Final Results

RNS Number : 9615G

Borders & Southern Petroleum plc

20 May 2011

 



20 May 2011

Borders & Southern Petroleum Plc

(AIM:BOR)

Preliminary Results for the 12 months ended

31 December 2010

Borders & Southern Petroleum Plc ("Borders & Southern" or "the Company") is pleased to announce its preliminary results for the year to 31 December 2010.

 Highlights

·     Signed rig contract for unit Leiv Eiriksson drilling unit

·     Selected drilling locations on the Darwin and Stebbing prospects

·     Initiated detailed well designs

·     Procured long lead items

·     Advanced logistical planning for operations

·     Signed rig assignment agreement

·     Cash balance of $194 million

Harry Dobson, Chairman of Borders & Southern, commented:

"During the last 12 months we have made considerable progress in the Company's goal of testing the exploration potential of our prospects in the Falkland Islands. We've signed a rig contract, built a strong drilling team and are well on the way with contracting drilling equipment and services. Everything is on track and we are now looking forward to commencing the exciting drilling programme at the end of the year."

For further information please contact:

Howard Obee

Borders & Southern Petroleum plc

Tel: [phone]

Simon Hudson

Tavistock Communications

Tel: [phone]

Katherine Roe

Panmure Gordon (UK) Limited

Tel: [phone]

Business Review

The past eighteen months have seen considerable drilling activity in the Falkland Islands. A large number of wells have been completed to the north of the Islands and one oil discovery reported. More relevant to our own exploration programme, the year also saw the first well drilled in the South Falkland Basin. BHP Billiton drilled the Toroa prospect, a stratigraphic trap located approximately 70 km north of our acreage. Although the outcome was disappointing, subsequent RNS statements suggest that there are a lot of positives that can be drawn from the results.

The Toroa well is reported to have found good quality sands in the Cretaceous, a thick, good quality source rock interval and good seals. This is consistent with our interpretation of our 3D seismic data, which we believe shows similar aged reservoirs and seals. The source rock was reported to be marginally mature at the Toroa well location. This same interval is buried deeper in our acreage and therefore is anticipated to have generated both oil and gas. The principal reason for failure of the Toroa well is considered to have been trap integrity, in particular, lateral seal failure in the stratigraphic trap. In contrast, our prospects are robust structural traps and are therefore expected to have greater trap integrity.

Technical work on our Darwin and Stebbing prospects is complete. As reported previously they are large structures with good geophysical attributes and we are delighted to have them in our portfolio. Our recoverable resource estimate for Darwin is 300 million barrels (amplitude anomaly only) or 760 million barrels (down to the structural spill point). Our recoverable resource estimate for Stebbing is 710 million barrels in the Tertiary alone or 1280 million barrels for combined Tertiary and Cretaceous reservoirs. We are hoping to spud the first well in December of this year, but before then we have a lot of work ahead of us.

In November 2010 we signed a contract with Ocean Rig UDW Inc. for the provision of mobile drilling rig services using their vessel the Eirik Raude. Recently, by mutual agreement, we have substituted its sister rig the Leiv Eiriksson. The substitution occurred as an opportunity arose to take a rig that had recently upgraded its Blowout Preventer to include casing shear rams and which had just completed its DNV 10 year special survey. The casing shear rams give superior capabilities in the event of a well control event or emergency disconnect. Further benefits of the rig substitution include an experienced crew and greater clarity on the arrival time. This could help save funds, as we will have greater certainty for the timing of third party services and equipment mobilisation.

The Leiv Eiriksson, completed in 2001, is a dynamically positioned semisubmersible with harsh environment capability. Its track record includes operations in West Africa, Atlantic West Ireland, Norwegian Sea, West of Shetlands and the Black Sea. Recently a Borders & Southern team comprising Howard Obee, Jonathan Harris and David Lord (AGR Peak Well Management) completed a successful rig inspection as it was mobilising from the Mediterranean towards its next assignment in Greenland.

Most recently we have announced that we have signed an Assignment Agreement with Falkland Oil & Gas Ltd. whereby they will take two of the option slots under our rig contract. This is a very good result for both companies. Not only will we share mobilisation costs for the rig but also on services and equipment. Considerable cost savings will be made by working closely together on the combined programme.

Our short-term work focus is on the detailed well engineering, logistics planning and gaining the relevant government approvals ahead of drilling. We are also in the process of setting up a base and offices in the Falkland Islands.

Final cost estimates for the wells are not yet complete but we believe we have sufficient funds, with contingency, to complete the programme. The current cash balance of $194 million includes costs already incurred on long lead items such as wellheads and casing. The Company's cash reserves continue to be held in high quality banks, although interest yields are very low in line with the economic environment.

Howard Obee

Chief Executive

Consolidated statement of comprehensive income

for the year ended 31 December 2010

		2010 $			2009 $
Administrative expenses			(1, 504,467)				(1,209,977)
Loss from operations			(1, 504,467)				(1,209,977)
Finance income Finance expense			1,359,497 (20,313)				4,587,604 (226,891)
(Loss)/ profit before tax			(165,283)				3,150,736
Tax expense			-				-
(Loss)/ profit for the year and total comprehensive (loss)/income for the year attributable to owners of the parent			(165,283)				3,150,736

Basic and basic (loss)/ earnings per share  (see note 2)	(0.039) cents	1.54 cents

Consolidated statement of financial position

as at 31 December 2010
		2010						2009
		$			$			$			$
Assets Non-current assets
Property, plant and equipment						13,110						19,516
Intangible assets						37,730,165						36,619,040
Total non-current assets						37,743,275						36,638,556
Current assets
Other receivables			11,315,514						100,191
Cash and cash equivalents			194,130,019						206,321,177
Total current assets						205,445,533						206,421,368
Total assets						243,188,808						243,059,924
Liabilities Current liabilities Trade and other payables						(271,471)						(244,680)
Total net assets						242,917,337						242,815,244
Equity
Share capital						7,675,453						7,675,453
Share premium						238,034,095						238,034,095
Other reserves						620,662						353,286
Retained deficit						(3,396,477)						(3,231,194)
Foreign currency reserve						(16,396)						(16,396)
Total equity						242,917,337						242,815,244

Consolidated statement of changes in equity

for the year ended 31 December 2010

	Share capital $	Share premium $			Other reserves  $			Retained deficit $		Foreign currency reserve $			Total $
Balance at 1 January 2009	3,867,741		57,906,686			209,409			(6,381,930)			(16,396)	55,585,510
Total comprehensive income for the year	-		-			-			3,150,736			-	3,150,736
Issue of share capital	3,807,712		180,127,409			-			-			-	183,935,121
Recognition of share based payments	-		-			143,877			-			-	143,877
Balance at 31 December 2009	7,675,453		238,034,095			353,286			(3,231,194)			(16,396)	242,815,244
Total comprehensive loss for the year	-		-			-			(165,283)			-	(165,283)
Recognition of share based payments	-		-			267,376			-			-	267,376
Balance at 31 December 2010	7,675,453		238,034,095			620,662			(3,396,477)			(16,396)	242,917,337

The following describes the nature and purpose of each reserve within owners' equity:

Reserve	Description and purpose
Share capital	This represents the nominal value of shares issued.
Share premium	Amount subscribed for share capital in excess of nominal value.
Other reserves	Fair value of options issued.
Foreign currency reserve	Differences arising on change of presentation and functional currency to US Dollars.
Retained deficit	Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.

Consolidated statement of cash flows

for the year ended 31 December 2010

		2010						2009
		$			$			$		$
Cash flow from operating activities
(Loss)/ profit before tax						(149,818)						3,150,736
Adjustments for:
Depreciation						9,930						9,206
Share-based payment						267,376						143,877
Finance income						(1,359,497)						(4,587,604)
Finance expense						20,313						226,891
Cash flows from operating activities before changes in working capital						(1,211,696)						(1,056,894)
(Increase)/decrease  in other  receivables						(1,847,804)						12,841
Increase  in trade and other payables						11,326						49,910
Net cash outflow from operating activities						(3,048,174)						(994,143)
Cash flows used in investing activities
Interest received			520,830						359,490
Redemption of other financial assets			-						9,950,668
Purchase of intangible assets			(10,479,407)						(578,180)
Purchase of property, plant and equipment			(3,524)						(13,793)
Net cash used in investing activities						(9,962,101)						9,718,185
						(13,010,275)						8,724,042
Cash flows from financing activities
Gain on forward contract			-						4,366,870
Interest paid			(20,313)						-
Proceeds from issue of shares and share options (net of issue costs)			-						183,935,121
Net cash from financing activities						(20,313)						188,301,991
Net (decrease)/ increase in cash and cash equivalents						(13,030,588)						197,026,033
Cash and cash equivalents at the beginning of the year Exchange gain/(loss) on cash and cash equivalents						206,321,177 839,430						9,522,035 (226,891)
Cash and cash equivalents at the end of the year						194,130,019						206,321,177

Notes:

1.            Basis of preparation

The group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS's and IFRIC Interpretations) issued by the International Accounting Standards Board (IASB) as

endorsed for use in the EU (IFRS) and those parts of the Companies Act 2006 that are applicable to companies that prepare their financial statements under IFRS.

The financial information for the years ended 31 December 2010 and 31 December 2009 does not constitute the company's statutory financial statements but is extracted from the audited accounts for those years.  The 31 December 2009 accounts have been delivered to the Registrar of Companies. The 31 December 2010 accounts will be delivered to Companies House within the statutory filing deadline. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.

2.            Loss per share 

The calculation of the basic loss per share is based on the loss attributable to

ordinary shareholders divided by the weighted average number of shares in issue

during the year. The loss for the financial year for the group was $165,283

(2008 - $3,150,736) and the weighted average number of shares in issue for the

year was 428,578,404 (2009 - 204,611,972).   

During the year the potential ordinary shares are ant-dilutive and therefore diluted loss per share has not been calculated. At the statement of financial position date, there were 2,450,000 (2009:2,250,000) potentially dilutive ordinary shares being the share options.

3.            Events after the reporting period

On the 5^th of May 2011, a new contract was entered into with Ocean Rig UDW to substitute the Leiv Eiriksson drilling unit for the Eirik Raude. There were no other material changes to the terms and conditions of the contract entered in to during the year.

Post reporting date the group made a cash deposit of $52.3m as security for a letter of credit which will be treated as restricted cash.

On the 18^th of May 2011, the company signed an agreement with Falkland Oil and Gas Limited to assign two of its well options. 

4.            Annual General Meeting

The Annual General Meeting of the Company will be held at 11:00 on Tuesday 21 June 2010 at the Company's office, 33 St James's Square London SW1 4JS.  Notice convening the meeting will be sent to shareholders with the 2010 Annual Report expected to be dispatched by the end of May 2010.

 

END

 

 

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