains the right to operate. Any decommissioning costs associated with the new concession would be delayed until the end of the new concession period.
Oil price environment
At the start of 2016, the oil and gas supply and demand dynamic continued to be weak, with the lower global demand and the ongoing oversupply, continuing to dominate price sentiment.
In 2016 the oil price continued its fall reaching a low of US$26.19/bbl (WTI) in February 2016, before steadily recovering to reach a high of US$54.01/bbl (WTI) in December 2016, and closing the year at US$53.75/bbl (WTI), an increase of US$27.56/bbl or 105% on the year's earlier low. The oil price stabilised in a trading range of US$43-54/bbl and maintained that for the last 4 months of the year.
In the first four months of 2017, the oil price (WTI) trading range has narrowed to US$47-54/bbl and the medium term oil price sentiment looks to be more positive. The Company continues to monitor price, as well as those related commodities and markets that could impact the Company's future project and operational development plans.
Cashflow
Cash outflow from operating activities in 2016 after movements in working capital amounted to £4.29 million (2015: outflow of £2.80 million). Net cash inflow from financing activities was £1.44 million (2015: £13.42 million). Net cash outflow from investing activities was £0.31 million (2015: £8.07 million).
Net cash position
Net cash at 31 December 2016 was £1.83 million (2015: £4.13 million).
Outlook
The Company has made significant progress in resolving all the outstanding creditor issues dating back to 2015. The Company continues to target costs reduction and has already significantly cut costs in 2017 through Board simplification and is planning additional reductions throughout the remainder of 2017. The Company has successfully returned to drilling with encouraging results from the first two wells completed to date.
Looking further ahead and the Company's return to growth, the following will form key elements of the Company's delivery:
· Continue the programme of lower risk Mayaro Sandstone wells
· Progressing the Goudron EOR scheme
· Rapidly progress and de-risk the interests in the SWP, and.
· Submit the Company's bid for Ayoluengo
With the Company freed from the restrictions experienced over most of 2016, with the oil price stable and having already drilled two new wells at the start of 2017, the Company is now able to focus on accelerating the growth agenda.
James Thadchanamoorthy
Chief Financial Officer
4 May 2017
Independent Auditors Report to the Shareholders of LGO Energy plc
We have audited the financial statements of LGO Energy plc for the year ended 31 December 2016 which comprise the Group Statement of Comprehensive Income, the Group and Parent Company Statements of Financial Position, the Group and Parent Company Statements of Cash Flows, the Group and Parent Company Statements of Changes in Equity and the related notes 1 to 24. 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.
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 auditors
As explained more fully in the Directors' Responsibilities Statement set out within the Directors' report, 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 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 Ethical Standards for Auditors.
Scope of the audit
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and the parent Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.
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 31 December 2016 and of the Group's and the Parent Company's losses for the year then ended;
· the financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and
· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
· the information given in the 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:
Under the Companies Act 2006 we are required 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.
We have nothing to report by exception.
Rowan J. Palmer (Senior Statutory Auditor)
for and on behalf of Chapman Davis LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom, 4 May 2017
GLOSSARY & NOTES
1P | proved reserves |
2P | proved plus probable reserves |
3P | proved plus probable plus possible reserves |
AIM | London Stock Exchange Alternative Investment Market |
barrel or bbl | 45 US gallons |
bbls | barrels of oil |
best estimate or P50 | the most likely estimate of a parameter based on all available data, also often termed the P50 (or the value of a probability distribution of outcomes at the 50% confidence level) |
BNPP | BNP Paribas |
BOLT | Beach Oilfield Limited |
bopd | barrels of oil per day |
contingent resources | those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies. Contingent Resources may include, for example, projects for which there are currently no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation of the accumulation is insufficient to clearly assess commerciality |
C-sand | sandstone reservoirs below the pre-Mayaro unconformity and above the pre-Lower Cruse unconformity encompassing sandstones of equivalent age to both the Gros Morne and the Lower Cruse formations |
CESL | Columbus Energy Services Limited |
CPR | Competent Persons Report |
CPS | Compañia Petrolifera de Sedano |
EOR | enhanced oil recovery |
FTG | Full Tensor Gravity Gradiometry. Full tensor gradiometers measure the rate of change of the gravity vector in all three perpendicular directions |
GEPL | Goudron E&P Limited |
Goudron Sandstone | reservoir sands above the pre-Mayaro unconformity, also known as the Mayaro Sandstone |
IPSC | incremental production service contract, the form of contract under which the Goudron Field is operated on behalf of Petrotrin |
La Lora | La Lora Production Concession in Spain |
LTL | Leni Trinidad Limited |
Mayaro Sandstone | reservoir sands above the pre-Mayaro unconformity, also known as the Goudron Sandstone |
MEEI | Trinidad and Tobago Ministry of Energy and Energy Industries (formally the Ministry of Energy and Energy Affairs, MEEA) |
m | thousand |
mm | million |
mmbbls | million barrels of oil |
Petrotrin | The Petroleum Company of Trinidad and Tobago Limited |
PPL | private petroleum rights license |
pre-Cruse | early to mid-Miocene sandstone reservoir below the pre-Cruse unconformity |
proved reserves | those quantities of petroleum, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable (1P), from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations |
probable reserves | those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves (2P) |
possible reserves | those additional reserves which analysis of geoscience and engineering data suggest are less likely to be recoverable than Probable Reserves. The total quantities ultimately recovered from the project have a low probability to exceed the sum of Proved plus Probable plus Possible (3P) Reserves, which is equivalent to the high estimate scenario |
PRMS | Petroleum Resources Management System |
reserves | those quantities of petroleum anticipated to be commercially recovered by application of development projects to known accumulations from a given date forward under defined conditions |
Saint-Gobain | Saint-Gobain Vicasa SA |
STOIIP or oil in place | stock tank oil initially in place, those quantities of oil that are estimated to be in known reservoirs prior to production commencing |
side-track | an additional or replacement well bore created from an existing well bore at a depth below the surface casing |
SWP | South West Peninsula of Trinidad |
WTI | West Texas Intermediate; oil price marker crude |
The estimates provided in this statement are based on the Petroleum Resources Management System ("PRMS") published by the Society of Petroleum Engineers ("SPE") and are reported consistent with the SPE's 2011 guidelines. All definitions used in the announcement have the meaning given to them in the PRMS.
Financial Statements
GROUP STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2016
|
| Year ended | Year ended |
|
| 31 December 2016 | 31 December 2015 |
| Note | £ 000's | £ 000's |
Revenue | 2 | 4,545 | 9,475 |
Cost of sales |
| (4,693) | (9,808) |
Gross loss |
| (148) | (333) |
|
|
|
|
Administrative expenses | 3 | (3,157) | (4,196) |
Amortisation and depreciation | 3 | (1,150) | (1,732) |
Exceptional item | 3 | 466 | (2,515) |
Loss from operations |
| (3,989) | (8,776) |
|
|
|
|
Finance income/(charges) | 9 | 43 | (240) |
Impairment charge | 10 & 11 | (7,940) | (2,457) |
Loss before taxation |
| (11,886) | (11,473) |
|
|
|
|
Income tax (expense)/credit | 5 | (33) | 930 |
Loss for the year attributable to equity holders of the parent |
| (11,919) | (10,543) |
|
|
|
|
Other comprehensive income |
|
|
|
Exchange differences on translation of foreign operations |
| 2,426 | 23 |
Other comprehensive income for the year net of taxation |
| 2,426 | 23 |
|
|
|
|
Total comprehensive income for the year attributable to equity holders of the parent |
| (9,493) | (10,520) |
|
|
|
|
Loss per share (pence) |
|
|
|
Basic | 8 | (0.21) | (0.35) |
Diluted | 8 | (0.21) | (0.35) |
Post capital reorganisation | 8 | (4.26) | (6.93) |
|
|
|
|
All operations are considered to be continuing (see note 2). |
|
|
|
The accompanying accounting policies and notes form an integral part of these financial statements.
GROUP STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2016
As at 31 December 2016 | As at 31 December 2015 | ||
Note | £ 000's | £ 000's | |
Assets |
|
| |
Non-current assets |
|
| |
Intangible evaluation assets | 10 | 4,998 | 11,477 |
Goodwill | 10 | - | - |
Oil and gas assets
| 11 | 14,958 | 14,754 |
Property, plant and equipment | 11 | 1,839 | 2,690 |
Investment in associate | 12 | 38 | 34 |
Total non-current assets | 21,833 | 28,955 | |
|
| ||
Current assets |
|
| |
Inventories | 14 | 457 | 309 |
Trade and other receivables | 13 | 1,076 | 2,475 |
Cash and cash equivalents | 20 | 1,827 | 4,127 |
Total current assets | 3,360 | 6,911 | |
Total assets | 25,193 | 35,866 | |
|
| ||
Liabilities |
|
| |
Current liabilities |
|
| |
Trade and other payables | 15 | (2,100) | (6,212) |
Borrowings | 16 | (682) | (7,006) |
Taxation | 5 | (23) | (20) |
Deferred consideration | 15 | (120) | (120) |
Total current liabilities | (2,925) | (13,358) | |
|
| ||
Non-current liabilities |
|
| |
Borrowings | 16 | (1,180) | (246) |
Provisions | 17 | (1,188) | (1,011) |
Total non-current liabilities | (2,368) | (1,257) | |
Total liabilities | (5,293) | (14,615) | |
Net assets | 19,900 | 21,251 | |
|
| ||
Shareholders' equity |
|
| |
Called-up share capital | 18 | 4,184 | 1,632 |
Share premium | 62,122 | 56,564 | |
Share based payments reserve | 19 | 1,341 | 1,309 |
Retained earnings | (53,846) | (42,156) | |
Revaluation surplus | 3,122 | 3,351 | |
Foreign exchange reserve | 2,977 | 551 | |
Total equity attributable to equity holders of the parent | 19,900 | 21,251 | |
|
| ||
The accompanying accounting policies and notes form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 4 May 2017 and signed on its behalf by:
| |||
|
| ||
|
| ||
Neil Ritson | James Thadchanamoorthy | ||
Chief Executive Officer | Chief Financial Officer | ||
COMPANY STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2016
|
| As at 31 December 2016 | As at 31 December 2015 | |
| Note | £ 000's | £ 000's | |
Assets |
|
|
| |
Non-current assets |
|
|
| |
Property, plant and equipment | 11 | 61 | 210 | |
Intangible assets | 10 | 82 | 115 | |
Investment in subsidiaries | 12 | 1 | 1 | |
Trade and other receivables | 13 | 38,151 | 29,928 | |
Total non-current assets |
| 38,295 | 30,254 | |
|
|
|
| |
Current assets |
|
|
| |
Trade and other receivables | 13 | 460 | 437 | |
Cash and cash equivalents | 20 | 600 | 406 | |
Total current assets |
| 1,060 | 843 | |
Total assets |
| 39,355 | 31,097 | |
|
|
|
| |
Liabilities |
|
|
| |
Current liabilities |
|
|
| |
Trade and other payables | 15 | (718) | (450) | |
Borrowings | 16 | (682) | - | |
Deferred consideration | 15 | (120) | (120) | |
Total current liabilities |
| (1,520) | (570) | |
|
|
|
| |
Non-current liabilities |
|
|
| |
Borrowings | 16 | (739) | - | |
Total non-current liabilities |
| (739) | - | |
Total liabilities |
| (2,259) | (570) | |
Net assets |
| 37,096 | 30,527 | |
|
|
|
| |
Shareholders' equity |
|
|
| |
Called-up share capital | 18 | 4,184 | 1,632 | |
Share premium |
| 62,122 | 56,564 | |
Share based payments reserve | 19 | 1,341 | 1,309 | |
Retained earnings | 24 | (30,551) | (28,978) | |
Total equity attributable to equity holders of the parent |
| 37,096 | 30,527 | |
The accompanying accounting policies and notes form an integral part of these financial statements.
These financial statements were approved by the Board of Directors on 4 May 2017 and signed on its behalf by: | ||||
| ||||
Neil Ritson | James Thadchanamoorthy | |||
Chief Executive Officer | Chief Financial Officer | |||
GROUP STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2016
| Year ended | Year ended |
| 31 December 2016 | 31 December 2015 |
| £ 000's | £ 000's |
Cash outflow from operating activities |
|
|
Operating loss | (3,989) | (8,776) |
Decrease/(increase) in trade and other receivables | 1,398 | (279) |
(Decrease)/increase in trade and other payables | (4,070) | 1,057 |
Increase in inventories | (148) | (6) |
Depreciation | 2,119 | 4,496 |
Amortisation | 420 | 710 |
Income tax paid | (20) | - |
Net cash (outflow) from operating activities | (4,290) | (2,798) |
|
|
|
Cash flows from investing activities |
|
|
Proceeds from equity swap arrangement | - | - |
Payment to acquire associate | - | (34) |
Payments to acquire intangible assets | (1) | (833) |
Payments to acquire tangible assets | (309) | (7,202) |
Net cash outflow from investing activities | (310) | (8,069) |
|
|
|
Cash flows from financing activities |
|
|
Issue of ordinary share capital | 8,560 | 9,853 |
Share issue costs | (450) | (458) |
Finance income/(charges) paid | 86 | (262) |
Repayment of borrowings | (8,199) | (4,224) |
Proceeds of borrowings | 1,445 | 8,511 |
Net cash inflow from financing activities | 1,442 | 13,420 |
|
|
|
Net increase/(decrease) in cash and cash equivalents | (3,158) | 2,553 |
Foreign exchange differences on translation | 858 | (9) |
Cash and cash equivalents at beginning of year | 4,127 | 1,583 |
Cash and cash equivalents at end of year | 1,827 | 4,127 |
COMPANY STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2016
| Year ended | Year ended |
| 31 December 2016 | 31 December 2015 |
| £ 000's | £ 000's |
Cash outflow from operating activities |
|
|
Operating loss | (1,384) | (1,380) |
Increase in trade and other receivables | (23) | (320) |
Increase/(decrease) in trade and other payables | 269 | (717) |
Depreciation | 149 | 39 |
Amortisation | 33 | 18 |
Net cash outflow from operating activities | (956) | (2,360) |
|
|
|
Cash flows from investing activities |
|
|
Proceeds from equity swap arrangement | - | - |
Loans granted to subsidiaries | (8,223) | (3,707) |
Payments to acquire intangible assets | - | (133) |
Payments to acquire tangible assets | - | (248) |
Net cash outflow from investing activities | (8,223) | (4,088) |
|
|
|
Cash flows from financing activities |
|
|
Issue of ordinary share capital | 8,560 | 9,853 |
Share issue costs | (450) | (458) |
Finance charges paid | (146) | (131) |
Repayments of borrowings | (75) | (3,553) |
Proceeds of borrowings | 1,445 | 660 |
Net cash inflow from financing activities | 9,334 | 6,371 |
|
|
|
Net increase/(decrease) in cash and cash equivalents | 155 | (77) |
Foreign exchange differences on borrowings | 39 | - |
Cash and cash equivalents at beginning of year | 406 | 483 |
Cash and cash equivalents at end of year | 600 | 406 |
STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2016
| Called up share capital | Share premium reserve | Share based payments reserve | Retained earnings | Foreign exchange reserve | Revaluation surplus | Total Equity |
| £ 000's | £ 000's | £ 000's | £ 000's | £ 000's | £ 000's | £ 000's |
Group |
|
|
|
|
|
|
|
As at 31 December 2014 | 1,364 | 47,437 | 1,296 | (32,169) | 528 | 3,907 | 22,363 |
|
|
|
|
|
|
|
|
Loss for the year | - | - | - | (10,543) | - | - | (10,543) |
Revaluation surplus amortisation |
|
|
| 556 |
| (556) | - |
Currency translation differences | - | - | - | - | 23 | - | 23 |
Total comprehensive income | - | - | - | (9,987) | 23 | (556) | (10,520) |
Share capital issued | 268 | 9,585 | - | - | - | - | 9,853 |
Cost of share issue | - | (458) | - | - | - | - | (458) |
Share based payments | - | - | 13 | - | - | - | 13 |
Total contributions by and distributions to owners of the Company | 268 | 9,127 | 13 | - | - | - | 9,408 |
As at 31 December 2015 | 1,632 | 56,564 | 1,309 | (42,156) | 551 | 3,351 | 21,251 |
|
|
|
|
|
|
|
|
Loss for the year | - | - | - | (11,919) | - | - | (11,919) |
Revaluation surplus amortisation | - | - | - | 229 | - | (229) | - |
Currency translation differences | - | - | - | - | 2,426 | - | 2,426 |
Total comprehensive income | - | - | - | (11,690) | 2,426 | (229) | (9,493) |
Share capital issued | 2,552 | 6,008 | - | - | - | - | 8,560 |
Cost of share issue | - | (450) | - | - | - | - | (450) |
Share based payments | - | - | 32 | - | - | - | 32 |
Total contributions by and distributions to owners of the Company | 2,552 | 5,558 | 32 | - | - | - | 8,142 |
As at 31 December 2016 | 4,184 | 62,122 | 1,341 | (53,846) | 2,977 | 3,122 | 19,900 |
Company |
|
|
|
|
|
|
|
As at 31 December 2014 | 1,364 | 47,437 | 1,296 | (27,475) | - | - | 22,622 |
|
|
|
|
|
|
|
|
Loss for the year | - | - | - | (1,503) | - | - | (1,503) |
Total comprehensive income | - | - | - | (1,503) | - | - | (1,503) |
Share capital issued | 268 | 9,585 | - | - | - | - | 9,853 |
Cost of share issue | - | (458) | - | - | - | - | (458) |
Share based payments | - | - | 13 | - | - | - | 13 |
Total contributions by and distributions to owners of the Company | 268 | 9,127 | 13 | - | - | - | 9,408 |
As at 31 December 2015 | 1,632 | 56,564 | 1,309 | (28,978) | - | - | 30,527 |
|
|
|
|
|
|
|
|
Loss for the year | - | - | - | (1,573) | - | - | (1,573) |
Total comprehensive income | - | - | - | (1,573) | - | - | (1,573) |
Share capital issued | 2,552 | 6,008 | - | - | - | - | 8,560 |
Cost of share issue | - | (450) | - | - | - | - | (450) |
Share based payments | - | - | 32 | - | - | - | 32 |
Total contributions by and distributions to owners of the Company | 2,552 | 5,558 | 32 | - | - | - | 8,142 |
As at 31 December 2016 | 4,184 | 62,122 | 1,341 | (30,551) | - | - | 37,096 |
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016
1 | Summary of significant accounting policies |
|
|
1.01 | General information and authorisation of financial statements |
LGO Energy plc is a public limited company registered in the United Kingdom under the Companies Act 2006. The address of its registered office is Suite 4B, Princes House, 38 Jermyn Street, London SW1Y 6DN. The Company's Ordinary shares are traded on the AIM Market operated by the London Stock Exchange. The Group financial statements of LGO Energy plc for the year ended 31 December 2016 were authorised for issue by the Board on 4 May 2017 and the balance sheets signed on the Board's behalf by Mr. Neil Ritson and Mr. James Thadchanamoorthy. | |
|
|
1.02 | Statement of compliance with IFRS |
| The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The Company's financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The principal accounting policies adopted by the Group and Company are set out below.
|
| New and revised standards and interpretations not applied |
At the date of authorisation of these Financial Statements, the following Standards and Interpretations were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
IFRS 2 Share-based Payment (effective date 1 January 2018) IFRS 9 Financial Instruments (effective date 1 January 2018) IFRS 15 Revenue from Contracts with Customers (effective date 1 January 2018) IFRS 16 Leases (effective date 1 January 2019)
| |
| The Directors do not expect that the adoption of the Standards and Interpretations listed above will have a material impact on the financial statements of the Group in future periods however, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed. |
|
|
1.03 | Basis of preparation |
| The consolidated financial statements have been prepared on the historical cost basis, except for the measurement to fair value of assets and financial instruments as described in the accounting policies below, and on a going concern basis.
The Company spent much of 2016 repaying its creditors created by the loan default in late 2015. By December 2016, the Company had refinanced the bank loan through the signing of a new facility, had raised additional funds and was planning for growth.
As well as the new facility signed in December 2016, the Company has additional capacity to raise funds and historically, it has both gained approval from shareholders to issue shares and actually raised the funds in the market.
The Company's internal cashflow forecasts monitor both the short and long term timelines, factoring in the known risks and uncertainties. These forecasts are updated regularly and demonstrate that, with the current cash reserves and the continued fund raising capacity, the Company is able to continue operating and making all bank and trade creditor payments over the next 12 month period.
The Directors believe that despite the uncertainty in the market, the Company is now on a clear path to growth. The Directors are of the opinion that on-going evaluations of the Company's interests indicate that preparation of the Group's accounts on a going concern basis is appropriate.
|
| The financial report is presented in Pound Sterling (£) and all values are rounded to the nearest thousand pounds (£'000) unless otherwise stated. |
|
|
1.04 | Basis of consolidation |
| The consolidated financial information incorporates the results of the Company and its subsidiaries ("the Group") using the purchase method. In the consolidated balance sheet, the acquiree's identifiable assets, liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained. Inter-company transactions and balances between Group companies are eliminated in full.
The investment in associate has been recorded at cost and has not been adjusted to reflect the Group's 25% share of the net profits/losses and assets/liabilities of the associate from the date of acquisition to the balance sheet date as it was deemed immaterial. |
1.05 | Goodwill and intangible assets |
| Intangible assets are recorded at cost less eventual amortisation and provision for impairment in value. Goodwill on consolidation is capitalised and shown within non-current assets. Positive goodwill is subject to an annual impairment review, and negative goodwill is immediately written-off to the income statement when it arises. |
1.06 | Oil and gas exploration assets and development/producing assets |
| The Group applies the successful efforts method of accounting for oil and gas assets, having regard to the requirements of IFRS 6 'Exploration for and Evaluation of Mineral Resources'.
|
| All licence acquisition, exploration and evaluation costs are initially capitalised as intangible fixed assets in cost centres by field or by exploration area, as appropriate, pending determination of commerciality of the relevant property. Directly attributable administration costs are capitalised insofar as they relate to specific exploration activities, as are finance costs to the extent they are directly attributable to financing development projects. Pre-licence costs and general exploration costs not specific to any particular licence or prospect are expensed as incurred.
|
| If prospects are deemed to be impaired ('unsuccessful') on completion of the evaluation, the associated costs are charged to the income statement. If the field is determined to be commercially viable, the attributable costs are transferred to development/production assets within property, plant and equipment in single field cost centres.
|
| Subsequent expenditure is capitalised only where it either enhances the economic benefits of the development/producing asset or replaces part of the existing development/producing asset.
|
| Increases in the carrying amount arising on revaluation of oil and gas properties are credited to other comprehensive income and shown as revaluation surplus reserve in shareholders' equity. Decreases that offset previous increases of the same asset are charged in other comprehensive income and debited against revaluation surplus reserve directly in equity; all other decreases are charged to the income statement. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the income statement, and depreciation based on the asset's original cost is transferred from 'revaluation surplus reserve' to 'retained earnings.
|
| Net proceeds from any disposal of an exploration asset are initially credited against the previously capitalised costs. Any surplus proceeds are credited to the income statement. Net proceeds from any disposal of development/producing assets are credited against the previously capitalised cost. A gain or loss on disposal of a development/producing asset is recognised in the income statement to the extent that the net proceeds exceed or are less than the appropriate portion of the net capitalised costs of the asset.
|
1.07 | Commercial reserves |
| Commercial reserves are proven and probable oil and gas reserves, which are defined as the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible. There should be a 50 per cent statistical probability that the actual quantity of recoverable reserves will be more than the amount estimated as a proven and probable reserves and a 50 per cent statistical probability that it will be less. |
|
|
1.08 | Depletion and amortisation |
| All expenditure carried within each field is amortised from the commencement of production on a unit of production basis, which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus the production in the period, generally on a field by field basis. In certain circumstances, fields within a single development area may be combined for depletion purposes. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future field development costs necessary to bring the reserves into production. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively. |
|
|
1.09 | Decommissioning |
| Where a material liability for the removal of production facilities and site restoration at the end of the productive life of a field exists, a provision for decommissioning is recognised. The amount recognised is the present value of estimated future expenditure determined in accordance with local conditions and requirements. The cost of the relevant tangible fixed asset is increased with an amount equivalent to the provision and depreciated on a unit of production basis. Changes in estimates are recognised prospectively, with corresponding adjustments to the provision and the associated fixed asset. |
1.10 | Property, plant and equipment |
| Property, plant and equipment is stated in the Balance Sheet at cost less accumulated depreciation and any recognised impairment loss. Depreciation on property, plant and equipment other than exploration and production assets, is provided at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful economic life of between one and five years.
Leasehold improvements are classified as property, plant and equipment and are depreciated on a straight-line basis over the period of the lease. |
1.11 | Inventories |
| Inventories are stated at the lower of cost and net realisable value. Cost is determined by the weighted average cost formula, where cost is determined from the weighted average of the cost at the beginning of the period and the cost of purchases during the period. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. |
1.12 | Revenue recognition |
| Revenue represents amounts invoiced in respect of sales of oil and gas exclusive of indirect taxes and excise duties and is recognised on delivery of product. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount. |
|
|
1.13 | Foreign currencies |
| Transactions in foreign currencies are translated at the exchange rate ruling at the date of each transaction. Foreign currency monetary assets and liabilities are retranslated using the exchange rates at the balance sheet date. Gains and losses arising from changes in exchange rates after the date of the transaction are recognised in the income statement. Non‑monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at the exchange rate at the date of the original transaction. |
|
|
| In the consolidated financial statements, the net assets of the Company are translated into its presentation currency at the rate of exchange at the balance sheet date. Income and expense items are translated at the average rates for the period. The resulting exchange differences are recognised in equity and included in the translation reserve. |
|
|
1.14 | Operating leases |
| The costs of all operating leases are charged against operating profit on a straight-line basis at existing rental levels. Incentives to sign operating leases are recognised in the income statement in equal instalments over the term of the lease. |
|
|
1.15 | Financial instruments |
| Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. |
|
|
| The particular recognition and measurement methods adopted are disclosed below: |
|
|
(i) | Cash and cash equivalents |
| Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. |
|
|
(ii) | Trade receivables |
| Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. |
|
|
(iii) | Trade payables |
| Trade payables are not interest-bearing and are stated at their nominal value. |
|
|
(iv) | Investments |
| Investments in subsidiaries are stated at cost and reviewed for impairment if there are indications that the carrying value may not be recoverable. The investment in associate has been recorded at cost and has not been adjusted to reflect the Group's 25% share of the net profits/losses and assets/liabilities of the associate from the date of acquisition to the balance sheet date as it was deemed immaterial. |
|
|
(v) | Equity instruments |
| Equity instruments issued by the Company and the Group are recorded at the proceeds received, net of direct issue costs. |
(vi) | Derivative instruments |
| Derivative instruments are recorded at cost, and adjusted for their market value as applicable. They are assessed for any equity and debt component which is subsequently accounted for in accordance with IFRS's. |
1.16 | Finance costs |
| Borrowing costs are recognised as an expense when incurred. |
1.17 | Borrowings |
| Borrowings are recognised initially at fair value, net of any applicable transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method (if applicable).
Interest on borrowings is accrued as applicable to that class of borrowing. |
|
|
1.18 | Provisions |
| Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. |
|
|
| When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. |
|
|
1.19 | Dividends |
| Dividends are reported as a movement in equity in the period in which they are approved by the shareholders. |
|
|
1.20 | Taxation |
| The tax expense represents the sum of the tax currently payable and deferred tax. |
|
|
| Current tax, including UK corporation and overseas tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date. |
|
|
| Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. |
|
|
| Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. |
|
|
| The carrying amount of deferred tax assets is reviewed at each balance sheet date and adjusted to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. |
|
|
| Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. |
1.21 | Impairment of assets |
| At each balance sheet date, the Group assesses whether there is any indication that its property, plant and equipment and intangible assets have been impaired. Evaluation, pursuit and exploration assets are also tested for impairment when reclassified to oil and natural gas assets. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash‑generating unit to which the asset belongs is determined.
|
| The recoverable amount of an asset or a cash‑generating unit is the higher of its fair value less costs to sell and its value in use. The value in use is the present value of the future cash flows expected to be derived from an asset or cash‑generating unit. This present value is discounted using a pre‑tax rate that reflects current market assessments of the time value of money and of the risks specific to the asset, for which future cash flow estimates have not been adjusted. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is recognised as an impairment loss. |
|
|
| The Group's impairment policy is to recognise a loss relating to assets carried at cost less any accumulated depreciation or amortisation immediately in the income statement. |
| Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash‑generating units, or groups of cash‑generating units, that are expected to benefit from the synergies of the combination. Goodwill is tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. An impairment loss is recognised or cash‑generating units, if the recoverable amount of the unit is less than the carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the assets of the unit by first reducing the carrying amount of any goodwill allocated to the cash‑generating unit, and then reducing the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit. |
|
|
| If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount but limited to the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised in the income statement. Impairment losses on goodwill are not subsequently reversed. |
|
|
1.22 | Share based payments |
| Equity settled transactions: |
| The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). |
|
|
| The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Black-Scholes model. |
|
|
| In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of LGO Energy plc (market conditions) if applicable. The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group's best estimate of the number of equity instruments that will ultimately vest. The Income Statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. |
|
|
| The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting date). |
|
|
| No expense is ultimately recognised for awards that do not vest. |
|
|
| If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. |
|
|
| The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.
|
1.23 | Segmental reporting |
| Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.
The Group has a single business segment: oil and gas exploration, development and production. The business segment can be split into six geographical segments: Spain, USA, Trinidad & Tobago, St. Lucia, Cyprus and UK.
Spain and Trinidad & Tobago, have been reported as the Group's direct oil and gas producing entities and are the Group's only third party revenue generating operations. The UK is the Group's parent and administrative entity and is reported on accordingly. The entities in Cyprus, St Lucia and the U.S. are non-operating in that they are either hold investments or are dormant. Their results are consolidated and reported on together as a single segment. |
1.24 | Share issue expenses and share premium account |
| Costs of share issues are written off against the premium arising on the issues of share capital. |
|
|
1.25 | Share based payments reserve |
| This reserve is used to record the value of equity benefits provided to employees and Directors as part of their remuneration and provided to consultants and advisors hired by the Group from time to time as part of the consideration paid. |
|
|
1.26 | Revaluation Surplus Reserve |
| This reserve is used to record the increase on revaluation of assets, in particular of oil and gas properties. |
1.27 |
Critical accounting estimates and assumptions |
| The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. |
|
|
(i) | Recoverability of intangible oil and gas costs |
| Costs capitalised as intangible assets are assessed for impairment when circumstances suggest that the carrying value may exceed its recoverable value. This assessment involves judgement as to the likely commerciality of the asset, the future revenues and costs pertaining and the discount rate to be applied for the purposes of deriving a recoverable value. |
|
|
(ii) | Decommissioning |
| The Group has decommissioning obligations in respect of its Spanish and Trinidadian assets. The full extent to which the provision is required depends on the legal requirements at the time of decommissioning, the costs and timing of any decommissioning works and the discount rate applied to such costs. |
|
|
(iii) | Share-based payment transactions |
| The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes model. |
|
|
1.28 | Earnings per share |
| Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. |
|
|
| Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: |
|
|
(i) | Costs of servicing equity (other than dividends) and preference share dividends; |
|
|
(ii) | The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and |
|
|
(iii) | Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. |
2 | Turnover and segmental analysis |
| Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions.
The Board has determined there is a single business segment: oil and gas exploration, development and production. The business segment can be further split into six geographical segments: Trinidad & Tobago, Spain, Cyprus, St Lucia, USA and UK.
Spain and Trinidad & Tobago, have been reported as the Group's direct oil and gas producing entities and are the Group's only third party revenue generating operations. The UK is the Group's parent and administrative entity and is reported on accordingly. The entities in Cyprus, St Lucia and the U.S. are non-operating in that they either hold investments or are dormant. Their results are consolidated and reported on together as a single segment.
|
|
| Year ended 31 December 2016 | Corporate | Operating | Operating | Non-operating | Total |
|
| UK (*) | Spain | Trinidad |
| ||
|
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Operating profit/(loss) by geographical area |
|
|
|
|
| |
| Revenue (**) | - | 920 | 3,625 | - | 4,545 | |
|
|
|
|
|
|
| |
| Operating profit/(loss) | (1,384) | (465) | (2,113) | (27) | (3,989) | |
| Asset impairment (***) | - | (7,940) | - | - | (7,940) | |
| Finance (charges)/income | (189) | - | 232 | - | 43 | |
| Profit/(loss) before taxation | (1,573) | (8,405) | (1,881) | (27) | (11,886) | |
|
|
|
|
|
|
| |
| Other information |
|
|
|
|
| |
| Depreciation and amortisation | (183) | (204) | (2,152) | - | (2,539) | |
| Capital additions | - | 10 | 300 | - | 310 | |
|
|
|
|
|
|
| |
| Segment assets |
|
|
|
|
| |
| Non-current assets | 143 | 160 | 21,529 | - | 21,833 | |
| Trade and other receivables | 460 | 125 | 490 | 1 | 1,076 | |
| Inventories | - | 252 | 206 | - | 457 | |
| Cash | 600 | 14 | 1,210 | 3 | 1,827 | |
| Consolidated total assets | 1,203 | 551 | 23,435 | 4 | 25,193 | |
|
|
|
|
|
|
| |
| Segment liabilities |
|
|
|
|
| |
| Trade and other payables | (718) | (218) | (1,155) | (9) | (2,100) | |
| Taxation | - | - | - | (23) | (23) | |
| Borrowings | (1,421) | - | (442) | - | (1,862) | |
| Deferred consideration | (120) | - | - | - | (120) | |
| Provisions | - | (813) | (374) | - | (1,188) | |
| Consolidated total liabilities | (2,259) | (1,031) | (1,971) | (32) | (5,293) | |
|
|
|
|
|
|
| |
| (*) Intercompany balances and transactions between Group entities have been eliminated. (**) Revenues were derived from a single customer within each of these operating countries. (***) Non-current assets in relation to Spain were impaired due to non-renewal of the licence. Operations in Spain have only been temporarily suspended pending a new application for a new licence hence, is still classified as an operating entity. | ||||||
|
| Corporate | Operating | Operating | Non-operating | Total | ||||
| Year ended 31 December 2015 | UK | Spain | Trinidad |
| |||||
|
| £'000 | £'000 | £'000 | £'000 | £'000 | ||||
| Operating profit/(loss) by geographical area |
|
|
|
|
| ||||
| Revenue | - | 1,112 | 8,363 | - | 9,475 | ||||
|
|
|
|
|
|
| ||||
| Operating profit/(loss) | (1,380) | (1,093) | (6,158) | (145) | (8,776) | ||||
| Asset impairment | (1,850) | - | (607) | - | (2,457) | ||||
| Finance charges | (123) | - | (117) | - | (240) | ||||
| Profit/(loss) before taxation | (3,353) | (1,093) | (6,882) | (145) | (11,473) | ||||
|
|
|
|
|
|
| ||||
| Other information |
|
|
|
|
| ||||
| Depreciation and amortisation | (57) | (582) | (4,567) | - | (5,206) | ||||
| Capital additions | 381 | 220 | 7,434 | - | 8,035 | ||||
|
|
|
|
|
|
| ||||
| Segment assets |
|
|
|
|
| ||||
| Non-current assets | 325 | 7,631 | 20,999 | - | 28,955 | ||||
| Trade and other receivables | 437 | 96 | 1,942 | - | 2,475 | ||||
| Inventories | - | 135 | 174 | - | 309 | ||||
| Cash | 406 | 159 | 3,554 | 8 | 4,127 | ||||
| Consolidated total assets | 1,168 | 8,021 | 26,669 | 8 | 35,866 | ||||
|
|
|
|
|
|
| ||||
| Segment liabilities |
|
|
|
|
| ||||
| Trade and other payables | (450) | (270) | (5,480) | (12) | (6,212) | ||||
| Taxation | - | - | - | (20) | (20) | ||||
| Borrowings | - | - | (7,252) | - | (7,252) | ||||
| Deferred consideration | (120) | - | - | - | (120) | ||||
| Provisions | - | (703) | (308) | - | (1,011) | ||||
| Consolidated total liabilities | (570) | (973) | (13,040) | (32) | (14,615) | ||||
|
|
|
|
|
|
| ||||
| ||||||||||
3 | Operating loss | 2016 | 2015 |
|
| £ 000's | £ 000's |
| Operating loss is arrived at after charging: |
|
|
| Fees payable to the Company's auditor for: |
|
|
| -the audit of the Company and Group accounts | 39 | 45 |
| -audit related assurance services | 2 | 3 |
| Directors' emoluments - fees and benefits | 803 | 879 |
| Depreciation (*) | 2,119 | 4,496 |
| Amortisation | 420 | 710 |
| Exceptional item (**) | (466) | 2,515 |
|
(*) Depreciation of certain oil and gas assets of £1,389,000 (2015: £3,474,000) has been recognised within cost of sales. (**) (Cost reduction)/costs in relation to an abandoned well and lost downhole equipment have been disclosed separately as an exceptional item. | ||
4 | Employee information (excluding Directors') | 2016 | 2015 |
|
| £ 000's | £ 000's |
| Staff costs: |
|
|
| Wages and salaries | 1,554 | 1,537 |
| Employer NIC's | 236 | 230 |
| Total | 1,789 | 1,767 |
|
| ||
| The average number of employees working on a full time equivalent basis: | ||
|
| Number | Number |
| Administration | 13 | 15 |
| Operations | 24 | 27 |
| Total | 37 | 42 |
5 | Taxation | 2016 | 2015 |
|
| £ 000's | £ 000's |
| Analysis of tax charge in the year |
|
|
| Tax charge/(income) on ordinary activities | 33 | (930) |
|
|
|
|
| Factors affecting the tax charge for the year: |
|
|
| Loss on ordinary activities before tax | 11,886 | 11,473 |
| Standard rate of corporation tax in the UK | 20% | 20%/21% |
|
|
|
|
| Loss on ordinary activities multiplied by the standard rate of corporation tax | 2,377 | 2,323 |
| Effects of: |
|
|
| Non-deductible expenses | (8) | (377) |
| Overseas tax on profits | 33 | 20 |
| Overseas deferred tax expense | - | (950) |
| Future tax benefit not brought to account | (2,369) | (1,946) |
| Current tax charge/(income) for the year | 33 | (930) |
|
No deferred tax asset has been recognised in the Group because there is uncertainty in the timing of suitable future profits against which the accumulated losses can be offset.
| ||
6 | Dividends | ||
| No dividends were paid or proposed by the Directors (2015: nil). | ||
7 | Directors' emoluments | ||||||
|
|
|
|
|
| 2016 | 2015 |
|
|
|
|
|
| £ 000's | £ 000's |
| Directors' remuneration |
|
|
| 803 | 879 | |
|
|
Directors fees |
Pension and medical benefits |
Employer NIC's |
Consultancy fees |
Total |
|
| £000's | £000's | £000's | £000's | £000's |
| 2016 |
|
|
|
|
|
| Executive Directors |
|
|
|
|
|
| Neil Ritson | 240 | 10 | 33 | - | 283 |
| Fergus Jenkins | 150 | 17 | 20 | - | 187 |
| James Thadchanamoorthy | 150 | 17 | 20 | - | 187 |
|
|
|
|
|
|
|
| Non-Executive Directors |
|
|
|
|
|
| Steve Horton (*) | 80 | - | 10 | - | 90 |
| Michael Douglas | 50 | - | 6 | - | 56 |
|
| 670 | 44 | 89 | - | 803 |
|
|
|
|
|
|
|
| 2015 |
|
|
|
|
|
| Executive Directors |
|
|
|
|
|
| Neil Ritson | 240 | 8 | 35 | - | 283 |
| Fergus Jenkins | 150 | 18 | 20 | - | 188 |
| James Thadchanamoorthy | 150 | 18 | 20 | - | 188 |
|
|
|
|
|
|
|
| Non-Executive Directors |
|
|
|
|
|
| Steve Horton | 80 | - | 13 | 30 | 123 |
| Iain Patrick | 37 | - | 6 | - | 43 |
| Michael Douglas | 50 | - | 6 | - | 56 |
|
| 707 | 44 | 98 | 30 | 879 |
|
| (*) Steve Horton resigned on 10 January 2017. | ||||
|
|
| ||||
|
| These accounts have been prepared on an accruals basis and therefore, include amounts paid and unpaid at the year-end. At the year-end, Neil Ritson was owed £239,000, Fergus Jenkins was owed £63,000, James Thadchanamoorthy was owed £51,000, Steve Horton was owed £70,000 and Michael Douglas was owed £44,000. In March 2017, these unpaid amounts were settled by issuing new ordinary shares in the Company, to the Directors (excluding Steve Horton) (see note 22). | ||||
|
|
| ||||
8 | Loss per share |
| ||||
| The calculation of loss per share is based on the loss after taxation divided by the weighted average number of shares in issue during the year: |
| ||||
|
| 2016 | 2015 |
| ||
| Net loss after taxation (£000's) | (11,919) | (10,543) |
| ||
|
|
|
|
| ||
| Weighted average number of ordinary shares used in calculating basic loss per share (millions) | 5,592 | 3,044 |
| ||
| Weighted average number of ordinary shares used in calculating diluted loss per share (millions) | 5,915 | 3,343 |
| ||
|
|
|
|
| ||
| Basic loss per share (expressed in pence) | (0.21) | (0.35) |
| ||
| Diluted loss per share (expressed in pence) | (0.21) | (0.35) |
| ||
|
|
| ||||
| As the inclusion of potentially issuable ordinary shares would result in a decrease in the loss per share, they are considered to be anti-dilutive and as such, a diluted loss per share is not included.
In March 2017, the Company reorganised its share capital and reduced the number of ordinary shares in issue by a ratio of 20:1. The weighted average number of ordinary shares used in calculating the basic and diluted loss per share post the capital reorganisation were 280 million and 296 million respectively. The basic loss per share post the capital reorganisation would be 4.26p (2015: 6.93p).
|
| ||||
9 | Finance (income)/charges | 2016 | 2015 | |
|
| £ 000's | £ 000's | |
| Loan interest payable | 178 | 161 | |
| Loan facility fees | 174 | 79 | |
| Realised (gain)/loss on loan maturity | (395) | - | |
| Total | (43) | 240 | |
|
|
|
| |
| Loan facility fees include the fair value of options issued in connection with the loan from Lind Partners LLC (Lind) (see note 19). | |||
|
|
|
| |
10 | Intangible assets | 2016 | ||||
| Group | |||||
|
| Intangible evaluation assets | Software | Goodwill | Total | |
|
| £000's | £000's | £000's | £000's | |
| Cost |
|
|
|
| |
| As at 1 January 2016 | 14,423 | 133 | 1,850 | 16,406 | |
| Additions | 1 | - | - | 1 | |
| Foreign exchange difference on translation | 1,878 | - | - | 1,878 | |
| As at 31 December 2016 | 16,302 | 133 | 1,850 | 18,285 | |
|
|
|
|
|
| |
| Amortisation and Impairment |
|
|
|
| |
| As at 1 January 2016 | 3,061 | 18 | 1,850 | 4,929 | |
| Amortisation | 387 | 33 | - | 420 | |
| Impairment | 7,252 | - | - | 7,252 | |
| Foreign exchange difference on translation | 686 | - | - | 686 | |
| As at 31 December 2016 | 11,386 | 51 | 1,850 | 13,287 | |
|
|
|
|
|
| |
| Net book value |
|
|
|
| |
| As at 31 December 2016 | 4,916 | 82 | - | 4,998 | |
| As at 31 December 2015 | 11,362 | 115 | - | 11,477 | |
|
| |||||
| Impairment review | |||||
| Intangible evaluation assets in relation to the Group entity in Spain, were written down due to non-renewal of the operating licence.
| |||||
10 | Intangible assets | 2016 |
|
| Company |
|
| Software |
|
| £000's |
| Cost |
|
| As at 1 January 2016 | 133 |
| Additions | - |
| Foreign exchange difference on translation | - |
| As at 31 December 2016 | 133 |
|
|
|
| Amortisation and Impairment |
|
| As at 1 January 2016 | 18 |
| Amortisation | 33 |
| Foreign exchange difference on translation | - |
| As at 31 December 2016 | 51 |
|
|
|
| Net book value |
|
| As at 31 December 2016 | 82 |
| As at 31 December 2015 | 115 |
|
|
|
10 | Intangible assets | 2015 | ||||||
| Group | |||||||
|
| Intangible evaluation assets | Software | Goodwill | Total | |||
|
| £000's | £000's | £000's | £000's | |||
| Cost |
|
|
|
| |||
| As at 1 January 2015 | 14,047 | - | 3,083 | 17,130 | |||
| Adjustment | - | - | (1,233) | (1,233) | |||
| Additions | 700 | 133 | - | 833 | |||
| Foreign exchange difference on translation | (324) | - | - | (324) | |||
| As at 31 December 2015 | 14,423 | 133 | 1,850 | 16,406 | |||
|
|
|
|
|
| |||
| Amortisation and Impairment |
|
|
|
| |||
| As at 1 January 2015 | 2,461 | - | - | 2,461 | |||
| Amortisation | 692 | 18 | - | 710 | |||
| Impairment | - | - | 1,850 | 1,850 | |||
| Foreign exchange difference on translation | (92) | - | - | (92) | |||
| As at 31 December 2015 | 3,061 | 18 | 1,850 | 4,929 | |||
|
|
|
|
|
| |||
| Net book value |
|
|
|
| |||
| As at 31 December 2015 | 11,362 | 115 | - | 11,477 | |||
| As at 31 December 2014 | 11,586 | - | 3,083 | 14,669 | |||
|
| |||||||
|
| |||||||
10 | Intangible assets | 2015 | ||||||
|
| Company | ||||||
|
| Software | ||||||
|
| £000's | ||||||
| Cost |
| ||||||
| As at 1 January 2015 | - | ||||||
| Additions | 133 | ||||||
| Foreign exchange difference on translation | - | ||||||
| As at 31 December 2015 | 133 | ||||||
|
|
| ||||||
| Amortisation and Impairment |
| ||||||
| As at 1 January 2015 | - | ||||||
| Amortisation | 18 | ||||||
| Foreign exchange difference on translation | - | ||||||
| As at 31 December 2015 | 18 | ||||||
|
|
| ||||||
| Net book value |
| ||||||
| As at 31 December 2015 | 115 | ||||||
| As at 31 December 2014 | - | ||||||
11 | Tangible assets | 2016 | ||||||||
|
|
|
|
| Group | Company | ||||
|
| Oil and gas assets | Property, plant and equipment (*) | Decommissioning costs | Total | Property, plant and equipment (*) | ||||
|
| £ 000's | £ 000's | £ 000's | £ 000's | £ 000's | ||||
| Cost or Valuation |
|
|
|
|
| ||||
| As at 1 January 2016 | 20,054 | 3,122 | 1,011 | 24,187 | 258 | ||||
| Additions | 287 | 22 |
| 309 | - | ||||
| Foreign exchange difference on translation | 2,256 | 450 | 123 | 2,829 | - | ||||
| As at 31 December 2016 | 22,597 | 3,594 | 1,134 | 27,325 | 258 | ||||
|
|
|
|
|
|
| ||||
| Depreciation and Impairment |
|
|
|
|
| ||||
| As at 1 January 2016 | 5,300 | 1,353 | 90 | 6,743 | 48 | ||||
| Depreciation | 1,619 | 464 | 36 | 2,119 | 149 | ||||
| Impairment | - | - | 688 | 688 | - | ||||
| Foreign exchange difference on translation | 720 | 247 |
11 | 978 | - | ||||
| As at 31 December 2016 | 7,639 | 2,064 | 825 | 10,528 | 197 | ||||
|
|
|
|
|
|
| ||||
| Net book value |
|
|
|
|
| ||||
| As at 31 December 2016 | 14,958 | 1,530 | 309 | 16,797 | 61 | ||||
| As at 31 December 2015 | 14,754 | 1,769 | 921 | 17,444 | 210 | ||||
|
|
|
|
|
|
| ||||
| (*) Property, plant and equipment includes leasehold improvements. | |||||||||
| Impairment review |
| Decommissioning assets in relation to the Group entity in Spain, were written down due to non-renewal of the operating licence.
|
|
| |||||||||||
11 | Tangible assets | 2015 | ||||||||||
|
|
|
|
| Group | Company | ||||||
|
| Oil and gas assets | Property, plant and equipment | Decommissioning costs | Total | Property, plant and equipment | ||||||
|
| £ 000's | £ 000's | £ 000's | £ 000's | £ 000's | ||||||
| Cost or Valuation |
|
|
|
|
| ||||||
| As at 1 January 2015 | 13,348 | 2,403 | 905 | 16,656 | 10 | ||||||
| Additions | 6,355 | 706 | 141 | 7,202 | 248 | ||||||
| Foreign exchange difference on translation | 351 | 13 | (35) | 329 |
| ||||||
| As at 31 December 2015 | 20,054 | 3,122 | 1,011 | 24,187 | 258 | ||||||
|
|
|
|
|
|
| ||||||
| Depreciation and Impairment |
|
|
|
|
| ||||||
| As at 1 January 2015 | 1,175 | 945 | 41 | 2,161 | 9 | ||||||
| Depreciation (*) | 4,030 | 415 | 51 | 4,496 | 39 | ||||||
| Foreign exchange difference on translation | 95 | (7) | (2) | 86 |
| ||||||
| As at 31 December 2015 | 5,300 | 1,353 | 90 | 6,743 | 48 | ||||||
|
|
|
|
|
|
| ||||||
| Net book value |
|
|
|
|
| ||||||
| As at 31 December 2015 | 14,754 | 1,769 | 921 | 17,444 | 210 | ||||||
| As at 31 December 2014 | 12,173 | 1,458 | 864 | 14,495 | 1 | ||||||
|
|
|
|
|
|
| ||||||
|
| |||||||||||
12 | Investment in associate | 2016 | 2015 | |||||||||
| Group | £ 000's | £ 000's | |||||||||
| Cost |
|
| |||||||||
| As at 1 January | 34 | - | |||||||||
| Additions | - | 34 | |||||||||
| Foreign exchange difference on translation | 4 | - | |||||||||
| As at 31 December | 38 | 34 | |||||||||
|
| |||||||||||
| LGO Energy plc, the parent company of the Group, holds 25% of the share capital of the following company:
| |||||||||||
| Company | Country of registration | Proportion held | Nature of business | ||||||||
| Indirect |
|
|
| ||||||||
| Via Leni Trinidad Ltd |
|
|
| ||||||||
| Beach Oilfield Limited | Trinidad & Tobago | 25% | Oil and Gas Production and Exploration Company | ||||||||
12 | Investment in subsidiaries | 2016 | 2015 | |||
| Company | £ 000's | £ 000's | |||
| Cost |
|
| |||
| As at 1 January | 1 | 1 | |||
| Additions | - | - | |||
| Disposals | - | - | |||
| As at 31 December | 1 | 1 | |||
|
| |||||
| LGO Energy plc, the parent company of the Group, holds 100% of the share capital of the following companies:
| |||||
| Company | Country of registration | Proportion held | Nature of business | ||
| Direct |
|
|
| ||
| Leni Gas & Oil Holdings Ltd | Cyprus | 100% | Holding Company | ||
|
|
|
|
| ||
| Indirect |
|
|
| ||
| Via Leni Gas & Oil Holdings Ltd |
|
|
| ||
| Leni Gas & Oil Investments Ltd | Cyprus | 100% | Investment Company | ||
| Leni Investments Cps Ltd | Cyprus | 100% | Investment Company | ||
| Leni Investments Byron Ltd | Cyprus | 100% | Investment Company | ||
| Leni Investments Trinidad Ltd | Cyprus | 100% | Investment Company | ||
|
|
|
|
| ||
| Via Leni Investments Cps Ltd |
|
|
| ||
| Compañia Petrolifera de Sedano S.L. | Spain | 100% | Oil and Gas Production and Exploration Company | ||
|
|
|
|
| ||
| Via Leni Investments Byron Ltd |
|
|
| ||
| Leni Gas and Oil US Inc. | United States | 100% | Oil and Gas Production and Exploration Company | ||
|
|
|
|
| ||
| Via Leni Investments Trinidad Ltd |
|
|
| ||
| LGO Trinidad Holdings Limited | St Lucia | 100% | Investment Company | ||
|
|
|
|
| ||
| Via LGO Trinidad Holdings Limited |
|
|
| ||
| Leni Trinidad Ltd | Trinidad & Tobago | 100% | Oil and Gas Production and Exploration Company | ||
| Columbus Energy Services Ltd | Trinidad & Tobago | 100% | Oil and Gas Services Company | ||
| Goudron E&P Ltd | Trinidad & Tobago | 100% | Oil and Gas Production and Exploration Company | ||
|
|
|
|
| ||
13 | Trade and other receivables | 2016 | 2015 | |||
|
| Group | Company | Group | Company | |
|
| £ 000's | £ 000's | £ 000's | £ 000's | |
| Current trade and other receivables |
|
|
|
| |
| Trade receivables | 366 | - | 357 | - | |
| VAT receivable | 167 | 26 | 1,648 | 55 | |
| Taxation receivable | 68 | - | 59 | - | |
| Other receivables | 182 | 182 | 132 | 132 | |
| Prepayments | 292 | 252 | 279 | 250 | |
| Total | 1,076 | 460 | 2,475 | 437 | |
|
|
|
|
|
| |
| Non-current trade and other receivables |
|
|
|
| |
| Loans due from subsidiaries (*) | - | 38,151 | - | 29,928 | |
| Total | - | 38,151 | - | 29,928 | |
|
|
|
|
|
| |
| (*) The loans due from subsidiaries are interest free, have no fixed repayment date and are denominated in GBP. At the year-end, loans to the Group entity in Spain and to two non-operating entities, were impaired due to irrecoverability. | |||||
14 | Inventories | 2016 | 2015 | |||
|
| Group | Company | Group | Company | |
|
| £ 000's | £ 000's | £ 000's | £ 000's | |
| Crude Oil | 267 | - | 143 | - | |
| Consumables | 190 | - | 166 | - | |
| Total | 457 | - | 309 | - | |
15 | Trade and other payables | 2016 | 2015 | ||||
|
| Group | Company | Group | Company | ||
|
| £ 000's | £ 000's | £ 000's | £ 000's | ||
| Current trade and other payables | ||||||
| Trade payables | 717 | 118 | 5,081 | 187 | ||
| Accruals | 1,383 | 600 | 1,131 | 263 | ||
| Sub total | 2,100 | 718 | 6,212 | 450 | ||
| Deferred consideration payable | 120 | 120 | 120 | 120 | ||
| Taxation payable | 23 | - | 20 | - | ||
| Total | 2,243 | 838 | 6,352 | 570 | ||
|
|
|
|
|
| ||
| Non-current trade and other payables | ||||||
| Deferred consideration payable | - | - | - | - | ||
| Deferred taxation | - | - | - | - | ||
| Total | - | - | - | - | ||
16 | Borrowings | 2016 | 2015 | ||
|
| Group | Company | Group | Company |
|
| £ 000's | £ 000's | £ 000's | £ 000's |
| Current borrowings |
|
|
|
|
| Secured loan 1 | 682 | 682 | - | - |
| Secured loan 2 | - | - | 7,006 | - |
| Total | 682 | 682 | 7,006 | - |
|
|
|
|
|
|
| Non-current borrowings |
|
|
|
|
| Secured loan 1 | 739 | 739 |
|
|
| Unsecured loan 2 | 203 | - | - | - |
| Secured loan 3 | 238 | - | 246 | - |
| Total | 1,180 | 739 | 246 | - |
|
|
|
|
|
|
| 1 In December 2016, LGO signed a US$8.6m Convertible Security facility with Lind. LGO drew down $1.825m in order to refinance and retire the outstanding BNP Paribas loan. Repayments are over 2 years with 24 monthly payments of $94,500. Lind are able to convert the outstanding balance at a fixed conversion price, subject to restrictions. The loan is denominated in US Dollars. | ||||
|
| ||||
| 2 The loan was issued by BNP Paribas in 2015. Loan repayments were made throughout the year and in December 2016, the outstanding balance of US$2.6m was refinanced, leaving a final, unsecured payment of US$0.25m due in December 2018. All security related to the BNP loan was removed in December 2016. The loan is denominated in US Dollars. | ||||
|
| ||||
| 3 The loan was issued by RBC Royal Bank Limited in 2015. Repayments are over 7 years and the loan is denominated in Trinidad Dollars. | ||||
|
| ||||
| The carrying amounts of all the borrowings approximate to their fair value. | ||||
|
| ||||
17 | Provisions | 2016 | 2015 | ||
| Provisions for decommissioning costs | Group | Company | Group | Company |
|
| £ 000's | £ 000's | £ 000's | £ 000's |
| At 1 January | 1,011 | - | 906 | - |
| Additions | 22 | - | 141 | - |
| Foreign exchange difference on translation | 155 | - | (36) | - |
| At 31 December | 1,188 | - | 1,011 | - |
|
|
|
|
|
|
| The provisions relate to the estimated costs of the removal of the Spanish and Trinidadian production facilities and site restoration at the end of the production lives of the facilities. | ||||
18 | Share capital | |||||||
| Called up, allotted, issued and fully paid ordinary shares of 0.05p each | Number of shares | Nominal value | |||||
|
|
| £ 000's | |||||
| As at 31 December 2014 | 2,728,840,849 | 1,364 | |||||
| 15 January 2015 cash at 3.00p per share | 33,333,333 | 17 | |||||
| 15 January 2015 cash at 3.00p per share | 19,166,667 | 10 | |||||
| 23 February 2015 cash at 2.50p per share | 96,062,500 | 48 | |||||
| 24 February 2015 cash at 2.50p per share | 172,760,000 | 85 | |||||
| 9 July 2015 consideration at 3.30p per share | 3,889,697 | 2 | |||||
| 5 October 2015 cash at 0.90p per share | 111,111,110 | 56 | |||||
| 12 October 2015 consideration at 0.90p per share | 14,679,556 | 7 | |||||
| 8 December 2015 consideration at 0.43p per share | 41,487,776 | 21 | |||||
| 14 December 2015 consideration at 0.28p per share | 43,668,470 | 22 | |||||
| As at 31 December 2015 | 3,264,999,958 | 1,632 | |||||
| 22 January 2016 consideration at 0.23p per share | 28,848,519 | 14 | |||||
| 16 March 2016 cash at 0.25p per share | 424,209,334 | 212 | |||||
| 16 March 2016 consideration at 0.25p per share | 235,995,235 | 118 | |||||
| 18 April 2016 cash at 0.25p per share | 120,000,000 | 60 | |||||
| 4 May 2016 cash at 0.20p per share | 1,625,000,000 | 813 | |||||
| 9 June 2016 consideration at 0.19p per share | 161,068,992 | 81 | |||||
| 18 August 2016 consideration at 0.15p per share | 727,877,588 | 364 | |||||
| 23 September 2016 consideration at 0.10p per share | 795,000,000 | 398 | |||||
| 13 December 2016 consideration at 0.12p per share | 984,600,000 | 492 | |||||
| As at 31 December 2016 | 8,367,599,626 | 4,184 | |||||
| During the year, 5.1 billion shares were issued (2015: 536.2 million). |
|
| |||||
|
In March 2017, the Company reorganised its share capital and reduced the number of ordinary shares in issue by a ratio of 20:1. The number of shares in issue as at 31 December 2016 post the capital reorganisation would be 418,379,981. The nominal value of each ordinary share remains unchanged at 0.05p.
| |||||||
| Total share options in issue | |||||||
| As at 31 December 2016 the options in issue were: | |||||||
| Exercise price | Vesting criteria | Expiry date | Options in issue | ||||
| 1p | - | 31 Dec 2020 | 56,000,000 | ||||
| 1p | 500 bopd | 31 Dec 2020 | 49,333,333 | ||||
| 1p | 600 bopd | 31 Dec 2020 | 49,333,333 | ||||
| 1p | 700 bopd | 31 Dec 2020 | 49,333,334 | ||||
| 4p | 1250 bopd | 31 Dec 2020 | 16,250,000 | ||||
| 4p | 1500 bopd | 31 Dec 2020 | 45,000,000 | ||||
| 4p | 1750 bopd | 31 Dec 2020 | 16,250,000 | ||||
| 0.15p | - | 8 Apr 2020 | 394,421,542 | ||||
| As at 31 December 2016 |
|
| 675,921,542 | ||||
|
During the year, 394.4 million options were issued (2015: nil). No options lapsed during the year (2015: nil), no options were cancelled in the year (2015: nil), and no options were exercised during the year (2015: nil). The number of share options in issue as at 31 December 2016 post the capital reorganisation would be 33,796,077 and the exercise prices as disclosed above should be multiplied by 20. | |||||||
| ||||||||
| ||||||||
| Total warrants in issue | |||||||
| As at 31 December 2016 the warrants in issue were: | |||||||
| Exercise price | Expiry date | Warrants in issue | |||||
| 4.5p | 25 Jun 2017 | 4,081,802 | |||||
| 6.2p | 15 Oct 2017 | 2,158,692 | |||||
| 5.1p | 22 Dec 2017 | 3,931,838 | |||||
| 4.2p | 16 Jan 2018 | 4,915,084 | |||||
| 2.5p | 23 Feb 2018 | 2,688,225 | |||||
| As at 31 December 2016 |
| 17,775,641 | |||||
| During the year, no warrants were issued (2015: 7.6 million). No warrants lapsed during the year (2015: nil), no warrants were cancelled during the year (2015: nil), and no warrants were exercised during the year (2015: nil). The number of warrants in issue as at 31 December 2016 post the capital reorganisation would be 888,782 and the exercise prices as disclosed above should be multiplied by 20. |
19 | Share based payments | |||||||
| Share options | |||||||
| The Company has established an employee share option plan to enable the issue of options as part of remuneration of key management personnel and Directors. Options were granted under the plan for no consideration. Options were granted for between a 6 and 7.5 year period. There are vesting conditions associated with the options. Options granted under the plan carry no dividend or voting rights.
| |||||||
| Under IFRS 2 'Share Based Payments', the Company determines the fair value of options issued to Directors and Employees as remuneration and recognises the amount as an expense in the income statement with a corresponding increase in equity. As at 31 December 2016 the unexpired share options were: | |||||||
| Name | Date granted | Vesting date | Number | Exercise price (pence) | Expiry date | Share price at grant date (pence) | Fair value after discount (pence) |
Neil Ritson | 1 Jul 2013 | 1 Jul 2013 | 25,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.51 | |
Neil Ritson | 1 Jul 2013 | 31 Aug 2014 | 25,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Neil Ritson | 1 Jul 2013 | 31 Aug 2014 | 25,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Neil Ritson | 1 Jul 2013 | 30 Sep 2014 | 25,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Steve Horton | 1 Jul 2013 | 1 Jul 2013 | 5,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.51 | |
Steve Horton | 1 Jul 2013 | 31 Aug 2014 | 3,333,333 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Steve Horton | 1 Jul 2013 | 31 Aug 2014 | 3,333,333 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Steve Horton | 1 Jul 2013 | 30 Sep 2014 | 3,333,334 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Fergus Jenkins | 1 Jul 2013 | 1 Jul 2013 | 10,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.51 | |
Fergus Jenkins | 1 Jul 2013 | 31 Aug 2014 | 7,500,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Fergus Jenkins | 1 Jul 2013 | 31 Aug 2014 | 7,500,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Fergus Jenkins | 1 Jul 2013 | 30 Sep 2014 | 7,500,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Staff | 1 Jul 2013 | 1 Jul 2013 | 10,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.51 | |
Staff | 1 Jul 2013 | 31 Aug 2014 | 7,500,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Staff | 1 Jul 2013 | 31 Aug 2014 | 7,500,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Staff | 1 Jul 2013 | 30 Sep 2014 | 7,500,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Consultants | 1 Jul 2013 | 1 Jul 2013 | 6,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.51 | |
Consultants | 1 Jul 2013 | 31 Aug 2014 | 6,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Consultants | 1 Jul 2013 | 31 Aug 2014 | 6,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
Consultants | 1 Jul 2013 | 30 Sep 2014 | 6,000,000 | 1 | 31 Dec 2020 | 0.73 | 0.20 | |
| Steve Horton | 1 Dec 2014 | 31 Dec 2014 | 15,000,000 | 4 | 31 Dec 2020 | 3.675 | 0.59 |
| Iain Patrick | 1 Dec 2014 | 31 Dec 2014 | 15,000,000 | 4 | 31 Dec 2020 | 3.675 | 0.59 |
| Michael Douglas | 1 Dec 2014 | 31 Dec 2014 | 15,000,000 | 4 | 31 Dec 2020 | 3.675 | 0.59 |
| James Thadchanamoorthy | 1 Dec 2014 | 31 Dec 2014 | 16,250,000 | 4 | 31 Dec 2020 | 3.675 | 1.79 |
| James Thadchanamoorthy | 1 Dec 2014 | 31 Dec 2014 | 16,250,000 | 4 | 31 Dec 2020 | 3.675 | 0.59 |
| Lind Partners LLC | 9 Dec 2016 | 9 Dec 2016 | 394,421,542 | 0.15 | 8 Apr 2020 | 0.13 | 0.01 |
| As at 31 December 2016 |
|
| 675,921,542 |
|
|
|
|
|
|
| The fair value of the options vested during the year was £32,000 (2015: nil) and the fair value of the options exercised during the year was nil (2015: nil). The assessed fair value at grant date is determined using the Black-Scholes Model which, takes into account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. The fair value is then discounted for the probability of the options actually vesting. The expected price volatility reflects the assumption that the historical volatility is indicative of future trends which, may not necessarily be the actual outcome.
If options are issued in connection with loans, the assessed fair value at grant date is determined using the estimated cash equivalent value. The options issued on 9 December 2016 were in connection with a loan and therefore the related share based payment expense has been recognised within finance charges (see note 9).
| |||||||||||||
|
| Warrants | ||||||||||||
|
| As at 31 December 2016 the unexpired warrants were: | ||||||||||||
|
| Date granted | Vesting date | Number | Exercise price (pence) | Expiry date | Share price at grant date (pence) | Fair value (pence) | ||||||
|
| 24 Jun 2014 | 24 Jun 2014 | 4,081,802 | 4.5 | 25 Jun 2017 | 3.9 | 0.63 | ||||||
|
| 15 Oct 2014 | 15 Oct 2014 | 2,158,692 | 6.2 | 15 Oct 2017 | 3.7 | 1.01 | ||||||
|
| 22 Dec 2014 | 22 Dec 2014 | 3,931,838 | 5.1 | 22 Dec 2017 | 4.4 | 0.33 | ||||||
|
| 16 Jan 2015 | 16 Jan 2015 | 4,915,084 | 4.2 | 16 Jan 2018 | 3.3 | 0.26 | ||||||
|
| 24 Feb 2015 | 24 Feb 2015 | 2,688,225 | 2.5 | 23 Feb 2018 | 2.9 | - | ||||||
|
| As at 31 December 2016 | 17,775,641 |
| ||||||||||
|
|
|
|
| ||||||||||
|
| The fair value of the warrants vested during the year was nil (2015: £13,000) and the fair value of the warrants exercised during the year was nil (2015: nil). The assessed fair value at grant date is determined using the Black Scholes model or the estimated cash equivalent value, if issued in connection with loans.
| ||||||||||||
20 | Financial instruments | ||||||||||
| The Group uses financial instruments comprising cash, and debtors/creditors that arise from its operations. The Group holds cash as a liquid resource to fund the obligations of the Group. The Group's cash balances are held in various currencies. The Group's strategy for managing cash is to maximise interest income whilst ensuring its availability to match the profile of the Group's expenditure. This is achieved by regular monitoring of interest rates and monthly review of expenditure forecasts.
The Company has a policy of not hedging foreign exchange and therefore takes market rates in respect of currency risk; however it does review its currency exposures on an ad hoc basis. Currency exposures relating to monetary assets held by foreign operations are included within the foreign exchange reserve in the Group Balance Sheet.
The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.
To date the Group has relied upon equity funding and short-term debt to finance operations. The Directors are confident that adequate cash resources exist to finance operations to commercial exploitation but controls over expenditure are carefully managed.
The net fair value of financial assets and liabilities approximates the carrying values disclosed in the financial statements. The currency and interest rate profile of the financial assets is as follows:
The financial assets comprise cash balances in bank accounts at call. | ||||||||||
| Cash and short term deposits | 2016 | 2015 | ||||||||
|
| £ 000's | £ 000's | ||||||||
| Sterling | 558 | 250 | ||||||||
| Euros | 14 | 159 | ||||||||
| US Dollars | 183 | 3,456 | ||||||||
| Trinidad Dollars | 1,072 | 262 | ||||||||
| Total | 1,827 | 4,127 | ||||||||
|
| ||||||||||
Oil Price Risk | |||||||||||
The Group is exposed to commodity price risk regarding its sales of crude oil which is an internationally traded commodity. The Group sales prices are based on two benchmarks, West Texas Intermediate (WTI) for sales in Trinidad and Brent Crude (Brent) for sales in Spain. | |||||||||||
The spot prices of both benchmarks are shown below:
| |||||||||||
| 2016 | 2015 | |||||||||
| Low | Average | High | Low | Average | High | |||||
| US$ | US$ | US$ | US$ | US$ | US$ | |||||
WTI | 26.19 | 43.29 | 54.01 | 34.55 | 48.66 | 61.36 | |||||
Brent | 26.01 | 43.67 | 54.96 | 35.26 | 52.32 | 66.33 | |||||
The below shows the Group's 2016 revenue sensitivity to an average price that is up to 30% lower and up to 30% higher than the average price for that year: |
Decrease | Current | Increase | |||||||
30% | 20% | 10% | 10% | 20% | 30% | ||||
£ 000's | £ 000's | £ 000's | £ 000's | £ 000's | £ 000's | £ 000's | |||
Trinidad | 2,538 | 2,900 | 3,263 | 3,625 | 3,988 | 4,351 | 4,713 | ||
Spain | 643 | 736 | 827 | 920 | 1,011 | 1,103 | 1,195 | ||
Total | 3,181 | 3,636 | 4,090 | 4,545 | 4,999 | 5,454 | 5,908 | ||
|
| ||||||||||
| Foreign currency risk | ||||||||||
| The following table details the Group's sensitivity to a 10% increase and decrease in the Pound Sterling against the relevant foreign currencies of Euro, US Dollar, and Trinidadian Dollar. 10% represents management's assessment of the reasonably possible change in foreign exchange rates.
The sensitivity analysis includes only outstanding foreign currency denominated investments and other financial assets and liabilities and adjusts their translation at the year-end for a 10% change in foreign currency rates. The table below sets out the potential exposure, where the 10% increase or decrease refers to a strengthening or weakening of the Pound Sterling:
| ||||||||||
|
| Profit or loss sensitivity | Equity sensitivity | ||||||||
|
| 10% increase | 10% decrease | 10% increase | 10% decrease | ||||||
|
| £ 000's | £ 000's | £ 000's | £ 000's | ||||||
| Euro | 959 | (959) | (48) | 48 | ||||||
| US Dollar | (1) | 1 | 325 | (325) | ||||||
| Trinidad Dollar | (166) | 166 | (961) | 961 | ||||||
| Total | 792 | (792) | (684) | 684 | ||||||
|
Rates of exchange to £1 used in the financial statements were as follows: | ||||||||||
|
|
|
|
|
| ||||||
|
| As at 31 December 2016 | Average for the relevant consolidated year to 31 December 2016 | As at 31 December 2015 | Average for the relevant consolidated year to 31 December 2015 | ||||||
| Euro | 1.173 | 1.221 | 1.357 | 1.377 | ||||||
| US Dollar | 1.234 | 1.350 | 1.480 | 1.528 | ||||||
| Trinidad Dollar | 8.321 | 8.963 | 9.504 | 9.715 | ||||||
|
|
21 | Commitments and contingencies |
| As at 31 December 2016, the Company had the following material commitments:
|
| Ongoing exploration expenditure is required to maintain title to the Group's mineral exploration permits. No provision has been made in the financial statements for these amounts as the expenditure is expected to be fulfilled in the normal course of the operations of the Group.
As announced in August 2013, as part of the licence extension and royalty reduction agreement, the Group agreed to a new work programme of 10 new wells in the next 10 years. Four by year 5, four by year 7 and two by year 10. By May 2017, a total of 16 wells had been drilled.
Additionally the Group committed to conduct an Airborne gravity survey by year 5 and drill one exploration well by year 7. The survey was completed in early 2015. |
| |
| On 27 November 2014, the Company announced that $2.1 million will be payable to Beach Oilfield Limited subject to the effective transfer of deep petroleum rights. This transaction is forecast to close in 2017, at which point, the amount payable is estimated to be US$1.4 million. |
|
|
| As at 31 December 2016, the Group had the following material contingent liabilities:
|
| Compañia Petrolifera de Sedano ("CPS"), the LGO subsidiary, has suspended its workforce, pending the re-awarding of the Ayoluengo concession that expired in January 2017. The suspended staff will return to work once the concession has been awarded, either to CPS or to the new concession owner. In the event that no concession is awarded, then CPS would be required to make the staff redundant, at an estimated cost of approximately £0.33 million. This eventuality is seen as a low probability event. |
22 | Related party transactions | |||||
| Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between other related parties are discussed below. | |||||
|
| |||||
| Remuneration of Key Management Personnel | |||||
The remuneration of the Directors of the Company are set out below in aggregate for each of the categories specified in IAS24 Related party Disclosures. | ||||||
| 2016 | 2015 | ||||
|
| £ 000's | £ 000's | |||
| Short-term employee benefits | 803 | 879 | |||
|
|
|
| |||
| These accounts have been prepared on an accruals basis and therefore, include amounts paid and unpaid at the year-end. At the year-end, Neil Ritson was owed £239,000, Fergus Jenkins was owed £63,000, James Thadchanamoorthy was owed £51,000, Steve Horton was owed £70,000 and Michael Douglas was owed £44,000. In December 2016, it was agreed that the amounts outstanding to the Directors (excluding Steve Horton) would be paid in shares at a conversion price of 0.15p (or 3p after the share consolidation in 2017). In March 2017, these unpaid amounts were settled by issuing new ordinary shares in the Company, to the Directors (excluding Steve Horton whose amount owed was settled in cash in April 2017) (see note 7). | |||||
23 | Events after the reporting period |
| On 10 January 2017, Steve Horton retired as a Director, Gordon Stein was appointed as a Director and Neil Ritson assumed the role of Chairman in addition to his existing role of Chief Executive Officer
On 30 January 2017, the extension of the La Lora concession, which was operated by Compañia Petrolifera de Sedano S.L., the Company's subsidiary in Spain, was not approved by the Spanish Cabinet of Ministers. As a result, field operations and staff members were suspended.
On 9 February 2017, the Company formally notified the Spanish Ministry of Energy, Tourism and Digital Agenda that Compañia Petrolifera de Sedano S.L. wishes to immediately commence the process of obtaining a new 30 year production concession.
On 7 March 2017, the Company held a general meeting and all the proposed resolutions were passed including reorganising the Company's share capital and reducing the number of ordinary shares in issue by a ratio of 20:1 and, authorising the Directors to allot shares up to an aggregate nominal amount of £96,100.
On 8 March 2017, the Company confirmed that the number of ordinary shares in issue pursuant to the capital reorganisation was 418,379,981 being, the previous number of ordinary shares in issue of 8,367,599,626 divided by 20. The reorganisation process included the creation of a new class of share; a deferred share, which carries no voting rights or economic value. As a result, the nominal value of each ordinary share remains unchanged at 0.05p.
On 9 March 2017, the Company issued 7,181,147 new ordinary shares to settle unpaid Directors' fees from 2015 and 2016, totalling £397,000.
On 31 March 2017, the Company issued 113,636,374 new ordinary shares at a price of 2.2 pence per share raising £2.5 million before expenses, through a placing and a fully underwritten offer.
|
24 | Profit and loss account of the parent company |
| As permitted by section 408 of the Companies Act 2006, the profit and loss account of the parent company has not been separately presented in these accounts. The parent company loss for the year was £1,573,000 (2015: £1,503,000). |
Note to the announcement:
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015. The financial information for the year ended 31 December 2015 is derived from the statutory accounts for that year. The audit of statutory accounts for the year ended 31 December 2016 is complete.
Related Shares:
CERP.L