Final Results

RNS Number : 7027W

Independent Resources PLC

24 November 2010

 



24 November 2010

Independent Resources plc

("Independent Resources" or the "Company" or the "Group)

Results for the twelve months ended 30 September 2010

Highlights

·    Keystone Rivara gas storage project - final round of Ministerial documentation

     Exhaustive consultation process continues to progress for a project Italy urgently needs

·    Ribolla - Casoni permit secured, 2-block farm-out preparation underway

     Project reclassified from coal bed methane (CBM) to shale gas in June 2010

Gross prospective estimates of in-place gas and recoverable gas upgraded to 8.6 BCM (300 BCF) and 4.6 BCM (160 BCF), respectively

Third party evaluation planned to form the basis for securing an attractive JV partner and realising Ribolla's full potential

·    Non-core Ksar Hadada - farmed out work programme satisfies permit renewal

     Carried interest resulted in minimal expenditure on unsuccessful 2010 programme

·    Committed third party funding for projects as at 30 September 2010: £5.2 million (2009: £6.1 million)

·    Net cash at 30 September 2010: £3.9 million (2009: £5.3 million)

Commenting, Grayson Nash, Executive Chairman of IRG said, "Our knowledge of and experience with our assets, coupled with our financial flexibility, will allow us to grow significantly in the year ahead and seek to produce excellent shareholder value. I look forward to providing further updates over the next few months."

Chairman's statement

This year has provided both success and disappointment. The core projects of Independent Resources are on the right track. As a result of the board's substantial equity stake in the company, the directors are of the opinion that their interests are wholly aligned with those of our external shareholders. We continually strive to improve on our achievements and I believe that in the year under review, our decision-making has been good.

During the reporting period, we stepped up efforts to secure the remaining permits to allow the company to commence development of our keystone underground gas storage ("UGS") facility at Rivara in the Po Valley, and these efforts are finally yielding tangible progress. Operations on our Ribolla shale gas project near Grosseto have confirmed the resource in place and we have also made further progress on permitting. Joint venture operations at Ksar Hadada in Tunisia were unsuccessful but fortunately our carried position, post farm-out, involved minimal cash exposure. We continue to maintain a cost-conscious approach to the development of our projects, and the company has sufficient human and financial resources to secure the Rivara concession and successfully farm out Ribolla on attractive terms.

Rivara

In September 2010, Italy's gas regulator published its findings regarding the nation's energy strategy and its review of energy markets. These documents highlight once again the strategic importance of gas storage for a market that is undersupplied. Our Rivara project is engineered to be a clean, efficient, low-cost and high-performance gas delivery asset. The directors believe that the time it has taken to permit Rivara is at odds with the national consensus view that the creation of this facility would be beneficial and timely.

The challenge the company has faced is that Italy is culturally very conservative and although this has contributed to the preservation of the country's strengths, it has also slowed progress and innovation. Underground gas storage is a business that very few people understand. It is - to say the least - a complex mix of geology, engineering and regulation, whose strategically vital services are provided to a handful of operators in the so-called midstream gas market. Consequently, underground gas storage does not lend itself well to an uninformed public debate. However, this debate is well underway, and is of course perfectly legitimate, but its drawn out nature is simply the logical consequence of the system in which we operate.

In June we signalled that the decision to permit Rivara was potentially just months away. This was based on the additional time we felt Italy's Ministry of Environment would require to reach a conclusion, particularly in light of its already difficult to justify disregard for procedural timeframes. In September we announced that the Ministry of Environment had engaged the support of an enlarged group of specialists to demonstrate to all stakeholders that its review of the project would not only be as rigorous and in-depth as possible, but also provide definitive answers to each and every critique that has ever been made. Despite this, we remain confident in the Italian permitting process as we seek to reassure all interested stakeholders that Rivara could very well provide Europe's most valuable storage capacity.

Under the original acquisition terms for Independent Gas Management srl, owner of the Rivara concession, deferred consideration amounting to 2.6 million Independent Resources plc shares was payable to the vendors if certain share price conditions were met. The accounts until now have reflected the board's expectation that the conditions would be met and that the deferred consideration shares would therefore be issued. As at 30 September 2010, however, with time running out, it now seems most unlikely that the conditions will be met and the acquisition cost of Independent Gas Management srl has been reduced accordingly. This has been achieved by eliminating the deferred consideration value of £4.8million from the "Goodwill" asset and the "Shares to be issued" reserve respectively.

Ribolla Basin Coal Bed Methane (CBM) & Shale Gas Assets

I believe it would be useful to put this project in a broader context, and to remind fellow shareholders of the assets we have, in order to clarify why we have signalled our intention to involve a partner with specialised expertise in unconventional gas rather than to continue these operations alone.

A brief history of the two permits

First, there is the Fiume Bruna Exploration Permit, which consists of an area totalling 247 km² located in southern Tuscany, Central Italy, lying entirely onshore. The exploration permit was applied for in August 2004 and the licence awarded in August 2008. The permit area contains the second most important coal mining area in Italy, exploited from 1839 to the late 1950s. The Ribolla coal is a low-sulphur sub-bituminous coal of Miocene age. The Ribolla mine was notorious for the frequent methane inflow and consequent explosions. The mine closed a few years after the large methane explosion of May 1954 that caused 43 casualties.

Secondly, there is the Casoni Exploration Permit, which consists of an area totalling 142 km² just to the south of the Fiume Bruna block, again entirely onshore. The exploration permit was applied for in March 2007, and approved by the Ministry of Economic Development in October 2008. Its environmental impact assessment is formally still pending, but on October 25 this year exemption was allowed by Tuscany's regional authorities. The prospective area covered by both licences is characterised by plains and includes cultivated fields.

What the permits contain

The reservoir rock for the unconventional gas in both permits ranges from coal beds that contain gas adsorbed into the solid matrix of coal to organic-rich sedimentary rocks. These latter are called carbonaceous shales, where the gas is adsorbed within the organic matter and is present in the microporosity and in the cleat space of this low permeability rock. Unconventional gas collectively includes both coal bed methane (CBM) and natural gas from organic-rich shale formations, known as shale gas. Shale gas production is one of the most rapidly expanding sectors in onshore US oil and gas exploration and production today. The development of technology that has enabled the cost-effective use of horizontal drilling and multi-stage hydraulic fracturing allows an area to be developed with substantially fewer wells than would be needed if vertical wells were used.

Operations

Independent Resources drilled and cored Italy's first CBM stratigraphic borehole in 2006, and measured gas content and gas adsorption characteristics in coal and carbonaceous shale. The gas was found to be thermogenic (an excellent sign, indicating widespread gas saturation of the host rock). During 2008-2009 we acquired a total of 66 km of 2D seismic and drilled the FB1 well in August 2009.

Confirmed subsequently, but speculated at the time, the FB1 well did not encounter the target coal shale sequence because the seismic imaging of the subsurface at the well's target depths proved unreliable. The FB1 well was suspended, pending deeper-penetration seismic imaging, so as to re-enter the well with greater depth control. Indeed, towards that end the company secured a long-term lease on the surface rights to the land around the well site. In addition, a large number of vintage boreholes from past mining activity have been used to construct a regional depositional model in the shallow part of the basin. This allowed us to map a thick gas-bearing carbonaceous shale sequence, consistently located immediately above and below the main coal seam.

The FB2 well (target zone present at a depth of 340 m, 1,100 ft) was subsequently drilled to test the coal's productivity in the shallow part of the basin, where the coal and the gas shale were found to be saturated with gas. A hydraulic fracture job coupled with ceramic proppant, designed to enhance productivity, was followed by a seven-week production test.

Results

We found that the coal is fairly easy to fracture with vertical fractures that can take sufficient quantities of proppant. The gas, desorbed at depth, flowed to surface and was tested to be of very high quality, (93-94% of methane, with 1-2% of higher hydrocarbons, 4% nitrogen and only 1% CO₂), perfectly suitable for sale, and with very little associated water, pointing to minimising a costly requirement to treat waste water.

The carbonaceous formation was found to have 1-2 millidarcies of permeability. However, the thermogenic gas, formed at high pressure and temperature from the natural cracking of the organic matter in the rock matrix, occurs in a rock with insufficient thermal maturity to generate gas. This is significant because it indicates gas migration from deeper in the basin and implies sufficient large-scale natural permeability. The organic matter in the source rock matrix has demonstrated this coal's capability to produce gas of very good quality. The Ribolla coal sequence can be classified as semi-dry. We have been able to measure de-gassing from cuttings from the same interval previously cored, reporting similarly high level of desorbed gas, particularly from the carbonaceous shale.

In June 2010, Independent Resources reclassified the play from "CBM" to "shale gas" after concluding that the Ribolla Carbonaceous Sequence (including the coal and the overlying and underlying shale) responds more like a gas shale than a classic high permeability CBM coal. Accordingly, extra pressure differential (proportional to the vertical distance from the surface to the bottom of the well) is needed to extract the gas at commercial rates. As a consequence, we took the decision to focus activity in the deeper part of the basin, where maximum driving pressure is available, and where coal and gas shale are interpreted to be at an average depth of 1,000 m.

Implications for gas potential

Following its analysis of operations and data from the wholly-owned Fiume Bruna and Casoni licences, Independent Resources has set out its early-stage prognosis for this organic-rich carbonaceous shale basin.

The Casoni and Fiume Bruna blocks cover 390 km² (96,000 acres) and contain more than 140 km² (35,000 acres) of potentially productive area with a coal plus gas shale sequence at depths averaging 1,000 m (3,280 ft). In June 2010, the company upgraded its gross prospective estimates of in-place gas and recoverable gas to 8.6 BCM (300 BCF) and 4.6 BCM (160 BCF) respectively, which includes both the Fiume Bruna and Casoni blocks. This represents an improvement of the gross figures, due to the combined addition of the Casoni licence area and the appropriate average gas content of the rock, and an improvement from Prospective Resources, as it was previously reported, to Contingent Resources, pursuant to the SPE's Petroleum Resources Management System 2007 guidelines.

Exploitation strategy

Since seismic was previously acquired for the shallower part of the basin using low-energy seismic acquisition techniques, a test seismic line is planned to determine the best acquisition parameters to map the subsurface carbonaceous stratum in the deeper part of the basin. This will define an appropriate seismic acquisition programme that will focus on proving the extent of the basin and siting a well location in the middle of the fairway. The University of Modena is involved in a detailed bio-stratigraphy study focused on investigating the geological section drilled by the FB1 well. Following the results of this study, a re-entry of the FB1 well (presently suspended with casing at 224 m depth) is envisaged along the new seismic line. Both the exploration and the development of the Ribolla play require drilling that is not only complex to execute, but also involves stimulation technique trials and optimisation. The company is not in a position to fund the required programme on terms that would likely be acceptable to most shareholders.

Independent Resources is therefore in the midst of discussions with the highest-calibre providers of services related to the upstream sector of the petroleum industry. What we are now seeking is a third-party evaluation of Ribolla's hydrocarbon potential, estimation and classification of reserves to be recovered, production forecasting, and a general appraisal of the property for prospective farm-out. This will form the basis for the company to produce a marketing document with a view to securing an attractive JV partner, and realising Ribolla's full potential.

We believe that a specialised operator's practical experience on a similar shale play would be a prudent and valuable addition to the project. We will likely be seeking such a partnership to appraise and develop this acreage and commence this process once the report described above has been produced. It should be noted that expertise in efficiently transforming gas to power at small scale at the wellhead would also be useful given the local area's need to improve energy independence.

Ksar Hadada

Although we had reason to be confident that this year's operations would lead to important oil discoveries on the block, we were also aware of the risks and the scale of the funding that would be required. We therefore farmed out a portion of our stake in the Ksar Hadada oil and gas exploration permit, which covers 5,600 km² onshore Tunisia, in exchange for a carried position. The permit remains a non-core asset.

Operations

The joint venture acquired over 100 km of new 2D seismic in Q4 2009, with processing and interpretation completed in January 2010. The Oryx-1 exploration well reached its total depth at 1,140 m. Although oil shows were encountered in both the upper and lower Ordovician reservoir units, log analysis indicates that no significant oil saturation is present in these reservoirs at this location. The Oryx-1 well was drilled under budget and without a time losing incident. It was plugged and abandoned without testing.

The ST-4 exploration well reached total depth at 1,603 m, along hole measured depth, corresponding to a true vertical depth subsea level of 1,009 m. The ST-4 well was designed and successfully drilled as a deviated wellbore through the Upper Ordovician, penetrating 364 m of the objective Bir Ben Tartar Formation at an average deviation angle of 77 degrees. Although oil and gas shows were encountered in the Bir Ben Tartar reservoir unit, evaluation of the extensive logging suite acquired in the Ordovician section indicates that the oil saturation and reservoir fracturation is insufficient at the ST-4 location to justify testing of this well bore. The well has been plugged and abandoned without testing.

Remaining known prospectivity

1.  Cambro-Ordovician prospects:

·    South Salah prospect: Although there is uncertainty in gross-rock volume for the on-block extent of this prospect, it is the next-best analogue to the TT2 oil discovery to the south on the Sud Remada permit. The prospect straddles the permit borders.

·    The NW compartment of Sidi Toui which has an independent interpreted oil-water contact.

2.  Silurian Acacus:

·    The Gazelle prospect is the best Acacus sandstone target identified at the Silurian Acacus level that was confirmed by recent seismic data.

3.  Silurian Hot Shale:

·    The Silurian Hot Shale is pervasive and present at potentially economic depths (indicatively 600 km² at depths shallower than 2,000 m). It could be an analogue to the Bakken Shale that produces oil in the Williston Basin. To prove that the Silurian is a good analogue to the Bakken would require that the Silurian shale and the adjacent formations be analysed for hydrocarbon generation potential, maturity, fracturing, porosity, permeability and oil saturation, among other parameters. They may require hydraulic fracture stimulation as part of any testing programme. The Italian oil major Eni has recently expressed optimism about Tunisian Hot Shale prospectivity.

Next steps

Although the results of the 2010 drilling campaign were unsuccessful, a significant amount of new and valuable data has been produced and analysed. Although the data will be put to direct use for the next operational campaign, and therefore could potentially be capitalised, we have written off the vast majority of our expenditures to date in Tunisia as a conservative approach. This, however, does not mean that we consider the resulting book value of the company's interest in the block in any way reflects its market value. The JV believes it has satisfied the terms of the permit work commitments to date and is currently evaluating next steps.

Outlook

Our objectives in the months ahead are clear, achievable, and focused on delivering shareholder value. The company is in a strong financial position. The directors therefore have the means to reach these objectives, and we are highly motivated through our own holdings of equity. Our knowledge of and experience with our assets, coupled with this financial strength and commitment, will allow us to grow significantly in the year ahead. I look forward to providing further updates over the next few months.

Grayson Nash

Executive Chairman

Independent Resources plc
Consolidated statement of comprehensive income
Year ended 30 September 2010
			Notes		2010		2009
Continuing operations					£		£
Revenue					-		33,073
Cost of sales					-		-
Gross profit					-		33,073
Administrative expenses					(1,164,280)		(1,316,406)
Operating loss before impairment					(1,164,280)		(1,283,333)
Impairment of Ksar Hadada					(1,390,588)		-
Operating loss					(2,554,868)		(1,283,333)
Financial income					355,041		682,661
Financial expense					(3,594)		-
Loss on ordinary activities
before taxation					(2,203,421)		(600,672)
Taxation			3		44,365		(72,148)
Loss for the year					(2,159,056)		(672,820)
Other comprehensive income:
Exchange difference on translating foreign operations					(735,217)		1,344,394
Income tax relating to other comprehensive income					44,594		-
Total comprehensive (loss)/income for the year					(2,849,679)		671,574
Loss attributable to:
Owners of the parent					(2,135,505)		(653,170)
Non-controlling interests					(23,551)		(19,650)
					(2,159,056)		(672,820)
Total comprehensive (loss)/income attributable to:
Owners of the parent					(2,742,618)		493,642
Non-controlling interests					(107,061)		177,932
					(2,849,679)		671,574
Loss per share (pence)			4
From continuing operations
Basic					(5.0)		(1.6)
Diluted					(5.0)		(1.6)

Independent Resources plc
Consolidated statement of financial position
As at 30 September 2010
		Notes	2010		2009
				£		£
Non-current assets
Property, plant and equipment				75,716		92,168
Goodwill		5		450,766		5,253,670
Other intangible assets		6		7,990,178		7,010,660
				8,516,660		12,356,498
Current assets
Other receivables			5,457,781		5,752,935
Current taxation assets			88,588		-
Cash and cash equivalents			3,894,310		5,337,403
			9,440,679		11,090,338
Current liabilities
Trade and other payables			(582,558)		(1,023,614)
Current taxation liabilities			-		(153,896)
Provisions			(309,759)
			(892,317)		(1,177,510)
Net current assets				8,548,362		9,912,828
Net assets				17,065,022		22,269,326
Equity attributable to equity holders of the parent
Share capital		7		458,369		415,739
Share premium		8		15,287,351		12,881,702
Shares to be issued				-		4,802,904
Share option reserve				389,844		389,844
Foreign currency translation reserve				830,295		1,437,408
Retained earnings				(1,241,057)		894,448
				15,724,802		20,822,045
Non-controlling interests				1,340,220		1,447,281
Total equity				17,065,022		22,269,326

Independent Resources plc
Statement of changes in equity
Year ended 30 September 2010
						Foreign
				Shares	Share	currency		Non-
	Retained	Share	Share	to be	option	translation		controlling	Total
	earnings	capital	premium	issued	reserve	reserve	Total	interests	equity
	£	£	£	£	£	£	£	£	£
Consolidated
1 October 2008	1,547,618	407,115	12,444,974	4,602,634	368,185	290,596	19,661,122	1,269,349	20,930,471
Loss for the year	(653,170)	-	-	-	-	-	(653,170)	(19,650)	(672,820)
Exchange differences	-	-	-	-	-	1,146,812	1,146,812	197,582	1,344,394
Total comprehensive income for the year	(653,170)	-	-	-	-	1,146,812	493,642	177,932	671,574
Fair value adjustments	-	-	-	648,705	-	-	648,705	-	648,705
New shares issued	-	8,624	439,811	(448,435)	-	-	-	-	-
Share issue costs	-	-	(3,083)	-	-	-	(3,083)	-	(3,083)
Share-based payments	-	-	-	-	21,659	-	21,659	-	21,659
30 September 2009	894,448	415,739	12,881,702	4,802,904	389,844	1,437,408	20,822,045	1,447,281	22,269,326
1 October 2009	894,448	415,739	12,881,702	4,802,904	389,844	1,437,408	20,822,045	1,447,281	22,269,326
Loss for the year	(2,135,505)	-	-	-	-	-	(2,135,505)	(23,551)	(2,159,056)
Exchange differences	-	-	-	-	-	(651,707)	(651,707)	(83,510)	(735,217)
Taxation on exchange differences	-	-	-	-	-	44,594	44,594	-	44,594
Total comprehensive loss for the year	(2,135,505)	-	-	-	-	(607,113)	(2,742,618)	(107,061)	(2,849,679)
Fair value adjustments	-	-	-	(4,802,904)	-	-	(4,802,904)	-	(4,802,904)
New shares issued	-	42,630	2,515,170	-	-	-	2,557,800	-	2,557,800
Share issue costs	-	-	(109,521)	-	-	-	(109,521)	-	(109,521)
30 September 2010	(1,241,057)	458,369	15,287,351	-	389,844	830,295	15,724,802	1,340,220	17,065,022

Independent Resources plc
Consolidated statement of cash flows
Year ended 30 September 2010
		2010		2009
Cash flows from operating activities		£		£
Loss before taxation		(2,203,421)		(600,672)
Adjustments for:
	Depreciation of property, plant and equipment	32,628		23,488
	Provision for well shut down costs	309,759		-
	Impairment of intangible assets	1,080,829		-
	Financial income	(355,041)		(682,661)
	Financial costs	3,594		-
		(1,131,652)		(1,259,845)
Decrease/(increase) in other receivables		612,154		(384,810)
(Decrease)/increase in trade and other payables		(521,452)		356,883
Share-based payments		-		21,659
Exchange rate difference on investments		(384,322)		880,591
Cash used in operations		(1,425,272)		(385,522)
Income taxes paid		(73,129)		(28,648)
Net cash used in operating activities		(1,498,401)		(414,170)
Cash flows from investing activities
Interest received		38,041		183,661
Interest paid		(3,594)		-
Proceeds on disposal of property, plant and equipment		26,527		-
Purchase of intangible assets		(2,406,018)		(2,839,562)
Purchases of property, plant and equipment		(47,927)		(44,647)
Net cash used in investing activities		(2,392,971)		(2,700,548)
Cash flows from financing activities
Issue of share capital		2,557,800		-
Share issue costs		(109,521)		(3,083)
Net cash from/(used in) financing activities		2,448,279		(3,083)
Net decrease in cash and cash equivalents		(1,443,093)		(3,117,801)
Cash and cash equivalents at 1 October 2009		5,337,403		8,455,204
Cash and cash equivalents at 30 September 2010		3,894,310		5,337,403

Notes to the final results for the year ended 30 September 2010

1.  Basis of Presentation

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and using accounting policies which are consistent with those applied in the financial statements for the year ending 30 September 2009, except for the impact of the adoption of the standards and interpretations described below:

IFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January 2009). IFRS 8 is a disclosure standard that has resulted in a re-designation of the Group's reportable segments (see note 2), but has had no impact on the reported results or financial position of the Group.

IAS1 (revised 1 January 2007) Presentation of financial statements (effective for annual periods beginning on or after 1 January 2009). The revised standard has introduced a number of terminology changes (including revised titles for the financial statements) and has resulted in a number of changes in presentation and disclosure. However, the revised standard has had no impact on the reported results or financial position of the Group.

The financial information set out in this announcement, which does not constitute the statutory financial statements of the Group but was derived from those financial. The auditors have reported on the financial statements for the period ended 30 September 2010; this report was unqualified.

The financial information for the year ending 30 September 2009 is derived from the financial statements for that year. The company's auditors have reported on the 2009 financial statements; their report was unqualified.

The financial information set out in this announcement was approved by the board on 23 November 2010.

The directors do not recommend the payment of a final dividend.

The full statutory financial statements will be included in the Group's annual report, which will be e-mailed or posted to shareholders on 26 November 2010.  They will be available during normal business hours from the offices of Seymour Pierce Limited at 20 Old Bailey, London EC4M 7EN from that date.  In addition, the annual report and accounts will be available to be downloaded from the Company's website at www.ir-plc.com . Additional copies will be available at the Group's offices Tower Bridge House, St. Katharine's Way, London E1W 1DD after that date. The accounts will be delivered to the Registrar of Companies after the Company's Annual General Meeting, which is scheduled for 21 December 2010.

2. Business segments

The group has adopted IFRS 8 Operating segments from 1 October 2009. Per IFRS 8 operating segments are basedon 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.	Ribolla Basin CBM & Shale Gas Assets
	d.	Ksar Hadada

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 30 September 2010. In the year to 30 September 2009 revenue of £33,073 was generated in the Ribolla Basin CBM & Shale Gas Assets operating segment, which is based in Italy. This revenue was not related to the Ribolla project itself.

Information regarding each of the operations of each reportable segments is included in the following table.

				Ribolla Basin
		Parent		CBM & Shale	Ksar
		company	Rivara	Gas Assets	Hadada	Consolidation	Total
		£	£	£	£	£	£
	2010
	Interest revenue	246,674	318,097	369	-	(210,099)	355,041
	Interest expense	-	(90,153)	(123,540)	-	210,099	(3,594)
	Depreciation	1,726	2,218	28,684	-	-	32,628
	Impairment of
	intangible assets	-	-	-	1,080,829	-	1,080,829
	Income tax	88,959	-	-	-	(44,594)	44,365
	Loss for the year
	before taxation	(1,706,957)	20,853	(673,046)	(206,006)	361,735	(2,203,421)
	Assets	13,142,757	11,580,315	4,544,026	104,876	(11,414,635)	17,957,339
	Liabilities	(60,683)	(4,198,340)	(5,214,482)	(316,309)	8,897,497	(892,317)
	2009
	Interest revenue	309,330	507,788	-	-	(134,457)	682,661
	Interest expense	-	(70,404)	(64,053)	-	134,457	-
	Depreciation	6,507	1,032	15,949	-	-	23,488
	Impairment of
	intangible assets	-	-	-	-	-	-
	Income tax	(71,058)	-	-	(1,090)	-	(72,148)
	Profit/(loss) for the
	year before taxation	238,776	242,154	(499,685)	(388)	(581,529)	(600,672)
	Assets	17,229,150	10,882,704	3,225,664	1,030,417	(8,921,099)	23,446,836
	Liabilities	(174,453)	(3,244,536)	(3,751,458)	(1,035,844)	7,028,781	(1,177,510)
	The geographical split of non-current assets arises as follows:
					United
					Kingdom	Overseas	Total
					£	£	£
	2010
	Intangible assets				-	7,990,178	7,990,178
	Goodwill				-	450,766	450,766
	Property, plant and equipment				-	75,716	75,716
	2009
	Intangible assets				-	7,010,660	7,010,660
	Goodwill				-	5,253,670	5,253,670
	Property, plant and equipment				1,726	90,442	92,168

3.	Taxation
		2010		2009
		£		£
	Tax on profit on ordinary activities
	Taxation charged based on profits for the year
	UK corporation tax based on the results for the year	(43,994)		73,500
	Over provided in prior year	(371)		(2,442)
	Overseas taxation	-		1,090
	Total tax expense in income statement	(44,365)		72,148
	Reconciliation of the tax expense
	The tax assessed for the year is different from the standard rate of corporation tax in the UK (28%).  The differences are explained below:
		2010		2009
		£		£
	Loss on ordinary activities before taxation	(2,203,421)		(600,672)
	Loss on ordinary activities multiplied by standard rate
	of corporation tax in the UK of 28% (2009: 21%)	(616,958)		(126,141)
	Effects of:
	Untaxed income on deemed disposal of interest in subsidiary	(88,354)		(100,457)
	Deferred tax not provided - tax losses carried forward	662,137		159,804
	Exchange gain on net investment taken to reserves but taxable	-		122,121
	Marginal tax relief	(819)		18,173
	Adjustments to tax charge in respect of previous years	(371)		(2,442)
	Overseas taxation	-		1,090
	Total current tax	(44,365)		72,148
	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.

4.	Loss per share
	The calculation of basic and diluted loss per share at 30 September 2010 was based on the loss attributable to ordinary shareholders of £2,135,505. The weighted average number of ordinary shares outstanding during the year ending 30 September 2010 and the effect of the potentially dilutive ordinary shares to be issued are shown below.
	Contingently issuable shares such as included within the share option scheme or in connection with the acquisition of Independent Gas Management srl have not been treated as dilutive as the market conditions have not been met at 30 September 2010.
		2010		2009
		£		£
	Net loss for the year	(2,135,505)		(653,170)
	Basic weighted average ordinary shares
	in issue during the year	42,543,262		41,403,754
	Diluted weighted average ordinary shares
	in issue during the year	42,543,262		41,403,754

5.	Goodwill (group)
		Goodwill
		£
	2010
	Cost
	1 October 2009	5,253,670
	Fair value adjustment	(4,802,904)
	30 September 2010	450,766
	Carrying amount
	30 September 2010	450,766
	30 September 2009	5,253,670
	2009
	Cost
	1 October 2008	4,604,965
	Fair value adjustment	648,705
	30 September 2009	5,253,670
	Carrying amount
	30 September 2009	5,253,670
	30 September 2008	4,604,965
	The goodwill arises as a result of the acquisition of Independent Energy Solutions srl and fair value adjustments to the shares to be issued relating to the acquisition of Independent Gas Management srl. The fair value adjustment relates to the directors review of their estimate of the cost of the acquisition of Independent Gas Management srl based upon the market conditions at the year end and the probability of issuing shares, contingent upon market conditions subsequent to the year end. The directors assessed at the year end the likelihood of the market conditions relating to the final tranche and, on this basis, have assessed that no further shares to be issued are expected to occur on this transaction. The market conditions relating to the final tranche have not been met and confirmed that no further shares are currently expected to be issuable in connection with the acquisition. The goodwill arising as a result has therefore been reversed as a fair value adjustment against the shares to be issued.
	A review of the latest management information and projections shows a net present value significantly in excess of assets and liabilities relating to this project. The main assumptions indicate that no significant change has arisen on these calculations which would materially impact on the group.
	The continuing analysis and testing of technical data continues to indicate that the project is feasible.
	The group continues to work towards, and is confident of, obtaining all the necessary approvals from regulatory authorities.
	The group anticipates being able to raise the necessary finance to continue to develop the project.
	For the purpose of goodwill impairment testing, recoverable amounts have been determined based upon the value in use of the Rivara project.
	Value in use
	Cash flows are projected for the periods up to the date that the project is expected to become commercially operational and from then until operations are expected to cease, based upon management's expectations. These dates depend on a number of variables, including the project's technical feasibility, regulatory approval, forecast revenue prices and the associate development and operational costs.
	The project is expected to generate revenue after five to nine years and to continue doing so for a further 35 years. The directors consider that projections calculated for a period greater than five years are justified as the project is still in a development stage. The directors have used a constant rate of growth of 3.0% (2009: 2.5%) to extrapolate the cash flow projections beyond the period in which the projects will commence to generate revenue. This growth rate is considered to cover increases resulting from inflation and regulatory changes. The discount rate used is 6.3% (2009: 10%).
	Key assumptions used in value in use calculations
	The key assumptions used in the value in use calculations for the goodwill asset are the expected storage and useable capacity, costs of plant and infrastructure, expected revenue prices, expected operational costs, appropriate discount rates and foreign exchange rates. For further details please see note 14.
	Management's assessment of the technical viability of the projects is supported by the evaluation work undertaken by appropriately qualified persons.
	Management have assessed the project's individual net present value and thereby impairment on a variety of bases and assumptions using, where appropriate, a number of discount rates.  The impairment tests are particularly sensitive to changes in the key assumptions and changes to these assumptions could result in impairment; however, all of the varying bases indicate a net present value significantly in excess of the value of goodwill.
	Foreign exchange rates have been based on external market forecasts, after considering long-term market expectations and the countries in which the group operates.

6.	Other intangible assets (group)
	Development and exploration
			Rivara gas	Ribolla Basin CBM	Ksar Hadada
			storage	& Shale	exploration
			facility	Gas assets	acreage	Total
			£	£	£	£
	2010
	Cost
	1 October 2009		3,311,726	2,673,017	1,025,917	7,010,660
	Exchange differences		(191,281)	(154,390)	-	(345,671)
	Additions		904,759	1,346,347	154,912	2,406,018
	30 September 2010		4,025,204	3,864,974	1,180,829	9,071,007
	Amortisation
	1 October 2009		-	-	-	-
	Impairment charge for the year		-	-	1,080,829	1,080,829
	30 September 2010		-	-	1,080,829	1,080,829
	Carrying amount
	30 September 2010		4,025,204	3,864,974	100,000	7,990,178
	30 September 2009		3,311,726	2,673,017	1,025,917	7,010,660
	2009
	Cost
	1 October 2008		1,772,203	1,138,059	805,526	3,715,788
	Exchange differences		277,261	178,049	-	455,310
	Additions		1,262,262	1,356,909	220,391	2,839,562
	30 September 2009		3,311,726	2,673,017	1,025,917	7,010,660
	Amortisation
	1 October 2008 and 30 September 2009		-	-	-	-
	Carrying amount
. 9	30 September 2009		3,311,726	2,673,017	1,025,917	7,010,660
	30 September 2008		1,772,203	1,138,059	805,526	3,715,788
	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.
	Ksar Hadada exploration acreage - impairment charge
	The results for the 2010 drilling campaign, which was completed shortly after the year end, were unsuccessful, although a significant amount of new and valuable data has been produced and analysed. The vast majority of the company's expenditures to date have therefore been written off as an impairment charge.
	Rivara gas storage facility and Ribolla Basin CBM & Shale Gas assets
	A review of the latest management information and projections shows a net present value significantly in excess of assets and liabilities relating to the projects. The main assumptions indicate that no significant change has arisen on these calculations which would materially impact on the group.
	The continuing analysis and testing of technical data continues to indicate that the projects are feasible.
	The group continues to work towards, and is confident of, obtaining all the necessary approvals from regulatory authorities.
	The group anticipates being able to raise the necessary finance to continue to develop the projects.
	Value in use
	Value in use has been calculated separately for the group's Rivara gas storage facility and Ribolla Basin CBM & Shale Gas assets. Cash flows are projected for the periods up to the date that the projects are expected to become commercially operational and from then until operations are expected to cease, based upon management's expectations. These dates depend on a number of variables, including the project's technical feasibility, regulatory approval, forecast revenue prices and the associate development and operational costs.
	The projects are expected to generate revenue after five to nine years and to continue doing so for a further 35 years. The directors consider that projections calculated for a period greater than five years are justified as the projects are still in a development stage.
	Key assumptions used in value in use calculations
	The key assumptions used in the value in use calculations for the intangible assets are the expected storage and useable capacity of the Rivara project, the anticipated quantity of resource available for extraction for the Ribolla Basin project, costs of plant and infrastructure, expected revenue prices (specifically gas prices), expected operational costs, appropriate discount rates and foreign exchange rates.
	Management's assessment of the technical viability of the projects is supported by the evaluation work
	undertaken by appropriately qualified persons.
	Management have assessed the projects' individual net present values and thereby impairment on a variety of bases and assumptions using, where appropriate, a number of discount rates.  The impairment tests are particularly sensitive to changes in the key assumptions and changes to these assumptions could result in impairment; however, all of the varying bases indicate a net present value significantly in excess of the value of the intangible assets.
	Foreign exchange rates have been based on external market forecasts, after considering long-term market expectations and the countries in which the group operates.
	The key assumptions used in the value in use calculations are as follows:
				Assumption		Sensitivity
						factor *
	Rivara gas storage facility:
		Growth rate		3.0%		-80%
		Discount rate		6.3%		+38%
		Capital expenditure		-		+31%
	Ribolla Basin CBM & Shale Gas assets:
		Growth rate		2.5%		-
		Discount rate		10.0%		+115%
		Gas price	€0.25 per cubic metre			-31%
		Capital expenditure		-		+49%
	The growth rates are considered to cover increases resulting from inflation and regulatory changes.
	* The sensitivity factor is the percentage change in each specific assumption which would, on its own, result in the net present value equal to the carrying value of the intangible asset in the accounts.

7.	Share capital
			2010		2009
			£		£
	Authorised
	80,000,000 ordinary shares of 1p		800,000		800,000
	Issued, called up and fully paid
	45,836,867 (2009: 41,573,867)
	ordinary shares of 1p		458,369		415,739
	The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the company.
	On 9 July 2010, a further 4,263,000 ordinary shares of 1p were issued at a placing price of 60p each giving rise to a share premium of £2,515,170.

8.	Share premium account
			2010		2009
			£		£
	1 October		12,881,702		12,444,974
	Premium arising on issue of equity shares		2,515,170		439,811
	Transaction costs		(109,521)		(3,083)
	30 September		15,287,351		12,881,702

9.     Other

This announcement can be viewed in full on the Company web-site www.ir-plc.com.

For further information, please visit www.ir-plc.com or contact:
Grayson Nash		Independent Resources plc		[phone]
Simon Hudson		Tavistock Communications		020 7920 3150
	Lydia Eades		Tavistock Communications		020 7920 3150
Jonathan Wright / Stewart Dickson (Corporate Finance)		Seymour Pierce Limited		020 7107 8000
Richard Redmayne / David Banks   (Corporate Broking)		Seymour Pierce Limited

 

END

 

 

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