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Jersey Oil & Gas PLC (JOG)

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Thursday 26 April, 2018

Jersey Oil & Gas PLC

Final Results for the year ended 31 December 2017

RNS Number : 1573M
Jersey Oil and Gas PLC
26 April 2018
 

26 April 2018

 

Jersey Oil and Gas plc

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

 

Final Results for the year ended 31 December 2017

 

Jersey Oil & Gas (AIM: JOG), an independent upstream oil and gas company ‎focused on the UK Continental Shelf ("UKCS") region of the North Sea, is pleased to announce its audited results for the year ended 31 December 2017.

 

Highlights

·      Oil Discovery at Verbier sidetrack well 20/05b-13Z, with estimated gross recoverable resources of up to 130 million barrels of oil equivalent, with a minimum proven volume of 25 million barrels of oil equivalent

·      Placing with new and existing institutional investors and open offer completed in November 2017 raising £23.8m (gross) to significantly strengthen the Company's balance sheet

·      The Company benefitted from a double carry on the exploration programme, with Operator Statoil carrying well costs of up to $25 million on the 20/05b-13 well and JOG receiving a 10% cash carry from its co-venturer CIECO of approximately £2.4m

·      Cash balances at year end of £25.4m and no debt

 

 

Post year end

 

·     2018 work programme and budget approved for P2170 licence which includes an appraisal well      programme for the recent Verbier oil discovery

·     Contracts awarded by P2170 Licence Operator, Statoil, for the semi-submersible rig, West Phoenix, to drill an appraisal well, with the possibility for a sidetrack well, on the Verbier oil discovery in P2170 licence in the summer of 2018

·     The P2170 licence co-venturers have committed to pre-fund a 3D seismic survey over the P2170 licence  area and certain offset acreage, during Q2 2018 with delivery of final data expected in Q1 2019

 

Outlook

 

·     Global oil prices appear to be holding steady above the $60/bbl level, providing increased clarity for          pursuit of the Group's growth strategy

·      Exciting year ahead with near-term drilling activity on Verbier in the summer of 2018

·     Additional 3D seismic survey will facilitate the potential future development of the Verbier discovery and enhance our understanding and evaluation of other drillable prospects in the greater P2170 licence area

·      Ongoing licence-wide exploration effort looking for other Verbier analogues, including Cortina and Meribel

·      Contingent plans for site survey and additional exploration well planning

·      The Company continues to pursue its dual strategy of appraising and exploring P2170, while seeking to acquire oil and gas production assets in the UK Continental Shelf ("UKCS") region of the North Sea

 

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

"2017 has been a significant and exciting year for Jersey Oil and Gas and has been the culmination of years of hard work by the Company. Our exploration drilling programme on our highly exciting Verbier prospect in October delivered a stand out discovery in the North Sea which we look forward to appraising this summer. Our successful fundraising in October has meant that the Company is well funded for the upcoming work programme on the P2170 licence."

"The board and I look forward to 2018 from a position of optimism and would like to thank shareholders for their ongoing support and look forward to updating them on further progress."

 

Enquiries:

Jersey Oil and Gas plc

 

Andrew Benitz, CEO

C/o Camarco:

Tel: 020 3757 4983

Strand Hanson Limited

James Harris

Matthew Chandler

James Bellman

Tel: 020 7409 3494

Arden Partners plc

Chris Hardie

Benjamin Cryer

Tel: 020 7614 5900

BMO Capital Markets Limited

Jeremy Low

Neil Haycock

Tom Rider

Tel: 020 7236 1010

Camarco

Billy Clegg

Georgia Edmonds

James Crothers

Tel: 020 3757 4983

 

Notes to Editors:

Jersey Oil & Gas is a UK E&P Company focused on building a production-focussed company in the North Sea. The Company owns an 18% interest in the P.2170 licence, Blocks 20/5b & 21/1d, Outer Moray Firth, in which the operator, Statoil (U.K.) Limited, owns a 70% interest and CIECO V&C (UK) Limited owns a 12% interest.  In October 2017, the Company announced the Verbier oil discovery, with initial operator estimates of gross recoverable resources of between 25 to130 million barrels of oil equivalent.  A well, planned for drilling in summer 2018, has been announced, to appraise the Verbier discovery.

The Company plans to build a production portfolio via both organic development and acquisitions coinciding with the cyclical recovery in the oil price and the current opportune buying market in the North Sea. The Company is involved in multiple sales processes and intends to draw on its management team's considerable experience, knowledge and expertise to deliver shareholder value from its stated strategy.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014.

 

CHAIRMANS STATEMENT

 

Overview

The year ended 31 December 2017 was transformational for Jersey Oil and Gas ("JOG" or the "Company" or, together with its subsidiaries, the "Group"), led by the Verbier discovery in licence P2170, in which the Company has an 18% working interest.

 

This discovery was a result of the drilling programme undertaken in 2017, by Statoil as operator of licence P2170, which enabled us to announce estimated gross recoverable resources of between 25 and 130 mmboe (million barrels of oil equivalent), with a minimum proven volume of 25 mmboe. Besides being of major significance to JOG, the Verbier discovery was also a positive endorsement of North Sea exploration activity generally.

 

The Board believes that the results at Verbier provide encouragement that in addition to the Verbier prospect there could be a material amount of further resources within the P2170 licence area, and we are approaching this potential prospectivity on a number of fronts. An appraisal drilling programme for Verbier is scheduled for which a work programme and budget have been agreed by the P2170 co-venturers. In addition, we have recently announced a major new 3D seismic survey, which will help with early stage development planning, should the Verbier appraisal programme be successful and also advance our exploration activity across the rest of the P2170 licence, which includes the Cortina prospect, the Meribel lead and other potential Verbier analogues. This work is being undertaken both by Statoil, on behalf of the joint venture, and by JOG on its own account, as we look to fully maximise the value of the Verbier discovery.

 

Whilst further details of the discovery are covered in the Chief Executive's Officers Report, it is clear that these are exciting times for JOG, with the potential for generating significant shareholder value, both from the Verbier prospect itself, and in the areas beyond.

 

Economic Background

The economic background against which this was achieved included Brent Crude Oil opening 2017 at $56 per barrel, falling back to $50 per barrel at the half way point, and then increasing to $66 per barrel at the year end. The consensus view, at the beginning of 2018, was for a year-end Brent Crude Oil price of around $60, which at the time of this statement is trading at c.$74 per barrel. In terms of the long-term outlook, the majority of global projections envisage the level of oil and gas demand in 2035 or 2040 to be in excess of what is it today. In a UK Continental Shelf ("UKCS") context, whilst we are past peak production, and a number of companies are seeking to dispose of asset portfolios, there also continues to be exploration activity, with notable successes, one of which was the 2017 JOG discovery at Verbier.

 

The development of activity in the UKCS continues to be actively promoted through the Oil and Gas Authority's Maximising Economic Recovery programme, which provides strategic influence on the future development of the UKCS (which the Government estimates could have up to 20 billion barrels of recoverable reserves remaining). As part of this Government led incentivisation process, the headline rate of tax in the UKCS was reduced to 40% in 2016.

 

Against this backdrop, we have continued to engage with multiple vendors in connection with the acquisition of producing assets. As in previous years, we continue to apply a rigorous and disciplined approach to asset valuation and will not be swayed in the event of what we see as uneconomic prices being offered by others, or unrealistic terms being asked by vendors. A number of potential transactions have reached very advanced stages of negotiation for JOG but have not been completed, for a number of quite different, deal-related reasons.

 

We believe that the level of divestment activity will most likely increase following proposed tax changes, announced by the Chancellor of the Exchequer in 2017 which, effective from November 2018, should allow the historical tax profile of an oil and gas field to be transferred to the purchaser of a licence interest, thereby allowing tax relief for future costs of abandonment expenditure. Although our experience is that a number of vendors are prepared to retain their abandonment obligations, this change should enable asset purchasers, such as JOG, to take them on more easily.

 

Equity Placing

In the third quarter of 2017 we raised approximately £24m through a placing and open offer of new ordinary shares, largely in order to fund our share of future appraisal and exploration costs relating to the Verbier discovery. We were particularly pleased to welcome new institutional shareholders via the placing and report a 94% take up of the maximum allocation of £4m under the open offer to our existing shareholders.

 

Financial Results

Our pre-tax profit for the year amounted to £726k, up from a loss of £793k in 2016. The main contributor to this profit was the carry reimbursement we received in relation to the Verbier drilling programme. Nonetheless, we continue to maintain a tight control over our costs, both in the year just passed and going forward.

 

Cash at year end was just over £25m and we are presently budgeting for £9m to £11m of capital expenditure in relation to the 2018 P2170 work programme, including the Verbier appraisal well.

 

Outlook

The drilling of one or perhaps two appraisal wells on Verbier later this year will clearly be an important milestone for JOG and we will be working closely with our co-venturers on this major opportunity. We will also continue to assess potential production asset acquisitions, whilst maintaining our pricing discipline and are cognisant not to overly dilute what may be significant value for shareholders ahead of this summer's Verbier appraisal well. Given the operating and economic environment in which JOG operates, I believe that the JOG strategy of appraising the Verbier discovery and additional exploration activity, together with an active production acquisition programme leaves us in the right place, at the right time, to develop significant value for shareholders, and we will be working very hard to do so.

 

On behalf of the Board, I would like to welcome the new shareholders who supported our equity placing in 2017 and to thank those existing shareholders who have increased their shareholdings. I would also like to thank all of our employees who have continued to work on our exploration and production ambitions, not forgetting the significant salary cuts that were taken in earlier years.

 

 

Marcus Stanton

Non-Executive Chairman

26 April 2018

 

 

CHIEF EXECUTIVE OFFICER'S REPORT

 

Overview

When our interim results were published on 28 September 2017, we had just embarked on the drilling of the Verbier sidetrack well, following a disappointing initial well earlier in the month. Potential for hydrocarbons to exist up dip from the water-bearing sands encountered in the initial well could not be ruled out, so a decision by the joint venture was made to drill the sidetrack well. We were subsequently delighted to announce, in early October, the Verbier oil discovery in good quality sands with the results exceeding pre-drill expectations for the sidetrack well. The operator's initial estimates of gross recoverable resources associated with the Verbier discovery were between 25 and 130 million barrels of oil equivalent, with a minimum proven recoverable volume of 25 million barrels of oil equivalent. It is our belief that this discovery was the largest conventional discovery to be made in UKCS part of the North Sea during 2017 and was a significant milestone for Jersey Oil and Gas.

 

Soon after the discovery, JOG completed a successful equity placing that strengthened its balance sheet ahead of an expected work programme of appraisal and further exploration across the P2170 licence. Post year end, we were pleased to announce that the West Phoenix, a sixth generation semi-submersible rig, has been contracted for a summer 2018 appraisal programme to determine the potential of our Verbier discovery. We have also recently announced JOG's participation in a new 3D seismic survey that will cover licence P2170 and further offset acreage, optimised to advance the interpretation of Verbier and additional exploration analogues; a clear demonstration of the licence co-venturers' optimism for the acreage.

 

Operations

A key focus for JOG during 2017 was the build up of operations and drilling on the P2170 licence area with respect to the Verbier exploration well programme, operated by Statoil. Following our successful farm-out to Statoil during 2016, JOG retained an 18% interest in this licence. In April 2017, we were pleased to announce the signing, by Statoil, of a contract for use of the Transocean Spitsbergen rig. This set in motion detailed plans for drilling of the Verbier exploration well, which commenced in August 2017.

 

Prior to the exploration drilling programme, JOG also furthered its technical understanding of the two drill-ready prospects on the licence, Verbier and Cortina, and in March 2017 we announced the findings of an independent Competent Person's Report ("CPR"), conducted by ERC Equipoise Limited, which ascribed prospective resources and risks for these prospects. We were pleased with the outcome of this independent study, as it reported an upgrade on our previous management estimates, with mean prospective resources of 162MMbbls ascribed to Verbier with a chance of success of 29%, and 124MMbbls ascribed to Cortina with a chance of success of 19%.

 

In August, JOG announced the commencement of the drilling of the Verbier exploration well, 20/05b-13. Unfortunately, although the well was on time and within budget, after 29 days of drilling, JOG was disappointed to announce that the well had failed to find any commercial hydrocarbons. The well encountered water-bearing Upper Jurassic sands, deeper than anticipated. This geological result was indeed a surprise to the P2170 co-venturers. Led by the operator, Statoil, the wireline log data from the well, together with the pressure samples and seismic data, were subsequently evaluated. It was concluded that potential for hydrocarbons to be present in an accumulation up dip of the 20/05b-13 Verbier exploration well could not be ruled out. Accordingly, JOG was pleased to support the operator's recommendation to undertake the drilling of a sidetrack exploration well which commenced in September 2017.

 

Successful Verbier Sidetrack

In October 2017, JOG was delighted to announce an oil discovery in the Verbier sidetrack well. Preliminary analysis indicated that the well had proven a hydrocarbon accumulation in good quality sands, up-dip of the water-bearing sands encountered in the initial well. Extensive evaluation of the sidetrack well results, together with the existing 3D seismic data, has been ongoing since the discovery, with initial Statoil estimates of gross recoverable resources associated with the discovery of between 25 and 130 million barrels of oil equivalent, with a minimum proven recoverable volume of 25 million barrels of oil equivalent in the immediate vicinity of the wellbore.

 

The Company's management has run notional development scenarios, which include a subsea tie-back development scenario to commercialise the minimum proven volume and a standalone platform development for volumes in excess of the mean recoverable volume estimate of 69 million barrels. For the Verbier upside case of 130 million barrels, management has estimated that full lifecycle costs (including capex, opex and abex) have the potential to be under $35/barrel. In the event of a low case of 25 million barrels recoverable, development scenarios exist which management currently believe could be commercially viable. When aggregating recoverable prospective resource estimates for the Cortina prospect and Meribel lead, the resource range for P2170 is estimated by management to be 70 MMboe in the low case to 273 MMboe in the upside case.

 

In addition to confirming the presence of oil in the Verbier prospect, this discovery provides valuable information to help better understand the prospectivity of the P2170 licence area, incentivising the joint venture partners to increase their exploration activities. In parallel with the excellent technical analysis being conducted by licence operator Statoil, JOG has been conducting its own technical studies post well results, for the benefit of shareholders, which are fully aligned, and have been presented to the co-venturers.

 

Other Licence Activity

In early 2016, JOG sold its interest in licence P1989, in which the Partridge prospect was located, to Azinor Catalyst Limited ("Azinor") in return for a contingent financial interest, subject to a discovery, of up to US$4m. During August 2017, Azinor announced that drilling had begun on its Partridge prospect. While the well encountered excellent quality reservoir rocks, hydrocarbons were not present and it has now been plugged and abandoned. Accordingly, no contingent payments will be received by the Company from Azinor.

 

In 2014 the P1923 licence was relinquished in which JOG has a 30% working interest. During 2017, Centrica, the original operator, identified an opportunity to recoup some of the costs incurred in the reprocessing of the datasets. The sale of the data resulted in a payment to JOG of £22,500.

 

As reported in previous years, Total E&P UK Limited ("TEPUK") has a conditional agreement to pay the Company £1m in relation to the termination of its 2013 farm-in to Licence P2032, Blocks 21/8c, 21/9c, 21/10c, 21/14a and 21/15b. TEPUK disputes that the conditions giving rise to the obligation to pay the Company have been satisfied. We continue efforts in pursuit of our claim.

 

JOG's Acquisition Strategy

The Company has continued with its other main focus of seeking to acquire value-enhancing North Sea production focused assets. The Company now benefits from a stronger balance sheet, which will provide vendors with greater confidence in its ability to execute on potential acquisitions. The Company will also benefit from having the necessary resources to undertake its own studies in relation to the ongoing evaluation of numerous North Sea oil and gas production focused prospects. The Company has a strong pipeline of asset opportunities currently under evaluation. Following the success with Verbier, JOG's management is mindful of the remaining upside potential that a 2018 appraisal programme has for our shareholders and whilst we are keen to expand our North Sea portfolio, we remain sensitive about equity dilution and are therefore increasingly disciplined in our approach to acquisitions.

 

Financial review

Due to the beneficial nature of JOG's carry arrangements on licence P2170, the Company ended the financial year posting a profit of £0.7m. Following the successful farm out to Statoil during 2016, JOG and its co-venturer CIECO benefitted from a cost carry of $25m for expenditure relating to the 20/05b-13 well. This well was drilled within budget and did not exceed this carry value. In addition to the carry from Statoil, JOG benefitted from a double carry arrangement receiving an additional 10% cash carry reimbursement from CIECO for the exploration programme, which included expenditure during the drilling of the sidetrack well. Reimbursement cash received by JOG from its co-venturer, CIECO, in relation to this carry arrangement was approximately £2.4m during 2017. Following the successful exploration programme in 2017, JOG's carry arrangements have now ceased and any future expenditure on this licence will be funded by JOG in proportion to its 18% working interest in the licence.

 

Our Cost of Sales during the year was limited to ongoing work on our remaining licence interest, P2170, where we have incurred expenditure which is not recoverable from our co-venturers. This included proprietary technical studies, commissioned by JOG, to further our geological understanding of the Verbier prospect and an independent competent person's report by ERC Equipoise Limited, the results of which were announced in March 2017.

 

The Company has always been focused on controlling administration costs and tries to keep these to a minimum. To this end we have continued to maintain a low cost operation, comprising only one very cost-effective office in Jersey. Overall, however, costs have increased year-on-year as we expanded our cost base slightly following the farm-out of licence P2170 and in the lead up to drilling. We also incurred increased advisory costs relating to potential asset acquisitions pursued during the period.

 

Looking Forward

The Company has worked hard over the last few years to deliver value to our shareholders and in 2017 we achieved another significant value-enhancing event with the Verbier oil discovery, following on from the farm-out to Statoil in 2016. Further to the successful fundraising in October 2017, the Company is well funded, as we turn our attention to appraising Verbier. We are also continuing our exploration activities with the recently announced 3D survey, to fully evaluate the prospectivity across the P2170 licence area.

 

We remain very excited by the opportunities currently available to us in the year ahead. The significant investment being made by our co-venturers in Verbier and the potential analogous opportunities, in close proximity, provide us with the potential to deliver significant further upside for our shareholders in the coming years. I would like to take this opportunity to thank our existing and new shareholders for their support and look forward to providing updates as we progress another exciting drilling programme during this year.    

 

 

Andrew Benitz 

Chief Executive Officer 

26 April 2018

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

2017

 

2016

 

 

Note

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

3

 

-

 

-

 

 

 

 

 

 

 

Cost of sales

 

 

 

(13,498)

 

(4,950)

 

 

 

 

 

 

 

GROSS LOSS

 

 

 

(13,498)

 

(4,950)

 

 

 

 

 

 

 

Other income

 

6

 

2,440,248

 

214,110

Gain on disposal of asset

 

7

 

-

 

239,724

Administrative expenses

 

 

 

(1,705,068)

 

(1,244,393)

 

 

 

 

 

 

 

OPERATING PROFIT/(LOSS)

 

 

 

721,682

 

(795,509)

 

 

 

 

 

 

 

Finance costs

 

8

 

-

 

-

 

 

 

 

 

 

 

Finance income

 

8

 

5,010

 

2,070

 

 

 

 

 

 

 

PROFIT/(LOSS) BEFORE TAX

 

9

 

726,692

 

(793,439)

 

 

 

 

 

 

 

Tax

 

10

 

-

 

-

 

 

 

 

 

 

 

PROFIT/(LOSS) FOR THE YEAR

 

 

 

726,692

 

(793,439)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL COMPREHENSIVE PROFIT/(LOSS) FOR THE YEAR

 

 

 

726,692

 

(793,439)

 

 

 

 

 

 

 

Total comprehensive profit/(loss) for the year attributable to:

 

 

 

 

 

 

Owners of the parent

 

 

 

726,692

 

(793,439)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/Loss per share expressed in pence per share:

 

 

 

 

 

 

Basic

 

11

 

6.49

 

(9.28)

Diluted

 

11

 

6.03

 

(9.28)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

 

 

2017

 

2016

 

 

Note

 

£

 

£

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

 

Intangible assets - Exploration costs

 

12

 

1,357,959

 

48,363

Property, plant and equipment

 

13

 

-

 

372

 

 

 

 

 

 

 

 

 

 

 

1,357,959

 

48,735

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Trade and other receivables

 

15

 

356,107

 

122,872

Cash and cash equivalents

 

16

 

25,415,410

 

1,882,310

 

 

 

 

 

 

 

 

 

 

 

25,771,517

 

2,005,182

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

 

27,129,476

 

2,053,917

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Called up share capital

 

17

 

2,466,144

 

2,347,017

Share premium account

 

 

 

93,851,526

 

71,170,230

Share options reserve

 

20

 

1,231,055

 

1,495,921

Accumulated losses

 

 

 

(71,666,579

)

(72,763,959)

Reorganisation reserve

 

 

 

(382,543)

 

(382,543)

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

 

25,499,603

 

1,866,666

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Trade and other payables

 

18

 

1,629,873

 

187,251

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

 

1,629,873

 

187,251

 

 

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

 

 

27,129,476

 

2,053,917

 

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Called up

 

Share

 

Share

 

 

 

 

 

 

 

 

share

 

premium

 

options

 

Accumulated

 

Reorganisation

 

 

Total

 

capital

 

account

 

reserve

 

losses

 

reserve

 

 

equity

 

£

 

£

 

£

 

£

 

£

 

 

£

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2016

2,331,767

 

69,569,978

 

1,381,133

 

(71,970,520)

 

(382,543)

 

 

929,815

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and total comprehensive loss for the year

-

 

-

 

-

 

(793,439)

 

-

 

 

(793,439)

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

15,250

 

1,600,252

 

-

 

-

 

-

 

 

1,615,502

 

 

 

 

 

 

 

 

 

 

 

 

 

Share based payments

-

 

-

 

114,788

 

-

 

-

 

 

114,788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2016 and 1 January 2017

2,347,017

 

71,170,230

 

1,495,921

 

(72,763,959)

 

(382,543)

 

 

1,866,666

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit and total comprehensive Profit for the year

-

 

-

 

-

 

726,692

 

-

 

 

726,692

 

 

 

 

 

 

 

 

 

 

 

 

 

Issue of share capital

119,127

 

22,681,296

 

-

 

-

 

-

 

 

22,800,423

 

 

 

 

 

 

 

 

 

 

 

 

 

Share based payments

-

 

-

 

105,822

 

-

 

-

 

 

105,822

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised share options

 

-

 

-

(370,688)

 

370,688

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2017

2,466,144

 

93,851,526

 

1,231,055

 

(71,666,579)

 

(382,543)

 

 

25,499,603

 

 

 

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 Income

Reorganisation reserve                                            Amounts resulting from the restructuring of the Group at the time of the Initial Public Offering (IPO) in 2011

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

 

 

2017

 

2016

 

 

Note

 

£

 

£

Cash flows from operating activities

 

 

 

 

 

 

Cash used in operations

 

22

 

2,036,892

 

(927,144)

Net interest received

 

8

 

5,010

 

2,070

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

 

2,041,902

 

(925,074)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of intangible assets

 

12

 

(1,309,225)

 

(85,993)

Proceeds on sale of intangible fixed assets

 

7

 

-

 

414,966

 

 

 

 

 

 

 

Net cash generated from/(used in) investing activities

 

 

 

(1,309,225)

 

328,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Net proceeds from share issue

 

 

 

22,800,423

 

1,615,501

 

 

 

 

 

 

 

Net cash generated from financing activities

 

 

 

22,800,423

 

1,615,501

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

22

 

23,533,100

 

1,019,400

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of year

 

22

 

1,882,310

 

862,910

 

 

 

 

 

 

 

Cash and cash equivalents at end of year

 

22

 

25,415,410

 

1,882,310

 

 

 

 

 

 

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1.          GENERAL INFORMATION

 

Jersey Oil and Gas plc (the "Company") and its subsidiaries (together, the "Group") are involved in the upstream oil and gas business in the UK.

 

The Company is a public limited company incorporated and domiciled in the United Kingdom and quoted on AIM, a market operated by London Stock Exchange plc. 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

The Company is required to have sufficient resources to cover the expected running costs of the business for a period of 12 months after the issue of these financial statements. Taking into account the P2170 licence 2018 approved work programme and budget, our current cash reserves are, expected to more than exceed the estimated liability of the Company. Based on these circumstances, the Directors have considered it appropriate to adopt the going concern basis of accounting in preparing its consolidated financial statements.

 

Changes in Accounting Policies and Disclosures

(a) New and amended standards adopted by the Company:

There are no new standards that came into effect during 2017.

(b) 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 adopted them early. The Group does not expect the adoption of these standards to have a material impact on the financial statements.

 

·      IFRS 15 'Revenue from contracts with customers' is effective for accounting periods beginning on or after 1 January 2018.

·      IFRS 9 'Financial 'instruments' is effective for accounting periods beginning on or after 1 January 2018.

·      IFRS 16 'Leases' is effective for accounting periods beginning on or after 1 January 2019.

 

Amendments have also been made to the following standards effective on or after 1 January 2017. The Group does not expect the amendments to have a material impact on the Group's financial statements.

 

·     IFRS 2 'Share-based Payment'

·     IFRS 4 'Insurance Contracts'

·     IFRS 12 'Disclosure of Interests in Other Entities'

·     IAS 7 'Statement of Cash Flows'

·     IAS 12 'Income Tax'

·     IAS 28 'Investment in Associates and Joint Ventures'

·     IAS 40 'Investment Property'

 

All other amendments to accounting standards 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:

 

·      the estimation of share based payment costs (note 20).

 

Impairments

The Group tests its capitalised exploration licence costs for impairment when facts and circumstances suggest that the carrying amount exceeds the recoverable amount. The recoverable amounts of Cash Generating Units are determined based on value-in-use calculations. There were no impairment triggers in 2017 and no impairment charge has been recorded.

 

Share Based Payments

The Group currently has a number of share schemes that give rise to share based charges. The charge to operating profit for these schemes amounted to £105,822 (2016: £114,788). For the purposes of calculating the fair value of the share options, a Black-Scholes option pricing model has been used. Based on past experience, it has been assumed that options will be exercised, on average, at the earliest exercise date. The share price volatility of 40% used in the calculation is based on the actual volatility of the Company's shares as well as that of comparable companies. The risk free rate of return is based on the implied yield available on zero coupon gilts with a term remaining equal to the expected lifetime of the options at the date of grant

 

Basis of Consolidation

(a) Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern their 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.

 

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 is 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 Income.

 

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 the 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 is recognised in the period in which services are provided to such partners by the Group or the date a trigger event occurs if this is later.

 

 

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 has 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 Income. If there are indications of impairment prior to the conclusion of exploration activities, an impairment test is carried out.

 

Property, Plant and Equipment

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

 

 

Joint Ventures

The Group participates in 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 Income 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's 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 maturity 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 doubtful debts. A provision for doubtful debts 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 recoverability of the trade receivable is doubtful. 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 Income within administrative expenses. Subsequent recoveries of amounts previously provided for are credited against administrative expenses in the Consolidated Statement of Comprehensive Income.

 

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

 

 

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 Income for the year.

 

Employee Benefit Costs

Payments to defined contribution retirement benefit schemes are recognised as an expense when employees have rendered service entitling them to contributions.

 

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.

 

During 2017 and 2016 the Group had no turnover. During the 2017 year the Group did receive £2,417,748 (2016: £87,528) for carried cost reimbursements from co-venturers which is shown in Other Income.  

 

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 debtor 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 also has a number of joint venture arrangements where co-ventureres have made commitments to fund certain expenditure. Management evaluate the credit risk associated with each contract at the time of signing and regularly 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 2017 is Nil (2016: Nil).

 

Maturity analysis of financial assets and liabilities

 

Financial Assets

 

2017

 

2016

 

£

 

£

Up to 3 months

356,107

 

122,872

3 to 6 months

-

 

-

Over 6 months

-

 

-

 

 

 

 

 

356,107

 

122,872

 

Financial Liabilities

 

2017

 

2016

 

£

 

£

Up to 3 months

1,629,872

 

187,251

3 to 6 months

-

 

-

Over 6 months

-

 

-

 

 

 

 

 

1,629,872

 

187,251

 

5.

EMPLOYEES AND DIRECTORS

 

 

 

 

 

2017

 

2016

 

 

£

 

£

 

Wages and salaries

795,389

 

429,553

 

Social security costs

64,409

 

38,690

 

Share based payments (note 20)

105,822

 

114,788

 

Other pensions costs

42,407

 

24,367

 

 

 

 

 

 

 

1,008,027

 

607,398

 

 

2017

 

2016

 

Directors

5

 

5

 

Employees

7

 

6

 

 

 

 

 

 

 

12

 

11

 

 

 

 

 

 

 

2017

 

2016

 

 

£

 

£

 

Directors' remuneration

489,000

 

210,500

 

Directors' pension contributions to money purchase schemes

20,000

 

11,000

 

Benefits

5,231

 

4,665

 

 

 

 

 

 

 

514,231

 

226,165

 

 

 

 

 

 

 

 

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

 

 

 

 

2017

 

2016

 

Money purchase schemes

1

 

1

           

 

Information regarding the highest paid Director is as follows:

2017

 

2016

 

 

£

 

£

 

Aggregate emoluments and benefits

153,924

 

68,000

 

Pension contributions

-

 

-

 

 

 

 

 

 

 

153,924

 

68,000

 

 

 

 

 

 

 

 

 

 

 

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;

 

 

2017

 

2016

 

 

£

 

£

 

Wages and short-term employee benefits

519,544

 

230,353

 

Share based payments (note 20)

52,978

 

82,411

 

Pension Contributions

24,375

 

14,375

 

 

 

 

 

 

 

596,897

 

327,139

6.

OTHER INCOME

 

 

 

2017

 

2016

 

£

 

£

Refund of well insurance

-

 

37,380

Refund of joint venture well costs

-

 

89,202

Sale of datasets

22,500

 

-

Carried costs reimbursement

2,417,748

 

87,528

 

 

 

 

 

2,440,248

 

214,110

 

Carried costs reimbursement:                      Reimbursement of well-related costs received as a result of the carried interest arrangement with CIECO V&C (UK) Limited in relation to licence P2170

Refund of well insurance:                            A return of prepaid insurance premiums on various policies

Sale of datasets                                           Income generate from the sale of data relating to a relinquished licence        

Refund of joint venture well costs:              Refund of prepaid well costs from the operator on the Niobe exploration well due to the actual costs of the well having been less than had been billed. These costs were initially capitalised as intangible assets under IFRS 6 and subsequently impaired in 2015. This has been reflected in the intangible assets note 12.

 

7.

GAIN ON DISPOSAL OF ASSET

 

2017

 

2016

 

£

 

£

Proceeds from Statoil

-

 

414,966

Net book value of asset

-

 

(175,242)

 

 

 

 

Gain on disposal of asset

-

 

239,724

         

 

During the prior year licence P2170, which contains the Verbier oil discovery and other exploration prospects was farmed out to Statoil. The Group retains an 18% interest in this licence.

8.

NET FINANCE INCOME

 

 

 

 

 

2017

 

2016

 

 

£

 

£

 

Finance income:

 

 

 

 

Joint venture finance charge

-

 

26

 

Interest received

5,010

 

2,044

 

 

 

 

 

 

 

5,010

 

2,070

 

Finance costs:

 

 

 

 

Unwinding of discount on the decommissioning liability

-

 

-

 

Joint venture finance charge

-

 

-

 

 

 

 

 

 

 

-

 

-

 

 

 

 

 

 

Net finance income

5,010

 

2,070

 

 

.

9.

PROFIT/(LOSS) BEFORE TAX

 

 

 

 

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

 

 

 

 

 

2017

 

2016

 

 

£

 

£

 

Depreciation

372

 

4,683

 

Impairment of intangible assets (note 12)

-

 

710

 

Auditors' remuneration - audit of parent company and consolidation

28,500

 

28,500

 

Auditors' remuneration - audit of subsidiaries

11,500

 

11,500

 

Foreign exchange (gain)/loss

4,980

 

(33,326)

 

Directors' remuneration (note 5)

514,231

 

226,165

 

Employee costs (note 5)

387,974

 

266,445

 

Share based payments (notes 5 & 20)

105,822

 

114,788

 

 

 

 

 

 

 

 

 

 

10.        TAX

 

 

Reconciliation of tax charge

 

 

 

 

 

2017

 

2016

 

 

£

 

£

 

Profit/Loss before tax

726,692

 

(793,439)

 

 

 

 

 

 

Tax at the domestic rate of 19.25% (2016: 20%)

138,072

 

(158,688)

 

Capital allowances in excess of depreciation

(276,257)

 

-

 

Expenses not deductible for tax purposes and non-taxable income

20,034

 

1,338

 

Deferred tax asset not recognised

118,151

 

157,350

 

 

 

 

 

 

Total tax expense reported in the Consolidated Statement of Comprehensive Income

-

 

-

 

No liability to UK corporation tax arose on ordinary activities for the year ended 31 December 2017 or for the year ended 31 December 2016.

 

The Group has 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 £25million.

 

11.        PROFIT/LOSS PER SHARE

 

Basic profit/(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 profit/(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 prior year, the issue of potential ordinary shares would have been anti dilutive (see note 20 for share options in place at the end of the year).

 

Profit/(Loss) attributable to ordinary shareholders

£

 

Weighted average number of shares

 

Per share amount pence

Year ended 31 December 2017

 

 

 

 

 

Basic and Diluted EPS

 

 

 

 

 

726,692

 

11,203,777

 

6.49

726,692

 

12,056,036

 

6.03

 

Year ended 31 December 2016

 

 

 

 

 

Basic and Diluted EPS

 

 

 

 

 

(793,439)

 

8,545,612

 

(9.28)

               

12.        INTANGIBLE ASSETS

 

 

 

 

Exploration costs

 

 

 

 

£

COST

 

 

 

 

At 1 January 2016

 

 

 

16,629,877

Additions

Disposals

Refund of prior additions

 

 

 

85,992

(175,242)

(94,202)

 

 

 

 

 

At 31 December 2016

 

 

 

16,446,425

 

 

 

 

 

Additions

 

 

 

1,309,596

Disposals

 

 

 

(16,222,821)

 

 

 

 

 

At 31 December 2017

 

 

 

1,533,200

 

 

 

 

 

AMORTISATION, DEPLETION & DEPRECIATION

 

 

 

 

At 1 January 2016

 

 

 

16,491,554

Charge for the year

 

 

 

-

Impairment charge for the year

Refund on prior year additions (note 6)

 

 

 

710

(94,202)

 

 

 

 

 

At 31 December 2016

 

 

 

16,398,062

 

 

 

 

 

Amortisation on disposal

 

 

 

(16,222,821)

 

 

 

 

 

At 31 December 2017

 

 

 

175,241

 

 

 

 

 

NET BOOK VALUE

 

 

 

 

At 31 December 2017

 

 

 

1,357,959

 

 

 

 

 

At 31 December 2016

 

 

 

48,363

 

 

 

 

 

At 31 December 2015

 

 

 

138,323

 

 

 

 

 

                                                                                                                                                                                                                                     

 

 

 

 

 

During 2017, the Group retained an 18% equity interest in Licence P2170 (Verbier) and a commercial interest in P1989 (Partridge)

 

During 2016, the P2170 licence was farmed out to Statoil, under the terms of which we disposed of 42% of our 60% interest (retaining an 18% interest) in the licence. The disposal recorded in the previous year within this note reflects this reduced interest.

 

At 31 December 2017 the remaining exploration asset (P2170 - Verbier) was reviewed and the then carrying value of £1,357,959 was considered reasonable based on on-going exploration work on the licence area and as a result no further impairments have been considered necessary.

 

 

13.        PROPERTY, PLANT AND EQUIPMENT

 

 

 

 

 

Computer and office equipment

 

 

 

 

 

£

COST

 

 

 

 

 

At 1 January 2016

 

 

 

 

286,022

Additions

 

 

 

 

-

 

 

 

 

 

 

At 31 December 2016

 

 

 

 

286,022

 

 

 

 

 

 

Disposals

 

 

 

 

(160,236)

 

 

 

 

 

 

At 31 December 2017

 

 

 

 

125,786

 

 

 

 

 

 

ACCUMULATED AMORTISATION, DEPLETION & DEPRECIATION

 

 

 

 

 

At 1 January 2016

 

 

 

 

280,967

Charge for the year

 

 

 

 

4,683

 

 

 

 

 

 

At 31 December 2016

 

 

 

 

285,650

 

 

 

 

 

 

Charge for the year

 

 

 

 

372

Disposals

 

 

 

 

(160,236)

 

 

 

 

 

 

At 31 December 2017

 

 

 

 

125,7856

 

 

 

 

 

 

NET BOOK VALUE

 

 

 

 

 

At 31 December 2017

 

 

 

 

-

 

 

 

 

 

 

At 31 December 2016

 

 

 

 

372

 

 

 

 

 

 

At 1 January 2016

 

 

 

 

5,055

 

 

 

 

 

 

               

                                                                                                                                                                                                                                     

 

14.        IMPAIRMENTS

 

2017

 

2016

 

£

 

£

Exploration assets

-

 

710

 

 

 

 

 

-

 

710

 

15.        TRADE AND OTHER RECEIVABLES

 

 

2017

 

2016

 

Current:

£

 

£

 

Trade receivables (net)

277,710

 

-

 

Other receivables

67

 

67

 

Value added tax

52,085

 

19,513

 

Prepayments and accrued revenue

26,245

 

103,292

 

 

 

 

 

 

 

356,107

 

122,872

 

 

As at 31 December 2017 there were no trade receivables past due nor impaired. There are no credit quality concerns over the trade receivables balance outstanding at the year end.

 

16.        CASH AND CASH EQUIVALENTS

 

 

2017

 

2016

 

 

£

 

£

 

Unrestricted cash in bank accounts

25,415,410

 

1,882,310

 

 

The cash balances are placed with a creditworthy financial institution.

 

 

 

 

17.        CALLED UP SHARE CAPITAL

 

Issued and fully paid:

 

Number:

Class

Nominal

 

2017

 

2016

 

 

 

value

 

£

 

£

 

21,829,227 (2016: 9,916,478)

Ordinary

1p

 

2,466,144

 

2,347,017

 

 

During the year the company issued 11,912,749 ordinary shares for which it received c.£24m gross

 

 

 

18.        TRADE AND OTHER PAYABLES

 

 

2017

 

2016

 

Current:

£

 

£

 

Trade payables

1,279,870

 

46,413

 

Accrued expenses

219,586

 

98,587

 

Other payables

8,169

 

10,391

 

Taxation and Social Security

122,248

 

31,860

 

 

 

 

 

 

 

19.        CONTINGENT LIABILITY

 

In accordance with a 2015 settlement agreement reached with the Athena Consortium, although Trap Oil Limited remains a Licensee in the joint venture, any past or future liabilities in respect of its interest can only be satisfied from the Group's share of the revenue that the Athena Oil Field generates and up to 60 per cent. of net disposal proceeds or net petroleum profits from the Group's interests in the P2170 and P1989 licences which are the only remaining assets still held that were in the Group at the time of the agreement with the Athena Consortium who hold security over these assets. Any future repayments, capped at 125% of the unpaid liability associated with the Athena Oil Field, 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. A payment was made in 2016 to the Athena Consortium in line with this agreement following the farm-out of P2170 (Verbier) to Statoil and the subsequent receipt of monies relating to that farm-out.

 

In 2014 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, which terminates on 30 October 2018.

 

20.        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.

 

The Group's share option schemes are for Directors, Officers and employees. The charge for the year was £105,822 (2016: £114,788l) 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 2017

Options issued

Options Exercised

Options lapsed/non vesting during the year

No. of shares for which options outstanding at 31 Dec 2017

 

 

 

 

 

 

 

Mar 2011

100

Vested

Mar 2021

24,138

-

20,974

-

3,164

Mar 2011

4,300

Vested

Mar 2021

5,809

-

-

-

5,809

Mar 2011

4,300

Mar 2014

Mar 2021

4,355

-

-

-

4,355

Mar 2011

4,300

Mar 2015

Mar 2021

5,809

-

-

-

5,809

Jul 2011

4,300

Jul 2011

Jul 2021

523

-

-

-

523

Jul 2011

4,300

Jul 2012

Jul 2021

523

-

-

-

523

Jul 2011

4,300

Jul 2014

Jul 2021

523

-

-

-

523

Dec 2011

2,712

Dec 2012

Dec 2021

1,650

-

-

-

1,650

Dec 2011

2,712

Dec 2014

Dec 2021

1,650

-

-

-

1,650

Dec 2011

2,712

Dec 2015

Dec 2021

-

-

-

-

-

May 2013

1,500

May 2014

May 2023

9,500

-

-

-

9,500

May 2013

1,500

May 2015

May 2023

9,500

-

-

-

9,500

May 2013

1,500

May 2015

May 2023

-

-

-

-

-

Nov 2016

110

Nov 2016

Nov 2021

260,000

-

13,333

-

246,667

Nov 2016

110

Nov 2017

Nov 2021

260,000

-

-

13,333

246,667

Nov 2016

110

Nov 2018

Nov 2021

260,000

-

-

13,333

246,667

Apr 2017

310

Apr 2017

Apr 2022

-

20,000

-

-

20,000

Apr 2017

310

Apr 2018

Apr 2022

-

20,000

-

-

20,000

Apr 2017

310

Apr 2019

Apr 2022

-

20,000

-

-

20,000

 

 

 

 

 

 

 

Total

843,007

 

The weighted average fair value of options granted during the year determined using the Black-Scholes valuation model was 41.55p per option. The significant inputs into the model were the mid-market share price on the day of grant or 1p exercise price as shown above and an annual risk-free interest rate of 2 per cent. The volatility measured at the standard deviation of continuously compounded share returns is based on a statistical analysis of daily share prices from the date of admission to AIM to the date of grant on an annualised basis.

 

21.        RELATED UNDERTAKINGS AND ULTIMATE CONTROLLING PARTY

 

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

 

 

 

 

 

 

 

 

Subsidiary

% owned

County of Incorporation

Principal Activity

Registered Office

 

 

Predator Oil Ltd

100%

England & Wales

Non Trading

1

 

 

 

Trap Oil Ltd

100%

England & Wales

Oil Exploration

1

 

 

 

Trap Oil & Gas Ltd

100%

Scotland

Non Trading

2

 

 

 

Trap Petroleum Ltd

100%

Scotland

Non Trading

2

 

 

 

 

Trap Exploration (UK) Ltd

100%

Scotland

Non Trading

2

 

 

 

Jersey Oil & Gas E & P Ltd

100%

Jersey

Management services

3

 

                     

 

             Registered Offices

                   1              10 The Triangle, NG2 Business Park, Nottingham, NG2 1AE

                   2              6 Rubislaw Terrace, Aberdeen, AB10 1XE

                   3              Howard House, 9 The Esplanade St Helier, Jersey, Channel Islands, JE2 3QA

 

 

22.             NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

 

             RECONCILIATION OF LOSS BEFORE TAX TO CASH USED IN OPERATIONS

 

 

2017

 

2016

 

 

£

 

£

 

 

 

 

 

 

Profit/(loss) for the year before tax

726,692

 

(793,439)

 

Adjusted for:

 

 

 

 

Amortisation, impairments, depletion and depreciation

-

 

5,393

 

Share based payments (net)

105,822

 

114,788

 

Gain on disposal of assets

-

 

(239,724)

 

Finance costs

-

 

-

 

Finance income

(5,010)

 

(2,070)

 

 

 

 

 

 

 

827,504

 

(915,052)

 

(Increase)/Decrease in trade and other receivables

(233,235)

 

104,846

 

Increase/(Decrease) in trade and other payables

1,442,623

 

(116,938)

 

 

 

 

 

 

Cash Generated from/(used in) operations

2,036,892

 

(927,144)

 

 

 

 

 

 

             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 2017

 

 

31 Dec 2017

 

1 Jan 2017

 

 

£

 

£

 

Cash and cash equivalents

25,415,410

 

1,882,310

 

 

 

 

 

Year ended 2016

 

 

31 Dec 2016

 

1 Jan 2016

 

 

£

 

£

 

Cash and cash equivalents

1,882,310

 

862,910

 

 

 

 

 

                                                                                                                                                                                            

 

 

Analysis of net cash

 

 

At 1 Jan 2017

 

 

Cash flow

 

 

At 31 Dec 2017

 

 

£

 

£

 

£

Cash and cash equivalents

 

1,882,310

 

23,533,100

 

25,415,410

Net cash

 

1,882,310

 

23,533,100

 

25,415,410

 

 

 

23             AVAILABILITY OF THE ANNUAL REPORT 2017

 

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.


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