Final Results for the year ended 31 December 2015

RNS Number : 1411W
Jersey Oil and Gas PLC
25 April 2016
 

 

 

 

 

25 April 2016

 

Jersey Oil and Gas plc

("Jersey Oil & Gas" or the "Company")

 

Final Results for the year ended 31 December 2015

 

Jersey Oil & Gas (AIM: JOG), an independent oil and gas company which is pursuing an acquisition-led strategy in the UK Continental Shelf region of the North Sea, is pleased to announce its audited results for the year ended 31 December 2015.

 

Highlights

·     Settlement agreement negotiated and entered into with the Athena oilfield consortium to ring-fence the Group's contractual liabilities associated with its interest in Licence P.1293 Block, 14/18b ("Athena")

·     Agreement also reached with CGG Services (UK) Limited ("CGG") to expunge the Group's remaining debt due to CGG

·     Acquisition of Jersey Oil and Gas E&P Limited, refined business strategy and appointment of Andrew Benitz as Chief Executive Officer and Ron Lansdell as Chief Operating Officer

·     Change in Company's name to Jersey Oil and Gas plc

·     Placing to raise approximately £0.82m (before expenses) to provide additional working capital

·     Exploration well drilled on Licence P.1889, Block 12/26b & 27 ("Niobe") thereby satisfying licence obligations, however no significant hydrocarbons were encountered

·     Worked up prospectivity for Licence P.2170, Block 20/5b ("Cortina")

·     Capital reorganisation involving, inter alia, a 1 for 100 share consolidation

·     Active in nine sales processes involving more than 25 field interests

·     Loss (before and after tax) for the year of £1.4m (2014: £44.4m)

·     Cash at the year end of £0.9m

 

Post period end

·     Sale and purchase agreement signed with Azinor Catalyst Limited ("Catalyst") for the farm-out of the Group's 50 per cent. interest in Seaward Production Licence P.1989, Blocks 14/11, 12 & 16

·     Farm out process underway for Licence P.2170 which contains the Verbier and Cortina prospects with oil in place estimates of 300MMbbls and 212MMbbls respectively

·     Relinquishment of Licence P.1610, Block 13/23a ("Liberator"), Licence P.1666, Block 30/11c ("Romeo"), Licence P.1889, Blocks 12/26b & 27 ("Niobe-Kratos") and Licence P.1556, Block 29/1c ("Orchid") due to the cost of maintaining such licences and limited realisation opportunities in the current oil price environment

·     Actively engaged in ongoing asset/corporate opportunities with a further pipeline of potential deal flow

·     Working closely with a major bank who is keen to support us as a possible provider of Reserve Base Lending against production assets that the Company acquires

 

Outlook

·     An active acquisition and divestiture market exists in the UK North Sea region and the continued depressed oil price environment is providing an increasing number of asset acquisition opportunities

·     The Board remains confident in the Group's ability to transact on a number of acquisition targets during 2016

·     Business strategy remains focused on creating shareholder value through the acquisition of cash generative, profitable, producing target assets, beneficially using the Group's valuable tax losses

 

 

Andrew Benitz, CEO of Jersey Oil & Gas, commented:

"Since the JOG team joined the Company in August 2015, we have remained singularly focussed on seeking to acquire positive cashflow generating production assets within the UK Continental Shelf region of the North Sea and are continually sourcing opportunities to grow the Company.

 

"With some current stability around the US$40+ per barrel level and with fundamentals in favour of an oil price recovery later this year, we remain excited about the Company's prospects for 2016 and our ability to secure attractive producing assets and look forward to updating shareholders on our progress in due course."

 

-Ends-

 

General enquiries:

Jersey Oil & Gas plc

 

Andrew Benitz, CEO

C/o Camarco:

Tel:  020 3757 4983

Strand Hanson Limited

James Harris

Matthew Chandler

Tel:  020 7409 3494

FirstEnergy Capital LLP

Hugh Sanderson

David van Erp

Tel:  020 7448 0200

 

Camarco

Billy Clegg

Georgia Mann 

 

Tel:  020 3757 4983

 

Notes to editors:

 

The Group's strategy is focused on maintaining, developing and exploiting a portfolio of North Sea assets with a greater focus on producing assets in order to seek to unlock the inherent value in the Group's existing tax losses. The Group is currently seeking to acquire potential further North Sea oil and/or gas producing assets, some of which have already been identified and are currently undergoing due diligence and subject to ongoing commercial negotiations. Any potential acquisitions that are taken forward are intended to be financed from one or more of the Group's balance sheet, the proceeds from strategic sales of selected parts of the Group's existing asset portfolio and further equity and debt capital raises. 

 

The Group's target acquisition profile includes mature oil and/or gas production assets with long tail-end production profiles and upside potential, from principally satellite fields with production-based tariff agreements, limited exposure to host platform costs, low operating costs and manageable decommissioning liabilities. 

 

 

 



 

CHAIRMAN'S REPORT

 

Introduction

The year ended 31 December 2015 was another year of great change for both the Company and the North Sea oil and gas operating environment, set against a backdrop of continuing and substantial falls in the price of oil. For the Company itself, 2015 can be broken down into two parts, the first of which saw us negotiate terms with our major creditors in order to enable the Company to look at strategic alternatives going forward. The second part of the year saw the Company successfully complete the acquisition of Jersey Oil and Gas E&P Limited ("JOG E&P") and a re-capitalisation of the business via a placing. The Company's name was then changed to Jersey Oil and Gas plc ("JOG" or the "Company") and, with new senior management personnel, we adopted a refined business strategy of seeking to unlock the inherent value in the Group's existing asset portfolio and it's tax losses, together with the identification of potential acquisitions of North Sea producing assets.  I was particularly pleased to welcome Andrew Benitz as the Company's new CEO following the JOG E&P acquisition. Andrew and his executive team have approached the new strategy with great dedication and energy.  He has brought with him a mature deal flow pipeline and a major bank which is keen to support us as a possible provider of Reserve Based Lending against those production assets that we seek to acquire. The other theme for the year was reducing costs, which was done very effectively with G&A costs currently running at approximately £0.9m per year, down from £1.5m during 2015.

 

Agreement Reached with Creditors

The combination of the significant drop in the oil price, a large increase in the expected decommissioning costs on our 15% interest in the Athena oilfield (Licence P.1293, Block 14/18b) and a significant ongoing deferred payment liability to CGG Services (UK) Limited ("CGG"), led to a position where it was thought likely that the Company may well have had liabilities greater than its assets. By far the largest of our financial commitments was to our partners in the Athena oilfield consortium (the "Athena Consortium"). A precursor to the agreement eventually reached between the Company and the Athena Consortium was for the renegotiation of the consortium's existing contract with BW Offshore (UK) Limited ("BW Offshore") the provider and operator of the Athena Floating Production, Storage and Offloading vessel. Whilst the amended contract, which was effective from June 2015, reduced the Athena Consortium's overall loss exposure, it did however necessitate a larger cash outflow in June 2015 than would have been required under the pre-existing contract. Subsequent to the revised contract with BW Offshore being agreed, and also effective from June 2015, the Company successfully entered into agreements with both the Athena Consortium and CGG such that, in return for an aggregate payment of £2million by the Company to the Athena Consortium and CGG, all of the Company's contractual liabilities to these parties would be ring-fenced and/or expunged.

 

Under the terms of these settlement agreements, all future liabilities (including decommissioning costs) relating to Athena are now to be met by the partners in the Athena Consortium, other than the Company, and the Company will no longer have any outstanding debt due to CGG.  Repayment to the Athena Consortium can only be sought from future revenue generated from the Athena Field and 60 per cent. of any petroleum sales or net disposal proceeds stemming from certain other specified licence interests, being Magnolia (Licence P.1610, Block 13/23a), Romeo (Licence P.1666, Block 30/11c), Niobe (Licence P.1889, Block 12/26b & 27b), Homer (Licence P.1989, Blocks 14/11, 12 & 16) and Cortina (Licence P.2170, Blocks 20/5b and 21/1d). Should the Company not have repaid the outstanding debt obligation by the time the Athena Field is decommissioned the remaining debt will be written off by the Athena Consortium. The decommissioning of the Athena field has since commenced and, as noted below, we have relinquished our interests in Magnolia, Romeo and Niobe.

 

Acquisition of Jersey Oil and Gas E&P Limited

Having entered into the settlement agreements referred to above it was then possible for us to seek ways of potentially extracting value from the Company's tax losses (amounting to approximately £25m as at 31 December 2015), its quotation on AIM and its then remaining licence interests.

 

In August 2015, the Company acquired Jersey Oil and Gas E&P Limited for a consideration of £0.495m, satisfied by the issue of 2,250,000 new ordinary shares. In addition, the Company successfully re-capitalised the business via a placing to raise approximately £0.82m (gross) and strengthened its senior management team through the appointments of Andrew Benitz and Ron Lansdell (both founding shareholders and directors of JOG E&P), as Chief Executive Officer and Chief Operating Officer of the Company respectively. As detailed further in the Chief Executive Officer's Report, the enlarged Group has since been evaluating numerous potential acquisition opportunities involving late stage North Sea oil and/or gas producing assets.

 

Review of Operations

 

Athena

In February 2015, the Company reported that despite continued stabilised production rates of approximately 4,800 bopd gross (720 bopd net to JOG), due to the then prevailing oil price of approximately US$58/barrel, the Athena oilfield was incurring a cash outflow of approximately £380,000 per month after absorption of the Group's share of the field's operating costs. The field continued to produce throughout the first six months of the year, although the rate had declined to less than 3,800 bopd (570 bopd net to the Company) by the end of June 2015. It was against this background that the contract between the Athena Consortium and BW Offshore was renegotiated, followed by the settlement agreement between the Company and the Athena Consortium.

 

Niobe

Our drilling prospect in the period was the Niobe exploration well (Licence P.1889, Blocks 12/26b & 27b), which was drilled by Suncor Energy UK Limited in June 2015 (Suncor Energy UK Limited, operator (49.5 per cent. equity interest)), Norwegian Energy Company UK Limited (22.5 per cent. equity interest) and JOG (28 per cent. equity interest, of which 2.5 per cent. was a carried interest).

 

The exploration well (for which the expected costs had been pre-paid), was drilled to its target depth of 5,005 feet Measured Depth Below Rotary Table within the Late Jurassic Heather Formation.  No significant hydrocarbons were encountered and the well was therefore plugged and abandoned, with the licence interest subsequently being relinquished with an effective date of 31 December 2015.

 

Orchid

In line with our cost minimisation strategy, the Company relinquished its interest in Orchid (Licence P.1556, Block 29/1c) following extensive efforts to secure a potential farm out.

 

Licence P.2032

Total E&P UK Limited ("Total") had a conditional agreement to pay the Company £1m in relation to the termination of its farm-in to Licence P.2032, Blocks 21/8c, 21/9c, 21/10c, 21/14a and 21/15b in certain circumstances.  Total is disputing that the conditions giving rise to the obligation to pay the Company the claimed amount have been satisfied and we are taking steps to pursue recovery of this amount.

 

Post Year End Licence Interests

 

Liberator

Effective 6 January 2016, and as a result of significant ongoing licence fees, Licence P.1610, Block 13/23a ("Liberator") was relinquished. The Company has therefore forgone its 10 per cent. carried interest in this licence.

 

Licence P.1989

In January 2016, the Company entered into a sale and purchase agreement (the "SPA") with Azinor Catalyst Limited ("Catalyst") for the farm-out of its 50 per cent. interest in Seaward Production Licence P.1989, Blocks 14/11, 12 & 16 (the "Licence").The balancing 50 per cent. interest in the Licence was held by Norwegian Energy Company UK Limited ("Noreco") and under the terms of the SPA, Catalyst agreed to acquire 100 per cent. of the Licence from both Trap and Noreco, and to be appointed as Operator. By way of consideration, Catalyst has undertaken certain firm work commitments, as set out in the terms of the Licence. These terms include the drill-or-drop obligation in respect of an exploration well, and a commitment to make certain payments to each of the Company and Noreco contingent on the occurrence of certain future events, namely:

 

·      US$2m within 90 days of the date when an exploration well, drilled within the Licence area, exceeds a threshold of net pay with a vertical extent of no less than twenty metres of sands with a hydrocarbon saturation above sixty per cent. and a permeability cut-off of 1mD; and

·      a further US$2m within 90 days of the date when a Field Development Plan in respect of the aforementioned exploration well is approved by the Secretary of State for Energy and Climate Change.

 

Romeo

Effective 11 February 2016, a decision by the joint venture partners was made to relinquish Licence P.1666, Block 30/11c ("Romeo"). Relinquishment of this licence interest has removed further cost exposure for JOG.

 

Licence P.2170, Blocks 20/5b & 21/1d ("Cortina")

The Company and its co-venturer, CIECO Exploration and Production (UK) Limited are currently seeking farm-in partners for their Cortina blocks.  Two large medium risk oil prospects have been identified with most likely unaudited in place volumes of 300 and 212 million stock-tank barrels ("Mmstb") respectively, analogous to the adjacent Tweedsmuir fields. Prospectivity has been confirmed following extensive geological and geophysical analysis undertaken by JOG utilising the latest and best quality seismic data available, including a stratigraphic re-interpretation of 12 key wells and a petroleum charge study.

 

Financial review

The Company made a loss before and after tax of £1.4m for the year ended 31 December 2015 (2014: a loss of £44.5m).  This result included an exceptional gain of £3.3m (2014: £21.8m), which was largely a result of the settlement agreement reached with the Athena Consortium and CGG, offset in part by the writing off of goodwill relating to the acquisition in the year. The year end net cash position was £0.9m.

 

Corporate annual overheads for 2015 were £1.5m, down from £3.1m in 2014 and £4.5m in 2013.

 

Subsequent to the year end, management and senior employees agreed to take further salary cuts therefore enabling the Company to operate within its existing cash reserves into 2017; further details can be found in the remuneration report.

 

Share Capital Reorganisation

In August 2015, a capital reorganisation was implemented pursuant to which the number of ordinary shares in issue was effectively reduced by a factor of 100. In addition, shareholder approval was obtained to amend the Company's Articles of Association so as to increase the Company's borrowing powers, increase the Directors' authority to allot shares and disapply certain pre-emption rights. Full details of these changes were set out in a circular to shareholders published on 28 July 2015, a copy of which is available on the Company's website at www.jerseyoilandgas.com.

 

Outlook

We have an unencumbered company with significant tax losses.  Since the new team members joined the Company in August 2015, they have worked diligently reviewing a large number of acquisition opportunities in the North Sea and are continually updating and enhancing our large database of North Sea fields.  Although several bids have been made to date, no acquisitions have yet been consummated, due in part to the volatile oil price in the second half of 2015 which has led a number of vendors expectations remaining unrealistic.

 

Nonetheless, the business strategy has never been more relevant and the continued sustained depression in the oil price is leading us to see an increasing number of opportunities as vendor expectations become more realistic or lenders force companies to dispose of non-core assets to meet their debt and banking obligations. Although it is clearly difficult to forecast a definitive date for our first acquisition, which itself will be dependent on agreeing acceptable terms with vendors, I am confident that the team we have in place, positive indications of funding support, a pipeline of potential deals and the current business environment will lead to the successful acquisition of production assets in 2016 and beyond.

 

 

 

 

M J Stanton

Non-Executive Chairman

22 April 2016


 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

In August 2015, Jersey Oil and Gas E&P Limited ("JOG E&P") combined with Trap Oil Group plc ("Trap Oil") to form an enlarged group with a renamed parent entity, Jersey Oil and Gas Plc ("JOG"). JOG E&P was launched as a private company in 2014, following the careful assessment of the oil and gas market with a targeted strategy to acquire production assets within the UK Continental Shelf ("UKCS") sector of the North Sea.  This was driven by an acknowledgment that exploration activities held limited appeal to investors and could not be appropriately financed under the current depressed market conditions. However, attractive cashflow generating assets remained viable, and JOG E&P felt that it had a key market advantage taking into account its core technical team's excellent working knowledge of the UKCS, built through decades of active involvement within the North Sea. 

 

As a private company, when approaching potential vendors of suitable assets, JOG E&P was often asked whether it had any tax losses that could serve to make its bids more competitive, which at that time it did not.  As a result it undertook a thorough review of North Sea operators, one of which was Trap Oil.  The two companies were able to negotiate a mutually beneficial business combination that enabled Trap Oil to secure new senior management personnel to pursue a refined business strategy whilst JOG E&P obtained access to tax losses and an established platform from which to grow its enlarged quoted business.  We were also pleased to complete a placing at the time of the business combination.  We now have a company with sizable existing tax losses and an experienced management team, and can move forward with our strategy from this strengthened position.

 

Post the business combination we quickly integrated teams, reduced costs further and set our sights on pursuing our main objective of acquiring positive cashflow generating production assets.  I purposefully use the term 'positive cashflow' because, as the oil price continued to slide, we have had to hunt harder to find such assets.  They do exist and we have evaluated and submitted bids on assets in a number of fields in the North Sea with operating costs as low as US$10/barrel.  Since August 2015, I am most proud of how the team has developed our approach to identifying, evaluating and bidding on assets, and would encourage shareholders to look at our latest corporate presentation to better understand our methodology.  For a small team, we have covered large swathes of the North Sea and have current knowledge of almost every producing field.  Bidding on a working interest in a field is a multi-faceted process; the combination of contributions from our technical and commercial teams, alongside input from our various advisers is a very thorough and detailed process that we have developed to the highest industry standards.

 

Since August 2015, we have been involved in nine sale processes involving more than 25 field interests. We remain actively engaged on a number of asset/corporate opportunities and subsequent to the year-end, we have continued to identify further potential deal flow.  As the oil price has dipped and subsequently found a new base during 2016, we have stuck to our investment principles and continue to evaluate deals at the prevailing oil price futures-curve.  Compared to most analyst price decks, we believe that this leaves considerable upside potential for our shareholders and we are inherently governed by doing the right deal, whilst being prepared to miss out on the wrong one. Whether proactively opening discussions with potential vendors or being invited into formal bid processes, we are continually sourcing opportunities to grow the Company. 

 

We are one of a limited number of quoted entities that is currently actively bidding.  Unencumbered and keenly valued, we hold a competitive advantage over many of our rivals.  We have nudged up alongside some of the private equity competitors which, generally speaking, are chasing the larger deals, leaving us well placed to pick and choose the best opportunities to successfully build shareholder value - and our business model is truly scalable.  Subsequent to the year end, we were pleased to note a favourable UK budget, in particular from JOG's perspective, with respect to clarity regarding decommissioning tax relief on retained liabilities, which will have a positive impact for late-life asset divestments.

 

We have also made great progress in developing strong relationships with potential funding partners.  We are working closely with a major bank, which is keen to support us as a possible provider of Reserve Based Lending against production assets that we may acquire.  We introduce this bank at an early stage when evaluating opportunities, so that we can obtain a good indication of the level of their potential funding support.  We also have good relationships with major trading groups that have put forward a variety of possible financing options.  Equity markets remain challenging, although in our view there is a general feeling that investment funds have been underweight in the sector for too long.  Furthermore, it is worth noting that whilst the industry might well be reeling from a 70% drop in the global oil price, JOG represents a new investment opportunity starting at the bottom of the cycle rather than at the top.

 

The exploration assets within our portfolio have been managed closely.  In January 2016 we were pleased to conclude a successful deal with Azinor Catalyst Limited on our Homer licence, leaving us with no cost exposure, but a potential future success fee payment. The Farm out process is underway for Licence P.2170 which contains the Verbier and Cortina prospects with oil in place estimates of 300MMbbls and 212MMbbls respectively. JOG is the licence operator with a 60% working interest.

 

I would like to take this opportunity to thank the JOG team for their considerable work effort and complete dedication in these early stages of the Company's growth, which extends to agreeing to work for salaries that fall very much towards the lower quartile for the industry.  We are all in this together and simply want to be part of a great future success story.

 

I would also like to thank our shareholders for their continued patience and support.  I am very pleased that we have loyal shareholders that see merit in our stated business strategy and the exciting value creation opportunity that JOG represents.

 

With some current stability around the US$40+ per barrel level and fundamentals pointing to an oil price recovery later this year, we remain excited about JOG's prospects for 2016 and look forward to updating shareholders on our progress in due course.

 

 

 

 

 

 

Andrew Benitz

Chief Executive Officer

22 April 2016


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2015

 

 





2015


2014



Note


£


£








 







Revenue


3


4,065,794


13,416,062








Cost of sales




(7,006,952)


(31,560,021)








GROSS LOSS




(2,941,158)


(18,143,959)








Other operating expense




-


(1,173,133)

Exceptional items


6


3,257,725


(21,784,400)

Administrative expenses




(1,595,283)


(3,082,943)








OPERATING LOSS




(1,278,716)


(44,184,435)








Finance costs


7


(164,399)


(240,567)








Finance income


7


13,037


19,029








LOSS BEFORE TAX


8


(1,430,078)


(44,405,973)








Tax


9


-


-








LOSS FOR THE YEAR




(1,430,078)


(44,405,973)















TOTAL COMPREHENSIVE LOSS FOR THE YEAR




(1,430,078)


(44,405,973)








Total comprehensive loss for the year attributable to:







Owners of the parent




(1,430,078)


(44,405,973)















Loss per share expressed in pence per share:







Basic and diluted


10


(29.21)


(19.55)








 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2015

 





2015


2014

 


Note


£


£








NON-CURRENT ASSETS







Intangible assets - Exploration costs


11


138,323


1,370,799

Intangible assets - Data licence costs


11


-


833,332

Property, plant and equipment


12


5,055


125,223












143,378


2,329,354








CURRENT ASSETS







Inventories


15


-


858,060

Trade and other receivables


16


227,718


10,026,706

Cash and cash equivalents (including restricted cash)


17


862,910


7,424,282

 







 




1,090,628


18,309,048

 







TOTAL ASSETS




1,234,006


20,638,402

 







 







EQUITY







Called up share capital


18


2,331,767


2,271,693

Share premium account




69,569,978


68,321,083

Share options reserve


22


1,381,133


1,786,425

Accumulated losses




(71,970,520)


(70,945,734)

Reorganisation reserve




(382,543)


(382,543)

 







TOTAL EQUITY




929,815


1,050,924

 







LIABILITIES







NON-CURRENT LIABILITIES







Trade and other payables


19


-


1,218,845

Provisions for liabilities and charges


20


-


14,206,831

 







 




-


15,425,676

 







CURRENT LIABILITIES







Trade and other payables


19


304,191


4,161,802

 







 




304,191


4,161,802

 







TOTAL LIABILITIES




304,191


19,587,478

 







TOTAL EQUITY AND LIABILITIES




1,234,006


20,638,402

 






 

 

The financial statements were approved by the Board of Directors and authorised for issue on 22 April 2016. They were signed on its behalf by Scott Richardson Brown - Chief Financial Officer.

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2015

 

 

 

 

 

 

 

 

 

 

 

 

Available

 

 

 

Called up

 

Share

 

Share

 

 

 

 

 

for sale

 

 

 

share

 

premium

 

options

 

Accumulated

 

Reorganisation

 

investment

 

Total

 

capital

 

account

 

reserve

 

losses

 

reserve

 

reserve

 

equity

 

£

 

£

 

£

 

£

 

£

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2014

2,271,693


68,321,083


2,575,472


(27,107,644)


(382,543)


(279,597)


45,398,464

 














Loss and total comprehensive loss for the year

-


-


-


(44,405,973)


-


-


(44,405,973)

 














Transfer on sale of assets held for investment

-


-


-


(279,597)


-


279,597


-

 














Lapsed share options

-


-


(847,480)


847,480


-


-


-

 














Transactions with owners - share based payments

-


-


58,433


-


-


-


58,433

 














 














At 31 December 2014

2,271,693


68,321,083


1,786,425


(70,945,734)


(382,543)


-


1,050,924

 














Total comprehensive loss for the year

-


-


-


(1,430,078)


-


-


(1,430,078)

 














Issue of share capital

60,074


1,248,895


-


-


-


-


1,308,969

 














Lapsed share options (note 22)

-


-


(405,292)


405,292


-


-


-

 














 














At 31 December 2015

2,331,767


69,569,978


1,381,133


(71,970,520)


(382,543)


-


929,815

 

 

 

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

 

Reserve

Description and purpose



Called up share capital

Represents the nominal value of shares issued

Share premium account

Amount subscribed for share capital in excess of nominal value

Share options reserve

Represents the accumulated balance of share based payment charges recognised in respect of share options granted by the Company less transfers to retained deficit in respect of options exercised or cancelled/lapsed

Accumulated losses

Cumulative net gains and losses recognised in the Consolidated Statement of Comprehensive Loss

Reorganisation reserve

Amounts resulting from the restructuring of the Group

Available for sale investment reserve

Cumulative net gains and losses recognised as Other Comprehensive Income on available for sale investment


 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2015

 

 





2015


2014

 


Note


£


£

Cash flows from operating activities







Cash used in operations


26


(4,163,979)


(972,043)

Prefunding for Athena's abandonment costs




-


(3,710,000)

Deposit for Niobe exploration well




-


(2,846,494)

Net interest received




9,358


29,896








Net cash used in operating activities




(4,154,621)


(7,498,641)















Cash flows from investing activities







Purchase of intangible assets


11


(2,722,853)


(1,648,607)

Purchase of property, plant and equipment


12


(147,868)


(3,590,239)

Sale of IGas Energy plc shares




-


4,195,588








Net cash used in investing activities




(2,870,721)


(1,043,258)















Cash flows from financing activities







CGG Services (UK) Limited repaid


20


-


(472,727)

Proceeds from share issue


18


813,970


-

 







Net cash used in financing activities




813,970


(472,727)

 







 







Decrease in cash and cash equivalents


26


(6,211,372)


(9,014,626)

 







Cash and cash equivalents at beginning of year


26


7,074,282


16,088,908

 







Cash and cash equivalents at end of year


26


862,910


7,074,282

 







 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2015

 

1.          GENERAL INFORMATION

 

Jersey Oil and Gas plc (formerly Trap Oil Group plc) ("the Company") and its subsidiaries (together, "the Group") are involved in the exploration, development and production of oil and gas reserves from the UK Continental Shelf.

 

The Company is a public limited company, which is quoted on AIM, a market operated by the London Stock Exchange plc and incorporated and domiciled in the United Kingdom. The address of its registered office is 10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE.

 

2.          SIGNIFICANT ACCOUNTING POLICIES

 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

 

Basis of Accounting

These financial statements have been prepared under the historic cost convention, in accordance with International Financial Reporting Standards and IFRS IC interpretations as adopted by the European Union ("IFRSs") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

Going Concern

It is very much the stated strategy of the Group to acquire producing North Sea Oil and Gas assets and it is expected that such acquisitions will bring in income and be tied into potential future equity or debt fund raisings to cover acquisition prices and any working capital needs.  The Directors are constantly in discussions with a number of parties and shareholders about the Group's capital requirements.

 

However, following the Board's review of the Group's financial position and cash flow projections, and the loss recognised in the year, the Directors recognise that the Group is unlikely to have adequate financial resources to continue its operational activities and meet its liabilities as and when they fall due for a period of at least 12 months from the date of authorisation of these financial statements. It is currently expected that the Group's existing cash resources will be sufficient at the current run rate to enable the Group to continue in its current form until the first Quarter of 2017.  In the event that further funding is not secured by February 2017, the Board believes that it is highly likely that the Company will become insolvent, and appropriate insolvency proceedings, such as administration or liquidation, would consequently need to be commenced.

 

Changes in Accounting Policy and Disclosures

(a) New and amended standards adopted by the Company

 

There are no new standards that came into effect during 2015: IAS 19 'Employee benefits' was amended with effect from 1 January 2015. The amendment does not have a material impact on the Group's financial statements.

(b) New standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

 

The following standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2018, but the Group has not early adopted them:

 

·     IFRS 15 'Revenue from contracts with customers' is effective for accounting periods beginning on or after 1 January 2018. The Group is in the process of assessing the likely impact of this standard on the financial statements.

·     IFRS 9 'Financial 'instruments' is effective for accounting periods on or after 1 January 2018. The Group does not expect the adoption of this standard to have a material impact on the financial statements.

·     IFRS 16 'Leases' is effective for accounting periods beginning on or after 1 January 2019. The Group is in the process of assessing the likely impact of this standard on the financial statements.

 

Amendments have also been made to the following standards effective 1 January 2016. The Group does not expect the amendments to have a material impact on the Group's financial statements.

 

·     IFRS 11 'Joint arrangements'

·     IAS 16 'Property, plant and equipment'

·     IAS 38 'Intangible assets'

·     IAS 27 'Separate financial statements'

·     IFRS 10 'Consolidated financial statements'

·     IAS 1 'Presentation of financial statements'

 

All other amendments not yet effective and not included above are not material or applicable to the Group.

 

Significant Accounting Judgements and Estimates

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities at the date of the financial statements. If in future such estimates and assumptions, which are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The Group's accounting policies make use of accounting estimates and judgements in the following areas:

 

·      amortisation (note 11),

·      impairment (note 11),

·      depreciation (note 12),

·      the estimation of share based payment costs (note 22).

 

These are described in more detail in the relevant accounting policies within note 2.

 

Basis of Consolidation

(a) Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50 per cent. of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the Group's voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies.

 

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date the Group ceases to have control.

 

The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.

 

Acquisition related costs are expensed as incurred.

 

If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.

 

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

 

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

 

Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

 

(c) Disposal of subsidiaries

When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

 

(d) Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20 per cent. and 50 per cent. of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition. The Group's investment in associates includes goodwill identified on acquisition.

 

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.

 

The Group's share of post-acquisition profits or losses is recognised in the Consolidated Statement of Comprehensive Loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

 

Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the Group's financial statements only to the extent of unrelated investors' interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

Dilution gains and losses arising in investments in associates are recognised in the Consolidated Statement of Comprehensive Loss.

 

Acquisitions, Asset Purchases and Disposals

Acquisitions of oil and gas properties are accounted for under the purchase method where the business meets the definition of a business combination.

 

Transactions involving the purchase of an individual field interest, farm-ins, farm-outs, or acquisitions of exploration and evaluation licences for which a development decision has not yet been made that do not qualify as a business combination, are treated as asset purchases. Accordingly, no goodwill or deferred tax arises. Consideration from farm-ins/farm-outs are adequately credited from, or debited to, the asset. The purchase consideration is allocated to the assets and liabilities purchased on an appropriate basis. Proceeds on disposal are applied to the carrying amount of the specific intangible asset or development and production assets disposed of and any surplus is recorded as a gain on disposal in the Consolidated Statement of Comprehensive Loss.

 

Revenue Recognition

Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. It is measured at the fair value of consideration received or receivable for sale of goods.

 

Revenue derived from the production of hydrocarbons in which the Group has an interest with joint venture partners is recognised on the basis of the Group's working interest in those properties. It is recognised when the significant risks and rewards of ownership have been passed to the buyer.

 

Revenue from strategic partners on the identification of opportunities for application for a licence to explore further and is recognised in the period in which the services are provided or the date a trigger event occurs if this is later.

 

The Group also receives revenue from the production of hydrocarbons from licences held by the Group that is recognised at the end of each month based upon the quantity and price of oil and gas delivered to the customer.

 

Exploration and Evaluation Costs

The Group accounts for oil and gas and exploration and evaluation costs using IFRS 6 "Exploration for and Evaluation of Mineral Resources". Such costs are initially capitalised as Intangible Assets and include payments to acquire the legal right to explore, together with the directly related costs of technical services and studies, seismic acquisition, exploratory drilling and testing.

 

Exploration costs are not amortised prior to the conclusion of appraisal activities.

 

Exploration costs included in Intangible Assets relating to exploration licences and prospects are carried forward until the existence (or otherwise) of commercial reserves have been determined subject to certain limitations including review for indications of impairment on an individual license basis. If commercial reserves are discovered, the carrying value, after any impairment loss of the relevant assets, is then reclassified as Property, plant and equipment under Production interests and fields under development. If, however, commercial reserves are not found, the capitalised costs are charged to the Consolidated Statement of Comprehensive Loss. If there are indications of impairment prior to the conclusion of exploration activities, an impairment test is carried out.

 

Data Licence

Acquired data licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific licence. These costs are amortised over the life of the licence of eight years.

 

Property, Plant and Equipment

 

Production Interests and Fields Under Development

Such assets are accumulated generally on a field by field basis and represent the cost of developing the commercial reserves discovered and bringing them into production, together with the exploration costs incurred in finding commercial reserves transferred from Intangible Assets.

 

The costs also include the acquisition and purchase of such assets, directly attributable overheads and the cost of recognising provisions for future restoration and decommissioning.

 

Amortisation, Depletion and Impairment of Oil and Gas Assets

All expenditure carried within each field is amortised from the commencement of production on a unit of production basis, which is the ratio of oil and gas production in the period to the estimated quantities of proven and probable reserves at the end of the period plus the production in the period, on a field by field basis. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future field development costs to access the related commercial reserves. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively.

 

Where there has been a change in economic conditions that indicate a possible impairment in an oil and gas asset, the recoverability of the net book value relating to that field is assessed by comparison with the estimated discounted future cash flows based on management's expectations of future oil and gas prices and future costs. Any impairment identified is charged to the Consolidated Statement of Comprehensive Loss as an exceptional item. Where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the Consolidated Statement of Comprehensive Loss, net of any depreciation that would have been charged since the impairment.

 

Property, plant and equipment is stated at historic purchase cost less accumulated depreciation. Asset lives and residual amounts are reassessed each year. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

 

Depreciation on these assets is calculated on a straight line basis as follows:

 

Computer & office equipment

-

3 years

 

 

Decommissioning and Site Restoration

Provision for decommissioning and site restoration is recognised in full when the related facilities are installed and the field commences production. A corresponding amount equivalent to the provision is also recognised as part of the cost of the related Production Interest. The amount recognised is the estimated cost of decommissioning and site restoration, discounted to its net present value and is reassessed each year in accordance with existing conditions and requirements. Changes in the estimated timing of cost estimates are dealt with as an adjustment to the provision and a corresponding adjustment to the Production interest. The unwinding of the discount on the decommissioning provision is included as a finance cost.

 

Inventories

Inventory of materials and product inventory supplies are stated at the lower of cost and net realisable value. Cost is determined on the first in, first out method. Inventories of hydrocarbons are stated at the lower of cost and net realisable value.

 

Joint Ventures

The Group participates in several joint venture agreements with strategic partners, where revenue is derived from annual retainers and success fees in a combination of cash and carried interests. The Group accounts for its share of assets, liabilities, income and expenditure of these joint venture agreements and discloses the details in the appropriate Statement of Financial Position and Statement of Comprehensive Loss headings in the proportion that relates to the Group per the joint venture agreement.

 

Investments

Fixed asset investments in subsidiaries are stated at cost less accumulated impairment in the Company only Statement of Financial Position and reviewed for impairment if there are any indications that the carrying value may not be recoverable.

 

Financial Instruments

Financial assets and financial liabilities are recognised in the Group's Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. The Group does not have any derivative financial instruments.

 

Cash and cash equivalents include cash in hand and deposits held on call with banks with a maturing of three months or less.

 

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss will be recognised in the Consolidated Statement of Comprehensive Loss within selling and marketing costs. When a trade receivable is uncollectible, it will be written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against selling and marketing costs in the Consolidated Statement of Comprehensive Loss.

 

Trade payables are stated initially at fair value and subsequently measured at amortised cost.

 

Loan notes are stated initially at fair value and subsequently measured at amortised cost of the investment as agreed in the loan instrument.

 

Exceptional Items

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

 

Deferred Tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred taxation liabilities are provided, using the liability method, on all taxable temporary differences at the reporting date. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

 

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date.

 

Foreign Currencies

Monetary assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the reporting date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Gains and losses arising on retranslation are recognised in the Consolidated Statement of Comprehensive Loss for the year.

 

Employee Benefit Costs

The Group operates a defined contribution pension scheme. Matching contributions are made by the employer and employees up to 10% each of salary and also as part of and in addition to a personal salary sacrifice scheme. Contributions payable are charged to the Statement of Comprehensive Loss in the period to which they relate. No further obligations remain once contributions have been paid.

 

Share Based Payments

Equity settled share based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The total amount to be expensed is determined by reference to the fair value of the options granted:

 

·        including any market performance conditions (for example, an entity's share price);

·        excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

·        including the impact of any non-vesting conditions (for example, the requirement for employees to save).

 

The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity settled employee benefits reserve.

 

Equity settled share based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

 

Exercise proceeds net of directly attributable costs are credited to share capital and share premium.

 

Share Capital

Ordinary shares are classified as equity.

 

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

Where any Group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of taxes) is deducted from equity attributable to the Company's equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related tax effects, is included in equity attributable to the Company's equity holders.

 

Segmental Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors.

 

3.          SEGMENTAL REPORTING

 

The Directors consider that the Group operates in a single segment, that of oil and gas exploration, appraisal, development and production, in a single geographical location, the North Sea of the United Kingdom and do not consider it appropriate to disaggregate data further from that disclosed.

 

Revenue from one major customer exceeded 10%, and amounted to £4.1m. In 2014 revenue from one major customer exceeded 10%, and amounted to £13.4m.

 

4.          FINANCIAL RISK MANAGEMENT

 

The Group's activities expose it to financial risks and its overall risk management programme focuses on minimising potential adverse effects on the financial performance of the Group. The Company's activities are also exposed to risks through its investments in subsidiaries and is accordingly exposed to similar financial and capital risks as the Group.

 

Risk management is carried out by the Directors and they identify, evaluate and address financial risks in close co-operation with the Group's management. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as mitigating foreign exchange risks and investing excess liquidity.

 

Credit Risk

The Group's credit risk primarily relates to its trade receivables. Responsibility for managing credit risks lies with the Group's management.

 

A customer evaluation is typically obtained from an appropriate credit rating agency. Where required, appropriate trade finance instruments such as letters of credit, bonds, guarantees and credit insurance will be used to manage credit risk.

 

The Group's major customers are typically blue chip companies which have strong credit ratings assigned by international credit rating agencies. Where a customer does not have sufficiently strong credit ratings, alternative forms of security such as the trade finance instruments referred to above may be obtained.

 

Management review trade receivables across the Group based on receivable days calculations to assess performance. There is significant management focus on receivables that are overdue. Trade receivable days for the Group for the year ended 31 December 2015 were nil days (2014: 42 days), based on the ratio of Group trade receivables at the end of the year to the amount invoiced during the year to trade receivables.

 

The Group also has a number of joint venture arrangements where partners have made commitments to fund certain expenditure. Management evaluate the credit risk associated with each contract at the time of signing and continually monitor the credit worthiness of our partners.

 

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group manages its liquidity through continuous monitoring of cash flows from operating activities, review of actual capital expenditure programmes, and managing maturity profiles of financial assets and financial liabilities.

 

Capital Risk Management

The Group seeks to maintain an optimal capital structure. The Group considers its capital to comprise both equity and net debt.

 

The Group monitors its capital structure on the basis of its net debt to equity ratio. Net debt to equity ratio is calculated as net debt divided by total equity. Net debt is calculated as borrowing less cash and cash equivalents. Total equity comprises all components of equity.

 

The ratio of net debt to equity as at 31 December 2015 is Nil (2014: Nil).

 

Maturity analysis of financial assets and liabilities

 

Financial Assets

 

2015

 

2014

 

£

 

£

Up to 3 months

227,718


1,816,894

3 to 6 months

-


4,134,739

Over 6 months

-


4,075,073

 




 

227,718


10,026,706

 

Financial Liabilities

 

2015

 

2014

 

£

 

£

Up to 3 months

304,191


1,306,606

3 to 6 months

-


2,855,196

Over 6 months

-


1,218,845

 




 

304,191


5,380,647

 

5.

EMPLOYEES AND DIRECTORS

 

 

 

 

 

2015

 

2014

 

 

£

 

£

 

Wages and salaries

555,682

 

1,367,272

 

Social security costs

71,954

 

181,653

 

Redundancy costs

-

 

699,812

 

Share based payments (note 22)

-

 

58,433

 

Other pensions costs

46,950

 

315,193

 

 

 

 

 

 

 

674,586

 

2,622,363

 

Post-employment benefits include employee and Company contributions to money purchase pension schemes.

 

The average monthly number of employees during the year was as follows:

 

 

2015

 

2014

 

Directors

3

 

6

 

Employees

4

 

7

 

 

 

 

 

 

 

7

 

13

 

 

 

 

 

 

 

2015

 

2014

 

 

£

 

£

 

Directors' remuneration

144,744

 

662,277

 

Compensation for loss of office/ variation in contract

73,333

 

477,593

 

Directors' pension contributions to money purchase schemes

18,333

 

224,725

 

 

 

 

 

 

 

236,410

 

1,364,595

 

 

 

 

 

 

The average number of Directors to whom retirement benefits were accruing was as follows:

 

 

 


2015

 

2014

 

Money purchase schemes

1

 

3

 

 

 

 

 

Information regarding the highest paid Director is as follows:

2015

 

2014

 

 

£

 

£

 

Aggregate emoluments

65,267

 

145,833

 

Compensation for loss of office/ variation in contract

73,333

 

156,338

 


 

 

 

 


138,600

 

302,171

 

 

 

 

 

 

Pension contributions

18,333

 

83,067

 


 

 

 

 

The Directors did not exercise any share options during the year.

 

 

 

 

             Key management compensation

 

Key management includes Directors (Executive and Non-Executive) and the Company Secretary. The compensation paid or payable to key management for employee services is shown below;

 

 

2015

 

2014

 

 

£

 

£

 

Wages and short-term employee benefits

475,946

 

841,972

 

Compensation for loss of office

-

 

592,643

 

Share based payments (note 22)

-

 

77,889

 

Post-employment benefits

54,658

 

243,924






 

 

530,604

 

1,756,428

 

6.          EXCEPTIONAL ITEMS

 

2015

 

2014

 

£

 

£

Impairment of Goodwill on Business Acquisition (note 14)

(569,884)

 

-

Impairment charge on production asset at 30/06/14 (note 13)

-

 

(4,704,352)

Impairment charge on production asset at 31/12/14 (note 13)

-

 

(10,372,431)

Provision for onerous contract on production asset

-

 

(6,492,271)

Release from contractual agreements with Creditors

3,827,609

 

-

Loss on disposal of IGas Energy plc shares

-

 

(215,346)





 

3,257,725

 

(21,784,400)

 

7.

NET FINANCE COSTS

 

 

 

 

 

2015

 

2014

 

 

£

 

£

 

Finance income:

 

 

 

 

Joint venture finance charge

9,238

 

-

 

Interest received

3,799

 

19,029






 

Finance costs:

13,037

 

19,029

 

 

 

 

 

 

CGG Services (UK) Limited interest

2,776

 

15,493

 

Unwinding of discount on the decommissioning liability (note 20)

160,720

 

251,435

 

Joint venture finance charge

903

 

1,776

 

G E Capital facility fees

-

 

(28,137)






 

 

164,399

 

240,567







Net finance costs

(151,362)

 

(221,538)

 

 

8.

LOSS BEFORE TAX

 

 

 

 

The loss before tax is stated after charging/(crediting):

 

 

 

 

 

2015

 

2014

 

 

£

 

£

 

Depreciation

120,168

 

86,895

 

Depletion of oil assets (note 12)

-

 

5,397,403

 

Impairment of oil assets (note 12)

147,868

 

15,076,783

 

Intangible asset amortisation (note 11)

833,332

 

500,000

 

Impairment of intangible assets (note 11)

3,955,329

 

12,534,158

 

Onerous contract provision

(4,177,609)

 

6,492,271

 

Auditors' remuneration - audit of parent company and consolidation

27,500

 

27,500

 

Auditors' remuneration - audit of subsidiaries

11,500

 

28,500

 

Foreign exchange (gain) / loss

(86,813)

 

(711,862)

 

Directors' remuneration (note 5)

236,410

 

1,364,595

 

Employee costs (note 5)

438,106

 

1,257,768

 

Share based payments (notes 5 & 22)

-

 

58,433









 

9.          TAX

 

 

Reconciliation of tax charge

 

 

 

 

 

2015

 

2014

 

 

£

 

£

 

Loss before tax

(1,430,078)

 

(44,405,973)






 

Tax at the domestic rate of 20% (2014: 20%)

(286,016)

 

(8,881,195)

 

Expenses not deductible for tax purposes and non-taxable income

2,010

 

7,867,214

 

Deferred tax asset not recognised

284,006

 

1,013,981

 

Utilisation of prior year trading losses

 

 

-






 

Total tax expense reported in the Consolidated Statement of Comprehensive Loss

-

 

-

 

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2015 or for the year ended 31 December 2014.

 

The Group have not recognised a deferred tax asset due to the uncertainty over when the tax losses can be utilised. At the year end the tax losses within the Group were approximately £24m.

 

10.        LOSS PER SHARE

 

Basic loss per share is calculated by dividing the losses attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

 

Diluted loss per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares. As a loss was recorded for the current and prior year, the issue of potential ordinary shares would have been anti dilutive (see note 22 for share options in place at the end of the year).

 


Loss attributable

to ordinary

shareholders

£


Weighted average

number

of

shares


 

 

Per share

amount

pence

Year ended 31 December 2015






Basic and Diluted EPS






Loss attributable to ordinary shareholders

(1,430,078)

 

4,895,881

 

(29.21)


 

 

 

 

 

Year ended 31 December 2014






Basic and Diluted EPS






Loss attributable to ordinary shareholders

(44,405,973)

 

227,169,331

 

(19.55)

 

 

11.        INTANGIBLE ASSETS


Exploration costs


Data Licence costs


Total


£


£


£

COST






At 1 January 2014

12,258,417


4,000,000


16,258,417

Additions

1,648,607


-


1,648,607







At 31 December 2014

13,907,024


4,000,000


17,907,024







Additions

2,722,853


-


2,722,853







At 31 December 2015

16,629,877


4,000,000


20,629,877







AMORTISATION, DEPLETION & DEPRECIATION





At 1 January 2014

2,067


2,666,668


2,668,735

Charge for the year

-


500,000


500,000

Impairment charge for the year

12,534,158


-


12,534,158







At 31 December 2014

12,536,225


3,166,668


15,702,893







Charge for the year

-


833,332


833,332

Impairment charge for the year

3,955,329


-


3,955,329







At 31 December 2015

16,491,554


4,000,000


20,491,554







NET BOOK VALUE






At 31 December 2015

138,323


-


138,323







At 31 December 2014

1,370,799


833,332


2,204,131







At 31 December 2013

12,256,350


1,333,332


13,589,682







                                                                                                                                                                                                                            

 

* Impairments relate to the following licences included in Cost of sales in the Consolidated Statement of Comprehensive Income:

 

 

 

 

£

 

 

 

Licence P.1293 - Athena

 

453

Licence P.1556 - Orchid

 

1,650

Licence P.1610 - Magnolia

 

29,732

Licence P.1666 - Romeo

 

362,820

Licence P.1768 - Bordeaux/Brule

 

410

Licence P.1889 - Niobe

 

3,174,181

Licence P.1989 - Homer

 

262,076

Licence P.2032 - Valleys

 

1,763

Licence P.2170 - Cortina

 

122,244




 

 

3,955,329

 

Following completion of geotechnical evaluation activities, certain North Sea licences were declared unsuccessful and certain prospects were declared non-commercial. This subsequently involved the relinquishment of all licences except Licence P.2170 (Cortina). The carrying value of all licences except Cortina were fully written down to nil with £3.9m included in the Consolidated Statement of Comprehensive Income in the year to 31 December 2015. At 31 December 2015 the only remaining exploration asset (P.2170 - Cortina) was reviewed and the carrying value of £138,000 was considered reasonable based on ongoing exploration work in the licence block.

 

 

 

12.        PROPERTY, PLANT AND EQUIPMENT


Production interests and fields under development


Computer and office equipment


Total


£


£


£

COST






At 1 January 2014

22,965,548


235,049


23,200,597

Additions

6,339,479


50,973


6,390,452







At 31 December 2014

29,305,027


286,022


29,591,049







Additions

147,868


-


147,868







At 31 December 2015

29,452,895


286,022


29,738,917







AMORTISATION, DEPLETION & DEPRECIATION





At 1 January 2014

8,830,841


73,904


8,904,745

Charge for the year

5,397,403


86,895


5,484,298

Impairment charge for the year

15,076,783


-


15,076,783







At 31 December 2014

29,305,027


160,799


29,465,826







Charge for the year

-


120,168


120,168

Impairment charge for the year

147,868


-


147,868







At 31 December 2015

29,452,895


280,967


29,733,862







NET BOOK VALUE






At 31 December 2015

-


5,055


5,055







At 31 December 2014

-


125,223


125,223







At 1 January 2014

14,134,707


161,145


14,295,852







                                                                                                                                                                                                                            

 

Following the contract negotiations on the Athena production field the costs incurred on the licence have been impaired as the asset does not have a value to the Group.

 

 

13.        IMPAIRMENTS

 

 

2015

 

2014

 

£

 

£

Production asset

147,868

 

15,076,783

Exploration assets

3,955,329

 

12,534,158

Provision for onerous contract on production asset

-

 

6,492,271





 

4,103,197

 

34,103,212

 

14.        BUSINESS COMBINATIONS

 

On 14 August 2015, the Group acquired 100% of the share capital of Jersey Oil & Gas E&P Limited through an issuance of 2,250,000 shares. As a result of the acquisition, the Group has been renamed and has a refined business strategy focused on acquiring positive cashflow production assets.

 

The following table summarises the consideration paid for Jersey Oil & Gas E&P Limited, the fair value of assets acquired and the liabilities assumed at the acquisition date of 14 August 2015.

 

 

£

 

 

Purchase Consideration (refer to b)

495,000

 

 

Fair value of net identifiable assets and liabilities acquired (refer to c)

74,884

 

 





Goodwill at the acquisition date

569,884

 

 

 

 

 

 

Impairment

(569,884)

 

 

 

 

 

 

Goodwill as at 31 December 2015

-

 

 

 

Purchase Consideration

The purchase consideration was wholly satisfied through the issue of 2.25m new ordinary shares. The value is based upon the published share price of GBP 0.22 on the day of admission. There was no other form of consideration paid for the acquisition of Jersey Oil & Gas E&P Limited.

 

Assets and Liabilities Acquired

 

£

 

 

Cash and Cash Equivalents

54,527

 

 

Creditors and Accruals

(129,411)

 

 





Fair Value of Net Assets/(Liability)

(74,884)

 

 

 

 

The net assets of the purchased company (Jersey Oil & Gas E&P) were carried at fair value and as such no adjustments were made to their value at the acquisition date for the purposes of the business combination.

 

Impairment of Goodwill

IAS 36 Impairment of Assets requires that goodwill is assessed for impairment annually. Based on this requirement the Group have impaired the full goodwill balance to nil in 2015 as the goodwill calculated was not supported by the future cash flows of the acquired business. Jersey Oil & Gas E&P had no oil and gas specific assets at the acquisition date and held only limited financial assets and liabilities. Based on the Group's evaluation at the year end it was deemed appropriate to impair the goodwill initially recognised.

 

The impairment has been expensed to the consolidated statement of comprehensive income as an exceptional item (note 6).

 

Jersey Oil & Gas E&P Limited contributed a loss of £127,204 to the consolidated statement of comprehensive income since the acquisition date.

 

Had Jersey Oil & Gas E&P Limited been consolidated from 1 January 2015, the Jersey Oil and Gas plc consolidated statement of income would show a loss of £1,817,626.

 

15.       INVENTORIES

 

 

2015

 

2014

 

 

£

 

£

 

Oil inventories held for resale

-

 

858,060

 


 

 

 

 

16.        TRADE AND OTHER RECEIVABLES

 

 

2015

 

2014

 

 

£

 

£

 

Current:

 

 

 

 

Trade receivables (net)

124,526

 

1,546,111

 

Other receivables

68

 

1,549,085

 

Deposits

15,000

 

6,556,494

 

Value added tax

26,253

 

87,093

 

Prepayments

61,871

 

287,923

 

 

 

 

 

 


227,718

 

10,026,706

 


 

 

 

 

17.        CASH AND CASH EQUIVALENTS

 

 

2015

 

2014

 

 

£

 

£

 

Unrestricted cash in bank accounts

862,910

 

7,074,282

 

Restricted cash in escrow bank accounts

-

 

350,000

 

 

 

 

 

 


862,910

 

7,424,282

 


 

 

 

The restricted cash relates to amounts held in escrow as security for possible future liabilities to third parties.

 

18.        CALLED UP SHARE CAPITAL

 

Issued and fully paid:

 

Number:

Class

Nominal

 

2015

 

2014

 

 

 

value

 

£

 

£

 

8,391,477 (2014: 227,169,331)

Ordinary

1p


2,331,767

 

2,271,693

 


 

 

 

In August 2015, a capital reorganisation was undertaken that effectively reduced, by a factor of 100 the number of ordinary shares in issue. In August 2015 3,711,228 new shares were issued which raised £0.82m. In August 2015 2,250,000 new shares were issued for 100% of the share capital of Jersey Oil & Gas E&P Limited (note 14).

 

19.        TRADE AND OTHER PAYABLES

 

 

2015

 

2014

 

 

£

 

£

 

Current:

 

 

 

 

Trade payables

29,202

 

1,306,606

 

Accrued expenses

150,560

 

679,332

 

Other payables

101,390

 

2,175,864

 

Taxation and Social Security

23,039

 

-

 

 

 

 

 

 


304,191

 

4,161,802

 


 

 

 

 

Non-current:

 

 

 

 

Other payables

-

 

1,218,845

 


 

 

 

 

Aggregate amounts

304,191

 

5,380,647

 


 

 

 



 

 

20.        PROVISIONS FOR LIABILITIES AND CHARGES


Onerous Contracts

(Athena)

Decommissioning

and site

restoration

Total


£


£


£

At 1 January 2014

-


4,662,912


4,662,912

Athena site restoration obligation adjustment

-


2,800,213


2,800,213

Disposal of Lybster

-


251,435


251,435

Provision on Athena production asset

6,492,271


-


6,492,271













At 1 January 2015

6,492,271


7,714,560


14,206,831







Unwinding of discount

-


160,720


160,720

Transfer to Contingent liability

-


(7,875,280)


(7,875,280)

Utilised during the year

(6,492,271)


-


(6,492,271)













At 31 December 2015

-


-


-







 

21.        CONTINGENT LIABILITY

 

During the year, the settlement agreement reached with our partners in the Athena Consortium (referred to above), means that, although Trap Oil Ltd remains a partner in the joint venture, any past or future liabilities in respect of its interest can only be paid from the revenue that the Athena Oil Field generates and 60 per cent. of any petroleum sales or net disposal proceeds from certain other Group assets, with its consortium partners holding security over such assets.  Any future repayments cannot be calculated with any certainty, and any remaining liability still in existence once the Athena Oil Field has been decommissioned will be written off.

 

During the prior year the Group assigned its lease of 35 King Street to a third party. However, the Group is still acting as Authorised Guarantor for all liabilities of the assignee in relation to the lease agreement.

 

22.        SHARE BASED PAYMENTS

 

The Group operates a number of share option schemes. Options are exercisable at the prices set out in the table below. Options are forfeited if the employee leaves the Group through resignation or dismissal before the options vest.

 

Equity settled share based payments are measured at fair value at the date of grant. The fair value determined at the date of grant of equity settled share based payments is expensed on a straight line basis over the vesting period, based upon the Group's estimate of shares that will eventually vest.

 

During the year, due to the capital reorganisation, the number of options were reduced by the same factor of 100 as the issued share capital at the time of the reorganisation and the option price was increased by the same factor. Therefore, the options remained the same percentage of the issued share capital with the same value.

 

During the year, a number of the share options lapsed or did not vest following employees leaving employment or certain performance criteria not being met.

 

The Group share option schemes are for Directors, Officers and employees and details of outstanding options are set out in the table below.

 

 

Date Of Grant

Exercise price pence

Vesting date

Expiry date

No. of shares for which options outstanding at 1 Jan 2015

14 Aug 2015 Reconstruction

 

Options lapsed/non vesting during the year

No. of shares for which options outstanding at 31 Dec 2015

Pre IPO Options

 

 

 

 

 

March 2011

100

Vested

Mar 2021

2,413,836

(2,389,698)

-

24,138

Under the Trap Oil Group plc Unapproved Share Option Plan 2011 and Individual Option Agreements


Mar 2011

4,300

Vested

Mar 2021

1,269,385

(1,256,691)

(6,885)

5,809

Mar 2011

4,300

Mar 2014

Mar 2021

627,409

 (621,135)

(1,919)

4,355

Mar 2011

4,300

Mar 2015

Mar 2021

627,409

 (621,135)

(465)

5,809

Jul 2011

4,300

Jul 2011

Jul 2021

52,823

(52,300)

-

523

Jul 2011

4,300

Jul 2012

Jul 2021

52,823

 (52,300)

-

523

Jul 2011

4,300

Jul 2014

Jul 2021

52,823

(52,300)

-

523

Dec 2011

2,712

Dec 2012

Dec 2021

165,000

 (163,350)

-

1,650

Dec 2011

2,712

Dec 2014

Dec 2021

165,000

 (163,350)

-

1,650

Dec 2011

2,712

Dec 2015

Dec 2021

300,000

(297,000) 

(3,000)

-

May 2013

1,500

May 2014

May 2023

1,083,333

(1,072,500)

(1,333)

9,500

May 2013

1,500

May 2015

May 2023

1,083,333

(1,072,500)

(1,333)

9,500

May 2013

1,500

May 2015

May 2023

1,083,334

 (1,072,501)

(10,833)

-

 

 

 

 



Total

63,980

 

 

During the year no options were exercised or granted.

 

 

 

 

23.        COMMITMENTS

 

Capital Commitments

 

Operating leases

 

2015

 

2014

 

2015

 

2014

 

£

 

£

 

£

 

£

No later than 1 year

-

 

4,600,000

 

10,000

 

-

Later than 1 year and no later than 5 years

-

 

-

 

-

 

82,500

Later than 5 years

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

-

 

4,600,000

 

10,000

 

82,500

 

The Group leased an office at 85 Gresham Street under a non-cancellable operating lease agreement. The lease expired in February 2016 and this was not renewed.

 

24.        RELATED PARTY DISCLOSURES AND ULTIMATE CONTROLLING PARTY

 

The Group and Company do not have an ultimate controlling party, or parent Company.

 

Related Undertakings

 

 

 

 

 

 

Amount due to/(from) subsidiaries

 

Subsidiary

% owned

County of Incorporation

Principal

Activity

 

2015

£

 

2014

£

 

Predator Oil Ltd

100%

England & Wales

Non Trading

 

211,676

 

(7,595)

 

 

Trap Oil Ltd

100%

England & Wales

Oil Exploration

 

-

 

-

 

Trap Oil & Gas Ltd

100%

Scotland

Non Trading

 

-

 

-

 

 

Trap Petroleum Ltd

100%

Scotland

Non Trading

 

1

 

-

 

 

Trap Exploration (UK) Ltd

100%

Scotland

Non Trading

 

1

 

1

 

Jersey Oil & Gas E & P Ltd

100%

Jersey

Management services

 

-

 

-

 

The balances outstanding at the end of the year from Trap Oil Limited £68,251,398 (2014: £36,403,124) and Jersey Oil & Gas E&P Ltd £160,882 have been, given the doubt over the ability of the subsidiaries to continue as going concerns, impaired to £nil.

 

During the year, the Company also made sales to Trap Oil Limited amounting to £1,040,704 (2014: £4,059,439).

 

25.        EVENTS AFTER THE REPORTING PERIOD

 

             Relinquishment of Exploration Licences

 

The Group and Company do not have an ultimate controlling party, or parent Company.

 

Liberator

Based on significant ongoing licence fees, management took the decision on 6 January 2016 to relinquish all interests in Licence P.1610, Block 12/23a ("Liberator"). As a result the Company has therefore forgone its 10 per cent carried interest in this licence.

 

Licence P.1989

In January 2016 the Company entered into a sale and purchase agreement (the "SPA") with Azinor Catalyst Limited ("Catalyst") for the farm-out of its 50 per cent. interest in Seaward Production Licence P.1989 Blocks 14/11, 12 & 16 (the "Licence").The balancing 50 per cent. interest in the Licence was held by Norwegian Energy Company UK Limited ("Noreco") and under the terms of the SPA Catalyst agreed to acquire 100 per cent. of the Licence from both Trap Oil and Noreco, and to be appointed as Operator.

 

 

 

By way of consideration, Catalyst will undertake certain firm work commitments, as set out in the terms of the Licence. These terms include the drill-or-drop obligation in respect of an exploration well and a commitment to make certain payments to each of the Company and Noreco contingent on the occurrence of certain future events, namely:

 

·      US$2m within 90 days of the date when an exploration well, drilled within the Licence area, exceeds a threshold of net-pay with a vertical extent of no less than twenty metres of sands with a hydrocarbon saturation above sixty per cent. and a permeability cut-off of 1mD; and

·      a further US$2m within 90 days of the date when a Field Development Plan in respect of the aforementioned exploration well is approved by the Secretary of State for Energy and Climate Change.

 

Romeo

Effective 11 February 2016, a decision by the joint venture partners was made to relinquish Licence P.1666, Block 30/11c ("Romeo"). Relinquishment of this licence interest will remove further cost exposure for Jersey Oil & Gas.

 

26.       NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

 

             RECONCILIATION OF LOSS BEFORE TAX TO CASH USED IN OPERATIONS

 

 

 

2015

 

2014

 

 

£

 

£

 

 

 

 

 

 

Loss for the year before tax

(1,430,078)

 

(44,405,973)

 

Adjusted for:

 

 

 

 

Amortisation, impairments, depletion and depreciation

5,901,697

 

33,595,239

 

Onerous contract provision

-

 

6,492,271

 

Loss on disposal of available for sale assets

-

 

215,346

 

Share based payments (net)

-

 

58,433

 

Finance costs

164,399

 

240,567

 

Finance income

(13,037)

 

(19,029)

 

Other payables

-

 

-

 

 

 

 

 

 


4,622,981

 

(3,823,146)

 

Decrease in inventories

858,060

 

391,539

 

Decrease in trade and other receivables

9,798,988

 

1,986,512

 

(Decrease)/Increase in trade and other payables

(19,444,008)

 

473,052

 


 

 

 

 

Cash used in operations

(4,163,979)

 

(972,043)

 


 

 

 

 

             CASH AND CASH EQUIVALENTS

 

The amounts disclosed on the Statement of Cash Flows in respect of Cash and cash equivalents are in respect of these statements of financial position amounts:

 

Year ended 2015

 


31 Dec 2015

 

1 Jan 2015

 


£

 

£

 

Cash and cash equivalents

862,910

 

7,074,282

 


 

 

 

Year ended 2014

 


31 Dec 2014

 

1 Jan 2014

 


£

 

£

 

Cash and cash equivalents

7,074,282

 

16,088,908

 


 

 

 

 

 

 

 

Analysis of net cash

 

 

 

At 1 Jan 2015


cash flow


At 31 Dec 2015

 

 

 

£

 

£

 

£

Cash and cash equivalents

 

 

7,074,282

 

(6,211,372)

 

862,910


 

 

 

 

 

 

 

Net cash

 

 

7,074,282

 

(6,211,372)

 

862,910

 

27.      AVAILABILITY OF THE ANNUAL REPORT 2015

 

A copy of these results will be made available for inspection at the Company's registered office during normal business hours on any weekday. The Company's registered office is at 10 The Triangle, ng2 Business Park, Nottingham NG2 1AE. A copy can also be downloaded from the Company's website at www.jerseyoilandgas.com. Jersey Oil and Gas plc is registered in England and Wales with registration number 7503957.


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