Final Results

RNS Number : 0281H

Borders & Southern Petroleum plc

14 May 2014

 



14 May 2014

Borders & Southern Petroleum Plc

("Borders & Southern" or "the Company")

Preliminary Unaudited Results for the 12 months ended 31 December 2013

Borders & Southern Petroleum Plc (AIM: BOR) announces preliminary unaudited results for the year to 31 December 2013.

Highlights

·    Acquired 1,025 sq.km. of 3D data to the north of the Darwin gas condensate discovery.

·    Evaluation of the fast-track processed data confirms that the Lower Cretaceous play extends to the north of Darwin. Fully processed data, received at the end of April 2014, will enable detailed prospect mapping.

·    Completed conceptual well design for Darwin appraisal wells and near field exploration wells.

·    Completed a preliminary reservoir engineering and facilities studies for a Darwin gas condensate development project.

·    Initiated farm-out of acreage - currently in progress.

·    Post year end activities - final processed 3D data from the 2013 acquisition programme and the reprocessed 3D data from the 2008 3D survey have been received and are being interpreted to produce an enhanced model of the Darwin area and a revised prospect inventory.

·    Cash balance as at 31 December 2013: $23.2 million - sufficient to cover forward overhead costs and all necessary short-term technical studies

Howard Obee, Borders & Southern's Chief Executive, commented: "The Board and senior management remain completely focused on securing partners so that we can accelerate the appraisal of Darwin and exploration of the adjacent areas.  Technically, our intention is to continue to work the new fully processed and reprocessed surveys to provide an update on the estimated recoverable resource of Darwin and a revision of our prospect inventory."

For further information, please visit www.bordersandsouthern.com or contact:

Howard Obee, Chief Executive Borders & Southern Petroleum plc	Tel: [phone]
Callum Stewart / Adam James Panmure Gordon (UK) Limited	Tel: [phone]
Simon Hudson / Conrad Harrington Tavistock Communications	Tel: [phone]

Chairman's Statement

2013 was a very active year for the Company as we drove forward the technical evaluation of our Darwin gas condensate discovery and initiated a programme to bring partners into our Licences to help fund the next phase of appraisal and exploration drilling. Whilst we have been really encouraged by the on-going technical assessment of Darwin, which has confirmed the quality of the discovery, we are frustrated that the farm-out process is taking longer than originally anticipated.

We believe that this is a reflection of the current commercial environment in the international E&P sector. Whilst the oil price has remained relatively stable, the industry has lacked positive news stories. Exploration success has been limited, mid-sized companies (and the majors) are in restructuring mode and onshore US shale plays have attracted a significant proportion of the available capital. In the UK, the AIM Oil & Gas index - a good proxy for international early stage E&P - fell for the third year in a rowin 2013, along with many fully listed independents. Our challenge has been to attract the significant capital resources we need to a remote area outside of current industry hot spots such as Africa.

That said, we have had a good response to the farm-out and have been extremely encouraged by other companies' views on the sub-surface data, endorsing our own interpretations. Darwin appears to be a relatively simple discovery with good quality reservoir. We have been very close to completing a farm-out, having negotiated commercial terms, only for the transaction to break down at the last minute due to external factors unrelated to the project. Needless to say, we will only close a farm-out transaction on terms we believe will deliver full value to all of our shareholders.

In the last quarter of 2013, in anticipation of closing out a farm-out, we initiated a rig search for a harsh environment, deep water rig for the next drilling campaign. When our farm-out negotiations broke down we passed over the lead for the rig contract negotiations to our Falkland Islands rig consortium partners. Even though we will not have secured a partner prior to the signature of the rig contract, we will be able to join the consortium at a later stage. We remain confident that a suitable partner will be secured and that we will participate in a 2015 drilling programme to appraise Darwin.

From an operations point of view we safely acquired additional 3D seismic data in 2013. The objective of the survey was to track the Darwin reservoir over nearby prospects that had previously been mapped on 2D data. The fast track data has been received and interpreted and early signs are that amplitude anomalies, that represent hydrocarbons on the Darwin structure, can be seen on other prospects. At this stage we are careful not to reach conclusions too soon and have just commenced assessing prospects and their associated risks using the final processed 2013 data and newly reprocessed 2008 seismic data.

Looking forward, following the interpretation of the new data, we plan to release an updated assessment of Darwin's recoverable resource and in due course provide some comments on the Lower Cretaceous prospects along trend from Darwin. Our main focus however continues to be on the farm-out and we will report to shareholders as soon as an agreement has been reached. Our balance sheet remains strong and we have enough funds to undertake all necessary work in the interim.  

Harry Dobson, Chairman

13 May 2014

Operations Review

Following a successful year in 2012, during which we made the Darwin gas condensate discovery, the objectives of the past year were partially to increase our understanding of the discovery but primarily to secure a technically competent and financially strong partner. We have made significant strides forward with the technical work, but have yet to sign a farm-out agreement. The process is on-going and it remains our central focus.

The year commenced with the acquisition of new 3D seismic data. PGS were awarded the contract for both acquisition and processing. The survey was completed safely and within budget. In total, 1,025 square kilometres were acquired in the area immediately to the north of our existing 3D data, which had been acquired in 2008. Our aim was to enhance our 2D based interpretation to track the Darwin Lower Cretaceous reservoir over adjacent look-alike prospects, gain more information on the deeper untested plays and prospects (such as Sulivan and Stokes) and to reduce the overall risk profile of our prospect inventory.

A fast track processed product has already been received and interpreted. Initial interpretations indicate that the Darwin reservoir does indeed extend north-eastwards over the next fault blocks. In addition, we have identified another potential reservoir unit stratigraphically slightly younger than the Darwin reservoir. This interval does not occur over Darwin East or Darwin West, only clipping the edge of the older survey. We currently interpret this younger horizon to represent laterally continuous shallow marine sands similar to Darwin's reservoir.

Amplitude anomalies are observed over previous mapped prospects: Covington, Childs and Clarke. However, it is too early to assess whether these anomalies represent hydrocarbons. The final processed data is required for us to undertake detailed analysis, but this is now with us and a full interpretation has commenced. Reprocessing of the 2008 3D survey occurred at the same time as the new survey processing. This has allowed the two surveys to be merged into one, giving us a total 2,517 square kilometres of 3D seismic data. This will allow us to directly compare the amplitude response of proven hydrocarbons at Darwin East with the amplitudes mapped on nearby prospects. We can already see the quality of the combined data is excellent. We will report further when the work has been completed.

Reservoir engineering studies of the discovery continued during the year. Considerable effort has been made to develop geologically and petrophysically more sophisticated reservoir models in order to better assess the recoverable volumes of condensate. As we have previously reported, our current mid case recoverable resource estimate is 200 million barrels of condensate. A potential development would involve six production wells and four gas re-injection wells, having stripped out the liquids. Our intention is to update the estimated recoverable resource, incorporating the new engineering studies and an evaluation of the reprocessed 3D.

Planning for the next drilling campaign has commenced with initial well designs completed and coring and well testing programmes defined. Our current plan is to target two locations on Darwin West and one on Darwin East. This should provide sufficient information to assess the commerciality of the discovery. Final decisions on the appraisal well programme will be made once partners have been brought into the Licence.

The Company reported a loss for the year of $2.9 million compared to a loss of $1.3 million for the previous year. This largely reflects the decrease in finance income. Administrative expense decreased slightly to $2.8 million. During the year a further $28.9 million was invested with a large part of this going into a new 3D seismic acquisition programme and the reprocessing of our existing 3D data. At the end of the year the Company held cash and cash equivalents of $23.2 million. This is held in short term treasury deposits, both in dollars and sterling. The cash reserves are sufficient to cover forward overhead costs and all necessary short-term technical studies. However, in order to finance the next drilling campaign, partners will be necessary.

Our share price performance during the year has been disappointing. This partially reflects the state of the oil and gas sector, particularly our peer group of exploration-led, AIM listed companies but it also reflects the delay in bringing a partner into our Licences. The market has given us little credit for making what we believe is a significant condensate discovery. The Board and Senior Management remain completely focused on securing partners so that we can accelerate the appraisal of Darwin and exploration of the adjacent areas in order to deliver value to our shareholders.

The annual report and notice of the Annual General Meeting will be sent out to shareholders later this month.

Howard Obee, Chief Executive

13 May 2014

Unaudited consolidated statement of comprehensive income

for the year ended 31 December 2013

		2013 $		2012 $
Administrative expenses		(2,819,593)		(3,125,685)
Loss from operations		(2,819,593)		(3,125,685)
Finance income Finance expense		71,163 (207,096)		2,023,224 -
Loss  before tax		(2,955,526)		(1,102,461)
Tax expense		-		(178,043)
Loss for the year and total comprehensive loss for the year attributable to owners of the parent		(2,955,526)		(1,280,504)
Basic loss  per share  (see note 3)		(0.6) cents		(0.3) cents

Unaudited consolidated statement of financial position

as at 31 December 2013

	2013		2012
	$	$	$	$
Assets Non-current assets
Property, plant and equipment		12,801		20,773
Intangible assets		286,950,378		258,011,250
Total non-current assets		286,963,179		258,032,023
Current assets
Other receivables	1,017,040		1,544,557
Cash and cash equivalents	23,258,717		44,715,158
Restricted use cash	30,736		11,719,899
Total current assets		24,306,493		57,979,614
Total assets		311,269,672		316,011,637
Liabilities Current liabilities
Tax payables		(185,327)		(178,043)
Trade and other payables		(1,306,889)		(3,527,721)
Total net assets		309,777,456		312,305,873
Equity
Share capital		8,530,461		8,530,461
Share premium		308,602,131		308,602,131
Other reserves		2,034,668		1,607,559
Retained deficit		(9,373,408)		(6,417,882)
Foreign currency reserve		(16,396)		(16,396)
Total equity		309,777,456		312,305,873

Unaudited consolidated statement of changes in equity

for the year ended 31 December 2013

	Share capital $	Share Premium $	Other reserves $	Retained deficit $	Foreign currency reserve $	Total $
Balance at 1 January 2012	7,675,453	238,034,095	1,046,565	(5,137,378)	(16,396)	241,602,339
Total comprehensive loss  for the year	-	-	-	(1,280,504)	-	(1,280,504)
Issue of shares	855,008	73,158,509	-	-	-	74,013,517
Share issue costs	-	(2,590,473)	-	-	-	(2,590,473)
Recognition of share based payments	-	-	560,994	-	-	560,994
Balance at 31 December 2012	8,530,461	308,602,131	1,607,559	(6,417,882)	(16,396)	312,305,873
Total comprehensive loss for the year	-	-	-	(2,955,526)	-	(2,955,526)
Recognition of share based payments	-	-	427,109	-	-	427,109
Balance at 31 December 2013	8,530,461	308,602,131	2,034,668	(9,373,408)	(16,396)	309,777,456

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.
Retained deficit	Cumulative net gains and losses recognised in the consolidated statement of comprehensive income.
Foreign currency reserve	Differences arising on change of presentation and functional currency to US Dollars.

Unaudited consolidated statement of cash flows

for the year ended 31 December 2013

	2013		2012
	$	$	$	$
Cash flow from operating activities
Loss before tax		(2,955,526)		(1,102,461)
Adjustments for:
Depreciation		9,248		4,000
Share-based payment		427,109		560,994
Net finance costs/(income)		135,933		(2,023,224)
Realised foreign exchange gains		49,243		532,591
Cash flows from operating activities before changes in working capital		(2,333,993)		(2,082,100
(Increase)/decrease in other  receivables		527,517		(454)
Increase  in trade and other payables		(2,087,083)		11,248
Tax paid		-		-
Net cash outflows from operating activities		(3,893,559)		(2,017,306)
Cash flows used in investing activities
Interest received	71,163		225,545
Purchase of intangible assets	(28,939,128)		(191,181,369)
Purchase of property, plant and equipment	(1,276)		(4,144)
Net cash used in investing activities		(28,869,241)		(190,959,968)
Cash flows from financing
Proceeds from issue of shares		-		71,423,044
Net decrease in cash and cash equivalents		(32,762,800)		(121,554,230)
Cash and cash equivalents at the beginning of the year		56,435,057		176,724,199
Exchange (loss)/gain on cash and cash equivalents		(382,804)		1,265,088
Cash and cash equivalents and cash held in escrow at the end of the year		23,289,453		56,435,057
Cash and cash equivalents		23,258,717		44,715,158
Restricted use cash		30,736		11,719,899

Accounting policies

1.   Basis of preparation

The financial information set out above does not constitute the company's statutory accounts for 2012 or 2013. Statutory accounts for the year 31 December 2012 have been reported on by the Independent Auditors.  The Independent Auditors' Report on the Annual Report and Financial Statements for 2012 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The results for 2013 are unaudited. Statutory accounts for the year ended 31 December 2013 will be finalised based on the information presented in this announcement.  The independent Auditors' Report will be based on those statutory accounts once they are complete.

Statutory accounts for the year ended 31 December 2012 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2013, prepared under IFRS, will be delivered to the Registrar in due course.

2.   Going concern

The Directors believe that the company has sufficient funds, with contingency, to meet its current commitments with excess funds expected to be sufficient to fund ongoing operations for the foreseeable future. Therefore, this financial information has been prepared on a going concern basis.

3.   Basic and dilutive loss per share

The calculation of the basic and dilutive 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 $2,955,526 (2012 - loss $1,280,504) and the weighted average number of shares in issue for the year was 484,098,484 (2012 - 463,145,812).    During the year the potential ordinary shares are anti-dilutive and therefore diluted loss per share has not been calculated. At the statement of financial position date, there were 6,150,000 (2012: 5,750,000) potentially dilutive ordinary shares being the share options.

4.   Capital Commitments

On 1 October 2012 the Company entered into an agreement with PGS Geophysical AS for the acquisition of 3D seismic. This seismic was acquired during 2013 and there is $750,000 outstanding under this contract which will be paid during 2014 according to the terms of the contract.

5.   Cash and cash equivalents

The company holds its deposits with banks. At the balance date, the company had a cash deposit held as security for a letter of credit issued as part of its obligations under the rig contract which now been released. The company has also placed funds into an escrow account under the terms of a project management contract.

6.   Post Reporting Date Events

There were no post reporting date events.

 

END

 

 

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