Audited results year ended 31 December 2016

RNS Number : 9153G
Echo Energy PLC
01 June 2017
 

Echo Energy plc

 


 

("Echo Energy" or the "Company" or the "Group")

 


 

Audited results for the year ended 31 December 2016

 

Chairman's statement

 


 

Echo Energy plc is a London listed Latin American focused mid-cap gas company in the making.  The company

 

is pursuing a high-value, piped, onshore gas strategy across South and Central America, commencing with a

 

Multi Tcf potential exploration portfolio.  Select corporate transactions in the region are also under evaluation.

 


 

On 6 March 2017, after the financial year end, the company announced a carefully orchestrated relaunch which saw the re-shaping

 

of the Board, the introduction of a cornerstone investor in the form of Greenberry plc, an associate of Continental Investment

 

Partners, an open offer as well as the renaming of the company.  These elements combined to fully rebrand the

 

company and set a platform for a new and exciting journey.

 


 

The open offer was a vital component to that relaunch providing private investors in Echo an opportunity

 

to access this high growth vehicle, led and backed by an experienced and successful team, on the same terms as

 

our cornerstone investor.  The fair treatment of private investors is central to the philosophy of Echo and will remain

 

so going forward. 

 


 

On 18 April 2017, the company announced its decision to pursue a LATAM regional exploration strategy focused

 

on multi Tcf, low cost, onshore gas piped to high value, growing markets.  This strategy was based on a combination

 

of elements, which included the recently increasing growth across the region, the increasing shortage of gas in the

 

major markets of Brazil and Argentina and a historic period of regional underinvestment in the sector.  In combination,

 

we believe these provide a compelling investment proposition for investors at this specific point in the cycle.

 


 

Consequently, we have planned to rapidly acquire a series of assets across the region, including potential asset

 

acquisitions in Bolivia, Colombia, Argentina and Brazil, leveraging existing pipeline infrastructure and processing

 

capability which enables new discoveries to be brought to market quickly. In addition, we intend to selectively bring

 

in pre-identified strategic partners to the business to fund and technically de-risk such assets. 

 


 

The company is now positioned for its bold and adventurous growth strategy, with approximately GBP 26M cash

 

and further access to capital if required.

 


 

The Echo Energy journey is underway…

 


 

Echo Energy plc

 

 

For further information please contact:

James Parsons

Greg Coleman


Echo Energy plc

Echo Energy plc

j.parsons@echoenergyplc.com

g.coleman@echoenergyplc.com

John Treacy


ZAI Corporate Finance Ltd.
(Nominated Adviser)

020 7060 2220

Oliver Stansfield
Jonathan Evans


Brandon Hill Capital
(Broker)

020 3463 5000

Patrick d'Ancona


Vigo Communications - PR Adviser

020 7830 9700

 

 

 

Consolidated statement of comprehensive income

 


 

Year ended 31 December 2016

 


 


Notes


Year to 31 December 2016


Year to 31 December 2015

 

Continuing operations

£


£

 





 

Revenue

2

                    -


                   -

 





 

Cost of sales

                    -


                   -

 


 

Gross profit

                    -


                          -

 


 

Administrative expenses

     (7,091,475)


    (1,652,631)

 


 

Other operating income

                    -


                   -

 


 


 

Operating loss


     (7,091,475)


    (1,652,631)

 


 


 

Financial income


               144 


              351 

 


 

Financial expense


         (21,133)


          (3,533)

 


 

Share of post-tax losses of equity




 

accounted joint ventures

7

       (137,906)


       (156,985)

 


 

Loss before tax

     (7,250,370)


    (1,812,798)

 


 

Taxation

4

                    -


                   -

 


 

Loss from continuing operations

     (7,250,370)


    (1,812,798)

 


 

Discontinued operations

 


 

Loss after taxation for the year from





 

discontinued operations

3

           (3,814)


         (96,269)

 


 

Loss for the year

     (7,254,184)


    (1,909,067)

 


 

Other comprehensive income:

 


 

Other comprehensive income to be reclassified to profit

 

or loss in subsequent periods (net of tax)

 

Exchange difference on translating foreign operations

        807,370 


       (296,126)

 


 

Total comprehensive loss for the year

     (6,446,814)


    (2,205,193)

 


 

Loss attributable to:

 


 

Owners of the parent

     (7,254,184)


    (1,909,067)

 


 


 

Total comprehensive loss attributable to:

 


 

Owners of the parent

     (6,446,814)


    (2,205,193)

 


 


 

Loss per share (pence)

5

 


 

Basic

             (18.6)


            (26.7)

 


 

Diluted

             (18.6)


            (26.7)

 


 

Loss per share (pence) for continuing operations

 


 

Basic

             (18.6)


            (25.4)

 


 

Diluted

             (18.6)


            (25.4)

 


 

Echo Energy plc

 


 

Consolidated statement of financial position

 


 

As at 31 December 2016

 


 



Notes


31 December 2016


31 December 2015

 


£  


£  

 

Non-current assets

 

   Property, plant and equipment


            3,647 


          11,127 

 

   Goodwill


                    -


                   -

 

   Other intangible assets

6

        432,486 


     5,387,018 

 

   Investments in equity-accounted





 

   joint ventures

7

                    -


        137,906 

 


 


        436,133 


     5,536,051 

 


 

Current assets

 

   Other receivables


       303,011 


      488,877 


 

   Cash and cash equivalents


       184,849 


      101,300 


 


 


       487,860 


      590,177 


 


 

   Assets held for distribution

3

         18,892 


        43,179 


 


       506,752 


      633,356 


 

Current liabilities

 

   Trade and other payables

3

      (428,547)


  (1,164,063)


 

   Liabilities directly associated with the

 

    assets held for distribution


            (802)


       (20,968)


 









 


      (429,349)


  (1,185,031)


 

Net current assets

          77,403 


       (551,675)

 


 

Net assets

        513,536 


     4,984,376 

 


 

Equity attributable to equity holders of the parent

 

   Share capital

8

      2,430,612 


     2,159,247 

 

   Share premium

9

    17,621,763 


   16,628,623 

 

   Deferred shares


                    -


                   -

 

   Shares to be issued


        277,468 


                   -

 

   Warrant reserve


        714,977 


        302,453 

 

   Share option reserve

          85,515 


          71,718 

 

   Foreign currency translation reserve

        471,680 


       (335,690)

 

   Retained earnings

   (21,088,479)


  (13,841,975)

 


 

Total equity

        513,536 


     4,984,376 

 


 

Echo Energy plc

 


 

Statement of changes in equity

 


 

Year ended 31 December 2016

 


 


Retained

Share

Share

Shares to

Warrant

Share

Foreign

Total

 


earnings

capital

premium

be issued

reserve

option

currency

equity

 







reserve

translation


 








reserve


 


£  

£  

£  

£  

£  

£  

£  

£  

 

Consolidated

 


 

1 January 2015

 (11,932,908)

 1,051,434 

16,302,050 

               -

              -

  25,776 

    (39,564)

  5,406,788 

 


 

Loss for the year

  (1,909,067)

                 -

               -

               -

              -

            -

                 -

(1,909,067)

 

Exchange differences

                  -

                 -

               -

               -

              -

            -

  (296,126)

   (296,126)

 


 

Total comprehensive loss for the









 

year

  (1,909,067)

                 -

               -

               -

              -

            -

  (296,126)

(2,205,193)

 


 

New shares issued

                  -

 1,107,813 

     405,334 

               -

              -

            -

                 -

  1,513,147 

 

New share warrants issued

                  -

                 -

               -

               -

 302,453 

            -

                 -

     302,453 

 

Share issue costs

                  -

                 -

    (78,761)

               -

              -

            -

                 -

     (78,761)

 

Share options lapsed

                  -

                 -

               -

-

              -

            -

                 -

                -

 

Share-based payments

                  -

                 -

               -

               -

              -

   45,942 

                 -

       45,942 

 


 

31 December 2015

 (13,841,975)

 2,159,247 

16,628,623 

               -

 302,453 

  71,718 

  (335,690)

  4,984,376 

 











 

1 January 2016

 (13,841,975)

 2,159,247 

16,628,623 

               -

 302,453 

  71,718 

  (335,690)

  4,984,376 

 


 

Loss for the year

  (7,254,184)

                 -

               -

               -

              -

            -

                 -

(7,254,184)

 

Exchange differences

                  -

                 -

               -

               -

              -

            -

     807,370 

     807,370 

 


 

Total comprehensive loss for the









 

year

  (7,254,184)

                 -

               -

               -

              -

            -

     807,370 

(6,446,814)

 


 

New shares issued

                  -

     264,065 

     887,329 

               -

              -

            -

                 -

  1,151,394 

 

New share warrants issued

                  -

                 -

               -

               -

 412,524 

            -

                 -

     412,524 

 

Share issue costs

                  -

                 -

      (9,889)

               -

              -

            -

                 -

      (9,889)

 

Share options lapsed

          7,680 

                 -

               -

               -

              -

  (7,680)

                 -

                -

 

Share-based payments

                  -

         7,300 

     115,700 

     277,468 

              -

  21,477 

                 -

     421,945 

 


 

31 December 2016

 (21,088,479)

 2,430,612 

17,621,763 

     277,468 

 714,977 

  85,515 

     471,680 

     513,536 

 


 

Echo Energy plc

 


 

Consolidated statement of cash flows

 


 

Year ended 31 December 2016

 


 


Year to 31 December 2016


Year to 31 December 2015

 


£


£

 

Cash flows from operating activities

 


 

Loss from continuing operations

   (7,250,370)


  (1,812,798)

 

Loss from discontinued operations

         (3,814)


      (96,269)

 


   (7,254,184)


  (1,909,067)

 


 

Adjustments for:

 


Depreciation of property, plant and equipment

          5,441 


         5,372 

 


Loss on disposal of property, plant and equipment

          2,437 


                 -

 


Impairment of intangible assets and goodwill

    5,756,250 


                 -

 


Share of post-tax loss of equity accounted joint ventures

      137,906 


     156,985 

 


Placing costs expensed

                  -


       69,244 

 


Share-based payments

      421,945 


       45,942 

 


Warrants issued

      412,524 


     302,453 

 


Financial income

            (144)


           (351)

 


Financial expense

        21,133 


         3,533 

 


 


     (496,692)


  (1,325,889)

 

(Increase)/decrease in other receivables

      312,074 


    (289,826)

 

Decrease in net amounts held for disposal

          4,121 


    (254,517)

 

Increase in trade and other payables

     (731,190)


     555,053 

 


 

Cash used in operations

     (911,687)


  (1,315,179)

 


 

Income taxes received

                  -


                 -

 


 

Net cash used in operating activities

     (911,687)


  (1,315,179)

 


 

Cash flows from investing activities

 


 

Interest received

             144 


            351 

 

Interest paid

       (21,133)


        (3,533)

 

Acquisition of equity accounted joint venture

                  -


    (294,891)

 

Purchase of intangible assets

                  -


      (73,013)

 

Purchases of property, plant and equipment

            (396)


        (3,486)

 


 

Net cash used in investing activities

       (21,385)


    (374,572)

 


 

Cash flows from financing activities

 


 

Issue of share capital

    1,026,510 


   1,513,147 

 

Share issue costs

         (9,889)


    (148,005)

 


 

Net cash from financing activities

    1,016,621 


   1,365,142 

 


 

Net decrease in cash and cash equivalents

        83,549 


    (324,609)

 


 

Cash and cash equivalents at 1 January 2016

      101,300 


     425,909 

 


 

Cash and cash equivalents at 31 December 2016

      184,849 


     101,300 

 


 

1

Basis of preparation

 



 


The company's functional currency is the Euro, and presentational currency is Great British Pounds Sterling.

 



 


The financial information has been prepared in accordance with International Financial Reporting Standards

 


("IFRS"), IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies preparing

 


their accounts under IFRS, as adopted by the European Union, and the Companies Act 2006. The financial

 


information has been prepared under the historical cost convention, as modified by revaluations of financial assets

 


and financial liabilities at fair value through the statement of comprehensive income. Details of the accounting

 


policies applied are set out in the financial statements for the year ended 31 December 2015 and have not

 


changed for the year ended 31 December 2016.

 



 


The financial information set out in this announcement does not constitute audited financial statements for the year

 


ended 31 December 2016. The financial information for the year ended 31 December 2015 is derived from the

 


statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on

 


those accounts: their report was qualified in respect of a limitation of scope in relation to financial information of the group's 25 per cent.

 


working interest in the East Ghazalat production licence (detailed below). The auditor's report for that year also included an emphasis of

 


matter in respect of the valuation of the group's development and exploration intangible asset and in relation to the group's ability to

 


continue as a going concern.

 



 


The financial information for the year ended 31 December 2016 is derived from the financial statements, but does not

 


constitute the group's financial statements. The company's auditors have reported on the statutory financial

 


statements for the year ended 31 December 2016 and their report is qualified, as follows:

 



 


Basis for qualified opinion on financial statements

 



 


The scope of our work was limited as a result of the following matter.  As disclosed in Note 17 a dispute has arisen in relation

 


to the operation of the joint venture arrangements relating to the group's 25 per cent. working interest in the East Ghazalat

 


production licence, held through Independent Resources (Egypt) Limited, in which the group holds a 50 per cent interest (the

 


 


by North Petroleum International S.A. ("North Petroleum") the operator of East Ghazalat. The Joint Venture has rebutted the

 


claims from North Petroleum but the breakdown in relations has meant that operator North Petroleum has continued to refuse

 


to furnish financial information to allow a proper determination of licence costs and an audit of licence revenues to be

 


completed. As a consequence of the lack of access to primary accounting records we have been unable to obtain sufficient

 


appropriate audit evidence in relation to the group and company financial statements concerning:

 


 

•

the carrying value of £Nil of the group's investments in equity-accounted joint ventures as at 31 December 2016;

 

•

the carrying value of £85,565 of the company's investments in equity accounted joint ventures as at 31

 


December 2016; and

 

•

the group's share of any profit or loss attributable to the group's underlying interests in the East Ghazalat

 


licence for the period from 1 July 2015 to 31 December 2016.

 



 

2.

Business segments

 


 


The group has adopted IFRS 8 Operating segments. Per IFRS 8, operating segments are based on internal reports

 


about components of the group, which are regularly reviewed and used by the Board of Directors being the Chief

 


Operating Decision Maker ("CODM") for strategic decision making and resource allocation, in order to allocate

 


resources to the segment and to assess its performance. The group's reportable operating segments are as follows:

 


 


a.

Parent company

 


b.

Rivara

 


c.

Ksar Hadada

 


 


The previously reported segment of Ribolla Basin CBM assets has been classified as a discontinued operation and has been

 


excluded from the analysis below.

 


 


The CODM monitors the operating results of each segment for the purpose of performance assessments and

 


making decisions on resource allocation. Performance is based on assessing progress made on projects and

 


the management of resources used. Segment assets and liabilities are presented inclusive of inter-segment

 


balances.

 


 


The group did not generate any revenue during the year to 31 December 2016 nor in the year to 31 December 2015.

 


 


Information regarding each of the operations of each reportable segment within continuing operations is included in

 


the following table.

 


 






Parent

Rivara

 Ksar Hadada

 Consolidation

 Total

 






company





 






£

£

 £

 £

 £

 


Year to 31 December 2016







 











 


Interest revenue



         57,331

                  1

                      -

          (57,188)

           144

 


Interest expense



       (23,739)

        (54,582)

                      -

            57,188

    (21,133)

 


Depreciation



           5,431

                 10

                      -

                     -

        5,441

 


Impairment of

 


intangible assets



                  -

      5,756,250

                      -

                     -

 5,756,250

 


Income tax



                  -

                   -

                      -

                     -

               -

 


Loss before tax



  (4,487,164)

    (5,820,694)

           (34,752)

        3,092,240

(7,250,370)

 


 


Assets



    1,579,091

      1,596,601

            433,226

     (2,684,925)

    923,993

 


Liabilities



     (411,350)

    (3,193,325)

       (1,079,688)

        4,255,816

      (428,547)

 



 


Year to 31 December 2015








 












 


Interest revenue



         92,800

            7,107

                      -

          (99,556)

           351

 


Interest expense



         (5,142)

        (59,780)

                      -

            61,389

      (3,533)

 


Depreciation



           5,335

                 37

                      -

                     -

        5,372

 


Impairment of

 


intangible assets



                  -

                   -

                      -

                     -

               -

 


Income tax



                  -

                   -

                      -

                     -

               -

 


Loss before tax



  (1,938,281)

        (96,672)

           (95,412)

           317,567

(1,812,798)

 


 


Assets



    4,763,050

      6,352,843

            442,739

     (5,432,404)

 6,126,228

 


Liabilities



  (1,084,119)

    (2,717,707)

       (1,054,449)

        3,692,212

   (1,164,063)

 












 


Consolidation adjustments in respect of the loss before tax includes the loss of £137,906 (2015:£156,985) in relation to

 


equity accounted joint ventures.

 


 


Consolidation adjustments in respect of assets includes the loss of £294,891 (2015: £156,985) in relation to equity

 


accounted joint ventures.

 


 


The geographical split of non-current assets arises as follows:

 



 



 United

 Overseas

 Total

 



 Kingdom



 



 £

 £

 £

 


31 December 2016

 


 


Intangible assets

                      -

          432,486

    432,486

 


Goodwill

                      -

                     -

               -

 


Property, plant and equipment

               3,647

                     -

           3,647

 


 


31 December 2015

 


 


Intangible assets

                      -

        5,387,018

 5,387,018

 


Goodwill

                      -

                     -

               -

 


Property, plant and equipment

             11,119

                    8

         11,127

 


 

3.

Discontinued operations

 


 


The group was unable to find an investment partner for the coal bed methane opportunities at Fiume Bruna and Casoni,

 


in Italy, therefore, these opportunities will no longer be pursued. As a result the directors decided, prior to 31 December 2014,

 


to significantly reduce its activities in Italy and to discontinue the activities within Independent Energy Solutions srl which

 


dealt solely with these opportunities. With Independent Energy Solutions srl classified as discontinued operations, the

 


Ribolla Basin CBM assets segment is no longer presented in the segment note. The results of Independent Energy

 


Solutions srl, incorporating consolidation adjustments, are presented below:

 


Year to 31 December 2016


Year to 31 December 2015

 


£


£

 


 


Revenue

                      -


                       -

 


Administrative expenses

             (3,814)


            (96,272)

 


 


Operating loss before impairment

             (3,814)


            (96,272)

 


 


Impairment of the historic cost and carrying value of intangible


 


assets

                      -


                       -

 


Impairment of goodwill arising on acquisition of Independent Energy


 


Solutions srl - consolidation adjustment

                      -


                       -

 


 


Operating loss after impairment

             (3,814)


            (96,272)

 


 


Financial income

                      -


                      3 

 


 


Financial expense

                      -


                       -

 


 


Loss on ordinary activities before taxation

             (3,814)


            (96,269)

 


 


Taxation

                      -


                       -

 


 


Loss for the year from discontinued operations

             (3,814)


            (96,269)

 


 


The major classes of assets and liabilities of  Independent Energy Solutions srl classified as held for distribution to equity

 


holders of the parent as at 31 December 2016 are as follows:

 


31 December 2016


31 December 2015

 


£


£

 


Assets

 


Intangible assets - fully impaired

                      -


                         -

 


Property, plant and equipment

                      -


                         -

 


Other receivables

            18,883 


                35,107 

 


Cash and cash equivalents

                    9 


                8,072 

 


 


Assets held for distribution

            18,892 


              43,179 

 


 


Liabilities

 


Trade and other payables

                (802)


            (20,968)

 


 


Liabilities directly associated with the  assets held for distribution

                (802)


            (20,968)

 


 


Net assets directly associated with disposal group

            18,090 


              22,211 

 


 


The net cash flows incurred by Independent Energy Solutions srl are as follows:

 


Year to 31 December 2016


Year to 31 December 2015

 


£


£

 


 


Operating

           (8,063)


               (53,092)

 


Investing

                      -


                        3 

 


Financing

                      -


                         -

 


 


Net cash (outflow)/inflow

           (8,063)


               (53,089)

 


 

4.

Taxation

 


Year to 31 December 2016


Year to 31 December 2015

 


£


£

 


Tax on profit on ordinary activities

 


 


Taxation charged based on profits for the period






 


 


UK corporation tax based on the results for the period

                      -


                         -

 


 


Total tax expense in income statement

                      -


                         -

 


 


Reconciliation of the tax expense

 


 


The tax assessed for the year is different from the standard rate of corporation tax in the UK of 20% (2015: 20.25%).  The differences are

 


explained below:

 


Year to 31 December 2016


Year to 31 December 2015

 


£


£

 


 


Loss on ordinary activities before taxation

       (7,250,370)


      (1,812,798)

 


 


Loss on ordinary activities multiplied by standard rate

 


of corporation tax in the UK of 20% (2015: 20.25%)

       (1,450,074)


         (367,092)

 


 


Effects of:

 


Expenses disallowed for tax purposes

        1,281,268 


              29,283 

 


Deferred tax not provided - tax losses carried forward

           168,806 


            337,809 

 


 


Total current tax

                      -


                         - 

 


 


The group has tax losses available to be carried forward in certain subsidiaries and the parent. With anticipated

 


substantial lead times for the group's projects, and the possibility that these may therefore expire before their use, it is

 


not considered appropriate to anticipate an asset value for them.

 


 


No amounts have been recognised within tax on the results of the equity accounted joint ventures.

 


 

5.

Loss per share

 


 


The calculation of basic and diluted loss per share at 31 December 2016 was based on the loss attributable to ordinary

 


shareholders of £7,254,184 The weighted average number of ordinary shares outstanding during the year ending

 


31 December 2016 and the effect of the potentially dilutive ordinary shares to be issued are shown below.

 


 


Year to 31 December 2016


Year to 31 December 2015

 


 £


 £

 


 


Net loss for the year

       (7,254,184)


      (1,909,067)

 


 


Basic weighted average ordinary shares

 


in issue during the year

      38,962,494 


         7,149,778 

 


 


Diluted weighted average ordinary shares

 


in issue during the year

      38,962,494 


         7,149,778 

 


 


Loss per share (pence)




 


 


Basic

               (18.6)


                (26.7)

 


 


Diluted

               (18.6)


                (26.7)

 


 


The company has consolidated all of the existing ordinary shares as at close of business on 22 May 2017 into ordinary shares

 


of 0.25 pence on the basis of one consolidated share for every 25 existing ordinary shares. As this consolidation happened

 


after the year end date but before the approval of the financial statements the weighted average number of ordinary shares

 


shown above has been adjusted for both years to reflect this change and the prior year loss per share figure has been re-stated.

 



 


In accordance with IAS 33 and as the average share price in the year is lower than the exercise price, the share options

 


do not have a dilutive impact on earnings per share for the year ending 31 December 2016.

 


 


Deferred shares have been excluded from the calculation of loss per share due to their nature. Please see note 8 for details

 


of their rights.

 



 

6.

Other intangible assets (group)



Development and exploration



Rivara gas

Ribolla Basin

Ksar Hadada

Total



storage

CBM assets

exploration




facility


acreage




£  

£  

£  

£  


31 December 2016



Cost



1 January 2016

   4,950,206 

        3,870,839 

     1,517,641 

10,338,686 


Exchange differences

      806,044 

           630,291 

                   -

  1,436,335 


Disposals

                  -

                      -

         (4,326)

      (4,326)



31 December 2016

   5,756,250 

        4,501,130 

     1,513,315 

11,770,695 



Impairment



1 January 2016

                  -

        3,870,839 

     1,080,829 

  4,951,668 


Exchange differences

                  -

           630,291 

                   -

     630,291 


Impairment charge for the year

   5,756,250 

                      -

                   -

  5,756,250 



31 December 2016

   5,756,250 

        4,501,130 

     1,080,829 

11,338,209 



Carrying amount



31 December 2016

                  -

                      -

        432,486 

     432,486 



31 December 2015

   4,950,206 

                      -

        436,812 

  5,387,018 



31 December 2015




Cost



1 January 2015

   5,239,353 

        4,096,939 

     1,444,628 

10,780,920 


Exchange differences

     (289,147)

          (226,100)

                   -

  (515,247)


Additions

                  -

                      -

          73,013 

       73,013 



31 December 2015

   4,950,206 

        3,870,839 

     1,517,641 

10,338,686 



Impairment



1 January 2015

                  -

        4,096,939 

     1,080,829 

  5,177,768 


Exchange differences

                  -

        (226,100)

                   -

  (226,100)


Impairment charge for the period

                  -

                      -

                   -

               -



31 December 2015

                  -

        3,870,839 

     1,080,829 

  4,951,668 



Carrying amount



31 December 2015

   4,950,206 

                      -

        436,812 

  5,387,018 



31 December 2014

   5,239,353 

                      -

        363,799 

  5,603,152 



The primary intangible assets are all internally generated.



For the purpose of impairment testing of intangible assets, recoverable amounts have been determined based


upon the value in use of the group's three projects.



Rivara gas storage facility



The Group holds a 100% interest in Rivara Gas Storage srl. Intangible assets include an amount of £5,756,000 with


respect to project expenditure. The regional council, Regione Emilia Romagna, where the project is located is


currently denying authorisation for project development. However authorisation has been granted by the national


government. As a result Rivara Gas Storage srl has appealed against this decision to the Emilia Romagna Bologna


Administrative Court.



Whilst the Group has obtained third party legal opinions regarding the appeal and believe that they would be successful in


their appeal it has been decided, for strategic reasons, to close its Italian operations and therefore this asset has been


impaired in full during the year.


7.

Investments in equity-accounted joint ventures


Year to 31 December 2016


£ 


Cost



1 January 2016

              294,891 


Additions in year

                         -



31 December 2016

                 294,891



Impairment


1 January 2016

                            -


Impairment recognised in parent company

              209,326 



31 December 2016

                 209,326



Share of post-tax losses of equity accounted joint ventures


1 January 2016

                 156,985


Share of post-tax losses of equity accounted joint ventures for the year

                 137,906



31 December 2016

                 294,891



Carrying amount - Group


31 December 2016

                         -



31 December 2015

              137,906 



Carrying amount - Company


31 December 2016

                85,565 



31 December 2015

              294,891 




The group has a 50 per cent. interest in Independent Resources (Egypt) Limited a company incorporated in England &


Wales, whose purpose is to invest in the oil and gas exploration and production activities in the Arab Republic of Egypt.


The other shareholder in Independent Resources (Egypt) Limited (the "Joint Venture") is Nostra Terra Oil and Gas Company


plc ("Nostra Terra") a UK resident company whose shares are traded on the AIM market of the London Stock Exchange.



In October 2015 the Joint Venture acquired a 50 per cent. working interest in the East Ghazalat production licence located


in the Western Desert, Egypt from TransGlobe Energy Corporation through the acquisition of the entire share capital of


Trans Globe (GOS) Inc. a wholly-owned subsidiary of TransGlobe Energy Corporation ("TransGlobe).  In December 2015,


the name of the acquired company was changed to Sahara Resources (GOS) Inc.



The total consideration for the transaction was $3.5 million of which $2.5 million had been deferred as a vendor loan


repayable by the Joint Venture on 30 September 2017.   The loan note accrued interest at 10 per cent annum on the


principal sum, payable semi-annually. Nostra Terra and Echo Energy plc are joint and severally liable for the repayment of the


loan note.



The final loan note principal and semi-annual interest payable to Trans Globe have been settled during the year.



As a non-monetary long-term asset, the consideration for acquiring the share capital of Trans Globe GOS Inc. has been


recorded at the prevailing exchange rate at the time of completion of the acquisition but has not been retranslated at the


prevailing year-end exchange rate.



In January 2016 the Joint Venture was served with notice of default in relation to cash calls raised by North Petroleum


International S.A. ("North Petroleum") the operator of East Ghazalat.



The Joint Venture has rebutted the claims from North Petroleum but the current breakdown in relations has meant that


operator North Petroleum has been unwilling to furnish financial information to allow a proper determination of licence costs


and an audit of licence revenues to be completed. 



In light of this lack of access to primary accounting records the results of the Joint Venture for the years ended 31


December 2015 and 31 December 2016 reflect the investment in Sahara Resources GOS Inc. at historical cost and the loan


note consideration payable to Trans Globe and the accrued costs of completing the related acquisition but do not


consolidate any share of profits or losses attributable to Sahara Resources GOS Inc. underlying interests in the East


Ghazalat licence for the period since 1 July 2015, the effective date of the transaction. The investment is reflected at its


estimated recoverable amount at the company level. In determining the group carrying value of the interest in


equity-accounted joint ventures, and consistent with IFRS 11, this has been written down to £nil by limiting the loss relating


to the group share of total comprehensive loss to £137,906.



The current liabilities of the Joint Venture at 31 December 2016 primarily reflects amounts due to Echo Energy


plc in respect of costs incurred by it to third parties in relation to the acquisition by the Joint Venture of Sahara Resources


GOS Inc.



Summarised financial information in relation to the joint venture is presented below:


31 December 2016


31 December 2015


£ 


£ 


As at 31 December







Current assets

                  943,026


                           1


Non-current assets

               1,172,009


              2,303,201


Current liabilities

            (1,734,506)


               (266,124)


Non-current liabilities

                            -


            (2,286,990)




Included in the above amounts are:





Cash and cash equivalents

                            -


                            -


Current financial liabilities (excluding trade payables)

            (1,734,506)


               (266,124)


Non-current financial liabilities (excluding trade payables)

                            -


            (2,286,990)




Net assets (100%)

                 380,529


               (249,912)


Group share of net assets (50%)

                  190,265


               (124,956)




Year ended 31 December







Revenues

                            -


                            -



Loss from continuing operations

               (324,272)


               (313,969)



Total comprehensive loss (100%)

               (324,272)


               (313,969)


Group share of total comprehensive loss (50%)

               (162,136)


               (156,985)



Included in the above amounts are:





Depreciation and amortisation

                            -


                            -


Interest income

                            -


                            -


Interest expense

                  143,559


                   36,277


Income tax expense

                            -


                            -



8.

Share capital






31 December 2016


31 December 2015


Issued, called up and fully paid


2,293,749,294 0.01p (2015: 335,924,701 0.1p)


ordinary shares




1 January 2016


        2,159,247 


           1,051,434 


Equity shares issued


           271,365 


           2,931,135 


Sub-division of capital


                      -


          (1,823,322)



31 December 2016


        2,430,612 


           2,159,247 



The holders of 0.01p ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per


share at meetings of the company.



In addition to the 0.01p ordinary shares detailed above, as part of capital reorganisations in 2015 and 2016, 202,591,368


deferred shares with a nominal value of 0.9p and 419,905,876 2016 deferred shares with a nominal value of 0.09p have been


created. The deferred shares and the 2016 deferred shares have no value or voting rights and the shareholders were not


 issued with a share certificate, nor are they listed on AIM. These shares remain issued, called up and fully paid at the year end.



Further shares issued and the sub-division of capital during the year was as follows:



Date

Shares

Price



Shares issued

26/02/2016

    6,000,000 

0.6p


Shares issued

03/03/2016

  77,981,175 

0.12p


Sub-division of capital

25/04/2016

419,905,876 

0.1p to 0.01p


Shares issued

16/05/2016

245,788,895 

0.1p and 0.25p


Shares issued

01/06/2016

144,428,571 

0.048p and 0.168p


Shares issued

03/06/2016

452,380,952 

0.048p


Shares issued

18/07/2016

  73,000,000 

0.3p to 0.6p


Shares issued

09/12/2016

958,245,000 

0.08p


9.

Share premium account






31 December 2016


31 December 2015



£ 


£ 



1 January 2016


      16,628,623 


         16,302,050 


Premium arising on issue of equity shares


        1,003,029 


              405,334 


Transaction costs


             (9,889)


               (78,761)



31 December 2016


      17,621,763 


         16,628,623 



10.

Share-based payments



(a) Share Options



The share option scheme, which was adopted by the company on 25 November 2005, was established to reward and incentivise


the executive management team for delivering share price growth. The share option scheme is administered by the Remuneration


Committee.



On 4 March 2013 the company issued 200,000 share options to W G Coleman upon his appointment to the board


as chief executive officer.


On 10 October 2014 the company issued 4,205,734 share options in total to the directors, key management


personnel and their service companies as follows:



Individual

Number of options granted




W G Coleman (director)

          2,628,583



O P T Franks (director)

             525,717



F P McCole (key management personnel)

             525,717



Rocky Mountain Limited (company controlled




by B Hepp, key management personnel)

             525,717




          4,205,734




On 27 February 2015, the company issued 1,050,000 share options to non-director and non-key management personnel.



Details of the tranches of share options outstanding at the year end are as follows:



Date of grant


01/01/2016


Issued/


31/12/2016


Date from which


Lapse

Exercise




Number of


lapsed in


Number of


options may be


date

Price per




options


the year


options


first exercised



option















04/03/2013


200,000


                -


200,000


04/03/2013


03/03/2023

1p


10/10/2014


4,205,734


   (525,717)


3,680,017


10/10/2015


10/10/2024

3p


27/02/2015


1,050,000


                -


1,050,000


27/02/2016


27/02/2025

3p



The options outstanding at the end of the year have a weighted average remaining contractual life of  0.75 years for the options


issued on 10 October 2014, and 1.17 years for the options issued on 27 February 2015. Those issued  on 4 March 2013


are considered to have no remaining contractual life.



The fair values of the options granted on 4 March 2013 were calculated using the Black-Scholes option pricing model. The


inputs into the model were as follows:



Weighted average share price

10.62p




Weighted average exercise price

1p




Expected volatility

92.00%




Expected life

10 years




Risk free rate

2.10%




Expected dividend yield

Nil





The fair values of the options granted on 10 October 2014 were calculated using the Black-Scholes option pricing model.


The inputs into the model were as follows:



Weighted average share price

2.12p




Weighted average exercise price

3p




Expected volatility

85.00%




Expected life

10 years




Risk free rate

2.22%




Expected dividend yield

Nil





The average fair value of share options granted in the year was 1.716p each.



The outstanding share options are not subject to any share-performance related vesting conditions but vesting is conditional


upon continuity of service.



The expected volatility was determined with reference to the company's share price since it was admitted for trading on AIM


in December 2005. The expected life used in the model has been adjusted, based on management's best estimate, for the


effects of non-transferability, exercise restrictions and behavioural considerations.



The fair values of the options granted on 27 February 2015 were calculated using the Black-Scholes option pricing model.


The inputs into the model were as follows:



Weighted average share price

1.62p




Weighted average exercise price

3p




Expected volatility

87.00%




Expected life

10 years




Risk free rate

1.73%




Expected dividend yield

Nil





The average fair value of share options granted in the year was 1.28p each.



The outstanding share options are not subject to any share-performance related vesting conditions but vesting is conditional


upon continuity of service.



The expected volatility was determined with reference to the company's share price since it was admitted for trading on AIM


in December 2005. The expected life used in the model has been adjusted, based on management's best estimate, for the


effects of non-transferability, exercise restrictions and behavioural considerations.



The group recognised total expenses of £21,477 (2015: £45,942) related to equity-settled, share-based payment transactions


relating to share options during the year.



A deferred taxation asset has not been recognised in relation to the charge for share-based payments due to the availability


of tax losses available to be carried forward.



(b) Warrants over ordinary shares



The company issued warrants over ordinary shares to the company to subscribers of new ordinary shares and as fundraising commission in


respect of equity fundraisings completed during the years to 31 December 2015 and 31 December 2016.



On 8 May 2015 the company issued warrants to subscribe for 9,200,000 ordinary shares at an exercise price of 1.50p.


On 8 May 2015 the company issued warrants to subscribe for 4,000,000 ordinary shares at an exercise price of 1.20p.


On 28 May 2015 the company issued warrants to subscribe for 30,800,000 ordinary shares at an exercise price of 1.50p.


On 21 July 2015 the company issued warrants to subscribe for 8,724,019 ordinary shares at an exercise price of 1.50p.


On 18 November 2015 the company issued warrants to subscribe for 133,333.333 ordinary shares at an exercise price of 1.00p.


On 18 November 2015 the company issued warrants to subscribe for 6,000,000 ordinary shares at an exercise price of 0.72p.



On 9 December 2016 the company issued warrants to subscribe for 1,006,157,250 ordinary shares at an exercise price of 0.12p.









Details of the tranches of warrants outstanding at the year-end are as follows:



Date of issue


01/01/2016


Issued/


31/12/2016


Date from which


Lapse


Exercise




Number of


lapsed in


Number of


warrants may be


date


price of




warrants


the year


warrants


first exercised




warrants



08/05/2015


    9,200,000


                -


9,200,000


08/05/2015


28/05/2017


1.50p


08/05/2015


    4,000,000


                -


4,000,000


08/05/2015


28/05/2018


1.20p


28/05/2015


  30,800,000


                -


30,800,000


28/05/2015


28/05/2017


1.50p


21/07/2015


    8,724,019


                -


8,724,019


21/07/2015


28/05/2017


1.50p


16/11/2015


133,333,333


                -


133,333,333


16/11/2015


18/11/2017


1.00p


16/11/2015


    6,000,000


                -


6,000,000


16/11/2015


18/11/2018


0.72p


09/12/2016

                     -


958,245,000


958,245,000


09/12/2016


09/12/2018


0.12p


09/12/2016

                     -


47,912,250


47,912,250


09/12/2016


09/12/2018


0.08p



A charge to the profit and loss account has been taken in compliance with IFRS2 in  respect of the fair value of warrants


issued to brokers in relation to fundraising services provided as set out below:




The fair value of the 1.20p warrants issued on 8 May 2015 was calculated using the Black-Scholes option pricing model.


The inputs into the model were as follows:


 

Weighted average share price

1.05p




Weighted average exercise price

1.20p




Expected volatility

88.00%




Expected life

3 years




Risk free rate

1.93%




Expected dividend yield

Nil





The average fair value of warrants granted was 0.57p each.



The fair value of the 0.72p warrants issued on 18 November 2015 was calculated using the Black-Scholes option pricing


model. The inputs into the model were as follows:



Weighted average share price

0.60p




Weighted average exercise price

0.72p




Expected volatility

85.00%




Expected life

3 years




Risk free rate

1.95%




Expected dividend yield

Nil





The average fair value of warrants granted was 0.31p each.



The fair value of the 0.12p warrants issued on 9 December 2016 was calculated using the Black-Scholes option pricing


model. The inputs into the model were as follows:



Weighted average share price

0.08p




Weighted average exercise price

0.12p




Expected volatility

125.00%




Expected life

2 years




Risk free rate

1.46%




Expected dividend yield

Nil





The average fair value of warrants granted was 0.041p each.



The group recognised total expenses of £Nil (2015: £5,686) related to equity-settled, share-based payment transactions


relating to warrants over ordinary shares during the year.



A deferred taxation asset has not been recognised in relation to the charge for share-based payments due to the availability


of tax losses available to be carried forward.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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