Financial Express (Holdings) Limited (“we”, “our”, “us” and derivatives) are committed to protecting and respecting your privacy. This Privacy Policy, together with our Terms of Use, sets out the basis on which any personal data that we collect from you, or that you provide to us, will be processed by us relating to your use of any of the below websites (“sites”).

  • FEAnalytics.com
  • FEInvest.net
  • FETransmission.com
  • Investegate.co.uk
  • Trustnet.hk
  • Trustnetoffshore.com
  • Trustnetmiddleeast.com

For the purposes of the Data Protection Act 1998, the data controller is Trustnet Limited of 2nd Floor, Golden House, 30 Great Pulteney Street, London, W1F 9NN. Our nominated representative for the purpose of this Act is Kirsty Witter.

WHAT INFORMATION DO WE COLLECT ABOUT YOU?

We collect information about you when you register with us or use any of our websites / services. Part of the registration process may include entering personal details & details of your investments.

We may collect information about your computer, including where available your operating system, browser version, domain name and IP address and details of the website that you came from, in order to improve this site.

You confirm that all information you supply is accurate.

COOKIES

In order to provide personalised services to and analyse site traffic, we may use a cookie file which is stored on your browser or the hard drive of your computer. Some of the cookies we use are essential for the sites to operate and may be used to deliver you different content, depending on the type of investor you are.

You can block cookies by activating the setting on your browser which allows you to refuse the setting of all or some cookies. However, if you use your browser settings to block all cookies (including essential cookies) you may not be able to access all or part of our sites. Unless you have adjusted your browser setting so that it will refuse cookies, our system will issue cookies as soon as you visit our sites.

HOW WE USE INFORMATION

We store and use information you provide as follows:

  • to present content effectively;
  • to provide you with information, products or services that you request from us or which may interest you, tailored to your specific interests, where you have consented to be contacted for such purposes;
  • to carry out our obligations arising from any contracts between you and us;
  • to enable you to participate in interactive features of our service, when you choose to do so;
  • to notify you about changes to our service;
  • to improve our content by tracking group information that describes the habits, usage, patterns and demographics of our customers.

We may also send you emails to provide information and keep you up to date with developments on our sites. It is our policy to have instructions on how to unsubscribe so that you will not receive any future e-mails. You can change your e-mail address at any time.

In order to provide support on the usage of our tools, our support team need access to all information provided in relation to the tool.

We will not disclose your name, email address or postal address or any data that could identify you to any third party without first receiving your permission.

However, you agree that we may disclose to any regulatory authority to which we are subject and to any investment exchange on which we may deal or to its related clearing house (or to investigators, inspectors or agents appointed by them), or to any person empowered to require such information by or under any legal enactment, any information they may request or require relating to you, or if relevant, any of your clients.

You agree that we may pass on information obtained under Money Laundering legislation as we consider necessary to comply with reporting requirements under such legislation.

ACCESS TO YOUR INFORMATION AND CORRECTION

We want to ensure that the personal information we hold about you is accurate and up to date. You may ask us to correct or remove information that is inaccurate.

You have the right under data protection legislation to access information held about you. If you wish to receive a copy of any personal information we hold, please write to us at 3rd Floor, Hollywood House, Church Street East, Woking, GU21 6HJ. Any access request may be subject to a fee of £10 to meet our costs in providing you with details of the information we hold about you.

WHERE WE STORE YOUR PERSONAL DATA

The data that we collect from you may be transferred to, and stored at, a destination outside the European Economic Area (“EEA”). It may be processed by staff operating outside the EEA who work for us or for one of our suppliers. Such staff may be engaged in, amongst other things, the provision of support services. By submitting your personal data, you agree to this transfer, storing and processing. We will take all steps reasonably necessary, including the use of encryption, to ensure that your data is treated securely and in accordance with this privacy policy.

Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to our sites; any transmission is at your own risk. You will not hold us responsible for any breach of security unless we have been negligent or in wilful default.

CHANGES TO OUR PRIVACY POLICY

Any changes we make to our privacy policy in the future will be posted on this page and, where appropriate, notified to you by e-mail.

OTHER WEBSITES

Our sites contain links to other websites. If you follow a link to any of these websites, please note that these websites have their own privacy policies and that we do not accept any responsibility or liability for these policies. Please check these policies before you submit any personal data to these websites.

CONTACT

If you want more information or have any questions or comments relating to our privacy policy please email publishing@financialexpress.net in the first instance.

 Information  X 
Enter a valid email address

Leni Gas & Oil PLC (CERP)

  Print      Mail a friend

Friday 13 June, 2014

Leni Gas & Oil PLC

Annual Financial Report

RNS Number : 6354J
Leni Gas & Oil PLC
13 June 2014
 



 

For Immediate Release

13 June 2014

 

 

Leni Gas & Oil PLC

("LGO" or the "Company")

 

Annual Report and Accounts 2013

Notice of Annual General Meeting ("AGM")

 

 

Leni Gas & Oil is pleased to announce that the Company's audited Annual Report and Accounts for the year ended 31 December 2013 together with the Notice of AGM is being posted to shareholders and will be available from the Company's website, www.lenigasandoil.co.uk.

 

The AGM will take place on 07 July 2014 at 11.00 am,  and will be held at the offices of the Company's solicitors,  Kerman and Co LLP whose address is 200 Strand,  London WC2R 1DJ.

 

 

Highlights

For 12 month Period ending 31 December 2013

 

OPERATIONS

 

CORPORATE

 

FINANCIAL

 

KEY TARGETS FOR 2014

·      Continue to rapidly develop the proven reserves in the Goudron Field through drilling of at least seven new development wells.

·      Progress the remainder of the Trinidad portfolio to ensure medium-term growth is maintained and long-term value is created.

·      Manage Spain for value pending granting of the Hontomin Production Concession in 2014 and extension of the La Lora Concession in 2017.

·      Seek long term sources of finance based on the cashflow and the oil reserves available in the Company.

 

NOTES

·      All figures are net LGO unless otherwise stated.

 

 

Chairman's Statement

 

The transformation of the Company has progressed rapidly in 2013 with an increased focus on the Group's assets in Trinidad and especially production growth in the flagship Goudron Field redevelopment project.  As a consequence Group production reached 500 barrel of oil per day for the first time and is firmly expected to reach new highs in succeeding years as the output from Trinidad continues to rise.

 

At Goudron our Phase 1 work, involving the reactivation of a large number of dormant legacy wells, progressed rapidly and by the end of the year, the Company had 61 wells on production.  When the Trinidad Minister of Energy, the Honourable Senator Kevin Ramnarine, visited the field at our first anniversary of operations in October the field had produced 59,339  barrels of oil in 69,964 accident free man-hours. Phase 1 was complemented by an active program of infrastructure repair and replacement, which saw the doubling of sales tank capacity, the extending of the power grid throughout the field, repair of roads and bridges, and the reactivation of a pre-existing tank battery to handle oil and water separation. 

 

In 2014 this infrastructure work was completed with the building of a permanent office, workshop and accommodation building and the completion of a new communications infrastructure, both in the field and to connect the field externally.  This work was all in place for the drilling campaign, Phase 2, which commenced in April 2014 with the mobilisation of Well Services Rig 20 to drill the first seven of the planned 30 new development wells.

 

At year end the Company was awaiting the necessary Certificate of Environmental Compliance (CEC) for its Phase 2 drilling program and for the further expansion of the sales tank capacity.  The CEC was subsequently granted in early January 2014 allowing Phase 2 to commence.

 

The Goudron Field has independently certified original proven and probably oil-in-place of 126.7 million barrels (mmbbls), of which less than 5 million barrels have been recovered to date through the previous development activities.  This represents a very substantial resource base for the Company to access.  It is anticipated that the Phase 1 activity will recover a further 1 mmbbls whilst the Phase 2 drilling is intended to access between 6 and 20 mmbbls of additional reserves.  The Company envisages Phase 3 will be a secondary recovery water-flood project with the aim of recovering up to 60 mmbbls of contingent resources.  There is a wealth of possibility available to LGO within this asset alone.

 

Elsewhere in Trinidad, the Company continued to expand its opportunity set in order to create medium and long term value.  An agreement was reached with Beach Oilfield Ltd to cross assign interests in the Cedros such that LGO gains access to over 7,500 gross acres of underexplored leases. Discussions continued with Maxim Resources and Advance Oil on arrangements struck earlier, and additional opportunities were evaluated.  LGO also forwarded its Private Petroleum Licence ("PPL") application for 100% owned leases in Cedros to the Ministry of Energy and Energy Affairs for consideration. The Icacos Field (LGO 50%) continued to be produced by the operator and a joint application for a new PPL was prepared.

 

So as to maintain the principle focus on Trinidad the Spanish assets were moved to a care and maintenance operation for the bulk of the year, however, they have remained profitable and as we reached the end of the year we invited the industry to again consider partnership arrangements for the long term redevelopment of the Ayoluengo Field and the development of Hontomin Field when a Production Concession is granted. 

 

During 2013 the management prepared to defend shareholders' interests through a High Court action against its former operator and partner in Malta concerning thesale of the Company's 10% stake in the venture.  At the subsequent trial in March 2014 the Commercial Court Judge did not find sufficient grounds to uphold the Company's claim.

 

The Board are extremely pleased with what has been achieved in a busy year and delighted with the platform for growth that has been created for the future within the Company.  I would like to thank the management, staff and shareholders for their support as the transformation of the Company has progressed significantly during the year.

 

 

David Lenigas

Executive Chairman

12 June 2014

 

Enquiries:

Leni Gas & Oil plc

David Lenigas

Neil Ritson

+44 (0)20 7440 0645



 

Beaumont Cornish Limited

Nomad and Joint Broker

Rosalind Hill Abrahams

Roland Cornish

+44(0) 20 7628 3396

 

Old Park Lane Capital Plc

Joint Broker

Michael Parnes

+44(0) 20 7493 8188

 

Pelham Bell Pottinger

Financial PR

Mark Antelme

 +44 (0) 20 7861 3232

Henry Lerwill

 

 

 

Chief Executive's Review

 

Leni Gas and Oil plc has the strategy of identifying, acquiring and developing assets within the oil and gas sector which are seen to have an opportunity to unlock significant value through a combination of financial, commercial, and technical expertise.

 

The Company operates a low risk portfolio of production assets in Trinidad and Spain with significant production and reserves upside using similar operating approaches and proven production enhancement techniques.  LGO has specifically targeted assets with near term production upside and follow-on exploitation potential. 

 

During 2013 the operational management of LGO concentrated primarily on furthering the field operations in Trinidad.  Organisational capability was progressively built as the Company moved from a single operating arena in Spain to a dual operation in Trinidad and Spain.  In order to ensure maximum attention to the flagship Goudron Field redevelopment, activities in Spain were maintained at a constant and largely care and maintenance mode.  Commercial and new business development activities, again focusing on Trinidad, were managed in parallel to help build a sustainable platform for production growth.  I am pleased to report on the success of those operations and the robust foundations for long-term value creation that have resulted.

 

A summary of activity in both countries of operation during the reporting period and until the date of this report follows:

 

Trinidad

 

The Company, through various wholly owned subsidiaries, holds interests in two producing fields; Goudron and Icacos, and in a number of private petroleum leases where production has yet to be established.  LGO has also negotiated various agreements with third parties to farm-in or otherwise acquire interests in additional properties in Trinidad.   

 

Goudron

 

On the 19 October 2012 LGO acquired, through its wholly owned subsidiary, Goudron E&P Limited ("GEPL"), the Incremental Production Service Contract ("IPSC") for the Goudron Field in the Eastern Fields Area in south eastern onshore Trinidad.  Under the terms of the IPSC the Company acts as a service contractor to the Petroleum Company of Trinidad & Tobago ("Petrotrin") who reimburse LGO on the basis of the oil sales and realised oil price.  On taking over the full-time operation of the contract, GEPL immediately commenced a series of well work-overs and reactivations which have continued throughout 2013.  Two work-over rigs have been continuously deployed at the field since April 2013 working on well reactivations and optimisations.

 

Oil produced at Goudron is stored in sales tanks before being measured and pumped into the Petrotrin owned pipeline adjacent to the field which carries the oil directly to the Pointe-au-Pierre refinery in western Trinidad.  To accommodate rising production volumes, a new sales tank was constructed and commissioned in August to allow production of up to 530 barrels of oil per day (bopd) to be handled on a weekly basis.  Additional sales tank capacity up to 2,000 barrels has been approved and will be installed as needed.  Longer-term the installation of a Lease Automatic Custody Transfer (LACT) meter is planned to handle anticipated production from the field.  Oil quality at Goudron is consistently high with an average export density of approximately 37 degree API.

 

A total of 61 wells had been reactivated by end-year, from a total stock estimated to be approximately 90 accessible and reusable wells.  New beam pumps, fabricated in China and purchased locally, are being used along with a small number of progressive cavity down-hole pumps (PCP) and plunger-lift pumps in order to most efficiently redevelop the field.  Most pumps deployed in the field are powered by electricity supplied from the Trinidadian electricity grid.  Electricity distribution is being progressively expanded within the field to ensure all major production areas have access to electric power.  Where necessary diesel-engine beam pumps are deployed to test wells in remote areas where electrical power is not yet available.  Following the reporting period additional wells have been reactivated and production in May 2014 was derived from 67 legacy wells.

 

In addition to electrical supply, other infrastructure improvements are being made in order to bring the field up to modern operational standards.  Security, communications, accommodation, roads and produced water handling facilities have all been brought up to date.  The field is located in an area of primary tropical forest which receives higher than average rainfall.  In order to prevent problems with electrical outages caused by falling trees a more extensive vegetation cut back has been undertaken.  The installation of a permanent camp facility equipped with workshops, storage, offices and accommodation was completed in early 2014 and at the time of this report dedicated communications had been commissioned providing infield and base radio, broadband and voice communications.

 

In October to mark the anniversary of LGO's operations at Goudron the Minister of Energy and Energy Affairs, Senator the Honourable Kevin Ramnarine, visited the field along with Petrotrin President Khalid Hassanali and His Excellency British High Commissioner Arthur Snell and their respective delegations.  At that time Goudron had produced 59,339 barrels of oil and operated safely for 69,964 man-hours in the first year of LGO operatorship.

 

All the necessary documentation associated with a certificate of environmental compliance ("CEC") for 30 new infill wells was submitted to the Environmental Management Agency and at year-end imminent approval was anticipated.  The final CEC was delivered on 13 January 2014.  The sites for the first seven new development wells were selected in the 4th quarter and site preparation commenced immediately on receipt of the CEC.  Ground water monitoring wells were installed using an adapted work-over rig as a requirement of the CEC and approved by the Water and Sewage Authority prior to the mobilisation of the drilling rig.

 

Drilling rig selection and contract negotiations were completed in early 2014 and the first new development well, designated GY-664 was spudded on 28 April 2014 using Well Services Rig 20.  The second well, GY-665, was subsequently spudded on 28 May 2014. 

 

The first well, GY-664, was spudded on 28 April 2014 and reached total depth on 13 May 2014 at a depth of 4,212 feet.  The well successfully intersected with the three planned reservoir intervals in the Goudron sandstones of the Mayaro Formation, the Gros Morne sandstones of the Moruga Formation and a sandstone in the Lower Cruse Formation.  Full petrophysical log analysis was conducted and it was decided to complete the well as a Gros Morne producer over and interval of 278 feet of net oil pay.  Further intervals of oil pay were identified in the Goudron sandstones totalling 192 feet and a further 87 feet in the Lower Cruse.  The Goudron sandstones were cased and may be completed for production in this well at a later date.  The Lower Cruse was also considered producible, however, flow rates from that interval which was somewhat silty were considered uneconomic at this location.  The well was perforated and placed on production on 30 April 2014 at an initial rate of 240 bopd through a 7/32-inch choke at a flowing pressure of approximately 660 psi.

 

The initial flow rate from well GY-664 was some four-times the historic average and exceeded any previous well on the field.  This strongly supports the Company's belief that modern drilling and completion practices would greatly enhance the production performance of wells in the field.  Modern electric logs and petrophysical analysis are revealing greater amounts of net oil sand in the key reservoirs and this is likely to have an impact on oil-in-place estimates.  The Company plans to incorporate the results of on-going production and drilling into the various studies prior to commissioning a new Competent Persons Report in the 2nd half of 2014.

 

At the time of writing the second well, GY-665, has reach a TD of 2,750 feet in the base of the Gros Morne sandstone and a decision has been taken to complete the well in the Gros Morne without deepening to the Lower Cruse secondary target in this well.  Plans to drill to the Lower Cruse will be carried forward to a later well.   GY-665 encountered 270 feet of net oil pay in the Goudron sandstones and 256 feet of net oil pay in the Gros Morne, confirmed by petrophysical analysis.

 

In August, the Company successfully renegotiated commercial terms with Petrotrin for the Goudron Field, which included an agreement to reduce the overriding royalties on production paid directly to Petrotrin. In return for the reduced royalty payments, LGO undertook to increase the commitment work programme through the drilling of ten additional development wells and one exploration well in the Goudron Block.  This work programme, already envisaged in the Company's business plans, will be carried out over the next 6 years to November 2019.  The contract was also modified to clarify the process for extending the duration of the IPSC, with terms for an additional 5 year period to 2023 being mutually agreed and further extensions being possible.  The new overriding royalty rates are effective from 1 August 2013 and represent a marked increase in cash net-back from production. 

 

Cedros Peninsula

 

Elsewhere in Trinidad, through its local subsidiary Leni Trinidad Limited ("LTL"), LGO holds a 50% interest in the producing Icacos Field in the Cedros Peninsula, operated by Territorial Services Group, a subsidiary of Touchstone Exploration.  Territorial have carried out two work-overs at the field in 2013, and as a result production has been maintained at similar levels to previous years.  LGO is not aware of any plans by the operator to carry out any non-routine activities in the remainder of 2014.

 

In the wider Cedros Peninsular, LTL holds a number of private petroleum leases totalling about 1,750 acres and is in the process of obtaining a private petroleum licence from the Trinidad and Tobago Ministry of Energy and Energy Affairs (MOEEA), in order to carry out a number of field surveys with a view to eventually drilling exploration wells.  LGO has also entered into a Letter of Intent with Beach Oilfield Limited ("BOLT") to cross-assign the interests of the two companies within the Cedros Peninsula at stratigraphic levels below 7,000 feet.  LTL will be the operator of the combined leases and will hold a 100% working interest, with BOLT receiving an overriding royalty on any future production revenues. 

 

As part of the BOLT agreements LTL has hired Dr Krishna Persad as a consultant on a retainer and has acquired from BOLT all the relevant seismic, well and historical report data available in the Cedros area.  The Company has also obtained a licence to the legacy 3D seismic survey that covers much of the Cedros Peninsular and has commissioned a soil geochemistry survey to localise areas of micro-seepage associated with entrapped oil in the subsurface.  All the available data will be integrated and interpreted during 2014 and 1H215 prior to making any decisions on drilling. 

 

Other Trinidad

 

The Company continues to pursue its strategy of increasing its footprint in Trinidad, and in March signed a heads of agreement with Maxim Resources Inc. (Maxim), to collaborate on oil field developments in the South Erin Block.  The agreement envisaged that should Maxim be successful in acquiring control of the South Erin Block, LGO will invest in further developing drilling in the producing Jasmin Field, and will become field operator and hold at least a 50% working interest.  Subsequent to end-year LGO has been advised that Maxim have settled its claim for cash.  The 2013 heads of agreement has now expired.

 

In the absence of any substantive progress in resolving the underlying land title issues that were found during due diligence in the North Moruga leases, and the presence of substantial alternative investment opportunities available to the Company, the farm-in to Advance Oil, announced in November 2012 was terminated on 11 November by means of a mutually agreed Deed of Termination simultaneously with the effective sunset clause.

 

After a thorough review of the three blocks announced as part of the onshore lease sale by the MOEEA in the 2013 LGO determined not to present a bid for any of the blocks available on the basis of the high cost of commitment work programmes and alternative investment priorities in the Company's portfolio in Trinidad.

 

In 2013, LGO tendered for a Full Tensor Gravity survey to be flown over the entirety of southern Trinidad to assist in its ongoing operations and to look for additional investment opportunities.  After contract negotiations a contract has been signed with ARKeX Limited to fly the survey in 2014.  Acquisition costs will be shared with various parties, including Petrotrin, and it is hoped that the data wil be available for interpretation by end 2014.

 

During the reporting period Trinidad oil sales totalled 77,121 barrels (2012: 9,812 barrels).  This sharp rise in production reflects a full year or production growth at Goudron compared to only 10 weeks of initial operations in 2012.  Production from the Icacos field was essential unchanged year on year.

 

Spain

 

LGO holds a 100% ownership through its wholly owned subsidiary, Compañia Petrolifera de Sedano (CPS), in one production concession, La Lora (which contains the Ayoluengo producing oilfield), and three exploration permits; Basconcillos-H, Huermeces and Valderredible, in Northern Spain.  An application for the production of oil from the Hontomin discovery in the Huermeces permit has been made and it is hoped that it will be awarded in 2014.

 

Oil sales during the year were made exclusively to Saint-Gobain Vicasa SA (Saint-Gobain) under the contract renewed in 2012.  Saint-Gobain uses the Ayoluengo crude oil as fuel oil in their factories within Northern Spain.  Under the terms of the contract CPS receives a price linked to Brent with discounts to adjust for the fuel oil grade and impurities.  During June and into July Saint-Gobain carried out a planned maintenance at their factory installations and during the shutdown LGO stockpiled oil at Ayoluengo.  Sales to Saint-Gobain resumed in August and normal stock levels were achieved by October.

 

During the sales stoppage in June and July CPS, carried out extensive maintenance to the processing facilities; opening and cleaning process vessels, and recertifying them.  This work has resulted in improved oil-water separation and reduced impurities  in the sales oil. As a consequence discussions have been renewed with BP España on trialling Ayoluengo crude through the Castellon Refinery as a first step in enacting the sales contract signed with BP in 2011.  Laboratory trials and analysis are on-going at various laboratories in pursuit of a cost-effective arsenic removal process that would open up the potential for sales to BP.

 

In early 2013 work commenced to install larger pumps in both Ayo-46 and Ayo-37.  Various problems were encountered with the Weatherford supplied pumps, which along with delays due to their late delivery by the supplier, lead to complications in installing the pumps during the winter weather conditions; low temperatures, snow and high winds, often cause non-production related operations to be suspended.  Following various trials, well Ayo-37 was eventually returned to the original pump design.  Further trials at Ayo-46 have been made without marked improvements in pump efficiency.  As a result a packer has been installed in Ayo-46 to reduce water inflow and the well has subsequently seen a return to better production efficiency, although the water-cut from this well remains high.

 

Production decline is now being seen in several key wells in the field and a remedial program of well clean-up involving the removal of accumulated scale and wax deposits was started in late 2013 and has continued into 2014.  Treatment of several wells with acid has increased flow rates of oil and in one instance also of gas.  Further ongoing well treatments to improve production performance of the Ayoluengo wells are planned for 2014. 

 

During the 1st half of 2014 the Company's Cardwell work-over rig suffered from several breakdowns that required the fabrication of replacement parts and consequently saw the rig out of service for several extended periods.  During periods when the rig was unserviceable all well work had to be deferred and there was a consequent reduction in production during those periods.  The rig has now been fully repaired and well service work is being performed with the aim of restoring production to 2013 levels as soon as practical.

 

Following the cessation of possible asset sale discussions in late 2012 LGO has held discussions with several parties who have expressed an interest in partnering with CPS in further field development at Ayoluengo.  At the end of 2013 the Company was in detailed discussions with three separate groups and subsequently signed a non-binding heads of terms with Pansoinco s.r.l in March 2014.  That arrangement was subsequently terminated in June 2014 when a reassessment of the value of the Spanish portfolio was made following early successes in the Goudron redevelopment in Trinidad and a new prediction of free cash flow showed that greater value could be generated from Spain through investment in the period 2016 to 2020. 

 

As previously stated, the most likely investment scenario for the Ayoluengo field is the drilling of a small number of side-track wells from the existing producing wells along the crest of the structure to access oil in zones that are known to be oil bearing, but from which oil is not believed to have been recovered to date.  This investment remains conditional on further details studies and on the granting of a 10 year extension of the La Lora Concession from January 2017.  Work started in mid-2013 to prepare the licence extension application which is expected to be lodged with the Spanish administration in the 3rd quarter 2014.

  

In the Huermeces licence, the Company's application for the conversion of the Exploration Licence to a Production Concession remained under consideration with the Spanish authorities.  In early 2014 the Ministry of Industry indicated that it was favourably considering the Concession application and as a final step requested a geological report be submitted.  That technical report, written by an independent consultancy in Spain for CPS, was submitted in May 2014 and at the time of this report we are awaiting final award of the Hontomin Concession.

 

There has been no work undertaken in the Basconcillos-H licence area where the Tozo-1 gas well is located.  This project is dormant pending further studies of potential uses of the gas discovered in Tozo.  A licence extension in the Valderredible licence is also pending approval.  It has so far proved difficult to operate in a large part of the licences due to environmental restrictions within the National Park which covers much of the area.  CPS's permits and concessions lie within the central portion of the Sedano trough within the Cantabrian Basin which is believed to have unconventional gas potential at depth.  LGO considers that shale gas potential represents additional long-term potential value and plans to acquire further regional studies in 2014 to assess the scale of the potential.

 

During the reporting period Spanish sales totalled 34,653 barrels oil (2012: 46,830 barrels) exclusively from the Ayoluengo Field. 

 

OTHER

 

In January LGO issued proceedings against Mediterranean Oil and Gas plc (MOG) in the High Court of England and Wales alleging misrepresentation at the time of the sale of the Company's 10% interest in the Area 4 Petroleum Sharing Contract in Malta.  In a Case Management Conference before Justice Clarke in May the Court refused MOG's application for security over costs in the action and ordered MOG to pay LGO's costs in defending that application.  The Court also ordered disclosure of relevant documents and set a timetable to trial in March 2014.  LGO and its legal team prepared for trial through 2013 and into 1st quarter 2014.  The trial was held before Justice Males between the 4th and 12th March.  Mr. Justice Males did not uphold LGO's claim against MOG and subsequently awarded costs in the action against the claimant.  After taking further independent legal advice LGO decided not to lodge an appeal in the Court of Appeal. 

 

Conclusion

 

The past year has seen a major shift in the Company's operations and new business development focus to Trinidad.  A vast amount of preparatory work has been undertaken in the Goudron Field for the commencement of the drilling which marks the commencement of the redevelopment phase in 2014.  All the Company's operations have been carried out without major incident and the Corporate Health Safety and Environment record has been enhanced significantly despite a rapid increase in remote operations in Trinidad.  I am delighted with the platform for future value that has now been created and the results in

2014 will I am sure amply demonstrate the confidence the Board have shown in our decision to focus on brown-field redevelopment opportunities in Trinidad.

 

I would like to thank our staff in London, Spain and Trinidad for their dedication and hard work during this period of rapid change and growth in our production operations. 

 

 

Neil Ritson

Chief Executive Officer

12 June 2013

 

 

Competent Person's statement:

The information contained in this document has been reviewed and approved by Neil Ritson, Executive Director for Leni Gas & Oil Plc.  Mr Ritson is a member of the Society of Petroleum Engineers, a Fellow of the Geological Society and an Active Member of the American Association of Petroleum Geologists.  Mr Ritson has over 35 years of relevant experience in the oil industry.

 

GLOSSARY & NOTES

 

3D = three-dimensional

AIM = London Stock Exchange Alternative Investment Market

bbls = barrels (equivalent to 45 US gallons)

bcf = billion cubic feet

boe = barrels of oil equivalent calculated on the basis of six thousand cubic feet of gas equals one barrel of oil

boepd = boe per day

bbls = barrels of oil

bopd = barrels of oil per day

 

EOR = enhanced oil recovery

m = thousand

mm = million

mmbbls = million barrels of oil

mscf = thousand standard cubic feet of gas

PSC = Production Sharing Contract

TD = total depth

 

contingent resources

 

those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies. Contingent Resources may include, for example, projects for which there are currently no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation of the accumulation is insufficient to clearly assess commerciality

 

oil-in-place

 

the volume of oil estimated to have been initially in place

 

possible reserves

 

those additional reserves which analysis of geoscience and engineering data suggest are less likely to be recoverable than Probable Reserves. The total quantities ultimately recovered from the project have a low probability to exceed the sum of Proved plus Probable plus Possible (3P) Reserves, which is equivalent to the high estimate scenario

 

probable reserves

 

those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves

 

proven reserves

 

those quantities of petroleum, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations

 

 

The estimates provide in this report are based on the Petroleum Resources Management System ("PRMS") published by the Society of Petroleum Engineers ("SPE") and are reported consistent with the SPE's 2011 guidelines.  A copy of the PRMS is available at http://www.spe.org/industry/reserves.php. All definitions used in this report have the meaning given to them in the PRMS. Specifically:

 

Finance Review

 

Economic environment

The performance of the Company is influenced by global economic conditions, and in particular, the conditions prevailing in the United Kingdom, Spain, USA and Trinidad. In 2013 the economies in these regions have re-emerged from the recessionary environment, with the global economy slowly improving throughout the year. The Company continues to monitor all of these markets particularly in relation to the Company's future project and operational development plans.

 

Results for the period

2013 was a significant year for Leni Gas and Oil plc, highlighted by the current operating performance and the growth of our Trinidadian business. The financial statements presented herein do not as yet  fully represent this real shift in direction, but the immediate years ahead should reflect this.

 

LGO is primarily a development business with programs in place to monetise the Company's interests in various oil and gas operations. Expectations are for a significant increase in production volumes and therefore revenue in the next few years. The results for the year reflect the beginning of this transformation. The Group recorded a gross profit of £1.12 million (2012: £1.09 million) and an operating loss after tax of £2.85 million (2012: £7.78 million) for the period ended 31 December 2013.

 

Revenue in the period of £5.91 million (2012: £3.35 million), which includes an increase in revenues from Trinidad.

 

Cash flow

Cash outflow from operating activities after movements in working capital amounted to £2.82 million (2012: outflow £1.28 million). Net cash inflow from financing activities was £4.15 million (2012: £2.29 million). Net cash outflow from investing activities was £1.19 million (2012: £1.96 million).

 

Net cash position

Net cash at 31 December 2013 was £0.34 million (2012: £0.22 million).

 

Key performance indicators

The current business of the Company continues to be in development and initial stage production, with the focus on the successful delivery of investment to enable the Company to progress to substantial oil and gas sales and a larger operational business. The Company has devised strategies to monetise the majority of its oil and gas assets primarily by means of various production enhancement, development expansion and commercial consolidation programs as outlined in the Operations Review. The Board and management are incentivised to deliver shareholder value in line with these plans. The 2014 Annual Report will provide analysis and comparison of production; cash flows from operations; operating costs per boe; and realised oil and gas prices per barrel and mscf.

 

Asset Revaluations

An independent CPR (Competent Persons Report) was commissioned to evaluate the Goudron IPSC asset.  The report, produced by Challenge Energy Ltd in July 2012 considered the value of not only the subsidiary which had the rights to acquire the IPSC, but the value of the IPSC itself which was acquired.  Using the output of the CPR and an audited financial model, the asset was re-valued to £9.9m.  This is reflected as £3.1m of Goodwill in LGO plc and £6.8m of tangible assets in the Trinidad subsidiary.

 

Management continue to consider this to be a prudent valuation when the financial model for the Goudron field is indicating a higher NPV over the remaining period of the IPSC, now extended out to 2023.

 

Outlook

Having increased production in Trinidad and started the development program in Goudron, LGO's financial future is very promising.  With the prospect of generating significantly increased operational cash flow in the next 12 months, the real monetisation of our assets and delivery of their potential has begun.

 

Financial Statements

GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013

 



Year ended

Year ended



31 December 2013

31 December 2012


Note

£ 000's

£ 000's

Revenue

2

5,913

3,345

Cost of sales


(4,794)

(2,259)

Gross profit


1,119

1,086





Administrative expenses

3

(2,730)

(1,963)

Oil & gas exploration costs expensed

11

(99)

-

Amortisation and depreciation

3

(324)

(317)

Share based payments

22

(412)

(103)

(Loss) from operations


(2,446)

(1,297)





Loss on disposal

13

-

(6,543)

Finance charges

10

(342)

(71)

Finance revenue


-

1

Other income

8

-

204

(Loss) before taxation


(2,788)

(7,706)





Income tax expense

5

(63)

(75)

(Loss) for the year attributable to equity holders of the parent


(2,851)

(7,781)





Other comprehensive income




Revaluation surplus on oil & gas properties


-

4,332

Exchange differences on translation of foreign operations


(20)

(108)

Other comprehensive income for the year net of taxation


(20)

4,224





Total comprehensive income for the year attributable to equity holders of the parent


(2,871)

(3,557)





Loss per share (pence)




Basic

9

(0.15)

(0.54)

Diluted

9

(0.15)

(0.54)

All of the operations are considered to be continuing.




GROUP STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2013

 



As at 31 December 2013

As at 31 December 2012


Note

£ 000's

£ 000's

Assets




Non-current assets




Property, plant and equipment

12

882

264

Oil and gas properties

 

12

6,867

6,804

Intangible assets

11

9,037

8,833

Goodwill

11

3,083

3,083

Total non-current assets


19,869

18,984





Current assets




Inventories

16

244

244

Trade and other receivables

15

2,238

572

Derivative financial instrument

17

500

-

Cash and cash equivalents


341

220

Total current assets


3,323

1,036

Total assets


23,192

20,020





Liabilities




Current liabilities




Trade and other payables

18

(2,410)

(1,259)

Borrowings

19

(2,277)

(631)

Deferred consideration

18

(120)

(120)

Taxation

18

(15)

(48)

Total current liabilities


(4,822)

(2,058)





Non-current liabilities




Deferred consideration

18

(1,850)

(1,850)

Provisions

20

(796)

(780)

Total non-current liabilities


(2,646)

(2,630)

Total liabilities


(7,468)

(4,688)

Net assets


15,724

15,332





Shareholders' equity




Called-up share capital

21

1,125

939

Share premium


36,555

33,890

Share based payments reserve

22

412

1,187

Retained earnings


(26,606)

(24,942)

Revaluation Surplus


4,332

4,332

Foreign exchange reserve


(94)

(74)

Total equity attributable to equity holders of the parent


15,724

15,332


COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2013

 



As at 31 December 2013

As at 31 December 2012


Note

£ 000's

£ 000's

Assets




Non-current assets




Property, plant and equipment

12

-

5

Investment in subsidiaries

14

1

3,085

Trade and other receivables

15

17,553

9,387

Total non-current assets


17,554

12,477





Current assets




Trade and other receivables

15

1,373

3,521

Derivative financial instrument

17

500

-

Cash and cash equivalents


41

37

Total current assets


1,914

3,558

Total assets


19,468

16,035





Liabilities




Current liabilities




Trade and other payables

18

(1,574)

(782)

Deferred consideration

18

(120)

(120)

Total liabilities


(3,971)

(1,533)





Non-current liabilities




Deferred consideration

18

(1,850)

(1,850)

Borrowings

19

-

-

Total non-current liabilities


(1,850)

(1,850)

Total liabilities


(5,821)

(3,383)

Net assets


13,647

12,652





Shareholders' equity




Called-up share capital

21

1,125

939

Share premium


36,555

33,890

Share based payments reserve

22

412

1,187

Retained earnings

27

(24,445)

(23,364)

Total equity attributable to equity holders of the parent


13,647

12,652

GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013

 


Year ended 

Year ended 


31 December 2013

31 December 2012


£ 000's

£ 000's

Cash outflow from operating activities



Operating (loss)

(2,446)

(1,297)

(Increase)/decrease in trade and other receivables

(1,666)

590

Increase/(decrease) in trade and other payables

651

(896)

(Increase) in inventories

-

(11)

Depreciation

291

142

Amortisation

33

175

Tangible asset write-down charge

3

-

Share based payments

412

103

Income tax (paid)

(96)

(84)

Net cash (outflow) from operating activities

(2,818)

(1,278)




Cash flows from investing activities



Interest received

-

1

Other income

-

204

Payments to acquire subsidiaries

(7)

(617)

Net payments to acquire intangible assets

(108)

(126)

Payments to acquire tangible assets

(1,076)

(2,694)

Proceeds from asset disposals

-

1,273

Net cash outflow from investing activities

(1,191)

(1,959)




Cash flows from financing activities



Issue of ordinary share capital

2,900

2,550

Share issue costs

(49)

(102)

Finance charges paid

(218)

(1)

Repayment of borrowings

(2,244)

(877)

Proceeds of borrowings

3,764

721

Net cash inflow from financing activities

4,153

2,291




Net increase/(decrease) in cash and cash equivalents

144

(946)

Foreign exchange differences on translation

(23)

110

Cash and cash equivalents at beginning of period

220

1,056

Cash and cash equivalents at end of period

341

220

COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013

 


Year ended

Year ended


31 December 2013

31 December 2012


£ 000's

£ 000's

Cash outflow from operating activities



Operating (loss)

(1,926)

(1,108)

(Increase) in trade and other receivables

(1,218)

(416)

Increase in trade and other payables

292

76

Share based payments expensed

412

103

Depreciation & impairment

5

2

Other non-cash adjustments

2

(3)

Net cash outflow from operating activities

(2,433)

(1,346)




Cash flows from investing activities



Interest received

-

1

Loans granted to subsidiaries

(1,716)

(776)

Payments to acquire subsidiaries

-

(617)

Net cash outflow from investing activities

(1,716)

(1,392)




Cash flows from financing activities



Issue of ordinary share capital

2,900

2,550

Share issue costs

(49)

(102)

Finance charges(paid)

(218)

(1)

(Repayments) of borrowings

(2,244)

(877)

Proceeds of borrowings

3,764

721

Net cash inflow from financing activities

4,153

2,291




Net increase/(decrease) in cash and cash equivalents

4

(447)

Cash and cash equivalents at beginning of period

37

484

Cash and cash equivalents at end of period

41

37

 

 STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013

 


Called up share capital

Share premium reserve

Share based payments reserve

Retained earnings

Foreign exchange reserve

Revaluation Surplus

Total Equity


£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

Group








As at 31 December 2011

630

31,751

1,251

(17,328)

34

-

16,338









Loss for the year

-

-

-

(7,781)

-

-

(7,781)

Revaluation of Oil & Gas Properties

-

-

-

-

-

4,332

4,332

Currency translation differences

-

-

-

-

(108)

-

(108)

Total comprehensive income

-

-

-

(7,781)

(108)

4,332

(3,557)

Share capital issued

309

2,241

-

-

-

-

2,550

Cost of share issue

-

(102)

-

-

-

-

(102)

Expiration of Options

-

-

(167)

167

-

-

-

Share based payments

-

-

103

-

-

-

103

Total contributions by and distributions to owners of the Company

309

2,139

(64)

167

-

-

2,551

As at 31 December 2012

939

33,890

1,187

(24,942)

(74)

4,332

15,332









Loss for the year

-

-

-

(2,851)

-

-

(2,852)

Currency translation differences

-

-

-

-

(20)

-

(20)

Total comprehensive income

-

-

-

(2,851)

(20)

-

(2,872)

Share capital issued

186

2,714

-

-

-

-

2,900

Cost of share issue

-

(49)

-

-

-

-

(49)

Expiration of Options

-

-

(1,187)

1,187

-

-

-

Share based payments

-

-

412

-

-

-

412

Total contributions by and distributions to owners of the Company

186

2,665

(775)

1,187

-

-

3,263

As at 31 December 2013

1,125

36,555

412

(26,606)

(94)

4,332

15,724

 

Company








As at 31 December 2011

630

31,751

1,251

(6,495)

-

-

27,137









Loss for the year

-

-

-

(17,036)

-

-

(17,036)

Total comprehensive income

-

-

-

(17,036)

-

-

(17,036)

Share capital issued

309

2,241

-

-

-

-

2,550

Cost of share issue

-

(102)

-

-

-

-

(102)

Expiration of Options

-

-

(167)

167

-

-

-

Share based payments

-

-

103

-

-

-

103

Total contributions by and distributions to owners of the Company

309

2,139

(64)

167

-

-

2,551

As at 31 December 2012

939

33,890

1,187

(23,364)

-

-

12,652









Loss for the year

-

-

-

(2,268)

-

-

(2,268)

Total comprehensive income








Share capital issued

186

2,714

-

-

-

-

2,900

Cost of share issue

-

(49)

-

-

-

-

(49)

Expiration of Options

-

-

(1,187)

1,187

-

-

-

Share based payments

-

-

412

-

-

-

412

Total contributions by and distributions to owners of the Company

186

2,665

(775)

1,187

-

-

3,263

As at 31 December 2013

1,125

36,555

412

(24,445)

-

-

13,647

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

 

1

Summary of significant accounting policies



1.01

General information and authorisation of financial statements


Leni Gas and Oil plc is a public limited company registered in the United Kingdom under the Companies Act 2006.  The address of its registered office is Suite 3B, Princes House, 38 Jermyn Street, London, SW1Y 6DN.  The Company's Ordinary shares are traded on the AIM Market operated by the London Stock Exchange.  The Group financial statements of Leni Gas & Oil plc for the period ended 31 December 2013 were authorised for issue by the Board on 12 June 2014 and the balance sheets signed on the Board's behalf by Mr. David Lenigas and Mr. Neil Ritson



1.02

Statement of compliance with IFRS


The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The Company's financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The principal accounting policies adopted by the Group and Company are set out below.

 


New standards and interpretations not applied


IASB (International Accounting Standards Board) and IFRIC (International Financial Reporting Interpretations Committee) have issued the following standards and interpretations with an effective date after the date of these financial statements:


IFRS 13 Fair Value Measurement

 

The Company has applied IFRS13 for the first time in the current year. IFRS13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. IFRS13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under IFRS13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, IFRS13 includes extensive disclosure requirements.

 

IFRS13 requires prospective application from 1 January 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard.

 

In accordance with these transitional provisions, the Company has not made any new disclosures required by IFRS13 for the 2012 comparative period. Other than the additional disclosures, the application of IFRS13 has not had any impact on the amounts recognised in the consolidated financial statements.

 

Amendments to IAS1 Presentation of Financial Statements

(as part of the Annual Improvements to IFRSs 2009; 2011 Cycle issued in May 2012)

The Annual Improvements to IFRSs 2009; 2011 have made a number of amendments to IFRSs. The amendments that are relevant to the Company are the amendments to IAS1 regarding when a statement of financial position as at the beginning of the preceding period (third statement of financial position) and the related notes are required to be presented. The amendments specify that a third statement of financial position is required when a) an entity applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items in its financial statements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position. The amendments specify that related notes are not required to accompany the third statement of financial position.

This has no impact for the 2013 financial statements.

 

Amendments to IFRS7 Disclosures

The Company has applied the amendments to IFRS7 Disclosures-Offsetting Financial Assets and Financial Liabilities for the first time in the current year. The amendments to IFRS7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.

As the Company does not have any offsetting arrangements in place, the application of the amendments has had no impact on the disclosures or on the amounts recognised in the consolidated financial statements.

 

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

 

IFRS9                      Financial Instruments

IFRS10                    Consolidated Financial Statements

IFRS12                    Joint Arrangements#

IAS27 (revised)     Investment Entities

IAS28 (revised)     Investments in Associates and Joint Ventures

IAS32 (revised)     Offsetting Financial Assets and Financial Liabilities

IAS36 (revised)     Recoverable Amount Disclosures for Non Financial Assets

IAS39 (revised)     Novation of Derivatives and Continuation of Hedge Accounting

IFRIC Interpretation21 Levies

 










The directors do not expect that the adoption of the Standards and Interpretations listed above will have a material impact on the financial statements of the Group in future periods, except as that IFRS9 will impact both the measurement and disclosures of Financial Instruments.  Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

 

The directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods, however, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed



1.03

Basis of preparation


The consolidated financial statements have been prepared on the historical cost basis, except for the measurement to fair value of assets and financial instruments as described in the accounting policies below, and on a going concern basis.

 


The financial report is presented in Pound Sterling (£) and all values are rounded to the nearest thousand pounds (£'000) unless otherwise stated.



1.04

Basis of consolidation


The consolidated financial information incorporates the results of the Company and its subsidiaries ("the Group") using the purchase method.  In the consolidated balance sheet, the acquiree's identifiable assets, liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained. Inter-company transactions and balances between Group companies are eliminated in full.



1.05

Goodwill and intangible assets


Intangible assets are recorded at cost less eventual amortisation and provision for impairment in value. Goodwill on consolidation is capitalised and shown within non-current assets. Positive goodwill is subject to an annual impairment review, and negative goodwill is immediately written-off to the income statement when it arises.

 

1.06

Oil and gas exploration assets and development/producing assets


The Group applies the successful efforts method of accounting for oil and gas assets, having regard to the requirements of IFRS 6 'Exploration for and Evaluation of Mineral Resources'.

 


All licence acquisition, exploration and evaluation costs are initially capitalised as intangible fixed assets in cost centres by field or by exploration area, as appropriate, pending determination of commerciality of the relevant property. Directly attributable administration costs are capitalised insofar as they relate to specific exploration activities, as are finance costs to the extent they are directly attributable to financing development projects. Pre-licence costs and general exploration costs not specific to any particular licence or prospect are expensed as incurred.

 


If prospects are deemed to be impaired ('unsuccessful') on completion of the evaluation, the associated costs are charged to the income statement. If the field is determined to be commercially viable, the attributable costs are transferred to development/production assets within property, plant and equipment in single field cost centres.

 


Subsequent expenditure is capitalised only where it either enhances the economic benefits of the development/producing asset or replaces part of the existing development/producing asset.

 


Increases in the carrying amount arising on revaluation of oil and gas properties are credited to other comprehensive income and shown as revaluation surplus reserve in shareholders' equity. Decreases that offset previous increases of the same asset are charged in other comprehensive income and debited against revaluation surplus reserve directly in equity; all other decreases are charged to the income statement. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the income statement, and depreciation based on the asset's original cost is transferred from 'revaluation surplus reserve' to 'retained earnings.

 


Net proceeds from any disposal of an exploration asset are initially credited against the previously capitalised costs. Any surplus proceeds are credited to the income statement. Net proceeds from any disposal of development/producing assets are credited against the previously capitalised cost. A gain or loss on disposal of a development/producing asset is recognised in the income statement to the extent that the net proceeds exceed or are less than the appropriate portion of the net capitalised costs of the asset.

 

1.07

Commercial reserves


Commercial reserves are proven and probable oil and gas reserves, which are defined as the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible. There should be a 50 per cent statistical probability that the actual quantity of recoverable reserves will be more than the amount estimated as a proven and probable reserves and a 50 per cent statistical probability that it will be less.



1.08

Depletion and amortisation


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 commercial reserves at the end of the period plus the production in the period, generally on a field by field basis. In certain circumstances, fields within a single development area may be combined for depletion purposes. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future field development costs necessary to bring the reserves into production. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively.



1.09

Decommissioning


Where a material liability for the removal of production facilities and site restoration at the end of the productive life of a field exists, a provision for decommissioning is recognised. The amount recognised is the present value of estimated future expenditure determined in accordance with local conditions and requirements. The cost of the relevant tangible fixed asset is increased with an amount equivalent to the provision and depreciated on a unit of production basis. Changes in estimates are recognised prospectively, with corresponding adjustments to the provision and the associated fixed asset.



1.10

Property, plant and equipment


Property, plant and equipment is stated in the Balance Sheet at cost less accumulated depreciation and any recognised impairment loss. Depreciation on property, plant and equipment other than exploration and production assets, is provided at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful economic life of between three and eight years.



1.11

Inventories


Inventories are stated at the lower of cost and net realisable value.  Cost is determined by the weighted average cost formula, where cost is determined from the weighted average of the cost at the beginning of the period and the cost of purchases during the period.  Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.



1.12

Revenue recognition


Revenue represents amounts invoiced in respect of sales of oil and gas exclusive of indirect taxes and excise duties and is recognised on delivery of product. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.



1.13

Foreign currencies


Transactions in foreign currencies are translated at the exchange rate ruling at the date of each transaction. Foreign currency monetary assets and liabilities are retranslated using the exchange rates at the balance sheet date. Gains and losses arising from changes in exchange rates after the date of the transaction are recognised in the income statement. Non‑monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at the exchange rate at the date of the original transaction.




In the consolidated financial statements, the net assets of the Company are translated into its presentation currency at the rate of exchange at the balance sheet date. Income and expense items are translated at the average rates for the period. The resulting exchange differences are recognised in equity and included in the translation reserve.



1.14

Operating leases


The costs of all operating leases are charged against operating profit on a straight-line basis at existing rental levels. Incentives to sign operating leases are recognised in the income statement in equal instalments over the term of the lease.



1.15

Financial instruments


Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.  The Group does not currently utilise derivative financial instruments.




The particular recognition and measurement methods adopted are disclosed below:



 (i)

Cash and cash equivalents


Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.



 (ii)

Trade receivables


Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

 

 (iii)

Trade payables


Trade payables are not interest-bearing and are stated at their nominal value.



 (iv)

Investments


Investments in subsidiaries are stated at cost and reviewed for impairment if there are indications that the carrying value may not be recoverable.



 (v)

Equity investments


Equity instruments issued by the Company and the Group are recorded at the proceeds received, net of direct issue costs.



 (vi)

Derivative instruments


Derivative instruments are recorded at cost, and adjust for their market value as applicable.  They are assessed for any equity and debt component which is subsequently accounted for in accordance with IFRS's. The Group's and Company's only derivative is considered to be the Equity Swap Arrangement as detailed in Note 17, which is accounted for on a fair value basis in accordance with the terms of the agreement, being based around the Company's share price as traded on AIM..



1.16

Finance costs


Borrowing costs are recognised as an expense when incurred.



1.17

Borrowings


Borrowings are recognised initially at fair value, net of any applicable transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method (if applicable).

 

Interest on borrowings is accrued as applicable to that class of borrowing.



1.18

Provisions


Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.




When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.



1.19

Dividends


Dividends are reported as a movement in equity in the period in which they are approved by the shareholders.



1.20

Taxation


The tax expense represents the sum of the tax currently payable and deferred tax.




Current tax, including UK corporation and overseas tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantially enacted by the balance sheet date.




Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. 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 tax profit nor the accounting profit.




Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.




The carrying amount of deferred tax assets is reviewed at each balance sheet date and adjusted to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.




Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.   Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.  

 

1.21

Impairment of assets


At each balance sheet date, the Group assesses whether there is any indication that its property, plant and equipment and intangible assets have been impaired. Evaluation, pursuit and exploration assets are also tested for impairment when reclassified to oil and natural gas assets. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash‑generating unit to which the asset belongs is determined.




The recoverable amount of an asset or a cash‑generating unit is the higher of its fair value less costs to sell and its value in use. The value in use is the present value of the future cash flows expected to be derived from an asset or cash‑generating unit. This present value is discounted using a pre‑tax rate that reflects current market assessments of the time value of money and of the risks specific to the asset, for which future cash flow estimates have not been adjusted. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is recognised as an impairment loss.




The Group's impairment policy is to recognise a loss relating to assets carried at cost less any accumulated depreciation or amortisation immediately in the income statement.




Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash‑generating units, or groups of cash‑generating units, that are expected to benefit from the synergies of the combination. Goodwill is tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. An impairment loss is recognised or cash‑generating units, if the recoverable amount of the unit is less than the carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the assets of the unit by first reducing the carrying amount of any goodwill allocated to the cash‑generating unit, and then reducing the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.




If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount but limited to the carrying amount that would have been determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised in the income statement. Impairment losses on goodwill are not subsequently reversed.



1.22

Share based payments


Equity settled transactions:


The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions).




The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using a Black-Scholes model.




In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Leni Gas & Oil Plc (market conditions) if applicable.




The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period).




The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group's best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The Income Statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.




No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition.




If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.




If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.




The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.



1.23

Segmental reporting


Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors that makes strategic decisions

 

The Group has a single business segment: oil and gas exploration, development and production. The business segment can be split into five geographical segments: Spain, USA, Trinidad & Tobago, St. Lucia, Cyprus and UK.



1.24

Share issue expenses and share premium account


Costs of share issues are written off against the premium arising on the issues of share capital.



1.25

Share based payments reserve


This reserve is used to record the value of equity benefits provided to employees and directors as part of their remuneration and provided to consultants and advisors hired by the Group from time to time as part of the consideration paid.



1.26

Revaluation Surplus Reserve


This reserve is used to record the increase on revaluation of assets, in particular of oil and gas properties.

 

1.27

Critical accounting estimates and assumptions


The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.



 (i)

Recoverability of intangible oil and gas costs


Costs capitalised as intangible assets are assessed for impairment when circumstances suggest that the carrying value may exceed its recoverable value. This assessment involves judgement as to the likely commerciality of the asset, the future revenues and costs pertaining and the discount rate to be applied for the purposes of deriving a recoverable value.



 (ii)

Decommissioning


The Group has decommissioning obligations in respect of its Spanish asset. The full extent to which the provision is required depends on the legal requirements at the time of decommissioning, the costs and timing of any decommissioning works and the discount rate applied to such costs. 



 (iii)

Significant accounting estimates and assumptions


The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:



 (iv)

Share-based payment transactions


The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes model.



1.28

Earnings per share


Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.




Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:



(i)

Costs of servicing equity (other than dividends) and preference share dividends;



(ii)

The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and



(iii)

Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

 

2

Turnover and segmental analysis

 


Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions.

 

The Board has determined there is a single business segment: oil and gas exploration, development and production.  The business segment can be further split into six geographical segments: Trinidad & Tobago, Spain, Cyprus, St Lucia, USA and UK.

 

Spain and Trinidad & Tobago, have been reported as the group's direct oil and gas producing entities, these are the group's only revenue generating operations. The UK is the Group's parent and administrative entity and is reported on accordingly.

 

The board considers the following external reporting to be appropriate.  The Cypriot administration costs are reported in the geographical segment of Cyprus, as are the subsidiaries which hold these investments. Further breakdown of each of these relative country investments is not seen to be informative at this time as a result of their current development stages, and are thus combined and reported under their investment entity.

 



Corporate

Holding

Holding

Operating

Operating

Operating

Total


Year ended 31 December 2013

UK

Cyprus

St Lucia

Spain

Trinidad

US




£'000

£'000

£'000

£'000

£'000

£'000

£'000


Operating profit/(loss) by geographical area









Revenue (*)

-

-

-

2,039

3,874

-

5,913











Operating (loss)

(1,927)

(33)

(4)

(348)

(128)

(6)

(2,446)


Finance Charges

(342)

-

-

-

-

-

(342)


Finance revenue

-

-

-

-

-

-

-


Profit/(loss) before taxation

(2,269)

(33)

(4)

(348)

(128)

(6)

(2,788)











Other information









Depreciation and amortisation

(2)

-

-

(101)

(221)

-

(324)


Capital additions

-

-

-

99

1,184

-

1,283











Segment assets









Financial assets

4,957

-

1

9,286

8,363

-

22,607


Inventories

-

-

-

118

126

-

244


Cash

41

1

-

180

117

2

341


Consolidated total assets

4,998

1

1

9,584

8,606

2

23,192











Segment liabilities









Trade and other payables

(1,575)

(5)

(2)

(283)

(542)

(3)

(2,410)


Taxation

-

(5)

-

-

(10)

-

(15)


Borrowings

(2,277)

-

-

-

-

-

(2,277)


Deferred Consideration

(1,970)

-

-

-

-

-

(1,970)


Provisions

-

-

-

(796)

-

-

(796)


Consolidated total liabilities

(5,822)

(10)

(2)

(1,079)

(552)

(3)

(7,468)

 

      (*) Revenues are derived from a single customer/partner within each of these operating countries.

 

2

Turnover and segmental analysis (continued)



Corporate

Holding

Holding

Operating

Operating

Operating

Total


Year ended 31 December 2012

UK

Cyprus

St Lucia

Spain

Trinidad

US




£'000

£'000

£'000

£'000

£'000

£'000

£'000


Operating profit/(loss) by geographical area









Revenue (*)

-

-

-

2,760

429

156

3,345











Operating profit/(loss)

(1,108)

(19)

-

454

(320)

(304)

(1,297)


Loss on disposal

-

(1,846)

-

-

-

(4,697)

(6,543)


Other income

-

204

-

-

-

-

204


Finance Interest

(71)

-

-

-

-

-

(71)


Finance revenue

1

-

-

-

-

-

1


Profit/(loss) before taxation

(1,178)

(1,661)

-

454

(320)

(5,001)

(7,706)











Other information









Depreciation and amortisation

(2)

-

-

(98)

(84)

(133)

(317)


Capital additions

-

-

-

173

2,647

-

2,820











Segment assets

3,088

-

-

8,866

7,030

-

18,984


Financial assets

155

-

-

279

138

-

572


Inventories

-

-

-

233

11

-

244


Cash

37

-

-

67

93

23

220


Consolidated total assets

3,280

-

-

9,445

7,272

23

20,020











Segment liabilities









Trade and other payables

(782)

(2)

-

(301)

(124)

(50)

(1,259)


Taxation

-

(32)

-

-

(16)

-

(48)


Borrowings

(631)

-

-

-

-

-

(631)


Deferred Consideration

(1,970)

-

-

-

-

-

(1,970)


Provisions

-

-

-

(780)

-

-

(780)


Consolidated total liabilities

(3,383)

(34)

-

(1,081)

(140)

(50)

(4,688)

 

      (*) Revenues are derived from a single customer/partner within each of these operating countries.

 

3

Operating loss

2013

2012



£ 000's

£ 000's


Operating loss is arrived at after charging:




Auditors' remuneration:




-Audit-related assurance services - Current year

25

25


-Auditors' remuneration payable to subsidiary auditors

15

5


Directors' emoluments - fees and salaries

454

445


Directors' emoluments - share based payments and options

226

-


Depreciation

291

142


Amortisation

33

175



 

4

Employee information (excluding directors')

2013

2012


Staff costs comprised:

£ 000's

£ 000's


Wages and salaries

1,018

934


Social security contributions

200

184


Total staff costs

1,218

1,118


The average number of employees on a full time equivalent basis during the year was as follows:



Number

Number


Administration

5

4


Operations

27

22


Total

32

26

 

5

Taxation

2013

2012


Analysis of charge in period

£ 000's

£ 000's


Tax on ordinary activities

63

75






Factors affecting the tax charge for the period:




Loss on ordinary activities before tax

(2,789)

(7,706)


Standard rate of corporation tax in the UK

23%/24%

24%/26%






Loss on ordinary activities multiplied by the standard rate of corporation tax

(648)

(1,888)


Effects of:




Non deductible expenses

100

26


Withholding tax on overseas interest

-

-


Overseas tax on profits

(63)

(75)


Future tax benefit not brought to account

548

1,862


Current tax charge for period

(63)

(75)


 

No deferred tax asset has been recognised because there is uncertainty of the timing of suitable future profits against which they can be recovered.

 

 

There are approximately £7,071,403 (2012: £4,991,667) of tax losses yet to be utilised by a subsidiary company in Spain. The Spanish tax rate applicable is currently 35%.



6

Dividends


No dividends were paid or proposed by the Directors (2012: nil).

 

7

Directors' emoluments





2013

2012





£ 000's

£ 000's


Directors' remuneration



680

445









Directors Fees

Consultancy Fees

Share based payments

Total



2013

£000's

£000's

£000's

£000's



Executive Directors







David Lenigas

12

240

-

252



Neil Ritson

160

-

192

352










Non-Executive Directors







Steve Horton

12

30

34

76




184

270

226

680

















2012

£000's

£000's

£000's

£000's



Executive Directors







David Lenigas

12

240

-

252



Neil Ritson

160

-

-

160










Non-Executive Directors







Steve Horton

12

21

-

33




184

261

-

445




No pension benefits are provided for any Director.





In Q3 2011 it was decided that Executive Directors would defer their cash salary. As a result the CEO was not paid between the 30th September 2011 and 30 June 2012, his salary which had been accrued for that period within the financial statements continues to be accrued.

 

As at the 31 December 2013 the accrued and unpaid remuneration totals £611,439 including accrued consultancy fees for the last 3 years.

 

 

8

Other income

2013

2012



£ 000's

£ 000's


Non-refundable deposit  re: Spanish divestment

-

204



-

204

9

Loss per share


 

The calculation of loss per share is based on the loss after taxation divided by the weighted average number of share in issue during the period:



2013

2012


Net loss after taxation (£000's)

(2,851)

(7,781)






Weighted average number of ordinary shares used in calculating basic loss per share (millions)

1,960.6

1,434.2


Weighted average number of ordinary shares used in calculating diluted loss per share (millions)

2,154.8

1,807.4






Basic loss per share (expressed in pence)

(0.15)

(0.54)


Diluted loss per share (expressed in pence)

(0.15)

(0.54)




As inclusion of the potential ordinary shares would result in a decrease in the loss per share they are considered to be anti-dilutive, as such, a diluted earnings per share is not included.

 

10

Finance charges

2013

2012



£ 000's

£ 000's


Loan interest payable

166

71


Loan facility fees

176

-



342

71

 

11

Intangible assets

2013



Oil and gas properties

Deferred exploration expenditure

Decommissioning costs

Goodwill

Total


Group

£000's

£000's

£000's

£000's


Cost






As at 1 January 2013

9,829

-

780

3,083


Additions

207

-

-

-


Expensed costs

(99)

-

-

-


Foreign exchange difference on translation

147

-

16

-

163


As at 31 December 2013

10,084

-

796

3,083

13,693








Amortisation and Impairment






As at 1 January 2013

1,763

-

13

-


Amortisation

31

-

2

-


Disposal

-

-

-

-


Foreign exchange difference on translation

34

-

-

-

34


As at 31 December 2013

1,828

-

15

-

1,843








Net book value






As at 31 December 2013

8,256

-

781

3,083

12,120


As at 31 December 2012

8,066

-

767

3,083

11,916


 

 






Impairment review


At 31 December 2013, the Directors carried out an impairment review and have confirmed that no provision is currently required.

11

Intangible assets (continued)







Group

Oil and gas properties

Deferred exploration expenditure

Decommissioning costs

Goodwill

Total



£000's

£000's

£000's

£000's

£000's


Cost






As at 1 January 2012

25,035

1,846

799

3,083


Additions

126

-

-

-


Disposal

(14,752)

(1,846)

-

-


Foreign exchange difference on translation

(580)

-

(19)

-

(599)


As at 31 December 2012

9,829

-

780

3,083

13,692








Amortisation and Impairment






As at 1 January 2012

10,793

-

11

-


Amortisation

173

-

2

-


Disposal

(8,673)

-

-

-


Foreign exchange difference on translation

(530)

-

-

-

(530)


As at 31 December 2012

1,763

-

13

-

1,776








Net book value






As at 31 December 2012

8,066

-

767

3,083

11,916


As at 31 December 2011

14,242

1,846

788

3,083

19,959

 

12

Property, plant and equipment



2013



2013





Group



Company



Oil and gas properties

Property, plant and equipment

Total


Property, plant and equipment

Total



£ 000's

£ 000's

£ 000's


£ 000's

£ 000's


Cost or Valuation








As at 1 January 2013

6,875

624

7,499


9

9


Additions

211

865

1,076


-

-


Disposals

-

-

-


-

-


Foreign exchange difference on translation

(76)

(34)

(110)


-

-


As at 31 December 2013

7,010

1,455

8,465


9

9










Depreciation








As at 1 January 2013

71

360

431


4

4


Depreciation

78

213

291


2

2


Impairment

-

3

3


3

3


Foreign exchange difference on translation

(6)

(3)

(9)


-

-


As at 31 December 2013

143

573

716


9

9










Net book value








As at 31 December 2013

6,867

882

7,749


-

-


As at 31 December 2012

6,804

264

7,068


5

5

 


Impairment review


At 31 December 2013, the Directors have carried out an impairment review and confirmed that no write down is currently required.

 

12

Property, plant and equipment (continued)



2012



2012





Group



Company



Oil and gas properties

Property, plant and equipment

Total


Property, plant and equipment

Total



£ 000's

£ 000's

£ 000's


£ 000's

£ 000's


Cost








As at 1 January 2012

-

541

541


9

9


Additions

2,598

96

2,694


-

-


Revaluation surplus

4,332

-

4,332


-

-


Foreign exchange difference on translation

(55)

(13)

(68)


-

-


As at 31 December 2012

6,875

624

7,449


9

9










Depreciation








As at 1 January 2012

-

297

297


2

2


Depreciation

72

70

142


2

2


Foreign exchange difference on translation

(1)

(7)

(8)


-

-


As at 31 December 2012

71

360

431


4

4










Net book value








As at 31 December 2012

6,804

264

7,068


5

5


As at 31 December 2011

-

244

244


7

7

 

Revaluation of Oil and Gas Properties

 

Management reviews the asset valuations on an ongoing basis, in particular those relating to oil and gas properties on purchase/acquisition, in 2012, an assessment is made of the true value to the business, and as such the most appropriate valuation method, that of cost or valuation was used.  In respect of the addition of the IPSC (Incremental Production Service Contract) in October 2012, the true value is over the initial period of the contract.

 

Management have with the benefit of the CPR (Competent Persons Report) on the Goudron Field Onshore Trinidad, independently produced by Challenge Energy Ltd in July 2012 considered the value of not only the subsidiary whom had the rights to acquire the IPSC, but the value of the IPSC itself which was acquired for £2,544,000 (US$4million), and chosen to adopt the revaluation method in respect of this asset.

 

Using the CPR and a financial model in respect of the field and forecast production, future well drilling costs, etc revalued the asset to £6.8million (US$11million).  Management consider this to be a prudent valuation when the financial model for the Goudron field is indicating a higher NPV over the remaining period of the IPSC to November 2019.  The most significant inputs into this valuation approach are future oil prices, timing of drilling new wells, and production levels.

 

The revaluation surplus was credited to other comprehensive income and is shown in revaluation surplus in shareholders equity.  The asset will be depreciated over the life of the IPSC on the unit of production basis.  As such this valuation and further extensions will be continuously monitored over the life of the project.

 

In 2014, the valuation was tested against future economic value and the Board of Directors' concluded that the carrying value is justified as at 31 December 2013.

 

13

Loss on disposal - Year ended 31 December 2012






Oil and gas properties

(US-Gulf of Mexico)

Deferred exploration expenditure

(Malta)

Total



£ 000's

£ 000's

£ 000's


Disposal Proceeds - cash received

1,273

-

1,273







Less





Intangible assets - at cost

14,959

1,846

16,805


Accumulated amortization

(8,989)

-

(8,989)


Net book value at disposal

5,970

1,846

7,816







Loss on disposal

(4,697)

(1,846)

(6,543)

 

During the year to 31 December 2012, the Group disposed of the above assets as two separate transactions.  The resultant losses on disposals are illustrated above.  Each disposal is detailed below;

 

Sale of oil and gas properties - US Gulf of Mexico

On 21 August 2012, Leni Gas and Oil US Inc., sold its interest in 2 exploration leases to Byron Energy Inc. for US$400,000, these 2 interest areas were held at cost of US$225,742, and resulted in a profit US$174,258 on disposal of these 2 leases.

 

On 5 November 2012, Leni Gas and Oil US Inc., sold all of its remaining minority interest in the US Gulf of Mexico for a cash consideration of $1.625million to a USA Group.  These assets had previously been written down in 2010 by £6.9million. 

 

As a result, the total loss on disposal on sale in relation to all of the US assets was £4.697million.

 

Sale of Malta, Area 4 Petroleum Sharing Contract (PSC)

On 1 August 2012, on the basis of information provided by its 90% partner and Operator, Mediterranean Oil and Gas plc (MOG), the Group agreed to sell its 10% interest in the PSC to MOG for consideration of US$1 and the assumption of the Group's outstanding liabilities. Following the completion of the sale MOG holds the entire interest in the PSC.

 

As a result the entire investment in Malta and the PSC has been effectively written off with a loss on disposal for the investment value of £1,846,000.

 

Following completion of the sale, on 24 August 2012 MOG announced its intention to farm-out 75% of the PSC for a cash consideration of US$10million.  LGO immediately asked for an explanation from MOG and sought legal advice regarding MOG's farm-out of the PSC.  MOG did not provide satisfactory answers and LGO was obliged to seek to resolve the issues through lawyers.  On 3 January 2013 issued legal proceedings against MOG in the High Court (England and Wales).

 

On 27 March 2014, the Company's court actions and legal proceedings against MOG came to a close.  The judge's ruling was against the Company and the Company was ordered to pay MOG's costs, which currently are expected to total between £1.1million and £1.35million (Of which £0.6million have been paid up to the date of this report).  After review of the case, the Company decided not to appeal against the Judge's decision.

 

 

14

Investment in subsidiaries

2013

2012


Shares in Group undertaking

£ 000's

£ 000's


Company




Cost




As at 1 January 2013

3,085

3,085


Additions

-

-


Disposals (see 1 below)

(3,084)

-


As at 31 December 2013

1

3,085




1.   On 29 April 2013, there was a Group re-organisation relating to the Group's ownership of the Trinidadian entities. The Group continues to retain 100% shareholding of all subsidiaries, and the transfer of ownership of subsidiaries from the parent company to LGO Trinidad Holdings Ltd was at carrying value (no gain/no loss).

 

The parent company of the Group holds more than 20% of the share capital of the following companies:

 


Company

Country of Registration

Proportion held

Nature of business


Direct





Leni Gas & Oil Holdings Ltd

Cyprus

100%

Holding Company







Indirect





Via Leni Gas & Oil Holdings Ltd





Leni Gas & Oil Investments Ltd

Cyprus

100%

Investment Company


Leni Investments Cps Ltd

Cyprus

100%

Investment Company


Leni Investments Byron Ltd

Cyprus

100%

Investment Company


Leni Investments Trinidad Ltd

Cyprus

100%

Investment Company







Via Leni Investments Cps Ltd





Compañia Petrolifera de Sedano S.L.

Spain

100%

Oil and Gas Production and Exploration Company







Via Leni Investments Byron Ltd





Leni Gas and Oil US Inc.

United States

100%

Oil and Gas Production and Exploration Company







Via Leni Investments Trinidad Ltd





LGO Trinidad Holdings Limited

St Lucia

100%

Investment Company







Via LGO Trinidad Holdings Limited





Leni Trinidad Ltd

Trinidad & Tobago

100%

Oil and Gas Production and Exploration Company


Columbus Energy Services Ltd

Trinidad & Tobago

100%

Oil and Gas Services Company


Goudron E&P Ltd

Trinidad & Tobago

100%

Oil and Gas Production and Exploration Company

 

15

Trade and other receivables

2013

2012



Group

Company

Group

Company



£ 000's

£ 000's

£ 000's

£ 000's


Current trade and other receivables






Trade receivables

841

-

332

3,366


Taxation receivable

99

87

142

68


Other receivables

1,227

1,217

22

12


Prepayments

71

69

76

75


Total

2,238

1,373

572

3,521








Non-current trade and other receivables






Loans due from subsidiaries

-

17,553

-

9,387


Total

-

17,553

-

9,387








The loans due from subsidiaries are interest free and have no fixed repayment date.

            

16

Inventories

2013

2012



Group

Company

Group

Company



£ 000's

£ 000's

£ 000's

£ 000's


Inventories - Crude Oil

229

-

244

-


Inventories - Consumables

15

-

-

-


Total

244

-

244

-

 

17

Derivative Financial Instrument

2013

2012


Shares in Group undertaking

£ 000's

£ 000's


Company




Cost




Fair value as at 1 January

-

-


Cost of equity swap arrangement

500

-


Settled during the year

-

-


As at 31 December

500

-




On 21 December 2013 the Company announced that it had entered into an equity swap agreement with YAGM over 131,578,944 of the Subscription Shares. In return for a payment by the Company to YAGM of £500,000 ("the Initial Escrowed Funds"), twelve monthly settlement payments were to be made by YAGM to the Company, or by the Company to YAGM, based on a formula related to the difference between the prevailing market price of the Company's ordinary shares in any month and a 'benchmark price' that is 10% above the Subscription Price. Thus the funds received by the Company in respect of the Swap Shares are dependent on the future price performance of the Company's ordinary shares.

 

The Initial Escrowed Funds was deposited into an escrow account and the subsequent monthly settlement payments will be managed through the Escrow Account under the terms of the Equity Swap Agreement.

 

YAGM may elect to terminate the Equity Swap Agreement and accelerate the payments due under it in certain circumstances. The Company may pause a monthly payment under the Equity Swap Agreement once in each six month period.

 

YAGM has agreed that it and its affiliates will refrain from holding any net short position in respect of the Company's ordinary shares and has agreed restrictions on the volume of ordinary shares in the Company that it can trade from time to time until the expiry or if earlier termination of the Equity Swap Agreement.

 

By 31 December 2013 nil shares had been closed out for net proceeds of £nil.  The remaining balance has been fair valued at 31 December 2013, which has not resulted in any fair value adjustment based on the benchmark price and formula of the arrangement, with any unrealised gain credited to reserve and highlighted in other comprehensive income.

 

18

Trade and other payables

2013

2012



Group

Company

Group

Company



£ 000's

£ 000's

£ 000's

£ 000's


Current trade and other payables


Trade Payables

944

262

573

316


Deferred consideration

120

120

120

120


Taxation

15

-

48

-


Accruals

1,466

1,312

686

466


Total

2,545

1,694

1,427

902








Non-current trade and other payables


Deferred consideration

1,850

1,850

1,850

1,850


Total

1,850

1,850

1,850

1,850

 

19

Borrowings

2013

2012



Group

Company

Group

Company



£ 000's

£ 000's

£ 000's

£ 000's


Current






Loans - other (unsecured) 1

1,287

1,287

221

221


Loans - other (unsecured) 2

-

-

310

310


Loans - other (unsecured) 3

112

112

-

-


Loans - other (unsecured) 4

653

653

-

-


Interest payable on borrowings

225

225

100

100









2,277

2,277

631

631








1. The loans due to other parties carry an interest charge of 10% and a repayment date of the 31 December 2014.The carrying amounts of short-term borrowings approximate their fair value, and are all denominated in pounds sterling.

 


2. The loans due to other parties carried an interest charge of 2% plus LIBOR and a repayment date of the 30 June 2013. The carrying amounts of short-term borrowings approximate their fair value, and are all denominated in pounds sterling.

 


3 The loans due to other parties carry an interest charge of 8% and a repayment date of the 30 June 2014. The carrying amounts of short-term borrowings approximate their fair value, and are all denominated in US Dollars.

 


4 The loans due to other parties carry an interest charge of 8% and a repayment date of the 31 December 2014. The carrying amounts of short-term borrowings approximate their fair value, and are all denominated in US Dollars.




Equity Line Facility

 

On the 12 November 2012, the Company announced that it had terminated its three year £5 million Equity Line Facility with Dutchess Opportunity Cayman Fund Ltd ("Dutchess") by mutual agreement. The Company no longer believes that this type of facility is required in the Company's forward funding plans. The facility was terminated at no cost to either party.

 

20

Provisions

2013

2012


Provision for decommissioning costs

Group

Company

Group

Company



£ 000's

£ 000's

£ 000's

£ 000's


At 1 January

780

-

799

-


Foreign exchange difference on translation

16

-

(19)

-


At 31 December

796

-

780

-








These costs relate to the estimated liability for removal of Spanish production facilities and site restoration at the end of the production life of the facilities.

 

21

Share capital






Called up, allotted, issued and fully paid

Number of shares

Nominal value




£ 000's


As at 1 January 2012

1,259,454,965

630


3 August 2012 cash at 0.82p per share

18,292,636

9


20 September 2012 cash at 0.40p per share

600,000,000

300


As at 31 December 2012

1,877,747,601

939


21 June 2013 cash at 0.8p per share

162,500,000

81


23 December 2013  cash at 0.76p per share

131,578,944

66


23 December 2013 cash at 0.76p per share

78,947,369

39


As at 31 December 2013

2,250,773,914

1,125






During the year 373 million shares were issued (2012: 618 million).






Total share options in issue


During the year 204 million options were issued (2012: 10 million).


As at 31 December 2013 the options in issue were:


Exercise Price

Vesting Criteria

Expiry Date

Options in Issue


1p

-

31 July 2018

56,000,000


1p

500 bopd

31 July 2018

49,333,333


1p

600 bopd

31 July 2018

49,333,333


1p

700 bopd

31 July 2018

49,333,334




As at 31 December 2013

204,000,000


28.8 million options lapsed during the year (2012: 16 million). 55 million options were cancelled in the year (2012: nil), and no options were exercised during the year (2012: nil).


 


Total warrants in issue


During the year, 28.1 million warrants were issued (2012: nil).


As at 31 December 2013 the warrants in issue were;


Exercise Price

Expiry Date

Warrants in Issue

31 December 2013


2.00p

30 September 2014

4,200,000


1.11p

25 June 2016

18,267,282


1p

8 November 2016

9,841,772



As at 31 December 2013

32,309,054


103,663,906 warrants lapsed during the year (2012: nil), no warrants were cancelled or exercised during the period. (2012: nil).

 

22

Share based payment arrangements


Share options


The Company has an established an employee share option plan to enable the issue of options as part of remuneration of key management personnel and Directors to enable the purchase of shares in the entity. Options were granted under the plan for no consideration. Options were granted for a three or five year period. There are vesting conditions associated with the options. Options granted under the plan carry no dividend or voting rights.

 


Under IFRS 2 'Share Based Payments', the Company determines the fair value of options issued to Directors and Employees as remuneration and recognises the amount as an expense in the income statement with a corresponding increase in equity.

 

Details of the current unexpired share options at the date of this report are as shown in the table below:


Name

Date Granted

Vesting Date

Number

Exercise Price (pence)

Expiry Date

Fair Value at Grant Date (pence)

Fair Value after discount (pence)


Neil Ritson

1 July 2013

1 July 2013

25,000,000

1

31 July 2018

0.73

0.51


Neil Ritson

1 July 2013

500 bopd

25,000,000

1

31 July 2018

0.73

0.46


Neil Ritson

1 July 2013

600 bopd

25,000,000

1

31 July 2018

0.73

0.46


Neil Ritson

1 July 2013

700 bopd

25,000,000

1

31 July 2018

0.73

0.45


Steve Horton

1 July 2013

1 July 2013

5,000,000

1

31 July 2018

0.73

0.51


Steve Horton

1 July 2013

500 bopd

3,333,333

1

31 July 2018

0.73

0.46


Steve Horton

1 July 2013

600 bopd

3,333,333

1

31 July 2018

0.73

0.46


Steve Horton

1 July 2013

700 bopd

3,333,334

1

31 July 2018

0.73

0.45


Staff

1 July 2013

1 July 2013

20,000,000

1

31 July 2018

0.73

0.51


Staff

1 July 2013

500 bopd

15,000,000

1

31 July 2018

0.73

0.46


Staff

1 July 2013

600 bopd

15,000,000

1

31 July 2018

0.73

0.46


Staff

1 July 2013

700 bopd

15,000,000

1

31 July 2018

0.73

0.45


Consultants

1 July 2013

1 July 2013

6,000,000

1

31 July 2018

0.73

0.51


Consultants

1 July 2013

500 bopd

6,000,000

1

31 July 2018

0.73

0.46


Consultants

1 July 2013

600 bopd

6,000,000

1

31 July 2018

0.73

0.46


Consultants

1 July 2013

700 bopd

6,000,000

1

31 July 2018

0.73

0.45


Totals



204,000,000






 

The fair value of the options vested during the period was £0.41 million (2012: £0.1 million). Also 28.8million (2012: 16 million) options lapsed during the year, 55 million (2012: nil) options were cancelled, and the fair value of these lapsed and cancelled options was £1.187 million, transferred through equity to retained earnings. The assessed fair value at grant date is determined using the Black-Scholes Model that takes into account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

 


The following table lists the inputs to the model used for the period ended 31 December 2013:

 



1 July 2013




Dividend Yield (%)

-




Expected Volatility (%)

97%




Risk-free interest rate (%)

2%




Share price at grant date (pence)

0.73p




 

The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may, not necessarily be the actual outcome.

 

23

Financial instruments

 


The Group uses financial instruments comprising cash, and debtors/creditors that arise from its operations. The Group holds cash as a liquid resource to fund the obligations of the Group. The Group's cash balances are predominantly held in Sterling. The Group's strategy for managing cash is to maximise interest income whilst ensuring its availability to match the profile of the Group's expenditure. This is achieved by regular monitoring of interest rates and monthly review of expenditure forecasts.

 

The Company has a policy of not hedging and therefore takes market rates in respect of foreign exchange risk; however it does review its currency exposures on an ad hoc basis. Currency exposures relating to monetary assets held by foreign operations are included within the foreign exchange reserve in the Group Balance Sheet.

 

The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.

 

To date the Group has relied upon equity funding to finance operations. The Directors are confident that adequate cash resources exist to finance operations to commercial exploitation but controls over expenditure are carefully managed.

 

The net fair value of financial assets and liabilities approximates the carrying values disclosed in the financial statements. The currency and interest rate profile of the financial assets is as follows:

 

 


Cash and short term deposits

2013

2012

 



£ 000's

£ 000's

 


Sterling

4

37

 


Euros

180

67

 


US Dollars

99

23

 


Trinidad Dollars

58

93

 



341

220

 


 

The financial assets comprise cash balances in interest earning bank accounts at call. The financial assets in Sterling currently earn interest at the base rate set by the Bank of England less 0.15%

 

 

 


Oil Price Risk





The Group is exposed to commodity price risk regarding its sales of crude oil which is an internationally traded commodity. The Group sales prices are based off of two benchmarks, West Texas Intermediate (WTI) for sales in Trinidad and Brent Crude (Brent) for sales in Spain.


The high/lows of both benchmarks are shown below:

 



Spot oil prices for 2013



Low

Average 

High


WTI

86.65

97.98

110.62


Brent

96.84

108.52

118.90

 


The below shows how the Group's 2013 revenue sensitivity to an average price that as 10% higher and 10% lower than the average price for the year.








Oil price sensitivity




10% decrease

10% increase



Trinidad

3,487

4,261



Spain

1,835

2,243



Total

5,322

6,504


 

23

Financial instruments (continued)


Foreign currency risk


The following table details the Group's sensitivity to a 10% increase and decrease in the Pound Sterling against the relevant foreign currencies of Euro, US Dollar, and Trinidadian Dollar. 10% represents management's assessment of the reasonably possible change in foreign exchange rates.

 

The sensitivity analysis includes only outstanding foreign currency denominated investments and other financial assets and liabilities and

 

adjusts their translation at the period end for a 10% change in foreign currency rates. The following table sets out the potential exposure, where the 10% increase or decrease refers to a strengthening or weakening of the Pound Sterling:

 



Profit or loss sensitivity

Equity sensitivity



10% increase

10% decrease

10% increase

10% decrease



£ 000's

£ 000's

£ 000's

£ 000's


Euro

32

(39

(597)

730


US Dollar

1

(1)

-

-


Trinidad Dollar

12

(14)

(908)

1,110



45

(54)

(1,505)

1,840


 

Rates of exchange to £1 used in the financial statements were as follows:









As at 31 December 2013

Average for the relevant consolidated period to 31 December 2013

As at 31 December 2012

Average for the relevant consolidated period to 31 December 2012


Euro

1.198

1.178

1.223

1.232


US Dollar

1.649

1.564

1.616

1.584


Trinidad Dollar

10.611

10.020

10.341

10.124

 

24

Commitments and contingencies


As at 31 December 2013, the Company had the following material commitments:




Exploration commitments


Ongoing exploration expenditure is required to maintain title to the Group's mineral exploration permits. No provision has been made in the financial statements for these amounts as the expenditure is expected to be fulfilled in the normal course of the operations of the Group.

 

As announced in August 2013, as part of the licence extension and royalty reduction agreement, the Group has agreed to a new work program of 10 new wells in the next 10 years.  Four by year 5, four by year 7 and two by year 10.

 

Additionally the Group has committed to conduct an Airborne gravity survey by year 5 and drill one developmental well by year 7.


 

Contingencies


As a result of the rulings of the court case with MOG in March 2014, Leni Gas and Oil Plc has paid, £600,000 in 2014, to cover MOG's legal costs.  The total amount expected still to be paid is between £500,000 and £750,000, however this is as yet to be agreed and finalised with MOG.

 

25

Related party transactions


Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between other related parties are discussed below.


During the period, the Company accrued the following consultancy fees to the Company's directors for work performed in relation to an overseas subsidiary. These fees have been recharged to this subsidiary as follows :

(i)

£240,000 to David Lenigas (2012: £240,000),

(ii)

£30,000 to Stephen Horton (2012: £33.000),

(iii)

Total consultancy fees accrued to directors £525,000 (2012:£325,000).




Remuneration of Key Management Personnel

The remuneration of the Directors and other key management personnel of the Group are set out below in aggregate for each of the categories specified in IAS24 Related party Disclosures.



2013

2012



£ 000's

£ 000's


Short-term employee benefits

556

610


Share-based payments

366

103



922

713

 

26

Events after the reporting period


On 18 March 2014, the Company announced it had signed a Heads of Term with Pansoinco srl, with the intention of Pansoinco becoming a long term partner in the group's Spanish oil and gas assets. 

 

However, on 4 June 2014, the Company announced these negotiations had been terminated, and the Company was no longer seeking to find a partner for the development of the Spanish assets.

 

On 27 March 2014, the Company's court actions and legal proceedings against Mediterranean Oil and Gas Plc (MOG) came to a close.  The judge's ruling was against the Group and the Group was ordered to pay MOG's costs (as per note 24).  To date, a payment of £600,000 has been made.  After review of the case, the Group decided not to appeal against the Judge's decision.

 

On 2 April 2014, the Company issued 14,218,605 new Ordinary Shares in respect of remuneration for services provided by Beach Oilfield Ltd to the value of £125,000.

 

On 25 April 2014, the Company raised £1.375million before expenses by way of a placing of 144,736,842 new Ordinary Shares, at a price of 0.95pence per share.

 

On 3 June 2014, the Company announced it had fully closed the Equity Swap Arrangement with YAGM. This swap was entered into on the 23rd December 2013, and since then has provided the Company with a total of £1,407,404 in cash.

 

27

Profit and loss account of the parent company


As permitted by section 408 of the Companies Act 2006, the profit and loss account of the parent company has not been separately presented in these accounts. The parent company loss for the year was £2,269 million (2012: £17.036 million).

 

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2013 or 2012.  The financial information for the year ended 31 December 2012 is derived from the statutory accounts for that year.  The audit of statutory accounts for the year ended 31 December 2013 is complete.  The auditors reported on those accounts, their report was unqualified and did not include references to any matters to which the auditors drew attention to by way of emphasis without qualifying their report.

 


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

a d v e r t i s e m e n t