19th Jun 2014 17:10
For Immediate Release
19 June 2014
Leni Gas & Oil PLC
("LGO" or the "Company")
Replacement RNS - Annual Financial Report
In the Company's recently published Annual Report and Accounts ("ARA") announced on Friday 13 June at 16.38 with RNS number 6354J the following statement was included in the Company's highlights:
· Company-wide oil sales, net to LGO's interest, totalled 111,774 barrels oil (2012: 58,450 barrels) an increase year on year of over 190%.
The Company wishes to clarify that production has nearly doubled between 2012 and 2013. The following wording has been amended and this replaces the wording in the previous announcement
· Company-wide oil sales, net to LGO's interest, totalled 111,774 barrels oil, 190% of the 2012 oil sales (2012: 58,450 barrels).
The ARA has been amended to ensure clarity on this point and the announcement is attached in full below. There are no other changes to the ARA as previously announced.
Enquiries:
Leni Gas & Oil plc
David Lenigas Neil Ritson | +44 (0)20 7440 0645 |
Beaumont Cornish Limited
Nomad and Joint Broker Rosalind Hill Abrahams Roland Cornish | +44(0) 20 7628 3396 |
Old Park Lane Capital Plc
Joint Broker Michael Parnes | +44(0) 20 7493 8188 |
Pelham Bell Pottinger
Financial PR Mark Antelme | +44 (0) 20 7861 3232 |
Henry Lerwill |
|
Leni Gas & Oil PLC
("LGO" or the "Company")
Annual Report and Accounts 2013
Notice of Annual General Meeting ("AGM")
Leni Gas & Oil is pleased to announce that the Company's audited Annual Report and Accounts for the year ended 31 December 2013 together with the Notice of AGM is being posted to shareholders and will be available from the Company's website, www.lenigasandoil.co.uk.
The AGM will take place on 07 July 2014 at 11.00 am, and will be held at the offices of the Company's solicitors, Kerman and Co LLP whose address is 200 Strand, London WC2R 1DJ.
Highlights
For 12 month Period ending 31 December 2013
OPERATIONS
· Company-wide oil sales, net to LGO's interest, totalled 111,774 barrels oil, 190% of the 2012 oil sales (2012: 58,450 barrels).
· Goudron production reaching a high of 388 bopd in October.
· A total of 61 wells were reactivated at the Goudron Field and placed on production by year end 2013.
· All approvals for a 30 well re-development were progressed and were due for imminent award at end year. These were subsequently awarded in early 2014.
· An agreement was signed with Beach Oilfield Limited ("BOLT") under which LGO will acquire the deep exploration and production rights of BOLT in the Cedros Peninsular of south-western Trinidad.
· An agreement was signed with Maxim Resources Inc. to collaborate in acquiring the rights to the South Erin Block in central southern Trinidad.
· A Private Petroleum Licence application was made for the Company's 100% owned leases in the Cedros Peninsula.
· LGO was granted reduced overriding royalty rates by Petrotrin on production from the Goudron field. The new, substantially lower, rates are effective from 1 August 2013.
CORPORATE
· The Company announced the negotiation of a US$50 million debt finance package with Meridian SEZC to potentially fund the development of the Trinidad portfolio.
· LGO raised £1.3 million in new share equity through the issue of 162.5 million ordinary shares to support development of the Goudron Field.
· The Company signed a short-term debt arrangement with YA Global Master SPV ("YAGM") for up to US$15 million of loans to be drawn over a 3 year period.
· An equity swap arrangement for £1 million was entered into with YAGM to provide general working capital to the Company's operations.
FINANCIAL
· Gross profit of £1.12 million (2012: £1.09 million).
· Pre-tax group loss narrowed to £2.79 million (2012: £7.71 million).
KEY TARGETS FOR 2014
· Continue to rapidly develop the proven reserves in the Goudron Field through drilling of at least seven new development wells.
· Progress the remainder of the Trinidad portfolio to ensure medium-term growth is maintained and long-term value is created.
· Manage Spain for value pending granting of the Hontomin Production Concession in 2014 and extension of the La Lora Concession in 2017.
· Seek long term sources of finance based on the cashflow and the oil reserves available in the Company.
NOTES
· All figures are net LGO unless otherwise stated.
Chairman's Statement
The transformation of the Company has progressed rapidly in 2013 with an increased focus on the Group's assets in Trinidad and especially production growth in the flagship Goudron Field redevelopment project. As a consequence Group production reached 500 barrel of oil per day for the first time and is firmly expected to reach new highs in succeeding years as the output from Trinidad continues to rise.
At Goudron our Phase 1 work, involving the reactivation of a large number of dormant legacy wells, progressed rapidly and by the end of the year, the Company had 61 wells on production. When the Trinidad Minister of Energy, the Honourable Senator Kevin Ramnarine, visited the field at our first anniversary of operations in October the field had produced 59,339 barrels of oil in 69,964 accident free man-hours. Phase 1 was complemented by an active program of infrastructure repair and replacement, which saw the doubling of sales tank capacity, the extending of the power grid throughout the field, repair of roads and bridges, and the reactivation of a pre-existing tank battery to handle oil and water separation.
In 2014 this infrastructure work was completed with the building of a permanent office, workshop and accommodation building and the completion of a new communications infrastructure, both in the field and to connect the field externally. This work was all in place for the drilling campaign, Phase 2, which commenced in April 2014 with the mobilisation of Well Services Rig 20 to drill the first seven of the planned 30 new development wells.
At year end the Company was awaiting the necessary Certificate of Environmental Compliance (CEC) for its Phase 2 drilling program and for the further expansion of the sales tank capacity. The CEC was subsequently granted in early January 2014 allowing Phase 2 to commence.
The Goudron Field has independently certified original proven and probably oil-in-place of 126.7 million barrels (mmbbls), of which less than 5 million barrels have been recovered to date through the previous development activities. This represents a very substantial resource base for the Company to access. It is anticipated that the Phase 1 activity will recover a further 1 mmbbls whilst the Phase 2 drilling is intended to access between 6 and 20 mmbbls of additional reserves. The Company envisages Phase 3 will be a secondary recovery water-flood project with the aim of recovering up to 60 mmbbls of contingent resources. There is a wealth of possibility available to LGO within this asset alone.
Elsewhere in Trinidad, the Company continued to expand its opportunity set in order to create medium and long term value. An agreement was reached with Beach Oilfield Ltd to cross assign interests in the Cedros such that LGO gains access to over 7,500 gross acres of underexplored leases. Discussions continued with Maxim Resources and Advance Oil on arrangements struck earlier, and additional opportunities were evaluated. LGO also forwarded its Private Petroleum Licence ("PPL") application for 100% owned leases in Cedros to the Ministry of Energy and Energy Affairs for consideration. The Icacos Field (LGO 50%) continued to be produced by the operator and a joint application for a new PPL was prepared.
So as to maintain the principle focus on Trinidad the Spanish assets were moved to a care and maintenance operation for the bulk of the year, however, they have remained profitable and as we reached the end of the year we invited the industry to again consider partnership arrangements for the long term redevelopment of the Ayoluengo Field and the development of Hontomin Field when a Production Concession is granted.
During 2013 the management prepared to defend shareholders' interests through a High Court action against its former operator and partner in Malta concerning thesale of the Company's 10% stake in the venture. At the subsequent trial in March 2014 the Commercial Court Judge did not find sufficient grounds to uphold the Company's claim.
The Board are extremely pleased with what has been achieved in a busy year and delighted with the platform for growth that has been created for the future within the Company. I would like to thank the management, staff and shareholders for their support as the transformation of the Company has progressed significantly during the year.
David Lenigas
Executive Chairman
12 June 2014
Enquiries:
Leni Gas & Oil plc
David Lenigas Neil Ritson | +44 (0)20 7440 0645 |
Beaumont Cornish Limited
Nomad and Joint Broker Rosalind Hill Abrahams Roland Cornish | +44(0) 20 7628 3396 |
Old Park Lane Capital Plc
Joint Broker Michael Parnes | +44(0) 20 7493 8188 |
Pelham Bell Pottinger
Financial PR Mark Antelme | +44 (0) 20 7861 3232 |
Henry Lerwill |
|
Chief Executive's Review
Leni Gas and Oil plc has the strategy of identifying, acquiring and developing assets within the oil and gas sector which are seen to have an opportunity to unlock significant value through a combination of financial, commercial, and technical expertise.
The Company operates a low risk portfolio of production assets in Trinidad and Spain with significant production and reserves upside using similar operating approaches and proven production enhancement techniques. LGO has specifically targeted assets with near term production upside and follow-on exploitation potential.
During 2013 the operational management of LGO concentrated primarily on furthering the field operations in Trinidad. Organisational capability was progressively built as the Company moved from a single operating arena in Spain to a dual operation in Trinidad and Spain. In order to ensure maximum attention to the flagship Goudron Field redevelopment, activities in Spain were maintained at a constant and largely care and maintenance mode. Commercial and new business development activities, again focusing on Trinidad, were managed in parallel to help build a sustainable platform for production growth. I am pleased to report on the success of those operations and the robust foundations for long-term value creation that have resulted.
A summary of activity in both countries of operation during the reporting period and until the date of this report follows:
Trinidad
The Company, through various wholly owned subsidiaries, holds interests in two producing fields; Goudron and Icacos, and in a number of private petroleum leases where production has yet to be established. LGO has also negotiated various agreements with third parties to farm-in or otherwise acquire interests in additional properties in Trinidad.
Goudron
On the 19 October 2012 LGO acquired, through its wholly owned subsidiary, Goudron E&P Limited ("GEPL"), the Incremental Production Service Contract ("IPSC") for the Goudron Field 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 realised oil price. On taking over the full-time operation of the contract, GEPL immediately commenced a series of well work-overs and reactivations which have continued throughout 2013. Two work-over rigs have been continuously deployed at the field since April 2013 working on well reactivations and optimisations.
Oil produced at Goudron is stored in sales tanks before being measured and pumped into the Petrotrin owned pipeline adjacent to the field which carries the oil directly to the Pointe-au-Pierre refinery in western Trinidad. To accommodate rising production volumes, a new sales tank was constructed and commissioned in August to allow production of up to 530 barrels of oil per day (bopd) to be handled on a weekly basis. Additional sales tank capacity up to 2,000 barrels has been approved and will be installed as needed. Longer-term the installation of a Lease Automatic Custody Transfer (LACT) meter is planned to handle anticipated production from the field. Oil quality at Goudron is consistently high with an average export density of approximately 37 degree API.
A total of 61 wells had been reactivated by end-year, from a total stock estimated to be approximately 90 accessible and reusable wells. New beam pumps, fabricated in China and purchased locally, are being used along with a small number of progressive cavity down-hole pumps (PCP) and plunger-lift pumps in order to most efficiently redevelop the field. Most pumps deployed in the field are powered by electricity supplied from the Trinidadian electricity grid. Electricity distribution is being progressively expanded within the field to ensure all major production areas have access to electric power. Where necessary diesel-engine beam pumps are deployed to test wells in remote areas where electrical power is not yet available. Following the reporting period additional wells have been reactivated and production in May 2014 was derived from 67 legacy wells.
In addition to electrical supply, other infrastructure improvements are being made in order to bring the field up to modern operational standards. Security, communications, accommodation, roads and produced water handling facilities have all been brought up to date. The field is located in an area of primary tropical forest which receives higher than average rainfall. In order to prevent problems with electrical outages caused by falling trees a more extensive vegetation cut back has been undertaken. The installation of a permanent camp facility equipped with workshops, storage, offices and accommodation was completed in early 2014 and at the time of this report dedicated communications had been commissioned providing infield and base radio, broadband and voice communications.
In October to mark the anniversary of LGO's operations at Goudron the Minister of Energy and Energy Affairs, Senator the Honourable Kevin Ramnarine, visited the field along with Petrotrin President Khalid Hassanali and His Excellency British High Commissioner Arthur Snell and their respective delegations. At that time Goudron had produced 59,339 barrels of oil and operated safely for 69,964 man-hours in the first year of LGO operatorship.
All the necessary documentation associated with a certificate of environmental compliance ("CEC") for 30 new infill wells was submitted to the Environmental Management Agency and at year-end imminent approval was anticipated. The final CEC was delivered on 13 January 2014. The sites for the first seven new development wells were selected in the 4th quarter and site preparation commenced immediately on receipt of the CEC. Ground water monitoring wells were installed using an adapted work-over rig as a requirement of the CEC and approved by the Water and Sewage Authority prior to the mobilisation of the drilling rig.
Drilling rig selection and contract negotiations were completed in early 2014 and the first new development well, designated GY-664 was spudded on 28 April 2014 using Well Services Rig 20. The second well, GY-665, was subsequently spudded on 28 May 2014.
The first well, GY-664, was spudded on 28 April 2014 and reached total depth on 13 May 2014 at a depth of 4,212 feet. The well successfully intersected with the three planned reservoir intervals in the Goudron sandstones of the Mayaro Formation, the Gros Morne sandstones of the Moruga Formation and a sandstone in the Lower Cruse Formation. Full petrophysical log analysis was conducted and it was decided to complete the well as a Gros Morne producer over and interval of 278 feet of net oil pay. Further intervals of oil pay were identified in the Goudron sandstones totalling 192 feet and a further 87 feet in the Lower Cruse. The Goudron sandstones were cased and may be completed for production in this well at a later date. The Lower Cruse was also considered producible, however, flow rates from that interval which was somewhat silty were considered uneconomic at this location. The well was perforated and placed on production on 30 April 2014 at an initial rate of 240 bopd through a 7/32-inch choke at a flowing pressure of approximately 660 psi.
The initial flow rate from well GY-664 was some four-times the historic average and exceeded any previous well on the field. This strongly supports the Company's belief that modern drilling and completion practices would greatly enhance the production performance of wells in the field. Modern electric logs and petrophysical analysis are revealing greater amounts of net oil sand in the key reservoirs and this is likely to have an impact on oil-in-place estimates. The Company plans to incorporate the results of on-going production and drilling into the various studies prior to commissioning a new Competent Persons Report in the 2nd half of 2014.
At the time of writing the second well, GY-665, has reach a TD of 2,750 feet in the base of the Gros Morne sandstone and a decision has been taken to complete the well in the Gros Morne without deepening to the Lower Cruse secondary target in this well. Plans to drill to the Lower Cruse will be carried forward to a later well. GY-665 encountered 270 feet of net oil pay in the Goudron sandstones and 256 feet of net oil pay in the Gros Morne, confirmed by petrophysical analysis.
In August, the Company successfully renegotiated commercial terms with Petrotrin for the Goudron Field, which included an agreement to reduce the overriding royalties on production paid directly to Petrotrin. In return for the reduced royalty payments, LGO undertook to increase the commitment work programme through the drilling of ten additional development wells and one exploration well in the Goudron Block. This work programme, already envisaged in the Company's business plans, will be carried out over the next 6 years to November 2019. The contract was also modified to clarify the process for extending the duration of the IPSC, with terms for an additional 5 year period to 2023 being mutually agreed and further extensions being possible. The new overriding royalty rates are effective from 1 August 2013 and represent a marked increase in cash net-back from production.
Cedros Peninsula
Elsewhere in Trinidad, through its local subsidiary Leni Trinidad Limited ("LTL"), LGO holds a 50% interest in the producing Icacos Field in the Cedros Peninsula, operated by Territorial Services Group, a subsidiary of Touchstone Exploration. Territorial have carried out two work-overs at the field in 2013, and as a result production has been maintained at similar levels to previous years. LGO is not aware of any plans by the operator to carry out any non-routine activities in the remainder of 2014.
In the wider Cedros Peninsular, LTL holds a number of private petroleum leases totalling about 1,750 acres and is in the process of obtaining a private petroleum licence from the Trinidad and Tobago Ministry of Energy and Energy Affairs (MOEEA), in order to carry out a number of field surveys with a view to eventually drilling exploration wells. LGO has also entered into a Letter of Intent with Beach Oilfield Limited ("BOLT") to cross-assign the interests of the two companies within the Cedros Peninsula at stratigraphic levels below 7,000 feet. LTL will be the operator of the combined leases and will hold a 100% working interest, with BOLT receiving an overriding royalty on any future production revenues.
As part of the BOLT agreements LTL has hired Dr Krishna Persad as a consultant on a retainer and has acquired from BOLT all the relevant seismic, well and historical report data available in the Cedros area. The Company has also obtained a licence to the legacy 3D seismic survey that covers much of the Cedros Peninsular and has commissioned a soil geochemistry survey to localise areas of micro-seepage associated with entrapped oil in the subsurface. All the available data will be integrated and interpreted during 2014 and 1H215 prior to making any decisions on drilling.
Other Trinidad
The Company continues to pursue its strategy of increasing its footprint in Trinidad, and in March signed a heads of agreement with Maxim Resources Inc. (Maxim), to collaborate on oil field developments in the South Erin Block. The agreement envisaged that should Maxim be successful in acquiring control of the South Erin Block, LGO will invest in further developing drilling in the producing Jasmin Field, and will become field operator and hold at least a 50% working interest. Subsequent to end-year LGO has been advised that Maxim have settled its claim for cash. The 2013 heads of agreement has now expired.
In the absence of any substantive progress in resolving the underlying land title issues that were found during due diligence in the North Moruga leases, and the presence of substantial alternative investment opportunities available to the Company, the farm-in to Advance Oil, announced in November 2012 was terminated on 11 November by means of a mutually agreed Deed of Termination simultaneously with the effective sunset clause.
After a thorough review of the three blocks announced as part of the onshore lease sale by the MOEEA in the 2013 LGO determined not to present a bid for any of the blocks available on the basis of the high cost of commitment work programmes and alternative investment priorities in the Company's portfolio in Trinidad.
In 2013, LGO tendered for a Full Tensor Gravity survey to be flown over the entirety of southern Trinidad to assist in its ongoing operations and to look for additional investment opportunities. After contract negotiations a contract has been signed with ARKeX Limited to fly the survey in 2014. Acquisition costs will be shared with various parties, including Petrotrin, and it is hoped that the data wil be available for interpretation by end 2014.
During the reporting period Trinidad oil sales totalled 77,121 barrels (2012: 9,812 barrels). This sharp rise in production reflects a full year or production growth at Goudron compared to only 10 weeks of initial operations in 2012. Production from the Icacos field was essential unchanged year on year.
Spain
LGO holds a 100% ownership through its wholly owned subsidiary, Compañia Petrolifera de Sedano (CPS), in one production concession, La Lora (which contains the Ayoluengo producing oilfield), and three exploration permits; Basconcillos-H, Huermeces and Valderredible, in Northern Spain. An application for the production of oil from the Hontomin discovery in the Huermeces permit has been made and it is hoped that it will be awarded in 2014.
Oil sales during the year were made exclusively to Saint-Gobain Vicasa SA (Saint-Gobain) under the contract renewed in 2012. Saint-Gobain uses the Ayoluengo crude oil as fuel oil in their factories within Northern Spain. Under the terms of the contract CPS receives a price linked to Brent with discounts to adjust for the fuel oil grade and impurities. During June and into July Saint-Gobain carried out a planned maintenance at their factory installations and during the shutdown LGO stockpiled oil at Ayoluengo. Sales to Saint-Gobain resumed in August and normal stock levels were achieved by October.
During the sales stoppage in June and July CPS, carried out extensive maintenance to the processing facilities; opening and cleaning process vessels, and recertifying them. This work has resulted in improved oil-water separation and reduced impurities in the sales oil. As a consequence discussions have been renewed with BP España on trialling Ayoluengo crude through the Castellon Refinery as a first step in enacting the sales contract signed with BP in 2011. Laboratory trials and analysis are on-going at various laboratories in pursuit of a cost-effective arsenic removal process that would open up the potential for sales to BP.
In early 2013 work commenced to install larger pumps in both Ayo-46 and Ayo-37. Various problems were encountered with the Weatherford supplied pumps, which along with delays due to their late delivery by the supplier, lead to complications in installing the pumps during the winter weather conditions; low temperatures, snow and high winds, often cause non-production related operations to be suspended. Following various trials, well Ayo-37 was eventually returned to the original pump design. Further trials at Ayo-46 have been made without marked improvements in pump efficiency. As a result a packer has been installed in Ayo-46 to reduce water inflow and the well has subsequently seen a return to better production efficiency, although the water-cut from this well remains high.
Production decline is now being seen in several key wells in the field and a remedial program of well clean-up involving the removal of accumulated scale and wax deposits was started in late 2013 and has continued into 2014. Treatment of several wells with acid has increased flow rates of oil and in one instance also of gas. Further ongoing well treatments to improve production performance of the Ayoluengo wells are planned for 2014.
During the 1st half of 2014 the Company's Cardwell work-over rig suffered from several breakdowns that required the fabrication of replacement parts and consequently saw the rig out of service for several extended periods. During periods when the rig was unserviceable all well work had to be deferred and there was a consequent reduction in production during those periods. The rig has now been fully repaired and well service work is being performed with the aim of restoring production to 2013 levels as soon as practical.
Following the cessation of possible asset sale discussions in late 2012 LGO has held discussions with several parties who have expressed an interest in partnering with CPS in further field development at Ayoluengo. At the end of 2013 the Company was in detailed discussions with three separate groups and subsequently signed a non-binding heads of terms with Pansoinco s.r.l in March 2014. That arrangement was subsequently terminated in June 2014 when a reassessment of the value of the Spanish portfolio was made following early successes in the Goudron redevelopment in Trinidad and a new prediction of free cash flow showed that greater value could be generated from Spain through investment in the period 2016 to 2020.
As previously stated, the most likely investment scenario for the Ayoluengo field is the drilling of a small number of side-track wells from the existing producing wells along the crest of the structure to access oil in zones that are known to be oil bearing, but from which oil is not believed to have been recovered to date. This investment remains conditional on further details studies and on the granting of a 10 year extension of the La Lora Concession from January 2017. Work started in mid-2013 to prepare the licence extension application which is expected to be lodged with the Spanish administration in the 3rd quarter 2014.
In the Huermeces licence, the Company's application for the conversion of the Exploration Licence to a Production Concession remained under consideration with the Spanish authorities. In early 2014 the Ministry of Industry indicated that it was favourably considering the Concession application and as a final step requested a geological report be submitted. That technical report, written by an independent consultancy in Spain for CPS, was submitted in May 2014 and at the time of this report we are awaiting final award of the Hontomin Concession.
There has been no work undertaken in the Basconcillos-H licence area where the Tozo-1 gas well is located. This project is dormant pending further studies of potential uses of the gas discovered in Tozo. A licence extension in the Valderredible licence is also pending approval. It has so far proved difficult to operate in a large part of the licences due to environmental restrictions within the National Park which covers much of the area. CPS's permits and concessions lie within the central portion of the Sedano trough within the Cantabrian Basin which is believed to have unconventional gas potential at depth. LGO considers that shale gas potential represents additional long-term potential value and plans to acquire further regional studies in 2014 to assess the scale of the potential.
During the reporting period Spanish sales totalled 34,653 barrels oil (2012: 46,830 barrels) exclusively from the Ayoluengo Field.
OTHER
In January LGO issued proceedings against Mediterranean Oil and Gas plc (MOG) in the High Court of England and Wales alleging misrepresentation at the time of the sale of the Company's 10% interest in the Area 4 Petroleum Sharing Contract in Malta. In a Case Management Conference before Justice Clarke in May the Court refused MOG's application for security over costs in the action and ordered MOG to pay LGO's costs in defending that application. The Court also ordered disclosure of relevant documents and set a timetable to trial in March 2014. LGO and its legal team prepared for trial through 2013 and into 1st quarter 2014. The trial was held before Justice Males between the 4th and 12th March. Mr. Justice Males did not uphold LGO's claim against MOG and subsequently awarded costs in the action against the claimant. After taking further independent legal advice LGO decided not to lodge an appeal in the Court of Appeal.
Conclusion
The past year has seen a major shift in the Company's operations and new business development focus to Trinidad. A vast amount of preparatory work has been undertaken in the Goudron Field for the commencement of the drilling which marks the commencement of the redevelopment phase in 2014. All the Company's operations have been carried out without major incident and the Corporate Health Safety and Environment record has been enhanced significantly despite a rapid increase in remote operations in Trinidad. I am delighted with the platform for future value that has now been created and the results in
2014 will I am sure amply demonstrate the confidence the Board have shown in our decision to focus on brown-field redevelopment opportunities in Trinidad.
I would like to thank our staff in London, Spain and Trinidad for their dedication and hard work during this period of rapid change and growth in our production operations.
Neil Ritson
Chief Executive Officer
12 June 2013
Competent Person's statement:
The information contained in this document has been reviewed and approved by Neil Ritson, Executive Director for Leni Gas & Oil 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 35 years of relevant experience in the oil industry.
GLOSSARY & NOTES
3D = three-dimensional
AIM = London Stock Exchange Alternative Investment Market
bbls = barrels (equivalent to 45 US gallons)
bcf = billion cubic feet
boe = barrels of oil equivalent calculated on the basis of six thousand cubic feet of gas equals one barrel of oil
boepd = boe per day
bbls = barrels of oil
bopd = barrels of oil per day
EOR = enhanced oil recovery
m = thousand
mm = million
mmbbls = million barrels of oil
mscf = thousand standard cubic feet of gas
PSC = Production Sharing Contract
TD = total depth
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
|
oil-in-place
| the volume of oil estimated to have been initially in place
|
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
|
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
|
proven reserves
| those quantities of petroleum, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations
|
The estimates provide in this report 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. A copy of the PRMS is available at http://www.spe.org/industry/reserves.php. All definitions used in this report have the meaning given to them in the PRMS. Specifically:
Finance Review
Economic environment
The performance of the Company is influenced by global economic conditions, and in particular, the conditions prevailing in the United Kingdom, Spain, USA and Trinidad. In 2013 the economies in these regions have re-emerged from the recessionary environment, with the global economy slowly improving throughout the year. The Company continues to monitor all of these markets particularly in relation to the Company's future project and operational development plans.
Results for the period
2013 was a significant year for Leni Gas and Oil plc, highlighted by the current operating performance and the growth of our Trinidadian business. The financial statements presented herein do not as yet fully represent this real shift in direction, but the immediate years ahead should reflect this.
LGO is primarily a development business with programs in place to monetise the Company's interests in various oil and gas operations. Expectations are for a significant increase in production volumes and therefore revenue in the next few years. The results for the year reflect the beginning of this transformation. The Group recorded a gross profit of £1.12 million (2012: £1.09 million) and an operating loss after tax of £2.85 million (2012: £7.78 million) for the period ended 31 December 2013.
Revenue in the period of £5.91 million (2012: £3.35 million), which includes an increase in revenues from Trinidad.
Cash flow
Cash outflow from operating activities after movements in working capital amounted to £2.82 million (2012: outflow £1.28 million). Net cash inflow from financing activities was £4.15 million (2012: £2.29 million). Net cash outflow from investing activities was £1.19 million (2012: £1.96 million).
Net cash position
Net cash at 31 December 2013 was £0.34 million (2012: £0.22 million).
Key performance indicators
The current business of the Company continues to be in development and initial stage production, with the focus on the successful delivery of investment to enable the Company to progress to substantial oil and gas sales and a larger operational business. The Company has devised strategies to monetise the majority of its oil and gas assets primarily by means of various production enhancement, development expansion and commercial consolidation programs as outlined in the Operations Review. The Board and management are incentivised to deliver shareholder value in line with these plans. The 2014 Annual Report will provide analysis and comparison of production; cash flows from operations; operating costs per boe; and realised oil and gas prices per barrel and mscf.
Asset Revaluations
An independent CPR (Competent Persons Report) was commissioned to evaluate the Goudron IPSC asset. The report, produced by Challenge Energy Ltd in July 2012 considered the value of not only the subsidiary which had the rights to acquire the IPSC, but the value of the IPSC itself which was acquired. Using the output of the CPR and an audited financial model, the asset was re-valued to £9.9m. This is reflected as £3.1m of Goodwill in LGO plc and £6.8m of tangible assets in the Trinidad subsidiary.
Management continue to consider this to be a prudent valuation when the financial model for the Goudron field is indicating a higher NPV over the remaining period of the IPSC, now extended out to 2023.
Outlook
Having increased production in Trinidad and started the development program in Goudron, LGO's financial future is very promising. With the prospect of generating significantly increased operational cash flow in the next 12 months, the real monetisation of our assets and delivery of their potential has begun.
Financial Statements
GROUP STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2013
Year ended | Year ended | ||
31 December 2013 | 31 December 2012 | ||
Note | £ 000's | £ 000's | |
Revenue | 2 | 5,913 | 3,345 |
Cost of sales | (4,794) | (2,259) | |
Gross profit | 1,119 | 1,086 | |
Administrative expenses | 3 | (2,730) | (1,963) |
Oil & gas exploration costs expensed | 11 | (99) | - |
Amortisation and depreciation | 3 | (324) | (317) |
Share based payments | 22 | (412) | (103) |
(Loss) from operations | (2,446) | (1,297) | |
Loss on disposal | 13 | - | (6,543) |
Finance charges | 10 | (342) | (71) |
Finance revenue | - | 1 | |
Other income | 8 | - | 204 |
(Loss) before taxation | (2,788) | (7,706) | |
Income tax expense | 5 | (63) | (75) |
(Loss) for the year attributable to equity holders of the parent | (2,851) | (7,781) | |
Other comprehensive income | |||
Revaluation surplus on oil & gas properties | - | 4,332 | |
Exchange differences on translation of foreign operations | (20) | (108) | |
Other comprehensive income for the year net of taxation | (20) | 4,224 | |
Total comprehensive income for the year attributable to equity holders of the parent | (2,871) | (3,557) | |
Loss per share (pence) | |||
Basic | 9 | (0.15) | (0.54) |
Diluted | 9 | (0.15) | (0.54) |
All of the operations are considered to be continuing. |
GROUP STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2013
As at 31 December 2013 | As at 31 December 2012 | ||
Note | £ 000's | £ 000's | |
Assets | |||
Non-current assets | |||
Property, plant and equipment | 12 | 882 | 264 |
Oil and gas properties
| 12 | 6,867 | 6,804 |
Intangible assets | 11 | 9,037 | 8,833 |
Goodwill | 11 | 3,083 | 3,083 |
Total non-current assets | 19,869 | 18,984 | |
Current assets | |||
Inventories | 16 | 244 | 244 |
Trade and other receivables | 15 | 2,238 | 572 |
Derivative financial instrument | 17 | 500 | - |
Cash and cash equivalents | 341 | 220 | |
Total current assets | 3,323 | 1,036 | |
Total assets | 23,192 | 20,020 | |
Liabilities | |||
Current liabilities | |||
Trade and other payables | 18 | (2,410) | (1,259) |
Borrowings | 19 | (2,277) | (631) |
Deferred consideration | 18 | (120) | (120) |
Taxation | 18 | (15) | (48) |
Total current liabilities | (4,822) | (2,058) | |
Non-current liabilities | |||
Deferred consideration | 18 | (1,850) | (1,850) |
Provisions | 20 | (796) | (780) |
Total non-current liabilities | (2,646) | (2,630) | |
Total liabilities | (7,468) | (4,688) | |
Net assets | 15,724 | 15,332 | |
Shareholders' equity | |||
Called-up share capital | 21 | 1,125 | 939 |
Share premium | 36,555 | 33,890 | |
Share based payments reserve | 22 | 412 | 1,187 |
Retained earnings | (26,606) | (24,942) | |
Revaluation Surplus | 4,332 | 4,332 | |
Foreign exchange reserve | (94) | (74) | |
Total equity attributable to equity holders of the parent | 15,724 | 15,332 | |
COMPANY STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2013
As at 31 December 2013 | As at 31 December 2012 | ||
Note | £ 000's | £ 000's | |
Assets | |||
Non-current assets | |||
Property, plant and equipment | 12 | - | 5 |
Investment in subsidiaries | 14 | 1 | 3,085 |
Trade and other receivables | 15 | 17,553 | 9,387 |
Total non-current assets | 17,554 | 12,477 | |
Current assets | |||
Trade and other receivables | 15 | 1,373 | 3,521 |
Derivative financial instrument | 17 | 500 | - |
Cash and cash equivalents | 41 | 37 | |
Total current assets | 1,914 | 3,558 | |
Total assets | 19,468 | 16,035 | |
Liabilities | |||
Current liabilities | |||
Trade and other payables | 18 | (1,574) | (782) |
Deferred consideration | 18 | (120) | (120) |
Total liabilities | (3,971) | (1,533) | |
Non-current liabilities | |||
Deferred consideration | 18 | (1,850) | (1,850) |
Borrowings | 19 | - | - |
Total non-current liabilities | (1,850) | (1,850) | |
Total liabilities | (5,821) | (3,383) | |
Net assets | 13,647 | 12,652 | |
Shareholders' equity | |||
Called-up share capital | 21 | 1,125 | 939 |
Share premium | 36,555 | 33,890 | |
Share based payments reserve | 22 | 412 | 1,187 |
Retained earnings | 27 | (24,445) | (23,364) |
Total equity attributable to equity holders of the parent | 13,647 | 12,652 |
GROUP STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2013
Year ended | Year ended | |
31 December 2013 | 31 December 2012 | |
£ 000's | £ 000's | |
Cash outflow from operating activities | ||
Operating (loss) | (2,446) | (1,297) |
(Increase)/decrease in trade and other receivables | (1,666) | 590 |
Increase/(decrease) in trade and other payables | 651 | (896) |
(Increase) in inventories | - | (11) |
Depreciation | 291 | 142 |
Amortisation | 33 | 175 |
Tangible asset write-down charge | 3 | - |
Share based payments | 412 | 103 |
Income tax (paid) | (96) | (84) |
Net cash (outflow) from operating activities | (2,818) | (1,278) |
Cash flows from investing activities | ||
Interest received | - | 1 |
Other income | - | 204 |
Payments to acquire subsidiaries | (7) | (617) |
Net payments to acquire intangible assets | (108) | (126) |
Payments to acquire tangible assets | (1,076) | (2,694) |
Proceeds from asset disposals | - | 1,273 |
Net cash outflow from investing activities | (1,191) | (1,959) |
Cash flows from financing activities | ||
Issue of ordinary share capital | 2,900 | 2,550 |
Share issue costs | (49) | (102) |
Finance charges paid | (218) | (1) |
Repayment of borrowings | (2,244) | (877) |
Proceeds of borrowings | 3,764 | 721 |
Net cash inflow from financing activities | 4,153 | 2,291 |
Net increase/(decrease) in cash and cash equivalents | 144 | (946) |
Foreign exchange differences on translation | (23) | 110 |
Cash and cash equivalents at beginning of period | 220 | 1,056 |
Cash and cash equivalents at end of period | 341 | 220 |
COMPANY STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2013
Year ended | Year ended | |
31 December 2013 | 31 December 2012 | |
£ 000's | £ 000's | |
Cash outflow from operating activities | ||
Operating (loss) | (1,926) | (1,108) |
(Increase) in trade and other receivables | (1,218) | (416) |
Increase in trade and other payables | 292 | 76 |
Share based payments expensed | 412 | 103 |
Depreciation & impairment | 5 | 2 |
Other non-cash adjustments | 2 | (3) |
Net cash outflow from operating activities | (2,433) | (1,346) |
Cash flows from investing activities | ||
Interest received | - | 1 |
Loans granted to subsidiaries | (1,716) | (776) |
Payments to acquire subsidiaries | - | (617) |
Net cash outflow from investing activities | (1,716) | (1,392) |
Cash flows from financing activities | ||
Issue of ordinary share capital | 2,900 | 2,550 |
Share issue costs | (49) | (102) |
Finance charges(paid) | (218) | (1) |
(Repayments) of borrowings | (2,244) | (877) |
Proceeds of borrowings | 3,764 | 721 |
Net cash inflow from financing activities | 4,153 | 2,291 |
Net increase/(decrease) in cash and cash equivalents | 4 | (447) |
Cash and cash equivalents at beginning of period | 37 | 484 |
Cash and cash equivalents at end of period | 41 | 37 |
STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2013
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 2011 | 630 | 31,751 | 1,251 | (17,328) | 34 | - | 16,338 |
Loss for the year | - | - | - | (7,781) | - | - | (7,781) |
Revaluation of Oil & Gas Properties | - | - | - | - | - | 4,332 | 4,332 |
Currency translation differences | - | - | - | - | (108) | - | (108) |
Total comprehensive income | - | - | - | (7,781) | (108) | 4,332 | (3,557) |
Share capital issued | 309 | 2,241 | - | - | - | - | 2,550 |
Cost of share issue | - | (102) | - | - | - | - | (102) |
Expiration of Options | - | - | (167) | 167 | - | - | - |
Share based payments | - | - | 103 | - | - | - | 103 |
Total contributions by and distributions to owners of the Company | 309 | 2,139 | (64) | 167 | - | - | 2,551 |
As at 31 December 2012 | 939 | 33,890 | 1,187 | (24,942) | (74) | 4,332 | 15,332 |
Loss for the year | - | - | - | (2,851) | - | - | (2,852) |
Currency translation differences | - | - | - | - | (20) | - | (20) |
Total comprehensive income | - | - | - | (2,851) | (20) | - | (2,872) |
Share capital issued | 186 | 2,714 | - | - | - | - | 2,900 |
Cost of share issue | - | (49) | - | - | - | - | (49) |
Expiration of Options | - | - | (1,187) | 1,187 | - | - | - |
Share based payments | - | - | 412 | - | - | - | 412 |
Total contributions by and distributions to owners of the Company | 186 | 2,665 | (775) | 1,187 | - | - | 3,263 |
As at 31 December 2013 | 1,125 | 36,555 | 412 | (26,606) | (94) | 4,332 | 15,724 |
Company | |||||||
As at 31 December 2011 | 630 | 31,751 | 1,251 | (6,495) | - | - | 27,137 |
Loss for the year | - | - | - | (17,036) | - | - | (17,036) |
Total comprehensive income | - | - | - | (17,036) | - | - | (17,036) |
Share capital issued | 309 | 2,241 | - | - | - | - | 2,550 |
Cost of share issue | - | (102) | - | - | - | - | (102) |
Expiration of Options | - | - | (167) | 167 | - | - | - |
Share based payments | - | - | 103 | - | - | - | 103 |
Total contributions by and distributions to owners of the Company | 309 | 2,139 | (64) | 167 | - | - | 2,551 |
As at 31 December 2012 | 939 | 33,890 | 1,187 | (23,364) | - | - | 12,652 |
Loss for the year | - | - | - | (2,268) | - | - | (2,268) |
Total comprehensive income | |||||||
Share capital issued | 186 | 2,714 | - | - | - | - | 2,900 |
Cost of share issue | - | (49) | - | - | - | - | (49) |
Expiration of Options | - | - | (1,187) | 1,187 | - | - | - |
Share based payments | - | - | 412 | - | - | - | 412 |
Total contributions by and distributions to owners of the Company | 186 | 2,665 | (775) | 1,187 | - | - | 3,263 |
As at 31 December 2013 | 1,125 | 36,555 | 412 | (24,445) | - | - | 13,647 |
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013
1 | Summary of significant accounting policies | ||||||||
1.01 | General information and authorisation of financial statements | ||||||||
Leni Gas and Oil plc is a public limited company registered in the United Kingdom under the Companies Act 2006. The address of its registered office is Suite 3B, 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 Leni Gas & Oil plc for the period ended 31 December 2013 were authorised for issue by the Board on 12 June 2014 and the balance sheets signed on the Board's behalf by Mr. David Lenigas and Mr. Neil Ritson | |||||||||
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 standards and interpretations not applied | |||||||||
IASB (International Accounting Standards Board) and IFRIC (International Financial Reporting Interpretations Committee) have issued the following standards and interpretations with an effective date after the date of these financial statements: | |||||||||
IFRS 13 Fair Value Measurement
The Company has applied IFRS13 for the first time in the current year. IFRS13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. IFRS13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under IFRS13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, IFRS13 includes extensive disclosure requirements.
IFRS13 requires prospective application from 1 January 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard.
In accordance with these transitional provisions, the Company has not made any new disclosures required by IFRS13 for the 2012 comparative period. Other than the additional disclosures, the application of IFRS13 has not had any impact on the amounts recognised in the consolidated financial statements.
Amendments to IAS1 Presentation of Financial Statements (as part of the Annual Improvements to IFRSs 2009; 2011 Cycle issued in May 2012) The Annual Improvements to IFRSs 2009; 2011 have made a number of amendments to IFRSs. The amendments that are relevant to the Company are the amendments to IAS1 regarding when a statement of financial position as at the beginning of the preceding period (third statement of financial position) and the related notes are required to be presented. The amendments specify that a third statement of financial position is required when a) an entity applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items in its financial statements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position. The amendments specify that related notes are not required to accompany the third statement of financial position. This has no impact for the 2013 financial statements.
Amendments to IFRS7 Disclosures The Company has applied the amendments to IFRS7 Disclosures-Offsetting Financial Assets and Financial Liabilities for the first time in the current year. The amendments to IFRS7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement. As the Company does not have any offsetting arrangements in place, the application of the amendments has had no impact on the disclosures or on the amounts recognised in the consolidated financial statements.
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
IFRS9 Financial Instruments IFRS10 Consolidated Financial Statements IFRS12 Joint Arrangements# IAS27 (revised) Investment Entities IAS28 (revised) Investments in Associates and Joint Ventures IAS32 (revised) Offsetting Financial Assets and Financial Liabilities IAS36 (revised) Recoverable Amount Disclosures for Non Financial Assets IAS39 (revised) Novation of Derivatives and Continuation of Hedge Accounting IFRIC Interpretation21 Levies
| |||||||||
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, except as that IFRS9 will impact both the measurement and disclosures of Financial Instruments. Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.
The directors do not expect that the adoption of the standards 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 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. | |||||||||
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 three and eight years. | |||||||||
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 Group does not currently utilise derivative financial instruments. | |||||||||
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. | |||||||||
(v) | Equity investments | ||||||||
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 adjust 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. The Group's and Company's only derivative is considered to be the Equity Swap Arrangement as detailed in Note 17, which is accounted for on a fair value basis in accordance with the terms of the agreement, being based around the Company's share price as traded on AIM.. | |||||||||
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 Leni Gas & Oil Plc (market conditions) if applicable. | |||||||||
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 period). | |||||||||
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. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. 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. | |||||||||
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. | |||||||||
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. | |||||||||
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. | |||||||||
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 five geographical segments: Spain, USA, Trinidad & Tobago, St. Lucia, Cyprus and UK. | |||||||||
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 asset. 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) | Significant accounting estimates and assumptions | ||||||||
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: | |||||||||
(iv) | 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, these are the group's only revenue generating operations. The UK is the Group's parent and administrative entity and is reported on accordingly.
The board considers the following external reporting to be appropriate. The Cypriot administration costs are reported in the geographical segment of Cyprus, as are the subsidiaries which hold these investments. Further breakdown of each of these relative country investments is not seen to be informative at this time as a result of their current development stages, and are thus combined and reported under their investment entity.
| |||||||||
Corporate | Holding | Holding | Operating | Operating | Operating | Total | |||
Year ended 31 December 2013 | UK | Cyprus | St Lucia | Spain | Trinidad | US | |||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
Operating profit/(loss) by geographical area | |||||||||
Revenue (*) | - | - | - | 2,039 | 3,874 | - | 5,913 | ||
Operating (loss) | (1,927) | (33) | (4) | (348) | (128) | (6) | (2,446) | ||
Finance Charges | (342) | - | - | - | - | - | (342) | ||
Finance revenue | - | - | - | - | - | - | - | ||
Profit/(loss) before taxation | (2,269) | (33) | (4) | (348) | (128) | (6) | (2,788) | ||
Other information | |||||||||
Depreciation and amortisation | (2) | - | - | (101) | (221) | - | (324) | ||
Capital additions | - | - | - | 99 | 1,184 | - | 1,283 | ||
Segment assets | |||||||||
Financial assets | 4,957 | - | 1 | 9,286 | 8,363 | - | 22,607 | ||
Inventories | - | - | - | 118 | 126 | - | 244 | ||
Cash | 41 | 1 | - | 180 | 117 | 2 | 341 | ||
Consolidated total assets | 4,998 | 1 | 1 | 9,584 | 8,606 | 2 | 23,192 | ||
Segment liabilities | |||||||||
Trade and other payables | (1,575) | (5) | (2) | (283) | (542) | (3) | (2,410) | ||
Taxation | - | (5) | - | - | (10) | - | (15) | ||
Borrowings | (2,277) | - | - | - | - | - | (2,277) | ||
Deferred Consideration | (1,970) | - | - | - | - | - | (1,970) | ||
Provisions | - | - | - | (796) | - | - | (796) | ||
Consolidated total liabilities | (5,822) | (10) | (2) | (1,079) | (552) | (3) | (7,468) | ||
(*) Revenues are derived from a single customer/partner within each of these operating countries.
2 | Turnover and segmental analysis (continued) | |||||||
Corporate | Holding | Holding | Operating | Operating | Operating | Total | ||
Year ended 31 December 2012 | UK | Cyprus | St Lucia | Spain | Trinidad | US | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Operating profit/(loss) by geographical area | ||||||||
Revenue (*) | - | - | - | 2,760 | 429 | 156 | 3,345 | |
Operating profit/(loss) | (1,108) | (19) | - | 454 | (320) | (304) | (1,297) | |
Loss on disposal | - | (1,846) | - | - | - | (4,697) | (6,543) | |
Other income | - | 204 | - | - | - | - | 204 | |
Finance Interest | (71) | - | - | - | - | - | (71) | |
Finance revenue | 1 | - | - | - | - | - | 1 | |
Profit/(loss) before taxation | (1,178) | (1,661) | - | 454 | (320) | (5,001) | (7,706) | |
Other information | ||||||||
Depreciation and amortisation | (2) | - | - | (98) | (84) | (133) | (317) | |
Capital additions | - | - | - | 173 | 2,647 | - | 2,820 | |
Segment assets | 3,088 | - | - | 8,866 | 7,030 | - | 18,984 | |
Financial assets | 155 | - | - | 279 | 138 | - | 572 | |
Inventories | - | - | - | 233 | 11 | - | 244 | |
Cash | 37 | - | - | 67 | 93 | 23 | 220 | |
Consolidated total assets | 3,280 | - | - | 9,445 | 7,272 | 23 | 20,020 | |
Segment liabilities | ||||||||
Trade and other payables | (782) | (2) | - | (301) | (124) | (50) | (1,259) | |
Taxation | - | (32) | - | - | (16) | - | (48) | |
Borrowings | (631) | - | - | - | - | - | (631) | |
Deferred Consideration | (1,970) | - | - | - | - | - | (1,970) | |
Provisions | - | - | - | (780) | - | - | (780) | |
Consolidated total liabilities | (3,383) | (34) | - | (1,081) | (140) | (50) | (4,688) | |
(*) Revenues are derived from a single customer/partner within each of these operating countries.
3 | Operating loss | 2013 | 2012 |
£ 000's | £ 000's | ||
Operating loss is arrived at after charging: | |||
Auditors' remuneration: | |||
-Audit-related assurance services - Current year | 25 | 25 | |
-Auditors' remuneration payable to subsidiary auditors | 15 | 5 | |
Directors' emoluments - fees and salaries | 454 | 445 | |
Directors' emoluments - share based payments and options | 226 | - | |
Depreciation | 291 | 142 | |
Amortisation | 33 | 175 | |
4 | Employee information (excluding directors') | 2013 | 2012 |
Staff costs comprised: | £ 000's | £ 000's | |
Wages and salaries | 1,018 | 934 | |
Social security contributions | 200 | 184 | |
Total staff costs | 1,218 | 1,118 | |
The average number of employees on a full time equivalent basis during the year was as follows: | |||
Number | Number | ||
Administration | 5 | 4 | |
Operations | 27 | 22 | |
Total | 32 | 26 | |
5 | Taxation | 2013 | 2012 |
Analysis of charge in period | £ 000's | £ 000's | |
Tax on ordinary activities | 63 | 75 | |
Factors affecting the tax charge for the period: | |||
Loss on ordinary activities before tax | (2,789) | (7,706) | |
Standard rate of corporation tax in the UK | 23%/24% | 24%/26% | |
Loss on ordinary activities multiplied by the standard rate of corporation tax | (648) | (1,888) | |
Effects of: | |||
Non deductible expenses | 100 | 26 | |
Withholding tax on overseas interest | - | - | |
Overseas tax on profits | (63) | (75) | |
Future tax benefit not brought to account | 548 | 1,862 | |
Current tax charge for period | (63) | (75) | |
No deferred tax asset has been recognised because there is uncertainty of the timing of suitable future profits against which they can be recovered.
There are approximately £7,071,403 (2012: £4,991,667) of tax losses yet to be utilised by a subsidiary company in Spain. The Spanish tax rate applicable is currently 35%. | |||
6 | Dividends | ||
No dividends were paid or proposed by the Directors (2012: nil). | |||
7 | Directors' emoluments | |||||
2013 | 2012 | |||||
£ 000's | £ 000's | |||||
Directors' remuneration | 680 | 445 | ||||
Directors Fees | Consultancy Fees | Share based payments | Total | |||
2013 | £000's | £000's | £000's | £000's | ||
Executive Directors | ||||||
David Lenigas | 12 | 240 | - | 252 | ||
Neil Ritson | 160 | - | 192 | 352 | ||
Non-Executive Directors | ||||||
Steve Horton | 12 | 30 | 34 | 76 | ||
184 | 270 | 226 | 680 | |||
2012 | £000's | £000's | £000's | £000's | ||
Executive Directors | ||||||
David Lenigas | 12 | 240 | - | 252 | ||
Neil Ritson | 160 | - | - | 160 | ||
Non-Executive Directors | ||||||
Steve Horton | 12 | 21 | - | 33 | ||
184 | 261 | - | 445 | |||
No pension benefits are provided for any Director. | ||||||
In Q3 2011 it was decided that Executive Directors would defer their cash salary. As a result the CEO was not paid between the 30th September 2011 and 30 June 2012, his salary which had been accrued for that period within the financial statements continues to be accrued.
As at the 31 December 2013 the accrued and unpaid remuneration totals £611,439 including accrued consultancy fees for the last 3 years. | ||||||
8 | Other income | 2013 | 2012 | |
£ 000's | £ 000's | |||
Non-refundable deposit re: Spanish divestment | - | 204 | ||
- | 204 | |||
9 | Loss per share | |||
The calculation of loss per share is based on the loss after taxation divided by the weighted average number of share in issue during the period: | ||||
2013 | 2012 | |||
Net loss after taxation (£000's) | (2,851) | (7,781) | ||
Weighted average number of ordinary shares used in calculating basic loss per share (millions) | 1,960.6 | 1,434.2 | ||
Weighted average number of ordinary shares used in calculating diluted loss per share (millions) | 2,154.8 | 1,807.4 | ||
Basic loss per share (expressed in pence) | (0.15) | (0.54) | ||
Diluted loss per share (expressed in pence) | (0.15) | (0.54) | ||
As inclusion of the potential ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive, as such, a diluted earnings per share is not included. | ||||
10 | Finance charges | 2013 | 2012 |
£ 000's | £ 000's | ||
Loan interest payable | 166 | 71 | |
Loan facility fees | 176 | - | |
342 | 71 |
11 | Intangible assets | 2013 | ||||
Oil and gas properties | Deferred exploration expenditure | Decommissioning costs | Goodwill | Total | ||
Group | £000's | £000's | £000's | £000's | £000's | |
Cost | ||||||
As at 1 January 2013 | 9,829 | - | 780 | 3,083 | 13,692 | |
Additions | 207 | - | - | - | 207 | |
Expensed costs | (99) | - | - | - | (99) | |
Foreign exchange difference on translation | 147 | - | 16 | - | 163 | |
As at 31 December 2013 | 10,084 | - | 796 | 3,083 | 13,693 | |
Amortisation and Impairment | ||||||
As at 1 January 2013 | 1,763 | - | 13 | - | 1,776 | |
Amortisation | 31 | - | 2 | - | 33 | |
Disposal | - | - | - | - | - | |
Foreign exchange difference on translation | 34 | - | - | - | 34 | |
As at 31 December 2013 | 1,828 | - | 15 | - | 1,843 | |
Net book value | ||||||
As at 31 December 2013 | 8,256 | - | 781 | 3,083 | 12,120 | |
As at 31 December 2012 | 8,066 | - | 767 | 3,083 | 11,916 | |
| ||||||
Impairment review | ||||||
At 31 December 2013, the Directors carried out an impairment review and have confirmed that no provision is currently required. | ||||||
11 | Intangible assets (continued) | |||||
Group | Oil and gas properties | Deferred exploration expenditure | Decommissioning costs | Goodwill | Total | |
£000's | £000's | £000's | £000's | £000's | ||
Cost | ||||||
As at 1 January 2012 | 25,035 | 1,846 | 799 | 3,083 | 30,763 | |
Additions | 126 | - | - | - | 126 | |
Disposal | (14,752) | (1,846) | - | - | (16,598) | |
Foreign exchange difference on translation | (580) | - | (19) | - | (599) | |
As at 31 December 2012 | 9,829 | - | 780 | 3,083 | 13,692 | |
Amortisation and Impairment | ||||||
As at 1 January 2012 | 10,793 | - | 11 | - | 10,804 | |
Amortisation | 173 | - | 2 | - | 175 | |
Disposal | (8,673) | - | - | - | (8,673) | |
Foreign exchange difference on translation | (530) | - | - | - | (530) | |
As at 31 December 2012 | 1,763 | - | 13 | - | 1,776 | |
Net book value | ||||||
As at 31 December 2012 | 8,066 | - | 767 | 3,083 | 11,916 | |
As at 31 December 2011 | 14,242 | 1,846 | 788 | 3,083 | 19,959 | |
12 | Property, plant and equipment | 2013 | 2013 | ||||
Group | Company | ||||||
Oil and gas properties | Property, plant and equipment | Total | Property, plant and equipment | Total | |||
£ 000's | £ 000's | £ 000's | £ 000's | £ 000's | |||
Cost or Valuation | |||||||
As at 1 January 2013 | 6,875 | 624 | 7,499 | 9 | 9 | ||
Additions | 211 | 865 | 1,076 | - | - | ||
Disposals | - | - | - | - | - | ||
Foreign exchange difference on translation | (76) | (34) | (110) | - | - | ||
As at 31 December 2013 | 7,010 | 1,455 | 8,465 | 9 | 9 | ||
Depreciation | |||||||
As at 1 January 2013 | 71 | 360 | 431 | 4 | 4 | ||
Depreciation | 78 | 213 | 291 | 2 | 2 | ||
Impairment | - | 3 | 3 | 3 | 3 | ||
Foreign exchange difference on translation | (6) | (3) | (9) | - | - | ||
As at 31 December 2013 | 143 | 573 | 716 | 9 | 9 | ||
Net book value | |||||||
As at 31 December 2013 | 6,867 | 882 | 7,749 | - | - | ||
As at 31 December 2012 | 6,804 | 264 | 7,068 | 5 | 5 |
Impairment review | |||||||
At 31 December 2013, the Directors have carried out an impairment review and confirmed that no write down is currently required.
| |||||||
12 | Property, plant and equipment (continued) | 2012 | 2012 | ||||
Group | Company | ||||||
Oil and gas properties | Property, plant and equipment | Total | Property, plant and equipment | Total | |||
£ 000's | £ 000's | £ 000's | £ 000's | £ 000's | |||
Cost | |||||||
As at 1 January 2012 | - | 541 | 541 | 9 | 9 | ||
Additions | 2,598 | 96 | 2,694 | - | - | ||
Revaluation surplus | 4,332 | - | 4,332 | - | - | ||
Foreign exchange difference on translation | (55) | (13) | (68) | - | - | ||
As at 31 December 2012 | 6,875 | 624 | 7,449 | 9 | 9 | ||
Depreciation | |||||||
As at 1 January 2012 | - | 297 | 297 | 2 | 2 | ||
Depreciation | 72 | 70 | 142 | 2 | 2 | ||
Foreign exchange difference on translation | (1) | (7) | (8) | - | - | ||
As at 31 December 2012 | 71 | 360 | 431 | 4 | 4 | ||
Net book value | |||||||
As at 31 December 2012 | 6,804 | 264 | 7,068 | 5 | 5 | ||
As at 31 December 2011 | - | 244 | 244 | 7 | 7 | ||
Revaluation of Oil and Gas Properties
Management reviews the asset valuations on an ongoing basis, in particular those relating to oil and gas properties on purchase/acquisition, in 2012, an assessment is made of the true value to the business, and as such the most appropriate valuation method, that of cost or valuation was used. In respect of the addition of the IPSC (Incremental Production Service Contract) in October 2012, the true value is over the initial period of the contract.
Management have with the benefit of the CPR (Competent Persons Report) on the Goudron Field Onshore Trinidad, independently produced by Challenge Energy Ltd in July 2012 considered the value of not only the subsidiary whom had the rights to acquire the IPSC, but the value of the IPSC itself which was acquired for £2,544,000 (US$4million), and chosen to adopt the revaluation method in respect of this asset.
Using the CPR and a financial model in respect of the field and forecast production, future well drilling costs, etc revalued the asset to £6.8million (US$11million). Management consider this to be a prudent valuation when the financial model for the Goudron field is indicating a higher NPV over the remaining period of the IPSC to November 2019. The most significant inputs into this valuation approach are future oil prices, timing of drilling new wells, and production levels.
The revaluation surplus was credited to other comprehensive income and is shown in revaluation surplus in shareholders equity. The asset will be depreciated over the life of the IPSC on the unit of production basis. As such this valuation and further extensions will be continuously monitored over the life of the project.
In 2014, the valuation was tested against future economic value and the Board of Directors' concluded that the carrying value is justified as at 31 December 2013.
13 | Loss on disposal - Year ended 31 December 2012 | |||
Oil and gas properties (US-Gulf of Mexico) | Deferred exploration expenditure (Malta) | Total | ||
£ 000's | £ 000's | £ 000's | ||
Disposal Proceeds - cash received | 1,273 | - | 1,273 | |
Less | ||||
Intangible assets - at cost | 14,959 | 1,846 | 16,805 | |
Accumulated amortization | (8,989) | - | (8,989) | |
Net book value at disposal | 5,970 | 1,846 | 7,816 | |
Loss on disposal | (4,697) | (1,846) | (6,543) |
During the year to 31 December 2012, the Group disposed of the above assets as two separate transactions. The resultant losses on disposals are illustrated above. Each disposal is detailed below;
Sale of oil and gas properties - US Gulf of Mexico
On 21 August 2012, Leni Gas and Oil US Inc., sold its interest in 2 exploration leases to Byron Energy Inc. for US$400,000, these 2 interest areas were held at cost of US$225,742, and resulted in a profit US$174,258 on disposal of these 2 leases.
On 5 November 2012, Leni Gas and Oil US Inc., sold all of its remaining minority interest in the US Gulf of Mexico for a cash consideration of $1.625million to a USA Group. These assets had previously been written down in 2010 by £6.9million.
As a result, the total loss on disposal on sale in relation to all of the US assets was £4.697million.
Sale of Malta, Area 4 Petroleum Sharing Contract (PSC)
On 1 August 2012, on the basis of information provided by its 90% partner and Operator, Mediterranean Oil and Gas plc (MOG), the Group agreed to sell its 10% interest in the PSC to MOG for consideration of US$1 and the assumption of the Group's outstanding liabilities. Following the completion of the sale MOG holds the entire interest in the PSC.
As a result the entire investment in Malta and the PSC has been effectively written off with a loss on disposal for the investment value of £1,846,000.
Following completion of the sale, on 24 August 2012 MOG announced its intention to farm-out 75% of the PSC for a cash consideration of US$10million. LGO immediately asked for an explanation from MOG and sought legal advice regarding MOG's farm-out of the PSC. MOG did not provide satisfactory answers and LGO was obliged to seek to resolve the issues through lawyers. On 3 January 2013 issued legal proceedings against MOG in the High Court (England and Wales).
On 27 March 2014, the Company's court actions and legal proceedings against MOG came to a close. The judge's ruling was against the Company and the Company was ordered to pay MOG's costs, which currently are expected to total between £1.1million and £1.35million (Of which £0.6million have been paid up to the date of this report). After review of the case, the Company decided not to appeal against the Judge's decision.
14 | Investment in subsidiaries | 2013 | 2012 | |||
Shares in Group undertaking | £ 000's | £ 000's | ||||
Company | ||||||
Cost | ||||||
As at 1 January 2013 | 3,085 | 3,085 | ||||
Additions | - | - | ||||
Disposals (see 1 below) | (3,084) | - | ||||
As at 31 December 2013 | 1 | 3,085 | ||||
1. On 29 April 2013, there was a Group re-organisation relating to the Group's ownership of the Trinidadian entities. The Group continues to retain 100% shareholding of all subsidiaries, and the transfer of ownership of subsidiaries from the parent company to LGO Trinidad Holdings Ltd was at carrying value (no gain/no loss).
The parent company of the Group holds more than 20% 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 | |||
15 | Trade and other receivables | 2013 | 2012 | ||
Group | Company | Group | Company | ||
£ 000's | £ 000's | £ 000's | £ 000's | ||
Current trade and other receivables | |||||
Trade receivables | 841 | - | 332 | 3,366 | |
Taxation receivable | 99 | 87 | 142 | 68 | |
Other receivables | 1,227 | 1,217 | 22 | 12 | |
Prepayments | 71 | 69 | 76 | 75 | |
Total | 2,238 | 1,373 | 572 | 3,521 | |
Non-current trade and other receivables | |||||
Loans due from subsidiaries | - | 17,553 | - | 9,387 | |
Total | - | 17,553 | - | 9,387 | |
The loans due from subsidiaries are interest free and have no fixed repayment date. | |||||
16 | Inventories | 2013 | 2012 | ||
Group | Company | Group | Company | ||
£ 000's | £ 000's | £ 000's | £ 000's | ||
Inventories - Crude Oil | 229 | - | 244 | - | |
Inventories - Consumables | 15 | - | - | - | |
Total | 244 | - | 244 | - | |
17 | Derivative Financial Instrument | 2013 | 2012 | ||
Shares in Group undertaking | £ 000's | £ 000's | |||
Company | |||||
Cost | |||||
Fair value as at 1 January | - | - | |||
Cost of equity swap arrangement | 500 | - | |||
Settled during the year | - | - | |||
As at 31 December | 500 | - | |||
On 21 December 2013 the Company announced that it had entered into an equity swap agreement with YAGM over 131,578,944 of the Subscription Shares. In return for a payment by the Company to YAGM of £500,000 ("the Initial Escrowed Funds"), twelve monthly settlement payments were to be made by YAGM to the Company, or by the Company to YAGM, based on a formula related to the difference between the prevailing market price of the Company's ordinary shares in any month and a 'benchmark price' that is 10% above the Subscription Price. Thus the funds received by the Company in respect of the Swap Shares are dependent on the future price performance of the Company's ordinary shares.
The Initial Escrowed Funds was deposited into an escrow account and the subsequent monthly settlement payments will be managed through the Escrow Account under the terms of the Equity Swap Agreement.
YAGM may elect to terminate the Equity Swap Agreement and accelerate the payments due under it in certain circumstances. The Company may pause a monthly payment under the Equity Swap Agreement once in each six month period.
YAGM has agreed that it and its affiliates will refrain from holding any net short position in respect of the Company's ordinary shares and has agreed restrictions on the volume of ordinary shares in the Company that it can trade from time to time until the expiry or if earlier termination of the Equity Swap Agreement.
By 31 December 2013 nil shares had been closed out for net proceeds of £nil. The remaining balance has been fair valued at 31 December 2013, which has not resulted in any fair value adjustment based on the benchmark price and formula of the arrangement, with any unrealised gain credited to reserve and highlighted in other comprehensive income.
| |||||
18 | Trade and other payables | 2013 | 2012 | ||
Group | Company | Group | Company | ||
£ 000's | £ 000's | £ 000's | £ 000's | ||
Current trade and other payables | |||||
Trade Payables | 944 | 262 | 573 | 316 | |
Deferred consideration | 120 | 120 | 120 | 120 | |
Taxation | 15 | - | 48 | - | |
Accruals | 1,466 | 1,312 | 686 | 466 | |
Total | 2,545 | 1,694 | 1,427 | 902 | |
Non-current trade and other payables | |||||
Deferred consideration | 1,850 | 1,850 | 1,850 | 1,850 | |
Total | 1,850 | 1,850 | 1,850 | 1,850 | |
19 | Borrowings | 2013 | 2012 | ||
Group | Company | Group | Company | ||
£ 000's | £ 000's | £ 000's | £ 000's | ||
Current | |||||
Loans - other (unsecured) 1 | 1,287 | 1,287 | 221 | 221 | |
Loans - other (unsecured) 2 | - | - | 310 | 310 | |
Loans - other (unsecured) 3 | 112 | 112 | - | - | |
Loans - other (unsecured) 4 | 653 | 653 | - | - | |
Interest payable on borrowings | 225 | 225 | 100 | 100 | |
2,277 | 2,277 | 631 | 631 | ||
1. The loans due to other parties carry an interest charge of 10% and a repayment date of the 31 December 2014.The carrying amounts of short-term borrowings approximate their fair value, and are all denominated in pounds sterling.
| |||||
2. The loans due to other parties carried an interest charge of 2% plus LIBOR and a repayment date of the 30 June 2013. The carrying amounts of short-term borrowings approximate their fair value, and are all denominated in pounds sterling.
| |||||
3 The loans due to other parties carry an interest charge of 8% and a repayment date of the 30 June 2014. The carrying amounts of short-term borrowings approximate their fair value, and are all denominated in US Dollars.
| |||||
4 The loans due to other parties carry an interest charge of 8% and a repayment date of the 31 December 2014. The carrying amounts of short-term borrowings approximate their fair value, and are all denominated in US Dollars. | |||||
Equity Line Facility
On the 12 November 2012, the Company announced that it had terminated its three year £5 million Equity Line Facility with Dutchess Opportunity Cayman Fund Ltd ("Dutchess") by mutual agreement. The Company no longer believes that this type of facility is required in the Company's forward funding plans. The facility was terminated at no cost to either party. | |||||
20 | Provisions | 2013 | 2012 | ||
Provision for decommissioning costs | Group | Company | Group | Company | |
£ 000's | £ 000's | £ 000's | £ 000's | ||
At 1 January | 780 | - | 799 | - | |
Foreign exchange difference on translation | 16 | - | (19) | - | |
At 31 December | 796 | - | 780 | - | |
These costs relate to the estimated liability for removal of Spanish production facilities and site restoration at the end of the production life of the facilities. | |||||
21 | Share capital | |||||||||||||||
Called up, allotted, issued and fully paid | Number of shares | Nominal value | ||||||||||||||
£ 000's | ||||||||||||||||
As at 1 January 2012 | 1,259,454,965 | 630 | ||||||||||||||
3 August 2012 cash at 0.82p per share | 18,292,636 | 9 | ||||||||||||||
20 September 2012 cash at 0.40p per share | 600,000,000 | 300 | ||||||||||||||
As at 31 December 2012 | 1,877,747,601 | 939 | ||||||||||||||
21 June 2013 cash at 0.8p per share | 162,500,000 | 81 | ||||||||||||||
23 December 2013 cash at 0.76p per share | 131,578,944 | 66 | ||||||||||||||
23 December 2013 cash at 0.76p per share | 78,947,369 | 39 | ||||||||||||||
As at 31 December 2013 | 2,250,773,914 | 1,125 | ||||||||||||||
During the year 373 million shares were issued (2012: 618 million). | ||||||||||||||||
Total share options in issue | ||||||||||||||||
During the year 204 million options were issued (2012: 10 million). | ||||||||||||||||
As at 31 December 2013 the options in issue were: | ||||||||||||||||
Exercise Price | Vesting Criteria | Expiry Date | Options in Issue | |||||||||||||
1p | - | 31 July 2018 | 56,000,000 | |||||||||||||
1p | 500 bopd | 31 July 2018 | 49,333,333 | |||||||||||||
1p | 600 bopd | 31 July 2018 | 49,333,333 | |||||||||||||
1p | 700 bopd | 31 July 2018 | 49,333,334 | |||||||||||||
As at 31 December 2013 | 204,000,000 | |||||||||||||||
28.8 million options lapsed during the year (2012: 16 million). 55 million options were cancelled in the year (2012: nil), and no options were exercised during the year (2012: nil). | ||||||||||||||||
Total warrants in issue | ||||||||||||||||
During the year, 28.1 million warrants were issued (2012: nil). | ||||||||||||||||
As at 31 December 2013 the warrants in issue were; | ||||||||||||||||
Exercise Price | Expiry Date | Warrants in Issue 31 December 2013 | ||||||||||||||
2.00p | 30 September 2014 | 4,200,000 | ||||||||||||||
1.11p | 25 June 2016 | 18,267,282 | ||||||||||||||
1p | 8 November 2016 | 9,841,772 | ||||||||||||||
As at 31 December 2013 | 32,309,054 | |||||||||||||||
103,663,906 warrants lapsed during the year (2012: nil), no warrants were cancelled or exercised during the period. (2012: nil).
| ||||||||||||||||
22 | Share based payment arrangements | |||||||||||||||
Share options | ||||||||||||||||
The Company has an established an employee share option plan to enable the issue of options as part of remuneration of key management personnel and Directors to enable the purchase of shares in the entity. Options were granted under the plan for no consideration. Options were granted for a three or five 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.
Details of the current unexpired share options at the date of this report are as shown in the table below: | ||||||||||||||||
Name | Date Granted | Vesting Date | Number | Exercise Price (pence) | Expiry Date | Fair Value at Grant Date (pence) | Fair Value after discount (pence) | |||||||||
Neil Ritson | 1 July 2013 | 1 July 2013 | 25,000,000 | 1 | 31 July 2018 | 0.73 | 0.51 | |||||||||
Neil Ritson | 1 July 2013 | 500 bopd | 25,000,000 | 1 | 31 July 2018 | 0.73 | 0.46 | |||||||||
Neil Ritson | 1 July 2013 | 600 bopd | 25,000,000 | 1 | 31 July 2018 | 0.73 | 0.46 | |||||||||
Neil Ritson | 1 July 2013 | 700 bopd | 25,000,000 | 1 | 31 July 2018 | 0.73 | 0.45 | |||||||||
Steve Horton | 1 July 2013 | 1 July 2013 | 5,000,000 | 1 | 31 July 2018 | 0.73 | 0.51 | |||||||||
Steve Horton | 1 July 2013 | 500 bopd | 3,333,333 | 1 | 31 July 2018 | 0.73 | 0.46 | |||||||||
Steve Horton | 1 July 2013 | 600 bopd | 3,333,333 | 1 | 31 July 2018 | 0.73 | 0.46 | |||||||||
Steve Horton | 1 July 2013 | 700 bopd | 3,333,334 | 1 | 31 July 2018 | 0.73 | 0.45 | |||||||||
Staff | 1 July 2013 | 1 July 2013 | 20,000,000 | 1 | 31 July 2018 | 0.73 | 0.51 | |||||||||
Staff | 1 July 2013 | 500 bopd | 15,000,000 | 1 | 31 July 2018 | 0.73 | 0.46 | |||||||||
Staff | 1 July 2013 | 600 bopd | 15,000,000 | 1 | 31 July 2018 | 0.73 | 0.46 | |||||||||
Staff | 1 July 2013 | 700 bopd | 15,000,000 | 1 | 31 July 2018 | 0.73 | 0.45 | |||||||||
Consultants | 1 July 2013 | 1 July 2013 | 6,000,000 | 1 | 31 July 2018 | 0.73 | 0.51 | |||||||||
Consultants | 1 July 2013 | 500 bopd | 6,000,000 | 1 | 31 July 2018 | 0.73 | 0.46 | |||||||||
Consultants | 1 July 2013 | 600 bopd | 6,000,000 | 1 | 31 July 2018 | 0.73 | 0.46 | |||||||||
Consultants | 1 July 2013 | 700 bopd | 6,000,000 | 1 | 31 July 2018 | 0.73 | 0.45 | |||||||||
Totals | 204,000,000 | |||||||||||||||
The fair value of the options vested during the period was £0.41 million (2012: £0.1 million). Also 28.8million (2012: 16 million) options lapsed during the year, 55 million (2012: nil) options were cancelled, and the fair value of these lapsed and cancelled options was £1.187 million, transferred through equity to retained earnings. The assessed fair value at grant date is determined using the Black-Scholes Model that 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 following table lists the inputs to the model used for the period ended 31 December 2013:
| ||||||||||||||||
1 July 2013 | ||||||||||||||||
Dividend Yield (%) | - | |||||||||||||||
Expected Volatility (%) | 97% | |||||||||||||||
Risk-free interest rate (%) | 2% | |||||||||||||||
Share price at grant date (pence) | 0.73p | |||||||||||||||
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may, not necessarily be the actual outcome.
| ||||||||||||||||
23 | 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 predominantly held in Sterling. 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 and therefore takes market rates in respect of foreign exchange 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 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:
|
| |||||||||||||||
Cash and short term deposits | 2013 | 2012 |
| |||||||||||||
£ 000's | £ 000's |
| ||||||||||||||
Sterling | 4 | 37 |
| |||||||||||||
Euros | 180 | 67 |
| |||||||||||||
US Dollars | 99 | 23 |
| |||||||||||||
Trinidad Dollars | 58 | 93 |
| |||||||||||||
341 | 220 |
| ||||||||||||||
The financial assets comprise cash balances in interest earning bank accounts at call. The financial assets in Sterling currently earn interest at the base rate set by the Bank of England less 0.15%
|
| |||||||||||||||
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 off of two benchmarks, West Texas Intermediate (WTI) for sales in Trinidad and Brent Crude (Brent) for sales in Spain. | ||||
The high/lows of both benchmarks are shown below: | ||||
Spot oil prices for 2013 | ||||
Low | Average | High | ||
WTI | 86.65 | 97.98 | 110.62 | |
Brent | 96.84 | 108.52 | 118.90 | |
The below shows how the Group's 2013 revenue sensitivity to an average price that as 10% higher and 10% lower than the average price for the year. | ||||
Oil price sensitivity | ||||
10% decrease | 10% increase | |||
Trinidad | 3,487 | 4,261 | ||
Spain | 1,835 | 2,243 | ||
Total | 5,322 | 6,504 | ||
23 | Financial instruments (continued) | ||||||
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 period end for a 10% change in foreign currency rates. The following table 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 | 32 | (39 | (597) | 730 | |||
US Dollar | 1 | (1) | - | - | |||
Trinidad Dollar | 12 | (14) | (908) | 1,110 | |||
45 | (54) | (1,505) | 1,840 | ||||
Rates of exchange to £1 used in the financial statements were as follows: | |||||||
As at 31 December 2013 | Average for the relevant consolidated period to 31 December 2013 | As at 31 December 2012 | Average for the relevant consolidated period to 31 December 2012 | ||||
Euro | 1.198 | 1.178 | 1.223 | 1.232 | |||
US Dollar | 1.649 | 1.564 | 1.616 | 1.584 | |||
Trinidad Dollar | 10.611 | 10.020 | 10.341 | 10.124 | |||
24 | Commitments and contingencies |
As at 31 December 2013, the Company had the following material commitments: | |
Exploration 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 has agreed to a new work program of 10 new wells in the next 10 years. Four by year 5, four by year 7 and two by year 10.
Additionally the Group has committed to conduct an Airborne gravity survey by year 5 and drill one developmental well by year 7. | |
Contingencies | |
As a result of the rulings of the court case with MOG in March 2014, Leni Gas and Oil Plc has paid, £600,000 in 2014, to cover MOG's legal costs. The total amount expected still to be paid is between £500,000 and £750,000, however this is as yet to be agreed and finalised with MOG. |
25 | 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. | ||||
During the period, the Company accrued the following consultancy fees to the Company's directors for work performed in relation to an overseas subsidiary. These fees have been recharged to this subsidiary as follows : | ||||
(i) | £240,000 to David Lenigas (2012: £240,000), | |||
(ii) | £30,000 to Stephen Horton (2012: £33.000), | |||
(iii) | Total consultancy fees accrued to directors £525,000 (2012:£325,000). | |||
Remuneration of Key Management Personnel | ||||
The remuneration of the Directors and other key management personnel of the Group are set out below in aggregate for each of the categories specified in IAS24 Related party Disclosures. | ||||
2013 | 2012 | |||
£ 000's | £ 000's | |||
Short-term employee benefits | 556 | 610 | ||
Share-based payments | 366 | 103 | ||
922 | 713 | |||
26 | Events after the reporting period |
On 18 March 2014, the Company announced it had signed a Heads of Term with Pansoinco srl, with the intention of Pansoinco becoming a long term partner in the group's Spanish oil and gas assets.
However, on 4 June 2014, the Company announced these negotiations had been terminated, and the Company was no longer seeking to find a partner for the development of the Spanish assets.
On 27 March 2014, the Company's court actions and legal proceedings against Mediterranean Oil and Gas Plc (MOG) came to a close. The judge's ruling was against the Group and the Group was ordered to pay MOG's costs (as per note 24). To date, a payment of £600,000 has been made. After review of the case, the Group decided not to appeal against the Judge's decision.
On 2 April 2014, the Company issued 14,218,605 new Ordinary Shares in respect of remuneration for services provided by Beach Oilfield Ltd to the value of £125,000.
On 25 April 2014, the Company raised £1.375million before expenses by way of a placing of 144,736,842 new Ordinary Shares, at a price of 0.95pence per share.
On 3 June 2014, the Company announced it had fully closed the Equity Swap Arrangement with YAGM. This swap was entered into on the 23rd December 2013, and since then has provided the Company with a total of £1,407,404 in cash. |
27 | 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 £2,269 million (2012: £17.036 million). |
The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2013 or 2012. The financial information for the year ended 31 December 2012 is derived from the statutory accounts for that year. The audit of statutory accounts for the year ended 31 December 2013 is complete. The auditors reported on those accounts, their report was unqualified and did not include references to any matters to which the auditors drew attention to by way of emphasis without qualifying their report.
Related Shares:
CERP.L